Category: Issue Comments

Enbridge Inc. has announced:

that it has closed its previously announced public offering of Cumulative Redeemable Preference Shares, Series 13 (the “Series 13 Preferred Shares”) by a syndicate of underwriters led by CIBC World Markets, RBC Capital Markets, Scotiabank, and TD Securities. Enbridge issued 14 million Series 13 Preferred Shares for gross proceeds of $350 million. The Series 13 Preferred Shares will begin trading on the TSX today under the symbol ENB.PF.E. 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.PR.E is a FixedReset, 4.40%+266, announced July 8. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

The issue traded 1,091,623 shares today (consolidated exchanges) in a tight range of 24.95-00 before closing at 24.95-96, 328×5.

Vital statistics are:

Dividend 15 Split Corp. has released its Annual Report to November 30, 2013.

Using the S&P TSX 60 index rather than “Dividend Aristocrats” seems a little odd to me – but we’ll let them choose their benchmark!

Figures of interest are:

MER: 1.49% of the whole unit value (As reported)0.

Average Net Assets: The average of the beginning and end of year figures is ($378.1-million + $307.8-million) / 2 = $343-million. Total preferred share dividends = $8,890,054 at 0.525 / share implies average of 16.93-million units outstanding, at an average NAVPU of ($18.22 + $18.45) / 2 = 18.34, implies average net assets of $310-million. Not very good agreement! But call it about $327-million

Underlying Portfolio Yield: Dividends received of $12.13-million divided by average net assets of 327-million is 3.7%

Income Coverage: Net Investment Income of 7.23-million divided by Preferred Share Distributions of 8.89-million is 81%.

Brompton Group has announced:

Dividend Growth Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form prospectus with respect to a treasury offering of class A and preferred shares. The class A and preferred share offering prices will be set at levels that ensure that existing unitholders are not diluted.
Dividend Growth Split Corp. invests in a portfolio of common shares of high quality, large capitalization companies, which have among the highest dividend growth rates of those companies included in the S&P/TSX Composite Index. Currently, the portfolio consists of common shares of the following 20 companies:

Great-West Lifeco Inc.	The Bank of Nova Scotia	AGF Management Limited	Shaw Communications Inc.
Industrial Alliance Insurance and Financial Services Inc.	Canadian Imperial Bank of Commerce	IGM Financial Inc.	TELUS Corporation
Manulife Financial Corporation	National Bank of Canada	Power Corporation of Canada	Canadian Utilities Limited
Sun Life Financial Inc.	Royal Bank of Canada	Manitoba Telecom Services Limited	Enbridge Inc.
Bank of Montreal	The Toronto-Dominion Bank	Rogers Communications Inc.	TransCanada Corporation

The investment objectives for the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per class A share and to provide the opportunity for growth in the net asset value per class A share.

The investment objectives for the preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.13125 per preferred share, representing a yield on the original issue price of 5.25% per annum, and to return the original issue price to holders of preferred shares on the original November 30, 2014 maturity date.

On October 1, 2013, the Company announced an extension of the maturity date of the class A and preferred shares of the Company for an additional 5 year term to November 28, 2019, subject to extension for successive terms of up to 5 years. The preferred share dividend rate for the extended term will be announced at least 60 days prior to the original November 30, 2014 maturity date. The new dividend rate will be determined based on then-current market yields for preferred shares with similar terms.

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

DGS.PR.A was last mentioned on PrefBlog when there was a similar offering in January.

DGS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

In a report available only to clients, Moody’s has stated:

Our outlook for the Canadian banking system has been changed to negative from stable to reflect the evolving support environment in Canada. The outlook expresses our expectation of how bank creditworthiness will evolve in this system over the next 12-18 months.

Our outlook for the Canadian banking system has been changed to negative from stable. This change reflects our view that the Canadian government’s plan to introduce a bail-in regime for senior debt combined with the accelerating global trend towards explicit inclusion of burden-sharing with senior debt holders as a means of reducing the public cost of bank resolutions could reduce the predictability of support being provided to the senior debt holders and uninsured depositors of the large Canadian banks.

Most rated Canadian banks’ long-term ratings benefit from at least two notches of uplift due to systemic support, which reflects our currently very high expectation that the government would provide support if required. On June 11, 2014 we affirmed the long-term ratings of the seven largest Canadian banks but changed the outlook to negative from stable on the supported senior debt and uninsured deposit ratings of these banks, to reflect the fact that the balance of risk has shifted to the downside for unsecured bank creditors given the Canadian government’s plans to implement a “bail-in” regime for domestic systemically important banks and the evolving global support environment.

The above-noted actions do not reflect any change in our assessment of the standalone credit profiles of the Canadian banks, all but one of which maintain their stable outlooks (see page 3).

DBRS has confirmed RY at Pfd-2 (high) [NVCC non-compliant] and Pfd-2 [NVCC compliant]:

Like its other Canadian peers, the Bank has exposure to the Canadian residential mortgage market and other real estate lending. A slowdown in these markets may slow earnings generation, while a downturn in the residential mortgage or commercial real estate markets could hurt asset quality indicators and ultimately have an impact on provisioning levels.

The Bank’s Deposits & Senior Debt rating of AA is composed of an intrinsic assessment of AA (low) and a support assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada). The SA2 support assessment results in a one-notch benefit to the Issuer Rating and the Deposits & Senior Debt and Subordinated Debt ratings.

confirmed TD at Pfd-2(high) / Pfd-2:

Like its other Canadian peers, the Bank has exposure to the Canadian residential mortgage market and other real estate lending. A slowdown in these markets may slow earnings generation, while a downturn in the residential mortgage or commercial real estate markets could hurt asset quality indicators and ultimately have an impact on provisioning levels.

TD’s Deposits & Senior Debt rating of AA is composed of an intrinsic assessment of AA (low) and a support assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada). The SA2 ranking results in a one-notch benefit to the Issuer Rating and the Deposits & Senior Debt and Subordinated Debt ratings.

NA at Pfd-2 / Pfd-2(low):

Like its other Canadian peers, the Bank has exposure to the Canadian residential mortgage market and other real estate lending. A slowdown in these markets may slow earnings generation, while a downturn in the residential mortgage or commercial real estate markets could hurt asset quality indicators and ultimately have an impact on provisioning levels.

National’s Deposits & Senior Debt rating of AA (low) is composed of an intrinsic assessment of A (high) and a support assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada), which results in a one-notch increase from the intrinsic assessment to the Issuer Rating and the Deposits & Senior Debt and Subordinated Debt ratings.

BMO at Pfd-2(high) / Pfd-2:

Like its other Canadian peers, the Bank has exposure to the Canadian residential mortgage market and other real estate lending. A slowdown in these markets may slow earnings generation, while a downturn in the residential mortgage or commercial real estate markets could hurt asset quality indicators and ultimately have an impact on provisioning levels.

BMO’s long-term Deposits & Senior Debt rating of AA is composed of an intrinsic assessment of AA (low) and a support assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada). The SA2 status results in a one-notch benefit to the senior debt and deposits and subordinated debt ratings.

CM at Pfd-2(high) / Pfd-2 (CM’s last non-compliant issues will be called July 31):

Like its other Canadian peers, the Bank has exposure to the Canadian residential mortgage market and other real estate lending. A slowdown in these markets may slow earnings generation, while a downturn in the residential mortgage or commercial real estate markets could hurt asset quality indicators and ultimately have an impact on provisioning levels.

CIBC’s long-term Deposits & Senior Debt rating at AA is composed of its assigned intrinsic assessment of AA (low) and its support assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada). The SA2 ranking results in a one-notch benefit to the senior debt and deposits and subordinated debt ratings.

and finally BNS at Pfd-2(high) (BNS doesn’t have any NVCC-compliant issues yet):

Like its other Canadian bank peers, Scotiabank has exposure to the Canadian residential mortgage market and other real estate lending. A slowdown in these markets may slow earnings generation, while a downturn in the residential mortgage or commercial real estate markets could hurt asset quality indicators and ultimately have an impact on provisioning levels. Scotiabank’s long-term deposits and senior debt rating, at AA, is composed of its intrinsic assessment of AA (low) and its support assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada). The SA2 ranking results in a one-notch benefit to the Deposits & Senior Debt and Subordinated Debt ratings.

Partners Value Split Corp. has announced:

the completion of its previously announced issue of 8,000,000 Class AA Preferred Shares, Series 6 (the “Series 6 Preferred Shares”) at an offering price of $25.00 per Series 6 Preferred Share, raising gross proceeds of $200,000,000. The Series 6 Preferred Shares carry quarterly fixed cumulative preferential dividends representing a 4.50% annualized yield on the offering price and have a final maturity of October 8, 2021. The net proceeds of the offering will be used to redeem the Company’s outstanding Class AA Preferred Shares, Series 4 and to pay a special cash dividend to holders of the Company’s capital shares. The Company has granted the underwriters an option, exercisable at any time, not later than 30 days after closing, to purchase up to an additional 1,200,000 Series 6 Preferred Shares, which, if exercised, would increase the gross offering size to $230,000,000.

The Series 6 Preferred Shares have been listed and posted for trading on the Toronto Stock Exchange under the symbol BNA.PR.F.

Prior to the closing of the offering, the Company subdivided the existing capital shares held by Partners Value Fund Inc. so that there are an equal number of preferred shares and capital shares outstanding.

The Company owns a portfolio consisting of 53,160,644 Class A Limited Voting Shares of Brookfield Asset Management Inc. (the “Brookfield Shares”) which is expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Shares. Brookfield Asset Management Inc. is a global alternative asset manager with over US$175 billion in assets under management. For more than 100 years Brookfield has owned and operated assets on behalf of shareholders and clients with a focus on property, renewable energy, infrastructure and private equity. Brookfield has a range of public and private investment products and services which leverage its expertise and experience. Brookfield Shares are co-listed on the New York Stock Exchange under the symbol “BAM”, the TSX under the symbol “BAM.A” and the NYSE Euronext under the symbol “BAMA”.

BNA.PR.F is a SplitShare, 4.50%, with 7-year term, announced June 16. It will be tracked by HIMIPref™ and has been assigned to the SplitShares subindex. It is rated Pfd-2(low) by DBRS.

The issue traded 148,800 shares today in a range of 24.70-85 before closing at 24.70-71, 16×3. Vital statistics are:

Assiduous Readers of the post POW.PR.F Sinking Fund will remember that Power Corporation is required to make all reasonable efforts to purchase 80,000 shares of this issue every year, but have missed their target in each of the past three years.

In addition it will be remembered that this repurchase is not a “Normal Course Issuer Bid”, so there are no fancy rules of which I am aware that prohibit things like buying on an uptick, or whatever.

I have written them, pointing out that the offer price of POW.PR.F has not exceeded the sinking fund upper limit price of $50,00 on any occasion in the last three calendar years, and asking them to clarify the meaning of the word “reasonable”, but have not yet received a reply.

While waiting, I took four snapshots of the market for POW.PR.F today:

… one at 1:30pm …

Click for Big

… the second at 2:30pm …

Click for Big

… the third at 3:35pm …

Click for Big

… and the fourth at 3:55pm …

Click for Big

So, I will await their 14Q2 report with great interest, and if they have not met their 20,000 share per quarter quota again in the past quarter, I will ask them to clarify why these offers were not lifted.

I enjoy being a prick.

Scotia Managed Companies has announced:

NewGrowth Corp. (the “Company”) is pleased to announce that is has completed its public offering of Class B preferred shares, series 3 (“Preferred Shares”) and Class A capital shares (“Capital Shares”), raising $91,796,616 through the issuance of 2,644,235 Preferred Shares and 165,000 Capital Shares at a price per share of $32.07 and $42.40, respectively. In addition, the Company has redeemed all of its outstanding Class B preferred shares, series 2. The Preferred Shares and Capital Shares were offered to the public on a best efforts basis by a syndicate of agents led by Scotiabank which included CIBC, TD Securities Inc., BMO Capital Markets, National Bank Financial Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Burgeonvest Bick Securities Limited, Desjardins Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

NewGrowth Corp. is a mutual fund corporation created to invest its assets in common shares of selected large capitalization Canadian companies (the “Portfolio Shares”) with growth potential and an attractive dividend yield in order to generate dividend income for holders of its preferred shares and to enable the holders of the Company’s Capital Shares to participate in any capital appreciation in the Portfolio Shares.

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NEW.PR.D is a SplitShare, 4.15%, maturing 2019-6-26. Regrettably, it is redeemable every June 26 until maturity at par; this adds a certain amount of risk to secondary market trading, as the asymmetry of potential returns is increased. This issue has been rated Pfd-2 by DBRS.

The issue will be tracked by HIMIPref™ and has been assigned to the SplitShare subindex.

NEW.PR.D traded 34,250 shares today in a range of 32.10-40 before closing at 32.30-75, 26×3. Vital statistics are:

Scotiabank has announced:

that it intends to exercise its right to redeem all outstanding Non-cumulative Preferred Shares Series 13 of Scotiabank (the “Preferred Shares Series 13”) on July 29, 2014 at a price equal to $25.00 per share, together with all declared and unpaid dividends. Formal notice will be issued to shareholders in accordance with the share conditions.

The redemption has been approved by the Office of the Superintendent of Financial Institutions and will be financed out of the general funds of Scotiabank.

On May 26, 2014, the Board of Directors of Scotiabank approved a quarterly dividend of $0.30 per Series 13 Share. This will be the final dividend on the Series 13 Shares and will be paid in the usual manner on July 29, 2014 to shareholders of record at the close of business on July 2, 2014, as previously announced. After July 29, 2014, the Series 13 Shares will cease to be entitled to dividends.

Is this the beginning of a wave of redemptions of bank DeemedRetractibles? Probably not, unless the banks want to pay a premium. I confess to some surprise that Scotia didn’t come up with a shareholder vote to change the terms of this issue; or alternatively, set up an exchange offer. Be that as it may, bank DeemedRetractibles with higher coupons are: