Category: Issue Comments

Standard and Poor’s has announced:

• •We are revising our outlook on Nova Scotia Power Inc. (NSPI) to stable from negative.
• •The outlook revision reflects our outlook revision to parent Emera Inc. because we believe that NSPI is “core” to Emera.
• •We have also affirmed our ratings, including our ‘BBB+’ long-term corporate credit rating, on both NSPI and Emera.

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The outlook revision on NSPI reflects the outlook revision on Emera. “Because we believe that NSPI is a “core” holding of Emera Inc. we equalize the ratings on the two entities,” said Standard & Poor’s credit analyst Stephen Goltz.

The outlook revision on Emera reflects our view of the progress Emera has made on the Maritime Link project, including regulatory approvals and issuance of debt guaranteed by the Government of Canada. The revision also reflects our view that Emera’s financial metrics are likely to remain in the “significant” category over the next two-to-three years.

The ratings on Emera reflect what Standard & Poor’s views as the company’s “excellent” business risk profile and significant financial risk profile.

NSI.PR.D was last mentioned on PrefBlog when it was confirmed by DBRS at Pfd-2(low) on February 19, 2014. S&P continues to rate it as P-2(low).

NSI.PR.D is tracked by HIMIPref™, but is relegated to the Scraps index on volume concerns.

Quadravest has announced:

Dividend 15 Split Corp. (the “Company”) is pleased to announce that it has filed a preliminary short form prospectus in each of the provinces of Canada with respect to an offering of Preferred Shares and Class A Shares of the Company. The offering will be co-led by National Bank Financial Inc., CIBC, RBC Capital Markets and will also include BMO Capital Markets, TD Securities Inc., GMP Securities L.P. and Canaccord Genuity Corp.

The Class A Shares will be offered at a price of $12.00 per Class A Share to yield 10.0% on the issue price and the Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.25% on the issue price. The closing price on the TSX of each of the Class A Shares and Preferred Shares on May 9, 2014 was $12.17 and $10.26, respectively.

Since the Company commenced on March 16, 2004, it has exceeded its distribution objectives. The aggregate dividends paid on Class A shares have been $15.60 per share, representing 121 regular consecutive monthly distributions, plus six special distributions. The Preferred Shares have received a total of $5.31 per share for a combined total distribution of $20.91 per unit paid by the Company. All distributions have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The net proceeds of the secondary offering will be used by the Company to invest in an actively managed portfolio of dividend yielding common shares which includes each of the 15 Canadian companies listed below:

Bank of Montreal	Enbridge Inc.	TELUS Corporation
The Bank of Nova Scotia	Manulife Financial Corp.	Thomson-Reuters Corporation
BCE Inc.	National Bank of Canada	The Toronto-Dominion Bank
Canadian Imperial Bank of Commerce	Royal Bank of Canada	TransAlta Corporation
CI Financial Corp.	Sun Life Financial Inc.	TransCanada Corporation

The Company’s investment objectives are:

Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends in the amount of $0.04375 per Preferred Share to yield 5.25% per annum on the original issue price; and
ii. on or about December 1, 2019, to pay the holders of the Preferred Shares the original issue price of those shares.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends initially targeted to be $0.10 per Class A; and
ii. on or about December 1, 2019, to pay the holders of Class A Shares at least the original issue price of those shares.

The sales period of this overnight offering will end at 9:00 a.m. (Toronto time) on May 13, 2014.

A preliminary short form prospectus containing important information relating to the Class A and Preferred Shares has been filed with securities commissions or similar authorities in all provinces of Canada. The preliminary short form prospectus is still subject to completion or amendment. Copies of the preliminary short form prospectus may be obtained from your registered financial advisor using the contact information for such advisor, or from representatives of the underwriters listed above. There will not be any sale or any acceptance of an offer to buy the Class A or Preferred Shares until a receipt for the final short form prospectus has been issued.

Given that the fund’s April 30 Valuation was $20.52, the matched units are hardly a bargain! Flip quickly, boys!!

DFN.PR.A was last mentioned on PrefBlog when they did a secondary offering last September. DFN.PR.A is tracked by PrefBlog, but relegated to the Scraps index on credit concerns.

Manulife Financial Corporation has announced:

its intention to redeem all of its outstanding 18,000,000 Non-cumulative Rate Reset Class A Shares Series 4 (“Series 4 Preferred Shares”) for cash on June 19, 2014. The Series 4 Preferred Shares are redeemable at Manulife’s option on June 19, 2014, at a redemption price per Series 4 Preferred Share equal to C$25.00 for an aggregate total of C$450 million. Formal notice will be delivered to holders of Series 4 Preferred Shares in accordance with the terms outlined in the share provisions for the Series 4 Preferred Shares.

Separately from the redemption price, the final quarterly dividend of C$0.4125 per Series 4 Preferred Share will be paid in the usual manner on June 19, 2014 to shareholders of record on May 13, 2014. After the Series 4 Preferred Shares are redeemed, holders of Series 4 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.

MFC.PR.D is a FixedReset, 6.60%+456, and given the size of the Issue Reset Spread there is no surprise regarding the redemption call. The issue commenced trading 2009-3-4 after being announced 2009-2-24.

Sun Life Financial Inc. has announced:

its intention to redeem all of its $250,000,000 Class A Non-Cumulative 5-Year Rate Reset Preferred Shares Series 6R (the “Series 6R Shares”) on June 30, 2014.

The Series 6R Shares are redeemable at Sun Life Financial Inc.’s option on June 30, 2014 (the “Redemption Date”) at a redemption price of $25.00 per share, together with all declared and unpaid dividends on such share to but excluding the Redemption Date. Notice will be delivered to the holders of the Series 6R Shares in accordance with the terms governing the Series 6R Shares.

Separately from the payment of the redemption price, the final quarterly dividend of $0.375 per share for the Series 6R Shares will be paid in the usual manner on June 30, 2014, to shareholders of record on May 28, 2014.

This comes as no surprise, since SLF.PR.F is a 6.00%+379 FixedReset that commenced trading 2009-5-20 after being announced 2009-5-8.

Canadian Utilities has announced:

CU Inc. announced today that it will redeem on June 1, 2014 all of its outstanding Cumulative Redeemable Preferred Shares Series 2 at a price of $25.00 per share. The $160 million aggregate cost of redemption will be funded from cash.

CIU.PR.B is a FixedReset, 6.70%+481, which commenced trading March 27, 2009 after being announced March 10, 2009. With such a whacking great Issue Reset Spread, the call for redemption comes as no surprise.

CIU.PR.B has been tracked by HIMIPref™ since issuance and is assigned to the FixedReset subindex.

DBRS has announced that it:

has today upgraded the rating of the Class B Preferred Shares, Series 1 (the Class B Preferred Shares) issued by BNS Split Corp. II (the Company) to Pfd-2 from Pfd-2 (low). The Class B Preferred Shares were issued in September 2010, following a reorganization of the Company. The Company used the proceeds from the initial share issuance of Class A Preferred Shares and Class A Capital Shares to purchase a portfolio of common shares of Bank of Nova Scotia (currently rated AA by DBRS).
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The performance of the Company has been positive since the last rating action. Downside protection increased steadily to 67.5% on April 10, 2014, from 63.9% on August 1, 2013, while increases in dividend distributions from underlying banks helped boost the dividend coverage ratio. As a result, the rating of the Class B Preferred Shares has been upgraded to Pfd-2 from Pfd-2 (low).

BSC.PR.B was last mentioned on PrefBlog at the time of a partial redemption last September (with a brief aside recently that it is the most illiquid issue in the HIMIPref™ universe). It is tracked by HIMIPref™ but relegated to the Scraps index on volume concerns.

Bank of Montreal has announced:

it has closed its inaugural Basel III-compliant public offering of Non-Cumulative 5-year Rate Reset Class B Preferred Shares Series 27 (the “Preferred Shares Series 27”). The offering was underwritten on a bought deal basis by a syndicate led by BMO Capital Markets. Bank of Montreal issued 20 million Preferred Shares Series 27 at a price of $25 per share to raise gross proceeds of $500 million.

The Preferred Shares Series 27 were issued under a prospectus supplement dated April 16, 2014, to the Bank’s short form base shelf prospectus dated March 13, 2014. Such shares will commence trading on the Toronto Stock Exchange today under the ticker symbol BMO.PR.S.

BMO.PR.S is a FixedReset, 4.00%+233, NVCC-compliant issue announced April 14. It will be tracked by HIMIPref™ and is assigned to the FixedReset Sub-Index. DBRS has confirmed their Pfd-2(stable) preliminary rating on the issue. Note that this is one notch below the other BMO issues due to NVCC uncertainty.

The issue traded 1,557,213 shares today in a range of 25.31-43 before closing at 25.42-44, 89×30. Vital statistics are:

If we compare BMO.PR.S to its sort-of peers with volatility theory, we find:

Click for Big

So, we see that BMO.PR.S is still cheap to the theoretical curve, and that the theoretical curve is absurdly steep, which favours higher-spread issue such as BMO.PR.S. On the other hand, BMO.PR.S has over five years to go until its call date, well in excess of the 3-year figure I use for convenience, and that it’s NVCC compliant unlike the other plotted members, and that an assumption of directionality in price (and therefore a steep curve) is entirely rational for the non-NVCC issues. So take your choice.

DBRS has announced:

The trend change reflects the combination of (1) increased financial flexibility to BAM, as 85% of its invested capital is now in listed companies (compared to DBRS’s estimate of 70% a year ago); (2) increased proportion and predictability of its asset management fees under the current corporate structure, a large proportion of which are fixed or based on sizes of investment under management, rather than performance or investment gains; and (3) improved financial metrics in 2013 due to strong operating cash flows from its investments and asset management fees, reduced corporate debt level and settlement of its contingent swap liabilities. With the improvements in 2013, BAM’s financial metrics with funds from operations (FFO, as defined by the Company) to debt of 38% and FFO interest coverage of 6.0 times (x) in 2013 (adjusted to exclude from FFO the one-time carried interests on private funds of $565 million) have exceeded the respective levels of 35% and 5.5x, targets DBRS had indicated in its previous report as necessary to maintain the current rating (“Funds from operation” are defined by BAM as “net income prior to fair value changes, depreciation and amortization, and deferred income taxes, and it also includes BAM’s proportionate share of FFO in its equity accounted investments”). The trend revision also factors into DBRS’s expectation that the Company will maintain these financial metrics generally in line with these targets for the foreseeable future.
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BAM’s rating remains supported by its strong liquidity and financial flexibility, which has been further strengthened in the past two years with the listing of all its flagship companies. At a company level, BAM had access to $814 million of cash and financial assets and unused committed bank facilities of about $2.0 billion as at December 31, 2013. After the listing of Brookfield Property Partners, 85% of BAM’s invested capital is now invested in listed assets. Total market valuation of these listed assets (as at March 28, 2014) and its cash balance will be adequate to cover 5.5x of company-level debt of $3.980 billion at year-end 2013, compared to 4.6x a year ago.

This trend change follows a similar move by S&P last September.

Brookfield Asset Management is the proud issuer of:

FixedResets BAM.PF.A, BAM.PF.B, BAM.PF.E, BAM.PR.P, BAM.PR.R, BAM.PR.T, BAM.PR.X, BAM.PR.Z
Floaters BAM.PR.B, BAM.PR.C, BAM.PR.K
RatchetRate BAM.PR.E
FixedFloater BAM.PR.G
Straight Perpetual BAM.PR.M, BAM.PR.N, BAM.PF.C, BAM.PF.D