Category: Issue Comments

DBRS has announced that it:

has today upgraded the rating of the Class C Preferred Shares, Series 1 (the Class C Preferred Shares), issued by AllBanc Split Corp. (the Company) to Pfd-2 from Pfd-2 (low). On March 8, 2013, the Company issued 1,177,652 Class C Preferred Shares and 560,000 Class A Capital Shares (the Capital Shares) as part of a share capital reorganization, where all previously outstanding Class B Preferred Shares, Series 1 were fully redeemed. The final redemption date for the both classes of shares is March 8, 2018.

Net proceeds of the offering were used to purchase additional common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and The Toronto-Dominion Bank (the Portfolio). Dividends received on the Portfolio are used to pay a fixed cumulative quarterly distribution to holders of the Class C Preferred Shares, yielding 4.00% annually on the initial issue price of $31.64. Increases in the dividend distribution policies of the underlying banks in the past year have boosted the dividend coverage ratio to 2.6 times. Holders of the Capital Shares are expected to receive all excess dividend income after the Class C Preferred Share distributions and other expenses of the Company have been paid.

The net asset value of the Company initially fell shortly after issuance, but has been generally increasing since the end of June 2013. Downside protection rose from 51.5% on June 20, 2013, to 60.2% on November 21, 2013, and has been fluctuating around 59% since then. As a result, the rating of the Class C Preferred Shares has been upgraded to Pfd-2 from Pfd-2 (low).

ABK.PR.C was last mentioned at the end of February when it announced a partial call for redemption. It is tracked by HIMIPref™ but relegated to the Scraps index on volume concerns.

Brookfield Asset Management Inc. has announced (as part of a new issue announcement):

its intention to redeem all of its outstanding Class A Preferred Shares, Series 12 (TSX:BAM.PR.J) for cash on April 6, 2014. The redemption price for each Preferred Share, Series 12 will be C$26.00 plus accrued and unpaid dividends thereon (for greater certainty, excluding declared dividends with a record date prior to the redemption date).

You gotta love the redemption date. It’s a Sunday.

One should always be wary of investment managers cherry-picking their past recommendations, but I will admit that I have a certain fondness for BAM.PR.J which was a long-time favourite recommendation in PrefLetter in the ‘Operating Retractible’ category. BAM issues weakened immediately following the Canadian ABCP collapse in August, 2007, and stayed very weak for a long time. For instance, I recommended it in December, 2008, near the bottom of the market at 14.00-25. I hope everybody loaded up!

It should also be noted that this issue is being redeemed at a premium ($26 vs. issue price of $25) and the premium is taxable as a Deemed Dividend, rather than as a capital gain. If we may assume that the issue will trade marginally below the total Future Value if held to redemption until it is actually redeemed, investors will want to think carefully about the choice between selling the issue in the market (incurring commission and getting slightly less than the full redemption amount, but being taxed on the premium as a capital gain) or holding to redemption (and being taxed on the premium as a dividend).

Algonquin Power & Utilities Corp. has announced:

the closing of the previously announced offering of Cumulative Rate Reset Preferred Shares, Series D (the “Series D Shares”). APUC issued a total of 4,000,000 Series D Shares at $25.00 per share for aggregate gross proceeds of $100 million.

The holders of the Series D Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.25 per share, payable quarterly, as and when declared by the board of directors of APUC. The Series D Shares will yield 5.00% per cent annually, for the initial period ending on March 31, 2019.

The offering was made on a bought deal basis through a syndicate of underwriters led by CIBC and TD Securities Inc.

The Series D Shares will commence trading on the Toronto Stock Exchange today, March 5, 2014, under the symbol AQN.PR.D.

The net proceeds of the offering will be used to partially finance certain of APUC’s previously disclosed growth opportunities, reduce amounts outstanding on APUC’s credit facilities and for general corporate purposes.

AQN.PR.D is a FixedReset, 5.00%+328, announced February 24. It will be tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

The issue traded 86,910 shares today in a range of 24.25-64 before closing at 24.26-38, 10×3. Vital statistics are:

The Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Rate Reset Class A Preferred Shares Series 35 for cash. The redemptions will occur on April 30, 2014. The redemption price is $25.00 per Series 35 share.

The $0.406250 per share quarterly dividend announced on February 27, 2014 will be the final dividend on the Series 35 shares and will be paid on April 28, 2014 to shareholders of record on March 28, 2014.

Holders of the Series 35 shares should contact the financial institution, broker or other intermediary through which they hold the shares to confirm how they will receive their redemption proceeds.

Series 35 trades as CM.PR.L, which settled on February 4, 2009 after having been announced January 26, 2009 as a FixedReset, 6.50%+447.

With an Issue Reset Spread of 447bp, the call for redemption comes as no surprise.

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.