Category: Issue Comments

National Bank of Canada has announced:

• Aligned with National Bank’s strategic plan to accelerate growth across all its business lines in Canada
• Provides customers an expanded product and service offering nationally, extensive banking centre network and common customer experience culture
• Maintains branch footprint and Edmonton-based executive and operational presence
• Combination creates stronger competitor, and provides more choice for Canadians
• Concurrent subscription receipt offering of $1 billion

National Bank of Canada (“National Bank”) (TSX: NA) and Canadian Western Bank (“CWB”) (TSX: CWB) today announced they have entered into a definitive agreement (the “Agreement”) for National Bank to acquire CWB, a diversified financial services institution based in Edmonton, Alberta. The transaction brings together two complementary banks with growing businesses, enabling the united bank to enhance services to customers by offering a comprehensive product and service platform at national scale, with a regionally focused service model.

National Bank will acquire all of the issued and outstanding common shares of CWB (the “CWB Shares”) by way of a share exchange (the “Transaction”), valuing CWB at approximately $5.0 billion (the “CWB Equity Value”).
…
Each CWB Share, other than those held by National Bank, will be exchanged for 0.450 of a common share (the “National Bank Shares”) of National Bank (the “Exchange Ratio”). Based on the 20-day volume weighted average trading price of the National Bank Shares on the TSX as of June 11, 2024, the Exchange Ratio values each CWB Share at $52.24, representing a 110% premium to the closing price of the CWB Shares on the TSX of $24.89 as of June 11, 2024, and a 100% premium to the volume weighted average trading price of the CWB Shares over the last 20 days. The National Bank Shares to be issued upon closing of the Transaction will represent a pro forma ownership of approximately 10.5% of National Bank by CWB shareholders, taking into account the Private Placement and the Public Offering (as defined below).

The Transaction is subject to approval of 662/3% of the votes cast by CWB shareholders at a special meeting of shareholders (the “Meeting”) expected to be held in September 2024 to approve an amendment to CWB’s by-laws to provide for the share exchange.
…
Each CWB Share, other than those held by National Bank, will be exchanged for 0.450 of a common share (the “National Bank Shares”) of National Bank (the “Exchange Ratio”). Based on the 20-day volume weighted average trading price of the National Bank Shares on the TSX as of June 11, 2024, the Exchange Ratio values each CWB Share at $52.24, representing a 110% premium to the closing price of the CWB Shares on the TSX of $24.89 as of June 11, 2024, and a 100% premium to the volume weighted average trading price of the CWB Shares over the last 20 days. The National Bank Shares to be issued upon closing of the Transaction will represent a pro forma ownership of approximately 10.5% of National Bank by CWB shareholders, taking into account the Private Placement and the Public Offering (as defined below).

The Transaction is subject to approval of 662/3% of the votes cast by CWB shareholders at a special meeting of shareholders (the “Meeting”) expected to be held in September 2024 to approve an amendment to CWB’s by-laws to provide for the share exchange.
…
ACQUISITION FINANCING

National Bank also announced today that it intends to complete an equity financing in connection with the Transaction. The equity financing is comprised of a public offering (the “Public Offering”) and concurrent private placement (the “Private Placement”) of subscription receipts (the “Subscription Receipts”) for gross proceeds totaling approximately $1.0 billion before giving effect to the Over-Allotment Option and the Additional Subscription Option (as defined below).

Pursuant to the Public Offering, National Bank has agreed to issue and sell 4,453,000 Subscription Receipts at a price of $112.30 for total gross proceeds of approximately $500 million. The Public Offering is being underwritten on a bought-deal basis by a syndicate of underwriters led by National Bank Financial Inc. (“NBF”). National Bank has granted the underwriters an option (the “Over-Allotment Option”) to purchase up to an additional 667,950 Subscription Receipts at the public offering price exercisable up to 30 days after closing of the public offering.

Pursuant to the concurrent Private Placement, National Bank has agreed to issue and sell 4,453,000 Subscription Receipts at the public offering price to Caisse de dépôt et placement du Québec or an affiliate thereof (“CDPQ”) for gross proceeds of approximately $500 million. All of CDPQ’s Subscription Receipts will be subject to a statutory hold period of four months plus one day from the date of their issuance. CDPQ will have the right to purchase up to an additional 667,950 Subscription Receipts, to maintain its pro-rata ownership and subject to, and in the same proportion as, the Over-Allotment Option being exercised by the underwriters (the “Additional Subscription Option”).

National Bank intends to use the net proceeds from the equity financing to support strong regulatory capital ratios following the closing of the Transaction, to fund any cash consideration under the terms of the Transaction and to pay the Transaction expenses.

Affected issues are CWB.PR.B and CWB.PR.D.

Thanks to Assiduous Reader IrateAR for bringing this to my attention!

Royal Bank of Canada has announced (on June 10):

its intention to redeem all of its issued and outstanding Non-Viability Contingent Capital (NVCC) Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series BB (Series BB shares) (TSX: RY.PR.H) on August 24, 2024, for cash at a redemption price of $25.00 per share to be paid on August 24, 2024.

There are 20,000,000 Series BB shares outstanding, representing $500 million of capital. The redemptions will be financed out of the general corporate funds of Royal Bank of Canada.

The final quarterly dividend of $0.228125 for each of the Series BB shares will be paid separately from the redemption price for each of the Series BB Shares and in the usual manner on August 23, 2024 to shareholders of record at the close of business on July 25, 2024. After such dividend payments, the holders of Series BB shares will cease to be entitled to dividends.

RY.PR.H was issued as a FixedReset, 3.90%+226, NVCC-Compliant issue that commenced trading 2014-6-3 after being announced 2014-5-23. The bank gave notice of extension on 2019-7-22. RY.PR.H reset at 3.65% effective 2019-8-24. I recommended against conversion and there was no conversion. The issue is tracked by HIMIPref™ and has been assigned to the FixedReset-Discount subindex.

Thanks to Assiduous Reader IrateAr for bringing this to my attention!

Fitch Ratings has announced that it:

has affirmed The Toronto-Dominion Bank’s (TD) Long-Term Issuer Default Rating (IDR) at ‘AA-‘ and Short-Term IDR at ‘F1+’. The Rating Outlook has been revised to Negative from Stable. Fitch has also affirmed the ratings of TD’s subsidiaries, TD Bank US Holding Company and TD Bank, N.A.

KEY RATING DRIVERS
The affirmations reflect TD’s resilient financial profile, including consistent and prudent underwriting, benign asset quality, diversified business mix, strong capitalization and robust liquidity. Under Fitch’s macroeconomic base case, conditions for continued financial and credit performance at TD’s current rating level are adequate.

The Negative Outlook reflects the uncertainty regarding the ultimate impact on the bank’s franchise, earnings and risk profiles from the various investigations by regulators on the deficiencies of TD’s anti-money laundering (AML) practices in the U.S. The outcomes of these investigations could have both monetary and non-monetary penalties, including, in Fitch’s opinion, an inability to engage in further M&A in the U.S. Furthermore, Fitch believes management’s focus on remediating shortcomings in risk controls may divert from ongoing operations, and with the costs of remediation, manifest in a weaker financial profile and franchise.

Regulatory Probe into BSA/AML: Fitch has changed its Business Profile factor outlook for TD to Negative from Stable. On April 30, TD announced that it took an initial provision of USD$450 million in connection with discussions with one of its U.S. regulators related to investigations of TD’s U.S. Bank Secrecy Act (BSA) / anti-money laundering (AML) program. The bank’s regulatory and law enforcement discussions with three U.S. regulators (including the regulator referenced in the preceding sentence) and the Department of Justice are ongoing.

TD has stated that its AML program was insufficient to effectively monitor, detect, report, and respond to suspicious activity. In 2023, TD terminated its agreement to acquire First Horizon Corporation (FHN), little more than a year after the announced merger, due to uncertainty when and if regulatory approvals could be obtained. The bank has invested approximately $500 million in program remediation and platform enhancements, and the work is well underway to enhance the bank’s risk controls.

Risk Management Shortcomings: Fitch has lowered the Risk Profile score to ‘a+’ from ‘aa-‘ and changed the factor outlook to Negative from Stable. TD has exhibited a strong track record of well-monitored and conservative risk appetite despite its moderately higher structural interest rate sensitivity, which is commensurate with its retail focus and deposit-rich balance sheet. However, Fitch expects the regulatory findings regarding TD’s AML practices to continue to garner a great deal of regulatory, political and potential legal attention, both in Canada and the U.S. over the near term.

The timetable of the investigation and implementation of remediation recommendations is unclear. Meanwhile, TD is undergoing a comprehensive overhaul of its U.S. and global AML program. TD has hired recognized AML executives from across the private and public sectors, onboarded hundreds of new AML professionals with expertise in program design, oversight and execution. The bank has also deployed new enterprise-wide training and onboarding programs, and made investments in new technology, processes and controls to enhance oversight across the enterprise.

Asset Quality Normalization: As with peers, TD’s credit quality measures are normalizing from unusually benign levels. The extent and duration of benign credit quality from 2020 to 2023 were not incorporated into the ratings because they were temporary. Similarly, Fitch does not expect to take rating actions on credit quality normalization, except if the velocity and scale of deterioration were to suggest sustained credit losses outside historical norms. Credit normalization started to pick up pace at the end of FY 2023. TD guided in 2Q24 that provisions would likely finish the year between 40bps-50bps of net loans, in line with 2019 levels (45bps). As of 2Q24, the provision ratio was 47bps.

Remediation and Regulatory Costs 2024: Fitch has changed the Earnings Profile factor outlook to Negative from Stable. TD’s core earnings power has been relatively stable over time, supported by its diversified business model. However, since the start of its AML issues, TD has thus far earmarked approximately $1.8 billion in extra costs according to Fitch’s calculations, including penalties, provisions, remediation efforts and the cost of the termination of the FHN acquisition. These costs could increase as the regulators announce their findings.

At the end of FY 2023 TD announced a restructuring program to reduce its cost base and achieve greater efficiency. Thus far, it has spent $819 million (pre-tax) and is expected to achieve savings of $400 million (pre-tax) in 2024 going up to run rate savings of approximately $725 million (pre-tax) thereafter. Management believes this will help achieve TD’s positive operating leverage target over the medium term.

Potential Capital Pressure: TD had built up its common equity Tier 1 (CET1) ratio to 15.2% prior to the FHN acquisition. The ratio has declined to 13.4% as of 2Q24, as TD deployed the unused capital and returned some it to shareholders through share buy-backs. Still at the highest level among peers, Fitch believes that a larger capital buffer is appropriate at this juncture to allow TD to provision for potential regulatory penalties.

Stable Funding and Liquidity Profile: TD’s funding and liquidity profile is stable and in line with peers. However, contraction in wealth management and U.S. retail deposits over the last couple of years, a trend seen industry wide, TD’s loans-to-deposits ratio deteriorated to 117% in 2Q24 (as per Fitch’s calculations), at the top end of Canadian peers. Meanwhile at 126%, TDS’s LCR ratio sits in the middle of the Canadian peer range.

RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
–Fitch could downgrade TD’s ratings if the current regulatory issues translate into a material loss of franchise strength, or if it becomes likely that the bank will incur fines that would result in structurally lower profitability that pressures existing capital levels.
–If TD’s Long-Term IDR is downgraded the Short-Term IDR would be downgraded as well.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
–Conversely, the Outlook may be revised to Stable if the monetary and non-monetary penalties form the regulatory findings are manageable for TD and do not significantly impact its growth prospects and earnings.

Affected issues are TD.PF.A, TD.PF.B, TD.PF.C, TD.PF.D, TD.PF.E, TD.PF.I, TD.PF.J and TD.PF.M.

An exchange of comments on PrefBlog about the captioned subject led to an exchange of eMails with Canoe Investor Relations, which I think is sufficiently interesting to warrant a post. I may be wrong!

I commenced by sending them an eMail:

I have a question regarding the captioned issue.

According to the prospectus at LINK , “Subject to the provisions of any equity securities of the Fund ranking prior to or pari passu with the Series 1 Preferred Units, and to the provisions described under “− Restrictions on Distributions and Retirement and Issue of Series 1 Preferred Units”, a Series 1 Preferred Unitholder may require the Fund to retract such Series 1 Preferred Units (by delivering notice to the Manager of the intention to have Series 1 Preferred Units retracted not less than 30 days prior to the applicable retraction date) on or after March 15, 2024 for a cash price of $25.00, together with any accrued and unpaid distributions up to but excluding the date of retraction and less any tax required by law to be deducted therefrom.”

My question relates to dividends that are paid by the company on retracted shares.

There are four important dates: the notification date, the retraction date, the record date of the current dividend and its payment date. It is not clear to me how the calculations work if the sequence of these dates for a particular retraction is notification – record – retraction – payment.

Say, for instance, that an investor gave notice on May 10 of his desire to retract and delivers EIT.PR.A shares to the Manager on that date in accordance with the prospectus. The retraction date is therefore June 9. In the interim, however, the shares earn a dividend with a record date of May 23, payment date June 15.

Therefore, it seems to me that the investor earns the full dividend of $0.30 payable June 15 and is also paid the accrued dividend of slightly less than $0.30 that has accrued from March 15 until the retraction date of June 9.

It does not appear likely to me that the issuer will actually pay such an excessive rate on shares submitted for retraction. How is this situation resolved in practice?

Sincerely,

Canoe responded:

Thank you for your email.

In the example that you noted, where the unit holder provides notice before the record date, and the retraction is after the record date (but before the June 15 payment date), the unit holder would receive $25/unit plus interest only. The interest would be calculated from March 16 to the retraction date. They would not get the $0.30/unit distribution, but instead only interest based on the number of days. Unitholders that retract are not eligible for a ‘double payment’.

Well, that seems clear enough! But how exactly does that work? So I asked:

Thank you for this.

What is the legal foundation for unitholders being ineligible for a ‘double payment’? Is there something involved such as a letter of transmittal that is specifies that the shares are ineligible for the regular dividend payment in such a situation?

Sincerely,

… and they answered:

When a unitholder submits their notice of retraction, the units are withdrawn from the exchange/CDS and the record date will not be applicable to the affected units. Going further, what they are paid will depend on the calculations described in the certificate of amendment.

I confess I find it surprising that the “units are withdrawn” prior to the company paying for them. What happens if the issuer goes bankrupt in between withdrawal and payment? This is very unlikely, particularly given that the issuer is a fund, but still … I’m surprised.

Do these withdrawn units continue to exist outside the Book Based System? Maybe: the prospectus doesn’t state that the issue is only Book Based, merely that:

Book-entry only certificates representing the Series 1 Preferred Units will be issued in registered form to CDS Clearing and Depository Services Inc. (“CDS”) or its nominee and will be deposited with CDS on the Closing Date.

I also suspect that there’s some kind of Letter of Transmittal that goes from the brokerage to the issuer that specifies exactly what’s gping on, but to my disappointment Canoe did not address that issue.

Perhaps I should note that I do not suspect that there’s any skullduggery or even any sloppiness in the procedures used … I just like to understand things and I will admit my understanding of the entire process is incomplete. But we can’t understand everything thoroughly in this big world, so I will leave the rest of the investigation to others!

Manulife Financial Corporation has announced (although not yet on their website):

the applicable dividend rates for its Non-cumulative Rate Reset Class 1 Shares Series 15 (the “Series 15 Preferred Shares”) (TSX: MFC.PR.L) and Non-cumulative Floating Rate Class 1 Shares Series 16 (the “Series 16 Preferred Shares”).

With respect to any Series 15 Preferred Shares that remain outstanding after June 19, 2024, holders thereof will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Manulife and subject to the provisions of the Insurance Companies Act (Canada). The dividend rate for the five-year period commencing on June 20, 2024, and ending on June 19, 2029, will be 5.77500% per annum or $0.360938 per share per quarter, being equal to the sum of the five-year Government of Canada bond yield as at May 21, 2024, plus 2.16%, as determined in accordance with the terms of the Series 15 Preferred Shares.

With respect to any Series 16 Preferred Shares that may be issued in connection with the conversion of the Series 15 Preferred Shares into the Series 16 Preferred Shares, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, calculated on the basis of the actual number of days elapsed in each quarterly floating rate period divided by 365, as and when declared by the Board of Directors of Manulife and subject to the provisions of the Insurance Companies Act (Canada). The dividend rate for the three-month period commencing on June 20, 2024, and ending on September 19, 2024, will be 1.77245% (7.03200% on an annualized basis) or $0.443113 per share, being equal to the sum of the three-month Government of Canada Treasury bill yield as at May 21, 2024, plus 2.16%, as determined in accordance with the terms of the Series 16 Preferred Shares.

Beneficial owners of Series 15 Preferred Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (Toronto time) on June 4, 2024. Conversion inquiries should be directed to Manulife’s Registrar and Transfer Agent, TSX Trust Company, at 1‑800‑783‑9495.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 16 Preferred Shares effective upon conversion. Listing of the Series 16 Preferred Shares is subject to Manulife fulfilling all the listing requirements of the TSX and, upon approval, the Series 16 Preferred Shares will be listed on the TSX under the trading symbol “MFC.PR.S”.

MFC.PR.L is a FixedReset, 3.90%+216, that commenced trading 2014-2-25 after being announced 2014-2-18. The extension was announced 2019-5-7. MFC.PR.L reset At 3.78600% effective June 20, 2019. I made no recommendation regarding conversion and there was no conversion.

Thanks to Assiduous Reader KC for bringing this to my attention!

Partners Value Split Corp. has announced:

y its intention to redeem 1,975,000 of its outstanding Class AA Preferred Shares, Series 8 (“Preferred Shares, Series 8”) (TSX: PVS.PR.F) for cash on May 31, 2024 (the “Redemption Date”) in accordance with the terms of the Preferred Shares, Series 8. The Preferred Shares, Series 8 being called for redemption represent approximately 32.92% of all outstanding Preferred Shares, Series 8 of the Company.

The Preferred Shares, Series 8 will be partially redeemed on a pro rata basis, so that each holder of Preferred Shares, Series 8 of record at the close on May 22, 2024 (the “Record Date”) will have approximately 32.92% of their Preferred Shares, Series 8 redeemed.

The redemption price per Preferred Share, Series 8 being redeemed will be equal to C$25.00 per share (the “Redemption Price”). Separately from the Redemption Price, the quarterly cash dividend of C$0.30 per share to May 31, 2024, will be paid in the usual manner on June 7, 2024, to holders of Preferred Shares, Series 8 of record on May 22, 2024, including those whose Preferred Shares, Series 8 were redeemed on May 31, 2024. Holders of Preferred Shares, Series 8 are entitled on a partial redemption to a redemption price equal to C$25.00 plus accrued and unpaid dividends. For greater certainty, such accrued and unpaid dividends will only be paid once per Preferred Share, Series 8, on June 7, 2024.

On the completion of the partial redemption herein, the remaining 4,024,300 unredeemed Preferred Shares, Series 8 will remain issued and outstanding in accordance with their terms.

Notice will be delivered to holders of the Preferred Shares, Series 8 in accordance with the terms of the Preferred Shares, Series 8.

From and after the Redemption Date, the Preferred Shares, Series 8 called for redemption will cease to be entitled to dividends or any other participation in any distribution of the assets of the Company and the holders thereof shall not be entitled to exercise any of their other rights as shareholders in respect thereof except to receive the Redemption Price (less any tax required to be deducted and withheld by the Company). After the partial redemption of the Preferred Shares, Series 8, the Company will consolidate the existing capital shares held by Partners Value Investments Inc. so that there are an equal number of preferred shares and capital shares outstanding.

PVS.PR.F was issued as a SplitShare, 4.80%, maturing 2024-9-30, which commenced trading 2017-9-18 after being announced 2017-09-07. It is tracked by HIMIPref™ and has been assigned to the SplitShare subindex.

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!

Laurentian Bank of Canada has announced:

the applicable dividend rates for its Non-Cumulative Class A Preferred Shares, Series 13 (the “Preferred Shares Series 13”) and Non-Cumulative Class A Preferred Shares, Series 14 (the “Preferred Shares Series 14”).

With respect to any Preferred Shares Series 13 that remain outstanding after June 17, 2024, being the first business day following the Saturday, June 15, 2024 conversion date identified in the prospectus supplement dated March 27, 2014 relating to the issuance of the Preferred Shares Series 13, holders thereof will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on June 15, 2024, and ending on June 14, 2029, will be 6.196% per annum, being equal to the sum of the five-year Government of Canada bond yield as at May 16, 2024, plus 2.55%, as determined in accordance with the terms of the Preferred Shares Series 13.

With respect to any Preferred Shares Series 14 that may be issued on June 17, 2024, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, calculated on the basis of the actual number of days elapsed in each quarterly floating rate period divided by 365, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the three-month period commencing on June 15, 2024, and ending on September 14, 2024, will be 7.473% on an annualized basis, being equal to the sum of the threemonth Government of Canada Treasury bill yield as at May 16, 2024, plus 2.55%, as determined in accordance with the terms of the Preferred Shares Series 14.

Beneficial owners of Preferred Shares Series 13 who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (Montreal time) on May 31, 2024. Conversion inquiries should be directed to the Bank’s Registrar and Transfer Agent, Computershare Investor Services Inc., at 1 800 564-6253.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Preferred Shares Series 14 effective upon conversion. Listing of the Preferred Shares Series 14 subject to the Bank fulfilling all the listing requirements of the TSX and, upon approval, the Preferred Shares Series 14 will be listed on the TSX under the trading symbol “LB.PR.I”.

They had previously announced (2024-4-18):

– Laurentian Bank of Canada (TSX: LB) (the “Bank”) announced today that it does not intend to exercise its right to redeem all or any of its currently outstanding Non-Cumulative Class A Preferred Shares, Series 13 (the “Preferred Shares Series 13”) (TSX: LB.PR.H) on June 15, 2024. As a result, subject to certain conditions described in the prospectus supplement dated March 27, 2014 relating to the issuance of the Preferred Shares Series 13 (the “Prospectus”), the holders of the Preferred Shares Series 13 have the right, at their option, to convert any or all of their Preferred Shares Series 13 into an equal number of the Bank’s Non-Cumulative Class A Preferred Shares, Series 14 (the “Preferred Shares Series 14”) on June 17, 2024. This date is the first business day following the conversion date of June 15, 2024, identified in the Prospectus, which falls on a Saturday. In accordance with the share conditions, a written notice of the right to convert Preferred Shares Series 13 into Preferred Shares Series 14 will be sent to the registered holders of the Preferred Shares Series 13. Holders of Preferred Shares Series 13 are not required to elect to convert all or any part of their Preferred Shares Series 13 into Preferred Shares Series 14. Holders who do not exercise their right to convert their Preferred Shares Series 13 into Preferred Shares Series 14 on such date will retain their Preferred Shares Series 13, unless automatically converted in accordance with the conditions below.

The foregoing conversion right is subject to the conditions that: (i) if, after May 31, 2024, the Bank determines that there would be less than 1,000,000 Preferred Shares Series 14 outstanding on June 17, 2024, then no Preferred Shares Series 13 will be converted into Preferred Shares Series 14, and (ii) alternatively, if after, May 31, 2024, the Bank determines that there would be less than 1,000,000 Preferred Shares Series 13 outstanding on June 17, 2024, then all remaining Preferred Shares Series 13 will automatically be converted into an equal number of Preferred Shares Series 14 on June 17, 2024. In either case, the Bank will give written notice to that effect to any registered holders of Preferred Shares Series 13 affected by the preceding minimums on or before June 7, 2024.

The dividend rate applicable to the Preferred Shares Series 13 for the five-year period from and including June 15, 2024 to, but excluding, June 15, 2029, and the dividend rate applicable to the Preferred Shares Series 14 for the three-month period from and including June 15, 2024 to, but excluding, September 15, 2024, will be determined and announced by way of a news release on May 16, 2024. The Bank will also give written notice of these dividend rates to the registered holders of Preferred Shares Series 13.

Beneficial owners of Preferred Shares Series 13 who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (Montreal time) on May 31, 2024. Conversion inquiries should be directed to the Bank’s Registrar and Transfer Agent, Computershare Investor Services Inc., at 1-800-564-6253

LB.PR.H was issued as a NVCC-compliant FixedReset, 4.30%+255, that commenced trading 2014-4-3 after being announced 2014-3-25. The extension was announced 2019-5-7. LB.PR.H reset At 4.123% effective June 15, 2019. I made no recommendation regarding conversion and there was no conversion.

Thanks to Assiduous Reader Le_bib for bringing this to my attention!

DBRS has announced that it:

confirmed the Issuer Rating and Senior Unsecured Debt rating of Brookfield Property Partners L.P. (BPP) at BBB (low). Morningstar DBRS also confirmed the ratings on Brookfield Property Finance ULC’s Senior Unsecured Notes and Brookfield Office Properties Inc.’s Senior Unsecured Notes at BBB (low), and Brookfield Office Properties Inc.’s Cumulative Redeemable Preferred Shares, Class AAA at Pfd-3 (low). All trends are Stable. The ratings are based on the credit risk profile of the consolidated entity, including BPP and its subsidiaries (collectively, BPY or the Partnership).

KEY CREDIT RATING CONSIDERATIONS
The Stable trends consider the demonstrated ability of BPY to continue to access alternative sources of capital, including by asset monetization and through support from its parent, Brookfield Corporation (BN; rated “A,” Stable by Morningstar DBRS) by various means, including the downstreaming of capital. Recent examples of parental support include the repayment at maturity of the 4.30% Series 3 Senior Unsecured Notes and the extension of an intercompany revolving credit facility between BN and BPY. In Morningstar DBRS’ view, these examples, among others, continue to demonstrate the willingness and ability of BN to support BPY for the foreseeable future. The Stable trends also consider BPY’s modestly positive operating performance, affirming the stability of cash flow derived from its assets, particularly in its core Office segment, as well as BPY’s high leverage and variable-rate debt exposure and the resultant strain of high interest rates on BPY’s cash flows.

CREDIT RATING DRIVERS
Morningstar DBRS would consider a negative rating action if Morningstar DBRS were to change its views on the level and strength of implicit support provided by BN, or should BPY’s total debt-to-EBITDA not improve as expected such that it remains above 16.0 times (x), or if BPY’s EBITDA interest coverage were to remain below 1.0x on a sustained basis, all else equal. On the other hand, Morningstar DBRS would consider a positive rating action should Morningstar DBRS’ outlook for BPY’s total debt-to-EBITDA improve to 13.0x or better.

FINANCIAL OUTLOOK
Morningstar DBRS has revised its financial risk assessment of BPY modestly lower, based on revised expectations for BPY’s primary credit metrics. In the near to medium term, Morningstar DBRS expects that BPY will continue to demonstrate an improving trend in its total debt-to-EBITDA metric toward the 15x-range (from 16.9x for the last 12 months ended December 31, 2023 (LTM)), and that BPY’s EBITDA interest coverage metric will stabilize near current levels (0.93x for the LTM) and begin improving toward the low 1.0x-range.

CREDIT RATING RATIONALE
The ratings continue to be supported by (1) Morningstar DBRS’ view of implicit support from BN, as detailed above; (2) BPY’s market position as a pre-eminent global real estate company; (3) high-quality assets, particularly BPY’s core Office and Retail segments, with long-term leases to large, recognizable investment-grade-rated tenants; and (4) superior diversification, in particular by property, tenant, and geography. The ratings continue to be constrained by BPY’s weak financial risk assessment as reflected by both its highly leveraged balance sheet; a riskier retail leasing profile in terms of lease maturities and counterparty risk relative to BPY’s Office segment; a higher-risk opportunistic LP Investment segment composed primarily of office, retail, industrial, and multifamily assets, as well as alternatives; and Morningstar DBRS’ assessment of the unmitigated structural subordination of the Senior Unsecured Debt at the BPP level relative to a material amount of debt at its operating subsidiaries.

This follows the downgrade to P-4 by S&P in December, 2023, and the confirmation at Pfd-3(low) by DBRS in May, 2023.

Affected issues are: BPO.PR.A, BPO.PR.C, BPO.PR.E, BPO.PR.G, BPO.PR.I, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T, BPO.PR.W, BPO.PR.X and BPO.PR.Y.

Capital Power Corporation has announced:

that it intends to redeem all of its 6,000,000 issued and outstanding 5.75% Cumulative Minimum Rate Reset Preference Shares, Series 11 (the “Series 11 Shares”) (TSX: CPX.PR.K) on June 30, 2024 (the “Redemption Date”) at a price of $25.00 per share (the “Redemption Price”) for an aggregate total of $150 million, less any tax required to be deducted and withheld by the Company. As June 30, 2024 is not a business day payment of the Redemption Price will occur on July 2, 2024.

As previously announced, the Company’s Board of Directors has declared a quarterly dividend of $0.359375 per Series 11 Share payable on June 28, 2024 (the “Q2 2024 Quarterly Dividend”) to shareholders of record as of June 17, 2024. This will be the final quarterly dividend on the Series 11 Shares.

The Company has provided notice today of the Redemption Price and the Redemption Date to the sole registered holder of the Series 11 Shares in accordance with their terms. Non-registered holders of Series 11 Shares should contact their broker or other intermediary for information regarding the redemption process for the Series 11 Shares in which they hold a beneficial interest.

This follows yesterday’s announcement of the possibility and indicates that the company was able to raise funds at an attractive price on the hybrid bond market – which may be taken as an indication that not only is the preferred share market cheap relative to other markets, but that even junk issuers are able to access financing at a better price.

CPX.PR.K was issued as a FixedReset 5.75%+415M575 issue that commenced trading 2019-5-16 after being announced 2019-5-7. The potential for redemption was announced 2024-5-14. The issue has been tracked by HIMIPref™ but relegated to the Scraps – FixedReset (Discount) subindex on credit concerns.

Thanks to Assiduous Reader IrateAR for bringing this to my attention!

Update, 2024-6-5: Interesting addendum to the refunding:

DBRS Limited (Morningstar DBRS) assigned a rating of BB with a Stable trend to Capital Power Corporation’s (CPC or the Company) $450 million 8.125% Fixed-to-Fixed Rate Subordinated Notes, Series 2 due June 5, 2054 (Subordinated Notes Series 2). Concurrently, Morningstar DBRS placed CPC’s existing 7.95% Fixed-to-Fixed Rate Subordinated Notes, Series 1 due September 9, 2082 (Subordinated Notes Series 1) Under Review with Developing Implications.

The Subordinated Notes Series 1 and Subordinated Notes Series 2 rank equally in right of payment until the occurrence of certain bankruptcy and related events at which time the Subordinated Notes Series 1 would automatically convert into preferred shares. The Subordinated Notes Series 1 would then rank below the Subordinated Notes Series 2. According to Morningstar DBRS’ Hierarchy Principle, as outlined in the Morningstar DBRS “Credit Ratings Global Policy,” the Subordinated Notes Series 1 would be subordinate to the Subordinated Notes Series 2 in the event of insolvency of the Company. Due to our Hierarchy Principle the Subordinated Notes Series 1 should be rated one notch below the Subordinated Notes Series 2, implying a downgrade to BB (low) from BB.

However, CPC has indicated that it is evaluating possible options, including a potential solicitation process to amend the terms so the Subordinated Notes Series 1 rank pari passu in the event of insolvency with the Subordinated Notes Series 2. Based on the Company’s intent to seek noteholder approval to make the subordinated notes pari passu, Morningstar DBRS has placed the Subordinated Notes Series 1 Under Review with Developing Implications. Following a successful process that would result in the Subordinated Notes Series 1 being ranked pari passu in the event of insolvency with the Subordinated Notes Series 2, Morningstar DBRS will remove the Under Review with Developing Implications designation from the Subordinated Notes Series 1 and confirm their rating at BB with a Stable trend. Conversely, a lack of progress to make the notes pari passu over the next few months could result in Morningstar DBRS downgrading the Subordinated Notes Series 1 to BB (low). Morningstar DBRS aims to resolve any Under Review action within 90 days.

Element Fleet Management has announced (in their 24Q1 earnings release, I don’t see a redemption press release):

Capital structure

Redemption of all outstanding 6.21% Cumulative 5-Year Rate Reset Preferred Shares Series C

To further optimize the Company’s balance sheet and mature its capital structure, the Company announced today its intention to redeem – in accordance with the terms of the 6.21% Cumulative 5-Year Rate Reset Preferred Shares Series C (the “Series C Shares”) as set out in the Company’s articles – all of its 5,126,400 issued and outstanding Series C Shares on June 30, 2024 (the “Share Redemption Date”) for a redemption price equal to CAD$25.00 per Series C Share for an aggregate total amount of approximately US$94.6 million (CAD$128 million), together with all accrued and unpaid dividends up to but excluding the Share Redemption Date (the “Redemption Price”), less any tax required to be deducted and withheld by the Company.

The Company has provided notice today of the Redemption Price and the Share Redemption Date to the sole registered holder of the Series C Shares in accordance with the terms of the Series C Shares as set out in the Company’s articles. Non-registered holders of Series C Shares should contact their broker or other intermediary for information regarding the redemption process for the Series C Shares in which they hold a beneficial interest. The Company’s transfer agent for the Series C Shares is Computershare Investor Services Inc. (“Computershare Investor Services”). Questions regarding the redemption process may be directed to Computershare Investor Services at 1-800-564-6253 or by email to corporateactions@computershare.com.

Following their redemption on June 30, 2024, the Series C Shares will be de-listed from and no longer trade on the Toronto Stock Exchange (“TSX”).

The Company also currently anticipates using a portion of its free cash flow to redeem all its outstanding 5.903% Cumulative 5-Year Rate Reset Preferred Shares Series E (due September 2024) for an approximate aggregate total amount of US$98.2 million (CAD$133 million).

This announcement validates their earlier anticipation of a redemption.

EFN.PR.C was announced 2014-2-26 as a FixedReset, 6.50%+481, but was not added to HIMIPref™ at that time as the company did not have a credit rating. The company received an initial rating from DBRS on 2015-9-24 and HIMIPref™ commenced tracking its four issues then outstanding shortly thereafter. The extension of the issue was announced 2019-5-22 and it was later announced that EFN.PR.C would reset at 6.210% effective June 30, 2019. I recommended against conversion and there was no conversion. The issue has been tracked by HIMIPref™ but is relegated to the Scraps – FixedReset (Discount) subindex on credit concerns.

Thanks to Assiduous Reader IrateAR for bringing this to my attention!