Category: Issue Comments

DBRS has announced:

The dividends received from the Portfolio are used to pay a fixed cumulative quarterly distribution of $0.2316 per share to holders of the Class B Preferred Shares, yielding approximately 4.25% annually on the initial issue price of $21.80. The current yield on the Portfolio shares fully covers the Class B Preferred Share dividends, providing dividend coverage of approximately 2.0 times. The Class A Capital Shares receive all excess dividend income after the Class B Preferred Share distributions and other expenses of the Company have been paid.

The performance of the Company has been positive in the previous year, in line with the share prices of Canadian banks. Downside protection increased steadily to 60.9% on February 13, 2014, from 53.4% on June 20, 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).

ALB.PR.B was last mentioned on PrefBlog when it had a partial call for redemption on February 18. ALB.PR.B is tracked by HIMIPref™, but relegated to the Scraps index on volume concerns.

Manulife Financial Corporation has announced:

that it has completed its offering of 8 million Non-cumulative Rate Reset Class 1 Shares Series 15 (the “Series 15 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $200 million.

The offering was underwritten by a syndicate of investment dealers co-led by Scotia Capital Inc., CIBC World Markets and RBC Capital Markets. The Series 15 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.L.

The Series 15 Preferred Shares were issued under a prospectus supplement dated February 18, 2014 to Manulife’s short form base shelf prospectus dated July 18, 2012.

MFC.PR.C is a FixedReset, 3.90%+216, announced February 18. It will be tracked by HIMIPref™ and assigned to the FixedReset index. As it is issued by an Insurance Holding Company and is not compliant with the banks’ NVCC rules, I have added a “Deemed Maturity” entry to the call schedule, dated 2025-1-31, at 25.00.

The issue traded 140,571 shares today in a range of 24.50-68 before closing at 24.50-51, 5×10. Vital statistics are:

Scotia Managed Companies has announced:

Allbanc Split Corp. (the “Company”) announced today that it has called 148,100 Preferred Shares for cash redemption on March 10, 2014 (in accordance with the Company’s Articles) representing approximately 12.576% of the outstanding Preferred Shares as a result of the special annual retraction of 148,100 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 March 6, 2014 will have approximately 12.576% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $31.64 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 March 10, 2014.

Payment of the amount due to holders of Preferred Shares will be made by the Company on March 10, 2014. From and after March 10, 2014 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. is a mutual fund Corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. Class A Capital Shares and Class C Preferred Shares of Allbanc Split Corp. are listed for trading on The Toronto Stock Exchange under the symbols ABK.A and ABK.PR.C respectively.

ABK.PR.C was last mentioned on PrefBlog when it was issued in March, 2013. It is tracked by HIMIPref™ but relegated to the Scraps index on volume concerns.

As reported here previously, RY.PR.K is a FloatingReset, 3-Month Bills + 193, that forms a Strong Pair with RY.PR.I.

Neither is NVCC compliant, so both have a Deemed Maturity in their call schedules dated 2022-1-31, at par.

RY.PR.K was posted for trading today, but there were no trades. This issue will be tracked by HIMIPref™ but due to low initial and anticipated volume, will be relegated to the Scraps index on volume concerns.
Vital statistics are:

The following FixedReset/FloatingReset Strong Pairs now exist and the schedule of implied 3-Month bill rates according to the Pairs Equivalency Calculator is:

Update, 2016-2-25: I should have included the following paragraph:

Note that since the issue is issued by a bank, is not compliant with OSFI’s Non-Viability Contingent Capital (NVCC) rules and is not convertible into common at the option of the issuer, I consider it to have a “Deemed Maturity” 2022-1-31 (this date may change in the future). This is an approximation (they will probably be called on an Exchange Date at par, not on precisely 2022-1-31) and is the result of analysis, not due to any legally binding commitment by the issuer – although I will note that this analysis with respect to bank issues has wide acceptance in the market. There is a brief explanation of this on the PrefLetter website (under the heading “DeemedRetractibles”) and with more detailed argument and progress reports on international negotiations in every edition of PrefLetter.

Quadravest has announced:

Canadian Banc Corp. (the “Company’) is pleased to announce it has filed a short form prospectus in each of the provinces of Canada with respect to an additional offering of Preferred Shares and Class A Shares (a “Unit”) of the Company. The offering price per Unit is expected to be in line with current market prices. The offering will be co-led by National Bank Financial Inc., CIBC World Markets Inc., RBC Capital Markets and TD Securities Inc.

The net proceeds of the treasury offering will be used by the Company to invest in a portfolio of six publicly traded Canadian Banks as follows: [Big 6 logos]

Shares held within the portfolio are expected to range between 5-20% in weight but may vary at any time. To generate additional returns above the dividend income earned on the portfolio, the Company will engage in a selective covered call writing program.

The Company’s objectives are to:
Preferred Shares:
i. provide holders with cumulative preferential floating rate monthly cash dividends at a rate per annum equal to the prevailing Canadian prime rate plus 0.75%, with a minimum annual rate of 5.0% and a maximum annual rate of 7% based on original issue price; and
ii. On or about December 1, 2018 or such other date as the Company may determine (the “termination date”) to pay holders the original issue price ($10) of those shares.

Class A Shares
i. provide holders with regular monthly cash distributions currently targeted to be at the annualized rate of 10% based upon the volume-weighted average trading price of the Class A Shares on the TSX for the last three trading days of the preceding month (effective September 17, 2013); and
ii. On the termination date to pay holders the original issue price ($15) of those shares.

The sales period of this overnight offering is expected to end at 12:00 p.m. EST on February 28, 2014. A copy of the preliminary short form prospectus is available from the syndicate of agents.

The syndicate of agents consists of National Bank Financial Inc., CIBC World Markets Inc., RBC Dominion Securities Inc., TD Securities Inc., BMO Nesbitt Burns Inc., GMP Securities L.P., Canaccord Genuity Corp., Desjardins Securities Inc., Mackie Research Capital Corporation, Manulife Securities Incorporated and Raymond James Ltd.

BK.PR.A was last mentioned on PrefBlog when its warrants approached expiration in April 2013. BK.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on both credit and volume concerns.

Scotia Managed Companies has announced:

Allbanc Split Corp. II (the “Company”) announced today that it has called 276,603 Preferred Shares for cash redemption on February 28, 2014 (in accordance with the Company’s Articles) representing approximately 23.118% of the outstanding Preferred Shares as a result of the special annual retraction of 553,206 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 26, 2014 will have approximately 23.118% 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 28, 2014.

Payment of the amount due to holders of Preferred Shares will be made by the Company on February 28, 2014. From and after February 28, 2014 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 there was a partial redemption in February 2013. ALB.PR.B is tracked by HIMIPref™, but relegated to the Scraps index on volume concerns.

The Royal Bank of Canada has announced:

that 2,421,185 of its 16,000,000 Non-Cumulative 5-Year Rate Reset First Preferred Shares Series AJ (the “Series AJ shares”) will be converted on February 24, 2014, on a one-for-one basis, into Non-Cumulative Floating Rate First Preferred Shares Series AK (the “Series AK shares”) of Royal Bank of Canada.

Furthermore, during the conversion notice period which ran from January 24, 2014 to February 10, 2014, only 530,659 Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series AL (the “Series AL shares”) were tendered for conversion into Non-Cumulative Floating Rate First Preferred Shares, Series AM (the “Series AM shares”). As per the conditions set out in the prospectus supplement dated October 27, 2008, since less than 1,000,000 Series AM shares would be outstanding after February 24, 2014, holders of Series AL shares who tendered their shares for conversion will not be entitled to convert their shares into Series AM shares. As a result, Series AM shares will not be issued at this time.

On February 24, 2014, Royal Bank of Canada will have 13,578,815 Series AJ, 2,421,185 Series AK and 12,000,000 Series AL shares issued and outstanding. The Series AJ and Series AL shares are currently listed on the Toronto Stock Exchange under the symbols RY.PR.I and RY.PR.L respectively. Series AK shares will be listed on the Toronto Stock Exchange under the symbol RY.PR.K.

The Reset Rate for RY.PR.I (3.52%+193) and RY.PR.L (4.26%+267) were discussed on PrefBlog. These two issues are tracked by HIMIPref™ and are members of the FixedReset subindex. RY.PR.K will be added to the FloatingReset subindex once it starts trading.

It may be significant that the issue with the lower spread got converted. It may be significant; it may not be; it might just be that people think that 3.52% is pretty skinny and want something else, no matter what it might be. I’ll have to think about it.

Standard & Poor’s has announced:

• •Montreal-based Bombardier Inc. announced negative free operating cash flow of about US$1.0 billion for fiscal 2013 and, based on our forecast, we expect continued negative free cash flow in 2014.
• •In addition, the company announced in January that entry into service for the CSeries will be delayed into the second half of 2015 and, as a result, Bombardier will incur incremental program costs.
• •We have reassessed the company’s financial risk profile, and do not believe Bombardier will be able to improve its credit measures to levels that will support a ‘BB’ corporate credit rating through our outlook period to late 2015.
• •As a result, we are lowering our ratings on Bombardier, including our long-term corporate credit rating to ‘BB-‘ from ‘BB’.
• •The stable outlook reflects our belief that Bombardier’s credit metrics will remain in the “highly leveraged” category through 2015, combined with our expectation that the company has sufficient liquidity through this period to fund its negative free cash flow.

…
The stable outlook reflects our belief that Bombardier’s credit metrics will remain in the highly leveraged category through 2015 and, specifically, funds from operations (FFO) to debt will remain below 12% at year-end 2015. The outlook also incorporates our expectation that the company maintains forward progression on placing the CSeries into service in late 2015 and has sufficient liquidity through this period to achieve this.

We could lower the rating on Bombardier should the CSeries experience further delays or order levels do not allow for profitable production, resulting in a reassessment of the company’s business risk profile. In addition, should the company be unable to improve margins and operating performance at both the aerospace and transportation division to guidance levels and generate positive free cash flow post-2015, we could also reassess the company’s business risk profile leading to a downgrade.

An upgrade would be contingent on Bombardier being able to place the CSeries into service, effectively removing the execution and cost risks associated with the program combined with a recovery of its credit metrics, specifically FFO to debt of 12% or higher, and the company demonstrating an ability to generate sustained positive free cash flow.

This follows S&P’s ‘Outlook Negative’ in August 2013 and the downgrade to Pfd-4(low) by DBRS in November 2013.

Bombardier has three series of preferreds outstanding: BBD.PR.B (Ratchet Rate); BBD.PR.C (PerpetualDiscount) and BBD.PR.D (FixedFloater). All are tracked by HIMIPref™; all are assigned to the Scraps index on Credit concerns.

Canadian Western Bank has announced:

that it has closed its domestic public offering of Basel III-compliant non-cumulative 5-year rate reset First Preferred Shares Series 5 (the “Series 5 Preferred Shares”). CWB issued 5 million Series 5 Preferred Shares at a price of $25 per share to raise gross proceeds of $125 million. The offering was underwritten by a syndicate led by National Bank Financial Inc.

The Series 5 Preferred Shares will commence trading on the Toronto Stock Exchange today under the ticker symbol CWB.PR.B. The Series 5 Preferred Shares were issued under a prospectus supplement dated February 3, 2014 to CWB’s short form base shelf prospectus dated January 30, 2014.

In conjunction with the closing of this offering, CWB has confirmed regulatory approval to redeem the currently outstanding non-cumulative 5-year rate reset First Preferred Shares Series 3 (TSX: CWB.PR.A), and intends to proceed with the full redemption of these shares on April 30, 2014 in accordance with the terms of such shares.

CWB.PR.B is a FixedReset, 4.40%+276, announced January 31. It will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The issue traded 241,874 shares today in a range of 24.90-98 before closing at 24.97-98, 20×42. Vital statistics are: