Category: Issue Comments

In December I deduced that RY.PR.I and RY.PR.L would not be called on their Exchange Date of 2014-2-24, but warned:

Mind you, it will be noted that the presumed extension cannot yet be deemed a fact. According to the prospectus for RY.PR.I and the prospectus for RY.PR.L:

We will give notice of any redemption to registered holders not more than 60 days and not less than 30 days prior to the redemption date.

… so they’ve still got lots of time to change their minds one way or another if the market goes blahooey.

Well, there’s been a distinct lack of blahooeyness in the market over the past month, and today Royal Bank of Canada announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series AJ (the “Series AJ shares”) or Series AL (the “Series AL shares”) on February 24, 2014. There are currently 16,000,000 Series AJ shares and 12,000,000 Series AL shares outstanding.

Subject to certain conditions set out in the prospectus supplement dated September 9, 2008 relating to the issuance of the Series AJ shares, the holders of the Series AJ shares have the right to convert all or part of their Series AJ shares, on a one-for-one basis, into Non-Cumulative Floating Rate First Preferred Shares, Series AK (the “Series AK shares”) on February 24, 2014.

Subject to certain conditions set out in the prospectus supplement dated October 27, 2008 relating to the issuance of the Series AL shares, the holders of the Series AL shares have the right to convert all or part of their Series AL shares, on a one-for-one basis, into Non-Cumulative Floating Rate First Preferred Shares, Series AM (the “Series AM shares”) on February 24, 2014. On such date, holders who do not exercise their right to convert their Series AJ shares or Series AL shares into Series AK or Series AM shares, as the case may be, will continue to hold their Series AJ and Series AL shares.

The foregoing conversion rights are subject to the following:

i. if Royal Bank of Canada determines that there would be less than 1,000,000 Series AK shares or less than 1,000,000 Series AM shares outstanding after February 24, 2014, then holders of Series AJ or Series AL shares will not be entitled to convert their shares into Series AK or Series AM shares, as the case may be, and

ii. alternatively, if Royal Bank of Canada determines that there would remain outstanding less than 1,000,000 Series AJ or less than 1,000,000 Series AL shares after February 24, 2014, then all remaining Series AJ or AL shares will automatically be converted into Series AK or AM shares, as the case may be, on a one-for-one basis on February 24, 2014.

In either case, Royal Bank of Canada will give written notice to that effect to holders of Series AJ and AL shares no later than February 17, 2014.

The dividend rates applicable for the Series AJ and AL shares for the 5-year period from and including February 24, 2014 to but excluding February 24, 2019, and the dividend rates applicable to the Series AK and AM shares for the 3-month period from and including February 24, 2014 to but excluding May 24, 2014, will be determined and announced by way of a press release on January 24, 2014.

Beneficial owners of Series AJ shares and Series AL shares who wish to exercise their conversion rights, should communicate with their broker or other nominee to obtain instructions for exercising such rights during the conversion period, which runs from January 24, 2014, until 5:00 p.m. (EST) on February 10, 2014.

It is obviously too early to make a firm recommendation regarding conversion into FloatingResets since the fixed rate is not yet known, but at the moment all the FloatingReset / FixedReset pairs are trading with an entirely reasonable levels of Implied Average Three-Month Bill yield, so no convincing argument can be made either way.

TransCanada Corporation has announced:

that it has completed its public offering of cumulative redeemable first preferred shares, series 9 (the “Series 9 Preferred Shares”). TransCanada issued 18 million Series 9 Preferred Shares for aggregate gross proceeds of $450 million through a syndicate of underwriters co-led by Scotiabank, BMO Capital Markets and RBC Capital Markets.

The net proceeds of the offering will be used for general corporate purposes and to reduce short term indebtedness of TransCanada and its affiliates, which short term indebtedness was used to fund TransCanada’s capital program and for general corporate purposes.

The Series 9 Preferred Shares will begin trading today on the TSX under the symbol TRP.PR.E.

TRP.PR.E is a FixedReset, 4.25%+235, announced January 13. It will be tracked by HIMIPref™ and assigned to the FixedReset subindex.

The issue traded 490,441 shares today in a range of 24.90-99 before closing at 24.86-95, 40×101. Vital statistics are:

Pembina Pipeline Corporation has announced:

that it has closed its previously announced public offering of 10,000,000 cumulative redeemable rate reset class A preferred shares, series 5 (the “Series 5 Preferred Shares”) for aggregate gross proceeds of $250 million (the “Offering”).

The Offering was announced on January 7, 2014 when Pembina entered into an agreement with a syndicate of underwriters led by Scotiabank and RBC Capital Markets. Due to strong investor demand, the size of the Offering was increased from an originally proposed offering of 6,000,000 Series 5 Preferred Shares plus an underwriters’ option to purchase up to an additional 2,000,000 Series 5 Preferred Shares (for aggregate gross proceeds of $200 million assuming the underwriters’ option had been exercised in full).

Proceeds from the Offering will be used to partially fund Pembina’s 2014 capital expenditure program, including capital expenditures relating to Pembina’s current expansion and growth projects, to reduce indebtedness under the Company’s credit facilities, and for general corporate purposes of the Company and its affiliates.

The Series 5 Preferred Shares will begin trading on the Toronto Stock Exchange today under the symbol PPL.PR.E.

Pembina’s Board of Directors also declared an initial dividend of $0.1507 per Series 5 Preferred Share for the period from January 16, 2014 to February 28, 2014 which is payable on March 1, 2014 to shareholders of record at the close of business on February 1, 2014.

Future dividends on the Series 5 Preferred Shares are expected to be $0.3125 quarterly, or $1.25 per share on an annualized basis, payable on the 1st day of March, June, September and December, as and when declared by the Board of Directors of Pembina, for the initial fixed rate period to but excluding June 1, 2019.

All of Pembina’s dividends are designated “eligible dividends” for Canadian income tax purposes.

PPL.PR.E is a FixedReset, 5.00%+300, announced January 7. It will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The issue traded 761,612 shares today in a range of 24.90-09 before closing at 25.05-06, 3×20. Vital statistics are:

Aimia Inc. has announced:

the closing of its previously announced offering of 6,000,000 Cumulative Rate Reset Preferred Shares, Series 3 (the “Series 3 Preferred Shares”), including 1,000,000 Series 3 Preferred Shares that were issued upon the exercise in full of the underwriters’ option to purchase additional shares, at a price of C$25.00 per Series 3 Preferred Share for gross proceeds of C$150 million. The Series 3 Preferred Shares were purchased by a syndicate of underwriters led by CIBC, TD Securities Inc., RBC Capital Markets and BMO Capital Markets.

The net proceeds of the issue will be used by Aimia to supplement its financial resources and for general corporate purposes.

AIM.PR.C is a FixedReset, 6.25%+420, announced January 6. The issue will be tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

The issue traded 537,900 shares today in a range of 25.00-10 before closing at 25.05-07, 6×50. Vital statistics are:

Quadravest announced on January 9:

Financial 15 Split 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 of the Company. The offering will be co-led by National Bank Financial Inc., CIBC World Markets Inc. and RBC Capital Markets.

The Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.25% and the Class A Shares will be offered at a price of $9.60 per Class A Share to yield 15.71%. The closing price of each of the Preferred Shares and the Class A Shares on January 8, 2014 on the TSX was $10.06 and $10.20, respectively.

The proceeds of the secondary offering, net of expenses and the underwriters’ fee, will be used by the Company to invest in a high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal	National Bank of Canada	Bank of America Corp.
The Bank of Nova Scotia	Manulife Financial Corporation	Citigroup Inc.
Canadian Imperial Bank of Commerce	Sun Life Financial Services of Canada Inc.	Goldman Sachs Group Inc.
Royal Bank of Canada	Great-West Lifeco Inc.	JP Morgan Chase & Co.
The Toronto-Dominion Bank	CI Financial Corp.	Wells Fargo & Co.

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 the termination date, currently December 1, 2015 (the “Termination Date”), to pay the holders of the Preferred Shares $10.00 per Preferred Share, which was the original issue price of the Preferred 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 Share to yield 8.0% per annum on the original issue price of the Class A Shares, and currently targeted to be $0.1257 per Class A Share;
ii. on or about Termination Date, to pay the holders of Class A Shares $15.00 per Class A Share, which was the original issue price of the Class A Shares.

The Company is currently scheduled to terminate on December 1, 2015. The Company intends to seek shareholder approval to extend the Termination Date initially to December 1, 2020, and thereafter for additional terms of five years each at the discretion of Quadravest Capital Management Inc., as the manager of the Company. In conjunction with such extension, if approved, shareholders would be offered a special retraction right which would allow them to exit their investment in the Company on the same basis as if the Company were to terminate on its otherwise scheduled Termination Date. Further information regarding the term extension will be provided at the time meetings of shareholders are called to consider and, if deemed acceptable, approve the extension.

The sales period of this overnight offering will end at 9:00 a.m. EST on January 10, 2014.

A copy of the preliminary short form prospectus is available from the syndicate of underwriters.

This has been followed by an announcement January 10:

Financial 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight marketing of up to 1,531,000 Preferred Shares and up to 1,531,000 Class A Shares. Total proceeds of the offering are expected to be approximately $30 million. The Company has granted the dealers an overallotment of 229,650 units if exercised, bringing the total proceeds to $34.5 million. The offering was co-led by National Bank Financial Inc., CIBC World Markets Inc. and RBC Capital Markets and also included BMO Nesbitt Burns Inc., GMP Securities L.P. and Canaccord Genuity Corp. The sales period of this overnight offering has now ended.

The Preferred Shares were offered at a price of $10.00 per Preferred Share to yield 5.25% and the Class A Shares were offered at a price of $9.60 per Class A Share to yield 15.71%. The closing price of each of the Preferred Shares and the Class A Shares on January 9, 2014 on the TSX was $10.08 and $10.23, respectively.

The Bank of Nova Scotia has announced:

the applicable dividend rates for its Non-cumulative 5-Year Rate Reset Preferred Shares Series 22 of Scotiabank (the “Preferred Shares Series 22”) and Non-cumulative Floating Rate Preferred Shares Series 23 of Scotiabank (the “Preferred Shares Series 23”).

With respect to any Preferred Shares Series 22 that remain outstanding after January 26, 2014, commencing as of such date, holders thereof will be entitled to receive non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Scotiabank and subject to the Bank Act (Canada). The dividend rate for the five-year period commencing on January 26, 2014 and ending on January 25, 2019 will be 3.830%, being equal to the 5-Year Government of Canada bond yield determined as at December 27, 2013 plus 1.88%, as determined in accordance with the terms of the Preferred Shares Series 22.

With respect to any Preferred Shares Series 23 that may be issued on January 26, 2014, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Scotiabank and subject to the Bank Act (Canada), based on a dividend rate equal to the 90-day Canadian Treasury Bill yield plus 1.88%, on an actual/365 day count basis, subject to certain adjustments in accordance with the terms of the Preferred Shares Series 23. The dividend rate for the period commencing on January 26, 2014 and ending on April 25, 2014 will be equal to 2.782%, as determined in accordance with the terms of the Preferred Shares Series 23.

Beneficial owners of Preferred Shares Series 22 who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to ensure that they meet the deadline to exercise such right, which is 5:00 p.m. (Toronto time) on January 13, 2014.

The extension of BNS.PR.R was previously reported on PrefBlog.

I am making no recommendation as to whether holders of BNS.PR.R should convert or not to the new FloatingReset that will appear on January 25. The five FloatingResets currently outstanding have an average three-month bill breakeven rate of 1.87%; given a current price of 25.33 on BNS.PR.R, this implies a price of 25.24 on the new issue, which is certainly within error. Given a current bill yield of 0.91%, the implication is that the Bank Rate will rise by 200bp over the next five years, assuming a steady rate of increases – this is reasonable. If you have strong views on the future of the Bank Rate, act accordingly (while remembering to ask yourself ‘What if I’m wrong?’) or go with what makes most sense for your portfolio.

On December 30, in all innocence, I posted the following entry in the Volume Highlights table:

Now Assiduous Reader SM writes in and says:

in yesterday’s volume highlights on prefblog, BNS.PR.X is listed as having a 1.44% YTW at $25.63. My use of Shakespeare’s YTC spreadsheet (14/01/06 settlement) tells me the YTW is exactly 2.00%. What gives?

The “Calculators” section of the Right Hand Navigation Panel has links to Shakespeare’s Spreadsheet and a souped-up version that accounts for dividend changes for FixedResets. Some may also be interested in my instruction manual for ytc.xls and a lengthy post discussing compounding frequency.

SM’s figure of 2.00% is derived from the following inputs:

• Current Price = 25.63
• Call Price = 25.00
• Settlement Date = 2014-1-6
• Call Date = 2014-4-25
• Quarterly Dividend = 1.5625/4
• Cycle = 1
• Pay Date = 25
• Include first Dividend = 1
• First Dividend Value = Blank

SM poses a complicated question – there are no less than three-and-a-half different things going on:

• Settlement Date
• Compounding Convention
• Cash Flow Amounts
• Cash Flow Timing

People who compulsively count up items in lists will notice that four lines are required to itemize the three-and-a-half things. The discrepancy arises because “Cash Flow Timing” is a superset of “Settlement Date”. Take some meds, guys.

Settlement Date

This is a more complex question than one might think. Is it really all that great to use the settlement date for yield calculations? After all, if Joe Average is going to buy security X, he’s got to fund the purchase (either with cash or margin) on the trade date – in fact, this has to be done before the trade is executed, never mind settled.

And when valuing the security, it it really all that kosher to use settlement date yields? This will include settlement date accrued interest (where applicable), which hasn’t been earned yet; additionally, financial reporting will show only the accrued interest as of the reporting date, i.e., Trade Date.

On the other hand, market prices are always quoted assuming the normal settlement convention, so if you’re going to use TD yields, you also need to use TD-specific prices. Trading bonds for non-standard settlement is – or at least was, in the old days – an intricate process that required the salesman to get the price from his trader, and then perform a lot of calculations based on the coupon, the yield and the day-count before quoting a price. This required time and swearing, but nowadays there’s probably an app for that.

It will also be noted that the Canadian Yield Calculation Conventions specify use of settlement date.

However, I use TD calculation instead and justify my decision with the argument that your mother wears army boots.

Using TD instead of VD in the Yield Calculator results in a reduction of the calculated yield to 1.88% from 2.00%.

Compounding Convention

Fixed Income Yield Calculations use periodic return rather than Annualized Return (IRR); that is, the yield is calculated per payment period and this yield is multiplied by the number of periods per year to express it as an annual rate (annual rate = y*4), rather than compounding it (annual rate = (1+y)^4 – 1).

In the case under discussion: HIMIPref™ calculates bond-equivalent yields. To convert quarterly compounded annual rates, y, to bond-equivalent semi-annual rates, r:

r = 2 * [(1 + y/4)^2 – 1]

so if the quarterly-compounded rate is y = 2.00%, then the bond-equivalent semi-annual rate is 2 * [1.005^2 – 1] = 2.005%. It is, obviously, a very minor difference at these yields, but can become much larger at higher levels.

Cash Flow Amounts

The YTC calculator calculates (in cell S4) that the final dividend, paid on April 25, will be 0.390625 – that is to say, one quarter of the annual rate, which appears at first glance to be obvious. But is it really all that obvious?

HIMIPref™ shows the prior dividend as being paid 2013-10-31 (which is wrong – the pay date was actually October 29, but a few days difference in pay date doesn’t usually matter), and therefore assumes that the next dividend will be paid on January 31. Then, when HIMIPref calculates in one part of the programme that the issue will be called on April 25, the part of the programme that calculates expected cash flows and yields says to itself, “Aha! It’s being called before the full dividend is due! Six days early, in fact!” So it takes six days’ dividend off the final payment and evaluates the last dividend as $0.36 (rounded to two decimal places in the report I’m looking at, but internal precision is higher). So right away, there’s a few pennies difference and each penny makes a difference of about 13bp in calculated yield, according to ytc.xls.

So we might be tempted to conclude that oh, yes, just another HIMIPref™ error, so what, until we consider the data calculated by ytc.xls. It assumes full payment of the entire quarterly dividend on April 25, reasonably enough since that is essentially what we told it to do when we filled in Pay Date = 25. So that’s wrong, too. If we change Pay Date to 29, it does the same thing HIMIPref™ does and performs its calculations with a pro-rata dividend paid on the April 25 redemption date.

But that’s still wrong, probably, although we can’t say this conclusively until Scotia announces the next dividend.

Consider BNS.PR.S. It will be redeemed on January 26, but the final dividend has been announced as the full amount of $0.3906 payable January 29.

What’s more, the prospectus for BNS.PR.S states:

The holders of Preferred Shares Series 24 will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the board of directors of the Bank (the “Board of Directors”), for the initial period commencing on the Closing Date (as defined herein) and ending on and including January 25, 2014 (the “Initial Fixed Rate Period”), payable quarterly on the third last business day of January, April, July and October in each year (other than January 28, 2009), at a rate equal to $0.3906 per share. The initial dividend, if declared, will be payable April 28, 2009 and will be $0.5865 per share, based on the anticipated closing date of December 12, 2008 (the “Closing Date”). Reference is made to “Details of the Securities Being Distributed”.

That’s valuable information, that is, because it allows us to calculate the precise period over which that first dividend was earned. A little playing around results in the conclusion that the $0.5865 first dividend was equal to 137 days of interest at an annual rate of 6.25% (the figure to six decimal places is $0.586473).

137 days? That’s 19 (December) + 31 (January) + 28 (February) + 31 (March) + 28 (April). So the first dividend payment on April 28, 2009, included an accrual for every single day up to the payment date. Therefore, we may conclude that the final dividend of $0.3906 (equal to every other dividend other than the first) also includes accruals up to the payment date of January 29 … even though Scotia

intends to exercise its right to redeem all outstanding Non-cumulative Preferred Shares Series 24 of Scotiabank on January 26, 2014

This is complicated even more by the amusing happenstance that January 26 is a Sunday and Scotia couldn’t pay the redemption price on that day even if it wanted to. AND, that according to the prospectus:

for the initial period commencing on the Closing Date (as defined herein) and ending on and including January 25, 2014

and therefore by rights a new rate should be calculated for the period 2014-1-26 to the paydate of 2014-1-29. And what’s up with the day count? Will the shareholders be getting their capital back on Monday, January 27, but still earn dividends on that capital to the final dividend pay-date of January 29? Or will the actual payment for the redemption be made on January 29 as well?

Cash Flow Timing

The whole thing’s a minefield, and with respect to BNS.PR.X it will be noted that the redemption date is actually April 26 anyway, which is a Saturday.

Conclusion

The moral of the story is that precise calculation of yields using actual dates is a quagmire and it doesn’t usually matter, but these minor differences can add up to quite a few beeps when the remaining term is very short – as has happened in this case with BNS.PR.X. In such cases, one is better off double-checking all the dates and amounts and valuing the shares as packages of money market instruments with yields calculated according to money market conventions, which is a another kettle of fish.

The Toronto-Dominion Bank has announced:

that it will exercise its right to redeem all of its 10 million outstanding Non-cumulative 5-Year Rate Reset Preferred Shares, Series AA (the “Series AA Shares”) on January 31, 2014 at the price per share of $25.00, for an aggregate total of approximately $250 million.

TD also announced it will exercise its right to redeem all of its 8.8 million outstanding Non-cumulative 5-Year Rate Reset Preferred Shares, Series AC (the “Series AC Shares”) on January 31, 2014 at the price per share of $25.00, for an aggregate total of approximately $220 million.

On December 5, 2013, the Board of Directors of TD declared quarterly dividends of $0.3125 per Series AA Share and $0.35 per Series AC Share. These will be the final dividends on the Series AA Shares and Series AC Shares, respectively, and will be paid in the usual manner on January 31, 2014 to shareholders of record on January 8, 2014, as previously announced. After January 31, 2014, the Series AA Shares and Series AC Shares will cease to be entitled to dividends and the holders of such shares will not be entitled to exercise any right in respect thereof except that of receiving the redemption amount.

Instructions with respect to receipt of the redemption amount will be set out in the Letter of Transmittal to be mailed to registered holders of the Series AA Shares and Series AC Shares shortly. Inquiries should be directed to our Registrar and Transfer Agent, CST Trust Company, at 1-800-387-0825 (or in Toronto 416-682-3860). Beneficial holders who are not directly the registered holder of these shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds. Further details and instructions will be posted shortly to our website, http://www.td.com/investor-relations/ir-homepage/share-information/preferred-shares/preferred.jsp.

TD.PR.A is a FixedReset, 5.00%+196bp, announced 2008-9-2 and closing 2008-9-12 … on the Friday before the before the Lehman Bankruptcy Weekend.

TD.PR.C is a FixedReset, 5.60%+274, announced 2008-10-27 and settling 2008-11-5 … slap in the middle of the biggest preferred share rout in memory.

It’s somewhat surprising that TD.PR.A was called – 196bp is a fairly modest Issue Reset Spread.

DBRS has announced that it:

has today upgraded the rating of the Preferred Shares issued by Brompton Lifeco Split Corp. (the Company) to Pfd-4 (high) from Pfd-5 (high). In April 2007 the Company issued 3.1 million Preferred Shares (at $10.00 each), along with an equal number of Class A Shares (at $15.00 each). The termination date for both classes of shares issued is April 30, 2014, but a term extension has been proposed by the Company.

The Company holds a portfolio consisting primarily of common shares of the four largest publicly traded Canadian life insurance companies (the Portfolio). As of September 30, 2013, the Portfolio’s composition was: Industrial Alliance Insurance and Financial Services Inc. (26.0%), Sun Life Financial Inc. (24.9%), Manulife Financial Corporation (24.4%) and Great-West Lifeco Inc. (24.0%). The Portfolio was initially equally weighted and is subject to annual rebalancing.

The Preferred Shares pay a fixed cumulative quarterly distribution of $0.13125 per Preferred Share, yielding 5.25% annually on their issue price of $10.00 per share. Holders of the Class A Shares are expected to receive regular monthly targeted cash distributions of $0.075 per share, yielding 6% annually on their issue price of $15.00 per share. Class A Share distributions were suspended in March 2011, due to the net asset value of the Company falling below $15.00 per unit (i.e., 33% downside protection), but were reinstated in July 2013.

On June 10, 2013, DBRS confirmed the ratings of the Preferred Shares at Pfd-5 (high). Since then, the performance of the Company has been positive, with downside protection climbing to its highest levels in over two years (39.5% as of December 12, 2013). In addition, the short-term outlook for the Canadian life insurance industry has improved. As a result, the rating of the Preferred Shares has been upgraded to Pfd-4 (high).

DBRS will continue to closely monitor changes in the credit quality of the Preferred Shares and provide rating updates as required.

The issue’s downgrade to Pfd-5(high) was reported on PrefBlog. LCS.PR.A is not tracked by HIMIPref™ as it is a very small issue – less than 1.7-million units are outstanding.

On November 26, Standard & Poor’s announced:

that it has reviewed its ratings on the corporate industrial and utility companies that were labeled as “under criteria observation” (UCO) after the publishing of its revised Corporate criteria on Nov. 19. The ratings on seven Canadian corporate entities were placed on CreditWatch with positive implications as a result of this review, meaning that they will likely be raised. At the same time, the ratings on three Canadian corporate entities were placed on CreditWatch with negative implications, meaning that they will likely be lowered.

AltaGas Ltd., proud issuer of ALA.PR.A and ALA.PR.E was put on Watch-Negative.

S&P has now announced:

• Standard & Poor’s published its revised corporate criteria Nov. 19, 2013
• We are affirming our ratings, including our ‘BBB’ long-term corporate credit rating, on AltaGas Ltd.
• We are also removing the ratings from CreditWatch, where we placed them with negative implications Nov. 26, 2013, in conjunction with our revised criteria.
• We assess AltaGas’ business risk profile as “strong” and financial risk profile as “significant” based on the medial volatility table.
• The stable outlook reflects our expectations of improving financial metrics in 2014 and 2015 when major capital projects enter service, and the company maintaining its mix of midstream, unregulated power and regulated utility businesses.

…
We believe the combination of acquisitions in 2013 and the Forrest Kerr project entering service mid-2014 will further diversify the company away from commodity-related cash flows such as fractionation margin and power sales in the Alberta market. We estimate that commodity-related cash flows will decline to less than 15% of consolidated cash flows by 2015.
…
The stable outlook reflects our expectations that financial metrics will improve in 2014 and 2015 as Forrest Kerr enters service, AltaGas’ business mix continues to diversify, and commodity exposure declines to less than 15% of cash flows in two years.