Category: Issue Comments

Aimia has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding 6,900,000 Cumulative Rate Reset Preferred Shares, Series 1 (the “Series 1 Shares”) on March 31, 2015. As a result and subject to certain conditions set out in the prospectus supplement dated January 13, 2010 relating to the issuance of the Series 1 Shares, the holders of the Series 1 Shares have the right to convert all or part of their Series 1 Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series 2 (the “Series 2 Shares”) of Aimia on March 31, 2015. Holders who do not exercise their right to convert their Series 1 Shares into Series 2 Shares on such date will continue to hold their Series 1 Shares.

The foregoing conversion right is subject to the conditions that: (i) if Aimia determines that there would be less than 1,000,000 Series 2 Shares outstanding after March 31, 2015, then holders of Series 1 Shares will not be entitled to convert their shares into Series 2 Shares, and (ii) alternatively, if Aimia determines that there would remain outstanding less than 1,000,000 Series 1 Shares after March 31, 2015, then all remaining Series 1 Shares will automatically be converted into Series 2 Shares on a one-for-one basis on March 31, 2015. In either case, Aimia will give written notice to that effect to registered holders of Series 1 Shares no later than March 24, 2015.

The dividend rate applicable to the Series 1 Shares for the 5-year period from and including March 31, 2015 to but excluding March 31, 2020, and the dividend rate applicable to the Series 2 Shares for the 3-month period from and including March 31, 2015 to but excluding June 30, 2015, will be announced by way of a press release on March 2, 2015.

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).

No surprises here, since the issue resets at GOC5 + 375bp and was quoted at 22.38-50 on February 27 to yield 4.97%-93 to perpetuity.

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.

Brompton Funds Ltd. has announced:

that Brompton Oil Split Corp. (the “Company”) has completed its initial public offering of 2,800,000 Class A shares and 2,800,000 Preferred shares for total gross proceeds of $70 million. The Class A and Preferred shares will commence trading today on the Toronto Stock Exchange under the symbol OSP and OSP.PR.A, respectively.

The Company will invest in a portfolio (the “Portfolio”) of equity securities of at least 15 large capitalization North American oil and gas issuers selected by the Manager from the S&P 500 Index and the S&P/TSX Composite Index, giving consideration to, among other metrics, attractive valuation, growth prospects, profitability, liquidity, sustainability of dividends and a strong balance sheet. The Portfolio will be focused primarily on oil and gas issuers that have significant exposure to oil, and will initially include equities of the following oil and gas issuers:

ARC Resources Ltd.	Chevron Corporation	Occidental Petroleum Corporation
Canadian Natural Resources Limited	Encana Corporation	PrairieSky Royalty Ltd.
ConocoPhillips	EOG Resources Inc.	Suncor Energy Inc.
Crescent Point Energy Corp.	Husky Energy Inc.	Vermilion Energy Inc.
Cenovus Energy Inc.	Imperial Oil Limited	Exxon Mobil Corporation

The investment objectives for the Class A shares are to provide holders with regular monthly non-cumulative cash distributions targeted to be 8.0% per annum on the $15.00 issue price, and the opportunity for growth in net asset value. The investment objectives for the Preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions in the amount of 5.0% per annum on the $10.00 issue price, and to return the original issue price on the maturity date, March 31, 2020.

Brompton Funds Limited is the manager and portfolio manager of the Company. In addition to Brompton Oil Split Corp., the Manager currently manages 4 other split-share funds with assets under management over $900 million. The portfolio management team is led by Laura Lau, an award winning portfolio manager with over 20 years of experience in financial services, who has a proven track record in managing flow-through funds and resource assets. The team also includes Michael Clare, an experienced energy and flow-through portfolio manager who specializes in the analysis of crude oil and natural gas markets.

The syndicate of agents for the offering was led by Scotiabank, CIBC and RBC Capital Markets and included TD Securities Inc., BMO Capital Markets, National Bank Financial Inc., GMP Securities L.P., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., Dundee Securities Ltd., Industrial Alliance Securities Inc. and Mackie Research Capital Corporation.

OSP.PR.A commenced trading today right on schedule. It is a Split Share, 5-Year, with a 5% coupon.

The issue traded 354,334 shares today (consolidated exchanges) in a range of 10.00-15 before closing at 10.11-14.

DBRS has confirmed its provisional rating of Pfd-3(high):

DBRS Limited (DBRS) has today finalized the provisional rating of Pfd-3 (high) to the Preferred Shares to be issued by Brompton Oil Split Corp. (the Company). The Company issued an equal number of Preferred Shares and Class A Shares at an issue price of $10.00 per Preferred Share and $15.00 per Class A Share. The Preferred Shares and Class A Shares are scheduled to mature on March 31, 2020.

Net proceeds from the offering were used to invest in the common shares of at least 15 large capitalization North American oil and gas issuers (the Portfolio). The Portfolio is initially equally weighted and will be rebalanced at least semi-annually. A portion of the Portfolio’s investments are denominated in U.S. dollars; however, this exposure is expected to be hedged completely back to the Canadian dollar.

The Company has advised DBRS that 2,800,000 Preferred Shares and 2,800,000 Class A Shares were issued on the initial offering, for gross proceeds of $70,000,000. The initial downside protection available to holders of the Preferred Shares is approximately 57.3% (after offering expenses). Dividends received on the Portfolio are used to pay a fixed cumulative quarterly distribution to holders of the Preferred Shares of $0.1250 per Preferred Share ($0.50 per annum or 5.0% per annum on the initial issue price of $10.00 per Preferred Share), while holders of the Capital Shares are expected to receive a regular monthly non-cumulative cash distribution of $0.10 per Class A Share. The Preferred Share dividend coverage ratio is approximately 0.9 times, based on the initial offering size. The Company has the ability to write covered call options or engage in securities lending in order to generate additional income. The Company has also granted a security interest in the Portfolio to RBC Investor Services Trust, in its capacity as custodian of the Company’s property (the Custodian), as security for any obligations owing by the Company to the Custodian. The Custodian also has a right to exercise set-off against the Company’s property (including the Portfolio) to the extent that the Company fails to satisfy any obligations owing to the Custodian.

Vital statistics are:

Industrial Alliance Insurance and Financial Services Inc. has announced:

The net proceeds [from an offering of sub-debt] will be added to the Company’s general funds and will be used for general corporate purposes (including, subject to the prior approval of the Autorité des marchés financiers, the redemption of Industrial Alliance’s outstanding 5.90% Non-Cumulative Class A Preferred Shares Series F (the “Series F Preferred Shares”), which Industrial Alliance currently intends to effect on March 31, 2015 (the “Series F Redemption”)).

Subject to the prior approval of the Autorité des marchés financiers, following the closing of the Offering, Industrial Alliance intends to issue a redemption notice to redeem the Series F Preferred Shares. Upon the Series F Redemption, Industrial Alliance will pay to the holders of the Series F Preferred Shares the redemption price of $26 less any taxes required to be withheld or deducted. There are 4,000,000 Series F Preferred Shares outstanding as of today. A formal notice and instructions for the redemption of the Series F Preferred Shares will be sent to all shareholders in accordance with the rights, privileges, restrictions and conditions attached to the Series F Preferred Shares.

Separately from the redemption price, the final quarterly dividend of $0.36875 per Series F Preferred Share will be paid in the usual manner on March 31, 2015 to shareholders of record on February 27, 2015. After the Series F Preferred Shares are redeemed, holders of Series F Preferred Shares will cease to be entitled to distributions of dividends and will not be entitled to exercise any rights as holders other than to receive the redemption price and the final quarterly dividend described above.

On a pro forma basis, after giving effect to the Offering and the Series F Redemption, the Company estimates that, as at December 31, 2014: (i) its debt ratio would increase from 13.2% to 18.1% if only its outstanding debentures are considered “debt”; (ii) its debt ratio would increase from 23.7% to 26.1% if its outstanding debentures and preferred shares are considered “debt”; and (iii) its solvency ratio would increase by 7 percentage points to 216%.

Holders are reminded that the $26 redemption price is a premium of $1.00 over par value and this amount will be considered a Deemed Dividend for tax purposes – that is, the transaction will be considered as a sale at $25.00 and a dividend of $1.00. Thus, some taxable holders will find it advantageous to sell into the market at a few pennies below the redemption value, in order to maximize (minimize) their capital gain (loss) while minimizing dividend income. Please consult your personal tax advisor.

IAG.PR.F has been tracked by HIMIPref™ and is assigned to the DeemedRetractible subindex.

Talisman Energy Inc. has announced:

that the holders of its Common Shares and Preferred Shares have approved the proposed arrangement under which Repsol S.A., through a wholly-owned subsidiary, is to acquire all of the outstanding shares of Talisman. Of the votes cast, over 99% of holders of each class of shares voted in favour of the agreement at the special meeting of shareholders held earlier today.

The completion of the arrangement remains subject to the granting of a final order by the Court of Queen’s Bench of Alberta, the receipt of required regulatory approvals and the satisfaction or waiver of other customary closing conditions. It is anticipated that the completion of the transaction will occur in the second quarter of 2015 and all regulatory approvals are on track.

However, it looks like shareholder approval was already factored into market prices, since the common closed at $9.51, well within its range of the past two weeks and actually down $0.02 on the day, while the preferred improved from 24.00-12 yesterday to 24.25-34 today.

It looks like traders are still accounting for a healthy amount of deal risk, since the common closed today at USD 7.68 on the New York Exchange, with a closing quote of 7.45 bid without. The day’s range was 7.65-71, compared with a deal price of USD 8.00, which (at today’s currency close of 1.2459), equates to CAD 9.57. The USD 7.68 close represents a 4% discount to deal price.

Thus, given that the preferreds are bid at 24.25, and will go ex-dividend for $0.2625 on March 11 (estimated) payable March 31 (estimated), both issues are showing comparable deal-risk.

Is it too much or too little? I don’t know – as I stated in my initial report on the potential deal, I don’t do deal risk. I will, however, bet a nickel that if the deal falls through, the preferreds will drop by $10.00 instantly.

The deal has attracted the usual weeping and wailing over a head-office closing from the usual suspects, who consider Canadians to be too stupid to take whatever money they’ve made from the investment to start new companies.

On February 16 Fairfax Financial Holdings announced:

that it has reached an agreement with Brit PLC (“Brit” or the “company”) to acquire all of the outstanding shares of Brit (the “Brit Shares”). Brit is a market-leading global Lloyd’s of London specialty insurer and reinsurer. The full announcement (the “Announcement”) is available for viewing on Fairfax’s website at www.fairfax.ca/britoffer.
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The aggregate purchase price payable by Fairfax for the Offer is approximately US$1.88 billion. On February 12, 2015, Fairfax announced 2014 earnings of approximately US$1.6 billion. Excluding the final dividend expected to be declared by the board of directors of Brit for the year ended December 31, 2014 in an amount of 25 pence per Brit Share , Fairfax’s purchase price of 280 pence per Brit Share is less than ten times the company’s earnings based on the company’s annualized net earnings for the six months ended June 30, 2014. The acquisition is accretive to Fairfax on several metrics including gross revenue per share and investments per share.

I love the bit about how the acquisition is accretive to Fairfax on several metrics including gross revenue per share and investments per share. The Public Relations team must have been scratching their heads for a while before coming up with that one! I can’t even tell you just exactly what “investments per share” means, since the phrase was not mentioned in FFH’s last quarterly statements or MD&A. The assertion was repeated by Prem Watsa in the conference call, but was left unchallenged – there were only softball questions from equity salesmen hoping to line up a financing deal for their firms.

In response to all this Standard & Poor’s has announced:

• •Fairfax Financial Holdings Ltd. announced on Feb. 16 that it had reached an agreement to acquire Brit PLC for about $1.88 billion.
• •We are affirming the issuer credit rating on Fairfax Financial Holdings Ltd. at ‘BBB-‘ and the issuer credit and financial strength ratings of its core insurance affiliates at ‘A-‘.
• •We are revising the outlook to negative from stable, considering the potentially significant reduction in the group’s capital adequacy, as measured by our proprietary capital model.

…
The company has several options for restoring capital adequacy to a level that Standard & Poor’s views as more supportive of the existing ratings. However, the company is still finalizing the capital enhancement strategy, and there is execution risk with regard to any capital management plan that it adopts.
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The negative outlook on Fairfax reflects the significant potential decline in the group’s capital adequacy following the completion of the Brit PLC acquisition. The time horizon for our outlook is six to 12 months.

Fairfax has several preferred share issues outstanding, FFH.PR.C, FFH.PR.D, FFH.PR.E, FFH.PR.G, FFH.PR.I and FFH.PR.K; FFH.PR.D is a FloatingReset paired with FFH.PR.C;, all the others are FixedResets.

Update, 2015-02-23: DBRS has confirmed Fairfax with a Stable Trend:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Debt of Fairfax Financial Holdings Limited (Fairfax) at BBB and the Company’s Preferred Shares at Pfd-3. The trends on all ratings remain Stable. The Senior Unsecured Notes of Fairfax (US) Inc. are guaranteed by Fairfax Financial Holdings Limited. This rating action follows the announcement that Fairfax has agreed to purchase Brit PLC (Brit) for $1.88 billion, a premium of 11.2% per share. Fairfax has obtained a sales agreement with approximately 73% of the voting shares of Brit. The transaction is expected to close in Q2 2015, subject to customary conditions, including regulatory approvals. As a Lloyd’s of London (Lloyd’s) insurer, Brit focuses on global specialty insurance and reinsurance and is the eighth-largest Lloyd’s insurer with a written premium capacity of GBP 1.0 billion as of July 2014.

The rating action reflects DBRS’s view that the purchase is consistent with Fairfax’s strategy of extending its franchise globally through opportunistic investments whereby it acquires businesses with demonstrated underwriting discipline that add to its existing franchise. Fairfax engages in property and casualty insurance, reinsurance and investment management. Brit focuses on property casualty (62% of premium) combined with complex specialty insurance lines such as marine, energy and terrorism risks. DBRS anticipates that the acquisition will help both Fairfax and Brit to expand globally. Fairfax is expected to benefit from the significant expansion in the specialty insurance markets, an enhanced distribution network and Brit’s underwriting skills in specialty insurance. Brit is expected to benefit from the greater scale of the combined companies in the Lloyd’s market, Fairfax’s franchise network presence and Fairfax’s resources, including Fairfax’s strong investment record. Pro forma, the purchase would result in Fairfax strengthening its position in the Lloyd’s market as it is expected to become the fifth-largest insurer with a premium capacity exceeding GBP 1.3 billion as of 2015, which is likely to enhance Fairfax’s ability to manage pricing and to facilitate greater lead opportunities in arranging deal terms.

DBRS has announced that it:

has today downgraded the Issuer Rating of Bombardier Inc. (Bombardier or the Company) to B (high) and the Trend has been changed to Negative. DBRS’s downgrade incorporates the Company’s progressively weaker financial profile due to debt and liquidity burdens, as well as the erosion of its business profile. The Company’s substantial negative net free cash flow and sizeable financing needs to support its aircraft developments programs have led to increasing indebtedness and weakening of all credit metrics in 2014. Substantial cost pressures have led to the erosion of margins at the aerospace and transportation businesses due to competitive and operational reasons. DBRS could take further negative rating action should the Company announce additional operating challenges, encounter difficulties in executing its ambitious financing, incur material indebtedness or see additional deterioration in profitability.
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DBRS’s rating action reflects the Company’s rapidly weakening financial and business risk profiles at its aerospace and transportation businesses. The Negative Trend reflects uncertainty surrounding the financial and business profiles of the Company, noting that both are subject to deterioration and potential rating action in the near-mid-term.

In November, 2013, DBRS announced that it:

downgraded the Issuer Rating and Senior Unsecured Debentures of Bombardier Inc. (BBD or the Company) to BB (low) and the Preferred Shares were downgraded to Pfd-4 (low). The trend on the Issuer Rating is Stable and DBRS has removed all ratings from Under Review with Negative Implications. Additionally, DBRS has discontinued the Company’s Senior Unsecured Debentures and Preferred Shares ratings effective immediately.

Earlier this year, PrefBlog reported that BBD.PR.B, BBD.PR.C & BBD.PR.D Downgraded to P-5(high) by S&P.

BBD.PR.B, BBD.PR.C and BBD.PR.D are all tracked by HIMIPref™ but are relegated to the Scraps index on credit concerns.

Scotia Managed Companies has announced:

Allbanc Split Corp. II (the “Company”) announced today that it has called 110,799 Preferred Shares for cash redemption on February 27, 2015 (in accordance with the Company’s Articles) representing approximately 12.045% of the outstanding Preferred Shares as a result of the special annual retraction of 221,598 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on February 25, 2015 will have approximately 12.045% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $21.80 per share.

Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including February 27, 2015.

Payment of the amount due to holders of Preferred Shares will be made by the Company on February 27, 2015. From and after February 27, 2015 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.

Allbanc Split Corp. II is a mutual fund corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. Capital Shares and Preferred Shares of Allbanc Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols ALB and ALB.PR.B respectively.

ALB.PR.B was last mentioned on PrefBlog when it was upgraded to Pfd-2 by DBRS. ALB.PR.B is tracked by HIMIPref™, but relegated to the Scraps index on volume concerns.

Brompton Group has announced:

Brompton Oil Split Corp. (the “Company”) has determined the exchange ratios for the exchange option (the “Exchange Option”) with respect to its initial public offering. Under the Exchange Option, prospective purchasers could purchase Class A shares of the Company or Units (consisting of one Class A and one Preferred share) by an exchange of freely tradable equity securities (“Exchange Securities”) of the issuers listed below (the “Exchange Eligible Issuers”). The Exchange Option expired at 5:00 pm on January 23, 2015.

The following table indicates the adjusted volume weighted average trading price and exchange ratio for the Exchange Securities of each Exchange Eligible Issuer as calculated in the manner described in the Company’s prospectus dated January 29, 2015. The adjusted volume weighted average trading price and exchange ratios are rounded to four decimal places. Fractional Class A shares/Units will not be issued.

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The Toronto Stock Exchange has conditionally approved the listing of the Class A and Preferred shares, subject to the Company fulfilling all customary requirements. Trading under the symbols OSP and OSP.PR.A is expected to commence on the closing date, February 24, 2015.

The Company will invest in a portfolio (the “Portfolio”) of equity securities of at least 15 large capitalization North American oil and gas issuers selected by Brompton Funds Limited (the “Manager”) from the S&P 500 Index and the S&P/TSX Composite Index, giving consideration to, among other metrics, attractive valuation, growth prospects, profitability, liquidity, sustainability of dividends and a strong balance sheet. The Portfolio will be focused primarily on oil and gas issuers that have significant exposure to oil.

The investment objectives for the Class A shares are to provide holders with regular monthly non-cumulative cash distributions targeted to be 8.0% per annum on the $15.00 issue price, and the opportunity for growth in net asset value. The investment objectives for the Preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions in the amount of 5.0% per annum on the $10.00 issue price, and to return the original issue price on the maturity date, March 31, 2020.

The Manager will also be the portfolio manager of the Company. The Manager currently manages 4 split-share funds with assets under management over $900 million. The portfolio management team will be led by Laura Lau, an award winning portfolio manager with over 20 years of experience in financial services, who has a proven track record in managing flow-through funds and resource assets. The team also includes Michael Clare, an experienced energy and flow-through portfolio manager who specializes in the analysis of crude oil and natural gas markets.

The syndicate of agents for the offering is being led by Scotiabank, CIBC and RBC Capital Markets and includes TD Securities Inc., BMO Capital Markets, National Bank Financial Inc., GMP Securities L.P., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., Dundee Securities Ltd., Industrial Alliance Securities Inc. and Mackie Research Capital Corporation.

This new issue was reported on PrefBlog in early January … but now we have a ticker symbol!

DBRS has announced that it:

has today placed the rating of the Class A, Preferred Shares (the Preferred Shares) issued by Big Bank Big Oil Split Corp. (the Company) Under Review with Negative Implications. In June 2006, the Company issued 2.72 million Preferred Shares at $10 each and an equal number of Capal Shares (the Capital Shares) at $15 each. The final redemption date for the Preferred Shares is December 30, 2016.
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DBRS last confirmed the rating of the Preferred Shares on April 4, 2014. The plunge in oil prices in recent months has caused downside protection to fall to 42% as of January 29, 2015. As a result, the Preferred Shares have been placed Under Review with Negative Implications.

BBO.PR.A was last mentioned on PrefBlog when it was confirmed at Pfd-2(low) by DBRS on April 5, 2013.

Blackrock’s useless and hard to find website does not explicitly publish the NAVPU for the fund, but I’m sure we can all applaud management of the company for doing so well despite being mentally deficient. Fiddling with Chart and getting the historical NAVs eventually leads to the information that the NAV is $8.04; note that this is PER CAPITAL UNIT, not per whole unit, which is not made explicit on the charts due to Blackrock management’s unfortunate handicap. As noted on April 5, 2013, this method of reporting valuation was only made clear on the fact sheet, but now clicking “Fact Sheet” on the fund’s page results in the notification that No search results found for keywords: ‘CA0888941006’. Other useful information on the site includes the fact that the page is “Missing portfolio manager content”.

I strongly urge that readers who might meet a Blackrock executive in the course of their day to please remember to be kind. There, but for the grace of God, go we.

BBO.PR.A is not tracked by HIMIPref™.

Standard & Poor’s has announced:

• •We have taken various rating actions on the operating and nonoperating holding companies (NOHCs) of certain systemically important U.K., German, and Austrian banking groups.
• …
• •We have lowered the issuer credit ratings on the U.K. and Swiss NOHCs to reflect our view that the prospect of extraordinary government support to the benefit of their senior creditors is now unlikely.
• …
• •For most of the U.K., German, and Austrian operating companies, we have placed their long-term, and in some cases also their short-term, ratings on CreditWatch with negative implications.
• •This reflects these countries’ recent full implementation of the EU Bank Recovery and Resolution Directive, our view that extraordinary government support will likely become less predictable in the near term, but also that we continue to see unresolved questions about how the legislation may operate in practice.
• …
• •We expect to resolve all these CreditWatch placements by early May 2015.

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As a result of our review, we took the following rating actions:

• •We lowered our long-term ratings on the following bank NOHCs by one or two notches: Barclays PLC, Credit Suisse Group AG, HSBC Holdings PLC, HSBC USA Inc., and Lloyds Banking Group PLC. Where relevant, we affirmed the short-term ratings. The outlooks on these companies are now stable, with the exception of Lloyds, which is positive. We affirmed our ratings on the hybrid capital instruments issued by, or guaranteed by, these NOHCs.