Category: Issue Comments

There was previously some doubt as to the ticker symbol for the new BCE preferred shares issued in exchange for BAF.PR.E.

However, BCE.PR.Q is, as guessed, the ticker for the new BCE shares which have the same economic terms as BAF.PR.E. The new issue traded 2,200 shares today in a range of 24.60-61 before closing at 25.00-30, 12×6.

The Toronto Stock Exchange has, wonder of wonders, modified its database so that the series denoted by this symbol is indeed “AQ” and that the listing date is now recorded as 2014-9-25.

Regrettably, the dim bulbs at BCE have not yet updated their preferred share information page to reflect the existence of their three new issues.

Each of the new issues, BCE.PR.M, BCE.PR.O and BCE.PR.Q, will be tracked by HIMIPref™. Vital statistics are:

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The Toronto-Dominion Bank has announced:

that it will exercise its right to redeem all of its 17 million outstanding Class A First Preferred Shares, Series O (the “Series O Shares”) on October 31, 2014 at the price per share of $25.00, for an aggregate total of approximately $425 million.

On August 28, 2014, the Board of Directors of TD declared quarterly dividends of $0.303125 per Series O Share. These will be the final dividends on the Series O Shares and will be paid in the usual manner on October 31, 2014 to shareholders of record on October 8, 2014, as previously announced. After October 31, 2014, the Series O Shares will cease to be entitled to dividends and the holders of such shares will not be entitled to exercise any right in respect thereof except that of receiving the redemption amount.

Beneficial holders who are not directly the registered holder of Series O 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 O 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).

Update, 2014-10-01: The coupon on TD.PR.O is 4.85%.

Enbridge Inc. has announced:

that it has closed its previously announced public offering of Cumulative Redeemable Preference Shares, Series 15 (the “Series 15 Preferred Shares”) by a syndicate of underwriters led by TD Securities, CIBC World Markets, RBC Capital Markets, and Scotiabank. Enbridge issued 11 million Series 15 Preferred Shares for gross proceeds of C$275 million. The Series 15 Preferred Shares will begin trading on the TSX today under the symbol ENB.PF.G. Proceeds will be used to partially fund capital projects, to reduce existing indebtedness and for other general corporate purposes of the Corporation and its affiliates.

ENB.PF.G is a FixedReset, 4.40%+268, announced September 11. It will be tracked by HIMIPref™ and is assigned to the FixedResets subindex.

The issue traded 815,553 shares today in a range of 24.87-96 before closing at 24.96-97, 50×90. Vital statistics are:

DBRS has announced that it:

has today placed Veresen Inc.’s (Veresen or the Company) Issuer Rating and Senior Unsecured Notes rating of BBB (high) and its Preferred Shares rating of Pfd-3 (high) Under Review with Negative Implications. If the planned acquisition of 50% convertible preferred interest in Ruby pipeline system (Ruby) proceeds as expected, Veresen’s overall business risk profile is expected to weaken and its financial risk profile is expected to deteriorate modestly. As a result, Veresen’s ratings will likely be downgraded by one notch following the completion of the acquisition.
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DBRS notes that the Acquisition could add a potential layer of uncertainty around re-contracting to the Company’s business risk profile. The average physical throughput on Ruby in the past three years indicates that only 55% of the pipeline capacity is utilized, largely reflecting the weak natural gas pricing environment and competitive landscape. DBRS is of the opinion that Ruby is exposed to re-contracting risk when the majority of contracts (approximately 65%) expire in 2021, as the pipeline’s capacity may not be re-contracted at current tolls, volumes or duration.
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Veresen plans to initially finance the Acquisition with approximately: 1) $800 million in equity (with a 15% over allotment option), 2) $750 million in debt from new credit facilities and 3) the balance from an existing revolving credit facility. Veresen intends to refinance the acquisition-related borrowings over the course of the next 12 months through various capital market instruments as well as with ongoing proceeds received from equity issued in connection with Veresen’s Premium Dividend and Dividend Reinvestment Plan.
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Based on a pro forma of the Acquisition, DBRS estimates that the credit metrics will weaken for Veresen (non-consolidated) with cash flow-to-interest at 5.3 times (x) (7.9x in the last 12 months (LTM) Q2 2014), higher debt-to-capital at 38.2% (35.2% at Q2 2014) and weaker cash flow-to-total debt at 26.0% (34.7% LTM Q2 2014). The significant increase in debt also reduces the Company’s financial flexibility and could affect its ability to meet large capital expenditure needs in the future.

Veresen is the proud issuer of VSN.PR.A and VSN.PR.C, both FixedResets currently rated Pfd-3(high).

BCE Inc. has announced:

the successful completion of the initial phase of BCE’s offers to purchase all outstanding Bell Aliant publicly held common shares and to exchange all outstanding Bell Aliant preferred shares.

CST Trust Company, the depository for the offers, reported that, as of 5:00 pm Eastern on September 19, 2014, a total of 103,486,954 Bell Aliant common shares, representing approximately 81.2% of the outstanding publicly held common shares, had been validly tendered to BCE’s offer and not withdrawn. BCE has taken up and expects to pay for such shares on September 24, 2014, at which time pro-ration information related to the cash and share alternatives will be available at BCE.ca/Investors/shareholder-info/bell-aliant-privatization.

As all conditions of the common share offer have been satisfied, and all regulatory approvals have been received, BCE’s privatization of Bell Aliant is expected to close on or about October 31, 2014.

CST Trust Company also reported that, as of 5:00 pm Eastern on September 19, 2014, a total of 18,388,857 preferred shares of Bell Aliant Preferred Equity Inc. (TSX: BAF) (Prefco), representing approximately 72.7% of the outstanding preferred shares, had been validly tendered to BCE’s offer and not withdrawn. As all conditions of the preferred share offer have been satisfied, the BCE preferred shares exchanged for tendered Prefco preferred shares are expected to be issued on September 24, 2014 and to commence trading on the Toronto Stock Exchange at the open of trading on the next day.
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BCE also intends to effect, and will hold sufficient votes to approve (at a meeting of Prefco shareholders to be held on October 31, 2014), a subsequent acquisition transaction to acquire the remaining preferred shares.

Update, 2014-9-25 : Last quoted line added to post 2014-9-25

As discussed on PrefBlog when the offer was announced:

Affected issues are:

• BAF.PR.A, FixedReset, 4.85%+209, commenced trading 2011-3-15
• BAF.PR.C, FixedReset, 4.55%+309, commenced trading 2011-12-7
• BAF.PR.E, FixedReset, 4.25%+264, commenced trading 2013-2-14

These issues will be nicely complementary to BCE.PR.K, A FixedReset, 4.15%+188, which commenced trading July 5, 2011 with a ridiculous re-opening 2011-12-12.

I don’t have the new tickers yet, but I’ll report ’em when I got ’em.

Implied volatility of the series shows an extraordinarily good fit:

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Fortis Inc. has announced:

that it has closed its public offering (the “Offering”) of Cumulative Redeemable Fixed Rate Reset First Preference Shares, Series M (“Series M First Preference Shares”) underwritten by a syndicate of underwriters led by Scotiabank and RBC Capital Markets. Fortis issued 24,000,000 Series M First Preference Shares at a price of $25.00 per share for aggregate gross proceeds to the Corporation of $600,000,000.

The net proceeds of the Offering will be used to repay a portion of the amounts borrowed by Fortis under its acquisition credit facility in connection with the acquisition of UNS Energy Corporation completed on August 15, 2014.

The Series M First Preference Shares were offered by way of a short form prospectus of Fortis dated September 11, 2014 and will commence trading today on the Toronto Stock Exchange under the symbol FTS.PR.M.

Fortis is the largest investor-owned distribution utility in Canada, with total assets approaching $25 billion and fiscal 2013 revenue exceeding $4 billion. Its regulated utilities account for approximately 93% of total assets and serve more than 3 million customers across Canada and in the United States and the Caribbean. Fortis owns non-regulated hydroelectric generation assets in Canada, Belize and Upstate New York. The Corporation’s non-utility investments are comprised of hotels and commercial real estate in Canada.

Additional information about the Corporation can be accessed at www.fortisinc.com or www.sedar.com.

FTS.PR.M is a FixedReset, 4.10%+248, announced and supersized 2014-9-3. The issue will be tracked by HIMIPref™ and has been assigned to the FixedResets subindex.

The issue traded a massive 2,113,711 shares today (consolidated exchanges) in a range of 24.98-12 before closing at 25.10-11, 9×150. Vital statistics are:

Implied Volatility analysis suggests that FTS.PR.M is cheap relative to other Fortis FixedResets, with a theoretical price of 25.97 … but remember that this conclusion is not necessarily applicable with respect to other issuers! It could just as easily be that the lower-spread FTS issues are expensive relative to the universe!

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Dundee Corporation has announced:

that 1,720,615 of its 5,200,000 Cumulative 5‐Year Rate Reset First Preference Shares, Series 2 (“Series 2 Shares”) will be converted on September 30, 2014, on a one for one basis, into Cumulative Floating Rate First Preference Shares, Series 3 (“Series 3 Shares”). As a result, on September 30, 2014, Dundee will have 3,479,385 Series 2 Shares and 1,720,615 Series 3 Shares issued and outstanding. The Series 2 Shares are listed on the Toronto Stock Exchange under the symbol DC.PR.B and the Series 3 Shares will be listed on the Toronto Stock Exchange effective September 30, 2014 under the symbol DC.PR.D.

DC.PR.B was extended on August 26 and the company announced the reset to 5.688% on September 2. The issue originally closed 2009-9-15 and is a FixedReset, 6.75%+410.

Both DC.PR.B and the FloatingReset, DC.PR.D, will be tracked by HIMIPref™, but relegated to the Scraps index on credit concerns.

Standard & Poor’s has announced:

• •We are placing our ratings on Atlantic Power Corp. (APC) and affiliate Atlantic Power Ltd. Partnership (APLP), including our ‘B’ corporate credit ratings, on CreditWatch with negative implications.
• •The CreditWatch placement follows the company’s decision to cut distributions for the second time in two years, and the departure of its CEO.
• •We will conduct a review of the company’s strategic and financial plan over the next several weeks and resolve the CreditWatch over the next 60 to 90 days.

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Atlantic Power has 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 has also revised its distribution payments to a quarterly schedule from monthly payouts. The company has cited a reevaluation of its medium-term plan, including debt maturities and recontracting risk from 2017 onwards that have caused a change in its payout policy. Atlantic plans to focus on optimization its assets and delevering its balance sheet to improve both its cost of capital and ability to compete for new investments. In addition, the company plans to assess other potential options, including asset sales or the contribution of assets to a joint venture to raise additional capital for growth and/or debt reduction. Our review will also evaluate if the distribution reductions have the potential of weighing negatively on the company’s ability to access the markets competitively as well as its future strategy given management transition.

The company’s announcement of changes, and the effect of these changes on its equity and preferred prices, was discussed on PrefBlog on September 16. S&P’s note did not mention that the previously trumpeted sale process has been cancelled, which I consider significant.

The company has two issues of preferred shares outstanding, AZP.PR.A and AZP.PR.B.

DBRS has announced that it:

DBRS has today downgraded the Issuer Rating and Unsecured Debentures & Medium-Term Notes rating of Talisman Energy Inc. (Talisman or the Company) to BBB from BBB (high), and changed the trend to Negative. DBRS has also downgraded the Company’s Preferred Shares rating to Pfd-3 from Pfd-3 (high), with a Negative trend.

On April 16, 2014, DBRS placed the ratings of Talisman Under Review with Negative Implications. The rating action reflected DBRS’s concern about the continued challenging natural gas market environment in North America (approximately 40% of total production in H1 2014), high capital expenditures (capex) (despite a 20% reduction from 2012), ongoing operational and production reliability issues in the North Sea, and its implication on Talisman’s credit risk profile. The Company recently released its H1 2014 financial results, which remained relatively weak due to the aforementioned negative driving factors. The reduced operating performance and weakened credit metrics have resulted in a credit risk profile that is no longer consistent with a BBB (high) rating.

DBRS has changed the trend to Negative on the ratings as DBRS believes a meaningful recovery will remain challenging, largely driven by the ongoing weak natural gas market outlook in North America, continued growth capex initiatives and capex commitment associated with the North Sea operations. In the absence of much stronger commodity prices, Talisman will have to continue to execute a combination of the following to maintain an adequate financial profile: (1) growth capital spending curtailment; (2) asset sales; and (3) joint venture agreements with upfront cash receipts, with the proceeds being used to reduce leverage. While DBRS acknowledges the Company’s track record on divesting non-core assets on a timely basis, DBRS views further significant non-core asset divestitures to remain challenging, particularly the announced North Sea assets with significant decommissioning obligations and production reliability issues. Kurdistan assets (the other non-core assets announced for sale) are exposed to heightened political instability in Iraq. If Talisman is successful in returning to a free cash flow neutral position while improving its credit metrics on a sustainable basis, which would largely be influenced by the timing of the North Sea asset divestiture (the North Sea operations have continued to result in significant cash flow deficits), DBRS may consider changing the trend to Stable. However, continued weak operating performance and cash flow deficits in the absence of timely asset divestitures would result in further rating pressure.

TLM.PR.A was last mentioned on PrefBlog when the underwriters held a clearance sale. This issue is a FixedReset, 4.20%+277, announced 2011-12-5. It is tracked by HIMIPref™, but relegated to the Scraps index on credit concerns.