Category: Issue Comments

Bank of Nova Scotia has announced:

that it does not intend to exercise its right to redeem the currently outstanding Non-cumulative 5-Year Rate Reset Preferred Shares Series 30 of Scotiabank (the “Preferred Shares Series 30”) on April 26, 2015 and, as a result, subject to certain conditions, the holders of Preferred Shares Series 30 have the right to convert all or part of their Preferred Shares Series 30 on a one-for-one basis into Non-cumulative Floating Rate Preferred Shares Series 31 of Scotiabank (the “Preferred Shares Series 31”) on April 26, 2015. Holders who do not exercise their right to convert their Preferred Shares Series 30 into Preferred Shares Series 31 on such date will retain their Preferred Shares Series 30.

The foregoing conversions are subject to the conditions that: (i) if Scotiabank determines that there would be less than one million Preferred Shares Series 30 outstanding after April 26, 2015, then all remaining Preferred Shares Series 30 will automatically be converted into Preferred Shares Series 31 on a one-for-one basis on April 26, 2015, and (ii) alternatively, if Scotiabank determines that there would be less than one million Preferred Share Series 31 outstanding after April 26, 2015, no Preferred Shares Series 30 will be converted into Preferred Shares Series 31. In either case, Scotiabank shall give a written notice to that effect to holders of Series 30 Preferred Shares no later than April 17, 2015.

The dividend rate applicable to the Preferred Shares Series 30 for the five-year period commencing on April 26, 2015 and ending on April 25, 2020, and the dividend rate applicable to the Preferred Shares Series 31 for the three-month period commencing on April 26, 2015, and ending on July 25, 2015, will be determined on March 27, 2015 and announced by way of a press release on March 30, 2015.

Beneficial owners of Preferred Shares Series 30 who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is 5:00 p.m. (EDT) on April 13, 2015.

There are no surprises here, since BNS.PR.Y is a FixedReset, 3.85%+100, that commenced trading 2010-4-12 after being announced March 29.

The Implied Volatility calculation shows a very high value for Implied Volatility; this is reasonable since all the BNS FixedResets are NVCC non-compliant and hence are expected to be redeemed on or prior to 2022-1-31.

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Well, they didn’t waste much time! After indicating the intention to redeem TD.PR.R on February 27, Toronto Dominion Bank has announced:

that it will exercise its right to redeem all of its 10 million outstanding Non-cumulative Redeemable Class A First Preferred Shares, Series R (the “Series R Shares”) on May 1, 2015 at the cash redemption price of $25.503836 per Series R Share, for total redemption proceeds of approximately $255 million.

The cash redemption price represents the sum of the redemption amount of $25.50 per share, plus an amount equal to the quarterly cash dividend pro rated for the period from and including April 30, 2015 to but excluding May 1, 2015. The regular quarterly dividend of $0.35 per Series R Share will be paid in the usual manner on April 30, 2015 to shareholders of record on April 8, 2015, as previously announced.

From and after May 1, 2015, the Series R Shares will cease to be entitled to dividends and the only remaining rights of holders of such shares will be to receive payment of the cash redemption price.

Beneficial holders who are not directly the registered holder of Series R Shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds. Instructions with respect to receipt of the redemption amount will be set out in the Letter of Transmittal to be mailed to registered holders of the Series R Shares shortly. Inquiries should be directed to our Registrar and Transfer Agent, CST Trust Company, at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PR.R is a DeemedRetractible, 5.60%, which commenced trading March 12, 2008 after being announced March 3, 2008.

The 2015-4-30 redemption date is its first day of being liable for redemption at 25.50. There can be no great surprise about the redemption intention announcement, given that the redemption of the very similar TD.PR.P and TD.PR.Q issues was announced in late January.

Fairfax Financial Holdings Limited has announced that it:

has completed its previously announced bought deal financings for Subordinate Voting Shares, Preferred Shares, Series M (“Series M Shares”) and Senior Notes due 2025 (“Notes”). As a result of the underwriters’ exercising their over-allotment option to purchase an additional 150,000 Subordinate Voting Shares, at a price of $650.00 per Subordinate Voting Share, Fairfax has issued 1,150,000 Subordinate Voting Shares for gross proceeds of $747,500,000 (the “Subordinate Voting Share Offering”). The underwriters for the offering of Series M Shares (the “Preferred Share Offering”) also exercised their option to purchase an additional 1,200,000 Series M Shares at a price of $25.00 per share. As a result, Fairfax has issued 9,200,000 Series M Shares for gross proceeds of $230 million pursuant to the Preferred Share Offering. In addition, Fairfax has completed its previously announced offering of Notes in an aggregate principal amount of $350 million (the “Notes Offering”). The total gross proceeds of the Subordinate Voting Share Offering, Preferred Share Offering and Notes Offering are approximately $1.325 billion.
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The Series M Shares were sold through a syndicate of Canadian underwriters led by BMO Capital Markets, RBC Capital Markets and Scotiabank and that also included CIBC World Markets Inc., National Bank Financial Inc., TD Securities Inc., Canaccord Genuity Corp., Desjardins Securities Inc., GMP Securities L.P. and Cormark Securities Inc.
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Fairfax intends to use the net proceeds of the Subordinate Voting Share Offering, the Preferred Share Offering and the Notes Offering to partially fund the previously announced proposed acquisition of all of the issued and to be issued shares of Brit plc. There can be no assurance that such acquisition will be completed. If the acquisition is not successfully completed, Fairfax intends to use the net proceeds from the offerings to augment its cash position, to increase short-term investments and marketable securities held at the holding company level, to refinance or retire outstanding debt and other corporate obligations of Fairfax and its subsidiaries from time to time, and for general corporate purposes.

FFH.PR.M is a FixedReset, 4.75%+398, announced February 20. It will be tracked by HIMIPref™ and will be assigned to the Scraps index on credit concerns.

The issue traded 774,812 shares today (consolidated exchanges) in a range of 24.63-75 before closing at 24.65-74. Vital Statistics are:

Implied Volatility theory provides a very poor fit to the data:

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According to this FFH.PR.M, resetting at +398bp on 2020-3-31, is $0.85 cheap at its bid of 24.65..

Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Class A Preferred Shares Series 29 (TSX: CM.PR.G), for cash. The redemption will occur on April 30, 2015. The redemption price is $25.00 per Series 29 share.

The $0.337500 quarterly dividend announced on February 26, 2015 will be the final dividend on the Series 29 shares and will be paid on April 28, 2015, covering the period to April 30, 2015, to shareholders of record on March 27, 2015.

Holders of the Series 29 shares should contact the financial institution, broker or other intermediary through which they hold the shares to confirm how they will receive their redemption proceeds.

CM.PR.G was issued in accordance with a prospectus dated June 4, 2004 as a matched unit of a warrant and a Series 28 preferred; it was a Straight Perpetual paying 5.40%.

The issue is noteworthy because it was convertible into common at the option of the bank; the right to exercise this option was assigned to OSFI in August, 2011, and the shares were thereafter deemed to be NVCC-compliant. Due to this, the initial assignment of these shares to the DeemedRetractible index was reversed and the issue considered to be a Straight Perpetual for reporting and analytical purposes. CM.PR.G is the last of CIBC’s preferreds that has been treated in this way; CM.PR.D and CM.PR.E have already been redeemed.

TransCanada Corporation has announced:

that it has completed its public offering of cumulative redeemable first preferred shares, series 11 (the “Series 11 Preferred Shares”). TransCanada issued 10 million Series 11 Preferred Shares for aggregate gross proceeds of $250 million through a syndicate of underwriters co-led by Scotiabank and RBC Capital Markets.

The net proceeds of the offering will be used for general corporate purposes and to reduce short term indebtedness of TransCanada and its affiliates, which short term indebtedness was used to fund TransCanada’s capital program and for general corporate purposes.

The Series 11 Preferred Shares will begin trading today on the TSX under the symbol TRP.PR.G.

TRP.PR.G is a FixedReset, 3.80%+296, announced February 23. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

The issue has been rated Pfd-2(low) by DBRS.

TRP.PR.G traded 1,511,656 shares today (consolidated exchanges) in a range of 24.83-93 before closing at 24.83-85. Vital statistics are:

Implied Volatility theory suggests that TRP.PR.G is $1.22 cheap:

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Fairfax Financial Holdings Limited has announced:

that it has determined the fixed dividend rate on its Cumulative 5-Year Rate Reset Preferred Shares, Series E (“Series E Shares”) (TSX: FFH.PR.E) for the five years commencing April 1, 2015 and ending March 31, 2020. The fixed quarterly dividends on the Series E Shares during that period will be paid at an annual rate of 2.91% (Cdn. $0.18188 per share per quarter).

Holders of Series E Shares have the right, at their option, exercisable not later than 5:00pm (Toronto time) on March 16, 2015, to convert all or part of their Series E Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series F (the “Series F Shares”), effective March 31, 2015. The quarterly floating rate dividends on the Series F Shares will be paid at an annual rate, calculated for each quarter, of 2.16% over the annual yield on three month Government of Canada treasury bills. The actual quarterly dividend rate in respect of the April 1, 2015 to June 29, 2015 dividend period for the Series F Shares will be 0.647753% (2.627 % on an annualized basis) and the dividend, if and when declared, for such dividend period will be Cdn. $0.16194 per share, payable on June 29, 2015.

Holders of Series E Shares are not required to elect to convert all or any part of their Series E Shares into Series F Shares.

As provided in the share conditions of the Series E Shares, (i) if Fairfax determines that there would be fewer than 1,000,000 Series E Shares outstanding after March 31, 2015, all remaining Series E Shares will be automatically converted into Series F Shares on a one-for-one basis effective March 31, 2015; and (ii) if Fairfax determines that there would be fewer than 1,000,000 Series F Shares outstanding after March 31, 2015, no Series E Shares will be permitted to be converted into Series F Shares. There are currently 7,915,539 Series E Shares outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series F Shares effective upon conversion. Listing of the Series F Shares is subject to Fairfax fulfilling all the listing requirements of the TSX and, upon approval, the Series F Shares will be listed on the TSX under the trading symbol “FFH.PR.F”.

Fairfax is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.

FFH.PR.E is a FixedReset that commenced trading 2010-2-1 after being announced 2010-1-21.

The initial dividend rate was 4.75%, so the dividend is being cut by a horrific 39%.

As noted in the release, the deadline for conversion instructions to reach the company is March 16 at 5pm; I will post a note a few days in advance of the deadline with a recommendation regarding whether holders should or should not exchange their shares.

Implied Volatility theory – with tomorrow’s new issue deemed to be bid at par – suggests that FFH.PR.E is currently $0.43 cheap … but the fit is very poor:

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Aimia has announced:

the applicable dividend rates for its Cumulative Rate Reset Preferred Shares, Series 1 (the “Series 1 Shares”) and its Cumulative Floating Rate Preferred Shares, Series 2 (the “Series 2 Shares”), further to the February 27, 2015 notice that it will not exercise its right to redeem all or any part of the outstanding Series 1 Shares and, as a result of which, subject to certain conditions, the holders of the Series 1 Shares will have the right to convert all or part of their Series 1 Shares into Series 2 Shares on a one-for-one basis.

With respect to any Series 1 Shares that remain outstanding after March 31, 2015, holders of the Series 1 Shares will be entitled to receive quarterly fixed, cumulative, preferential cash dividends, as and when declared by the Board of Directors of Aimia, subject to the provisions of the Canada Business Corporations Act. The dividend rate for the five-year period from and including March 31, 2015 to but excluding March 31, 2020 will be 4.5%, being 3.75% over the five-Year Government of Canada bond yield, as determined in accordance with the terms of the Series 1 Shares.

With respect to any Series 2 Shares that may be issued on March 31, 2015, holders of the Series 2 Shares will be entitled to receive quarterly floating rate, cumulative, preferential cash dividends, calculated on the basis of the actual number of days elapsed in such quarterly period divided by 365, as and when declared by the Board of Directors of Aimia, subject to the provisions of the Canada Business Corporations Act. The dividend rate for the floating rate period from and including March 31, 2015 to but excluding June 30, 2015 will be 4.217%, being 3.75% over the 90-day Government of Canada Treasury Bill yield, as determined in accordance with the terms of the Series 2 Shares.

Beneficial owners of Series 1 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right on or prior to the deadline for exercise, which is 5:00 p.m. (Montreal time) on March 17, 2015.

Inquiries should be directed to Aimia’s Registrar and Transfer Agent, CST Trust Company, at 1-800-387-0825 (toll free in Canada and the United States).

The extension has been previously reported on PrefBlog. AIM.PR.A changed its ticker from AER.PR.A in October, 2011. AER.PR.A commenced trading 2010-1-20 after being announced 2010-1-12.

The initial dividend rate was 6.50%, so the new rate of 4.50% represents a decline of about 31%.

As noted in the release, the deadline for conversion instructions to reach the company is March 17 at 5pm Montreal Time; I will post a note a few days in advance of the deadline with a recommendation regarding whether holders should or should not exchange their shares.

Standard & Poor’s has announced:

• •We are affirming our ‘B’ corporate credit ratings on U.S. power generator Atlantic Power Corp. (APC) and affiliate Atlantic Power Limited Partnership, and are removing them from CreditWatch with negative implications.
• •At the same time, we are revising our recovery ratings on APC’s senior unsecured debt to ‘2’ from ‘4’.
• •The outlook on all ratings is stable.

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The CreditWatch placement followed the departure of the company’s CEO and a significant cut in distributions by the company that had triggered our review of the company’s financial plan. In September 2014, APC had lowered its dividend by 70% (C$0.12 annually from C$0.40), a second distribution cut in 18 months, following a 65% reduction in February 2013. The company had also revised its distribution payments to a quarterly schedule from monthly payouts. The company had cited a reevaluation of its medium-term plan, including debt maturities and recontracting risk from 2017 onward that had caused the change in its payout policy.

The challenge management faces at this point is the relatively high leverage as it deals with recontracting risk in 2017 and 2018. Atlantic is considering selling assets (the company has made statements that its wind assets could be candidates for sale) and using proceeds for deleveraging.

We are affirming the ratings based on our expectations that:

• •The sale of the wind portfolio would appear to be a likely divestment by the company. APC is not restricted by its capital structure on use of proceeds and wind assets appear to be attractive assets in the current market.
• •Even if a sale does not close successfully, ratios are incrementally weaker but the level of financial performance on a quality of cash flow (QCF) score of ‘6’ is adequate for the rating.
• •There are no debt acceleration covenants in the documents. If Atlantic cannot meet its EBITDA to interest covenant it will have restrictions on dividend payments over a specified amount, but the covenant breach is not an event of default.
• •We expect the company to be in compliance with its covenants in first-half 2015 (APC’s bond fixed-charge ratio was not in compliance at year-end 2014 because of make-whole charges incurred in February 2014).
• •Management changes have concluded and a new CEO has taken charge.

“The stable outlook reflects our expectation that the company will maintain POCF to mandatory debt service levels above 1.9x and POCF to debt above 13%,” said Standard & Poor’s credit analyst Aneesh Prabhu.

We also expect POCF to interest levels to be above 2x. Selling the wind assets will not change these levels materially, but we expect a potential sale (and proceeds used for debt reduction) to move consolidated debt leverages, as reflected in consolidated debt to EBITDA by 50 basis points to below 6x by year-end 2015, which supports ratings.

The now concluded ‘Watch-Negative’ was reported on PrefBlog 2014-9-17.

For those of you who missed it in the post announcing the new TD FixedReset issue, Toronto-Dominion Bank has announced:

It is the intention of the Bank to exercise its right to redeem all of its outstanding 10 million Non-cumulative Redeemable Class A First Preferred Shares, Series R (the “Series R Shares”). The foregoing statement of intention does not constitute formal notice of redemption. Should the Bank exercise its right to redeem the Series R Shares, formal notice of redemption will be issued by the Bank in due course.

TD.PR.R is a DeemedRetractible, 5.60%, which commenced trading March 12, 2008 after being announced March 3, 2008.

It is currently redeemable at 25.75; the redemption price declines by $0.25 on 2015-4-30. There can be no great surprise about the redemption intention announcement, given that the redemption of the very similar TD.PR.P and TD.PR.Q issues was announced in late January.