Category: Issue Comments

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:

The National Bank of Canada has announced:

it has closed its domestic public offering of Basel III-compliant non-cumulative 5-year rate reset first preferred shares series 30 (the “Series 30 Preferred Shares”). National Bank issued 14 million Series 30 Preferred Shares at a price of $25 per share to raise gross proceeds of $350 million.

The offering was underwritten by a syndicate led by National Bank Financial Inc.

The Series 30 Preferred Shares will commence trading on the Toronto Stock Exchange today under the ticker symbol NA.PR.S.

The Series 30 Preferred Shares were issued under a prospectus supplement dated January 31, 2014 to National Bank’s short form base shelf prospectus dated October 5, 2012.

NA.PR.S is a NVCC-compliant FixedReset, 4.10%+240, announced January 29. It will be tracked by HIMIPref™ and assigned to the FixedResets index.

DBRS finalized the rating:

DBRS has today finalized the rating of National Bank of Canada’s (the Bank or National Bank) Non-Cumulative five-year Rate Reset First Preferred Shares Series 30 (NVCC Preferred Shares Series 30 or Series 30) at Pfd-2 (low) with a Stable trend.

Following the review of all documentation associated with the recent offering, DBRS has confirmed that all terms of the issuance are consistent with those reviewed at the time the provisional rating was assigned on January 29, 2014. For further details on the provisional rating, please see the DBRS press release entitled “DBRS Provisionally Rates National Bank’s Non-Viability Contingent Capital Preferred Shares Pfd-2 (low), Stable.”

The aggregate gross proceeds from the NVCC Preferred Shares Series 30 totalled $350 million. Proceeds from the issuance will be used for general business purposes.

NA.PR.S traded 713,963 shares today in a range of 24.90-00 before closing at 24.94-98, 5×1. Vital statistics are:

Scotia Managed Companies has announced:

NewGrowth Corp. (the “Company”) announced today that its Board of Directors has approved a proposal to reorganize the Company. The reorganization will permit holders of Capital Shares to extend their investment in the Company beyond the scheduled redemption date of June 26, 2014 for an additional five years. The Preferred Shares will be redeemed on the same terms originally contemplated in their share provisions on June 26, 2014. Holders of Capital Shares who do not wish to extend their investment and all holders of Preferred Shares will have their shares redeemed on June 26, 2014.

The reorganization will involve (i) the extension of the originally scheduled redemption date, (ii) adjusting and rebalancing the portfolio, (iii) a special retraction right to enable holders of Capital Shares to retract their shares as originally contemplated should they not wish to extend their investment and (iii) the issuance of new preferred shares in order to provide continuing leverage for the Capital Shares. The Company may also offer additional Capital Shares at the time of the preferred share offering.

A special meeting of holders of the Capital Shares will be held on March 26, 2014 to consider and vote upon the proposed reorganization. Details of the proposed reorganization will be outlined in an information circular to be prepared and delivered to holders of Capital Shares of record on February 20, 2014 in connection with the special meeting and will be available on www.sedar.com. Implementation of the proposed reorganization will also be subject to applicable regulatory approval including the Toronto Stock Exchange.

NewGrowth Corp. is a mutual fund corporation whose investment portfolio consists of publicly-listed securities of selected Canadian chartered banks, telecommunication, pipeline and utility issuers. The Capital Shares and Preferred Shares of NewGrowth Corp. are listed for trading on the Toronto Stock Exchange under the symbols NEW.A and NEW.PR.C respectively.

NEW.PR.C was last mentioned on PrefBlog in connection with a partial call for redemption in June 2012. NEW.PR.C is tracked by HIMIPref™ but is assigned to the Scraps index on volume concerns.

DBRS has announced:

You have attempted to access Subscriber content. Please click here to request a Subscription and someone from DBRS will get back to you promptly. Thank you for your interest – See more at: http://dbrs.com/research/264931/dbrs-downgrades-transcontinental-to-bbb-low-pfd-3-low-stable-trends.html#sthash.39AYaR78.dpuf

So press releases about credit rating changes are behind a pay-wall now. Well, fuck them. They’re already paid by the issuer. And if I can’t republish the gist of the rationale here, then I don’t want it.

So all the news of the rationale behind the downgrade that is available to the general public is:

Click for Big

However, it’s not too hard to figure out the reasons: TCL recorded another loss in 2013 as a result of asset impairment – last year’s loss was due to unusual adjustments to income taxes, asset impairment and a restructuring charge. According to Standard & Poors in March 2013:

The stable outlook reflects Standard & Poor’s expectation that Transcontinental’s financial policy will be moderate, operating performance will be satisfactory despite secular pressures, free cash flow will be healthy, and credit measures will be managed in line with our expectations in the medium term, including adjusted debt to EBITDA in the 2x area. We could lower the ratings if Transcontinental’s operating performance deteriorates, if it does not achieve our revenue targets, if margins decline, or if debt leverage exceeds 2.5x. Given challenging industry conditions, Standard & Poor’s is not contemplating raising the ratings in the next year. However, we could raise the ratings on Transcontinental in the medium term if the company improves its market position in growing sectors, while strengthening its operating performance and credit protection measures on a sustainable basis.