Category: Issue Comments

In June, 2013, a shareholders’ vote was scheduled:

The purpose of the meeting is to consider and vote upon a special resolution that would allow the merger of STREAMS III into Dividend 15 Split Corp. (“Dividend 15”) on December 1, 2013 while still allowing any STREAMS III shareholders, should they choose, to retract their shares on the existing scheduled termination date on the same terms as originally contemplated.

A vote FOR the proposal will give you two options at the December 1, 2013 termination date:
1) Capital Yield and Equity Dividend shareholders will be able to have their shares exchanged (based on relative net asset values) for an equal dollar amount of units of Dividend 15 through the merger of STREAMS III into Dividend 15, OR
2) Capital Yield shares would receive $25 per share and Equity Dividend shares would receive the NAV less $25 (to a maximum of $15 per share) under the existing termination formula as originally contemplated.

If this proposal is approved, shareholders will not be required to make a decision on this choice until early in November, 2013 when further information will be provided.

The vote was favourable:

The Board of Directors of Income STREAMS III Corporation (“STREAMS III”) is pleased to announce that Equity Dividend Shareholders voted 97% in favour and Capital Yield Shareholders voted 89% in favour of a proposal that would allow the merger of STREAMS III into Dividend 15 Split Corp. (“Dividend 15”) on December 1, 2013.

Approximate values were announced in November:

Based on the November 15, 2013 net asset value (NAV) exchange ratios (as adjusted for the DFN and DFN.PR.A November declared dividends) and the market value of a Dividend 15 unit (as at November 15, 2013) STQ shareholders would receive the equivalent of $26.17 in market value of Dividend 15 units for each STQ share exchanged. STQ.E shareholders would receive the equivalent of $8.06 in market value of Dividend 15 units for each STQ.E share exchanged.

Precise exchange ratios were announced November 29:

Income STREAMS III Corp. (“IS STREAMS”) provides the final exchange ratio and other details relating to the merger of IS STREAMS into Dividend 15 Split Corp (“Dividend 15”).

All Capital Yield (TSX symbol STQ) and Equity Dividend (TSX symbol STQ.E) shares outstanding on December 1, 2013 will automatically be exchanged into an equal dollar amount of Dividend 15 units based on the November 28 net asset value (NAV) exchange ratios. One unit of Dividend 15 is comprised of one Class A share (TSX symbol DFN) and one Preferred share (TSX symbol DFN.PR.A).

The final exchange ratios are as follows:

1 STQ share will be exchanged into 1.22352296 DFN shares and 1.22352296 DFN.PR.A shares

1 STQ.E share will be exchanged into 0.37682901 DFN shares and 0.37682901 DFN.PR.A shares

(Fractional shares will not be issued)

It is expected that STQ and STQ.E shares will be halted for trading by the TSX before the opening of trading on December 3, 2013 and delisted from the TSX on that day. Any STQ or STQ.E purchased prior to the halt of these shares will receive the applicable number of DFN and DFN.PR.A shares upon settlement. The exchange of STQ and STQ.E into DFN and DFN.PR.A shares will occur automatically and no further action is required by STQ or STQ.E shareholders. This exchange is a non taxable event.

Based on the November 28, 2013 NAV exchange ratios and the market value of a Dividend 15 unit (as at November 28, 2013), STQ shareholders will receive the equivalent of $25.69 in market value of Dividend 15 units for each STQ share exchanged. STQ.E shareholders would receive the equivalent of $7.91 in market value of Dividend 15 units for each STQ.E share exchanged.

Well, the recovery of about $7.91 on STQ.E is a far cry from the par value of $15! STQ.E was last mentioned on PrefBlog when the credit rating was discontinued in February 2008. STQ.E has been tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

In June, 2013, Quadravest sent CGQ & CGQ.E unitholders a management information circular:

The purpose of the meeting is to consider and vote upon a special resolution that would allow the merger of CG STREAMS into Dividend 15 Split Corp. (“Dividend 15”) on December 1, 2013 while still allowing any CG STREAMS shareholders, should they choose, to retract their shares on the existing scheduled termination date on the same terms as originally contemplated.

A vote FOR the proposal will give you two options at the December 1, 2013 termination date:
1) Capital Yield and Equity Dividend shareholders will be able to have their shares exchanged (based on relative net asset values) for an equal dollar amount of units of Dividend 15 through the merger of CG STREAMS into Dividend 15, OR
2) Capital Yield shares would receive $25 per share and Equity Dividend shares would receive the NAV less $25 (to a maximum of $15 per share) under the existing termination formula as originally contemplated.

If this proposal is approved, shareholders will not be required to make a decision on this choice until early in November 2013
when further information will be provided.

Shareholders approved the proposal in July, 2013:

The Board of Directors of Capital Gains Income STREAMS (“CG STREAMS”) is pleased to announce that both classes of shareholders have voted over 94% in favour of a proposal that would allow the merger of CG STREAMS into Dividend 15 Split Corp. (“Dividend 15”) on December 1, 2013.

On November 29, final exchange ratios were announced:

Capital Gains Income STREAMS (“CG STREAMS”) provides the final exchange ratio and other details relating to the merger of CG STREAMS into Dividend 15 Split Corp (“Dividend 15”).

All Capital Yield (TSX symbol CGQ) and Equity Dividend (TSX symbol CGQ.E) shares outstanding on December 1, 2013 will automatically be exchanged into an equal dollar amount of Dividend 15 units based on the November 28 net asset value (NAV) exchange ratios. One unit of Dividend 15 is comprised of one Class A share (TSX symbol DFN) and one Preferred share (TSX symbol DFN.PR.A).

The final exchange ratios are as follows:

1 CGQ share will be exchanged into 1.22352296 DFN shares and 1.22352296 DFN.PR.A shares

1 CGQ.E share will be exchanged into 0.19516249 DFN shares and 0.19516249 DFN.PR.A shares

(Fractional shares will not be issued)

It is expected that CGQ and CGQ.E shares will be halted for trading by the TSX before the opening of trading on December 3, 2013 and delisted from the TSX on that day. Any CGQ or CGQ.E purchased prior to the halt of these shares will receive the applicable number of DFN and DFN.PR.A shares upon settlement. The exchange of CGQ and CGQ.E into DFN and DFN.PR.A shares will occur automatically and no further action is required by CGQ or CGQ.E shareholders. This exchange is a non taxable event.

Based on the November 28, 2013 NAV exchange ratios and the market value of a Dividend 15 unit (as at November 28, 2013), CGQ shareholders will receive the equivalent of $ 25.69 in market value of Dividend 15 units for each CGQ share exchanged. CGQ.E shareholders would receive the equivalent of $4.10 in market value of Dividend 15 units for each CGQ.E share exchanged.

Well, the recovery of about $4.17 on CGQ.E is a far cry from the par value of $15! CGQ.E was last mentioned on PrefBlog when the credit rating was discontinued in February 2008. CGQ.E has been tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

As noted in the new issue report, Power Financial Corporation has announced:

The Corporation intends to redeem all of its $175 million First Preferred Shares, Series M on January 31, 2014 upon completion of the Series T offering.

Nice! PWF.PR.M is a FixedReset, 6.00%+320 (announced in November, 2008, when the market was going vertical and not in a nice way), while the new issue is 4.20%+237 … so the company is saving 180bp on the difference in initial dividend and will save 93bp on all future resets.

Standard & Poor’s has announced:

• We are raising our long-term corporate credit rating on Northland Power Inc. (NPI) to ‘BBB’ from ‘BBB-‘.
• We are also raising our global scale and Canada scale preferred stock ratings on NPI to ‘BB+’ and ‘P-3(High)’ from ‘BB’ and ‘P-3’, respectively.
• As well, we are affirming our ‘BBB’ issue-level rating on the company’s senior secured debt.
• The upgrade reflects our assessment of NPI’s consistent cash flow generation, coupled with the completion of its North Battleford project on time and within budget.
• The stable outlook reflects our belief that the company will continue to perform as it has been, maintaining its credit metrics commensurate with the higher rating over the next two years.

…
The stable outlook reflects our view of NPI’s partially consolidated financial measures, which we believe will remain at or above 30% parent-only cash flow (POCF)-to-debt, and our expectation that the company will continue to finance its projects with nonrecourse project debt. The outlook also reflects our expectation that NPI’s long-term contracted power generation businesses will continue to produce stable and predictable cash flows with a quality of cash flow score of 5. We believe there will be a modest improvement in its diversity with respect to asset concentration, counterparty, and fuel type as its various projects come online on time and budget.

Given the potential for additional financial commitments to the Gemini project in addition to what the company has already committed to, we don’t expect an upgrade during the next two-to-three years.

Conversely, if the Gemini project should experience material unanticipated delays or cost increases or POCF-to-debt consistently falls below 22% on a partially deconsolidated basis, we would consider a downgrade.

NPI has two series of preferred shares outstanding, NPI.PR.A and NPI.PR.C, both FixedResets at +280 and +346 respectively. NPI.PR.A was last mentioned on PrefBlog when the ticker changed from NPP.PR.A in January 2011; NPI.PR.C was last mentioned when the issue closed in May, 2012. Both issues are tracked b HIMIPref™; both are relegated to the Scraps subindex on credit concerns.

Quadravest has announced:

Dividend 15 Split Corp. II (“Dividend 15 II”) is pleased to announce that 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 $8.25 per Class A Share to yield 13.51%. The closing price of each of the Preferred Shares and the Class A Shares on November 15, 2013 on the TSX was $8.88 and $10.12, respectively.

The proceeds of the secondary offering, net of expenses and the Agents’ fee, 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. These are currently among the highest dividend-yielding securities in the S&P/TSX 60 Index:

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. EST on November 19, 2013.

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

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Investors should read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

DF.PR.A was last mentioned on PrefBlog when it was confirmed at Pfd-3(low) by DBRS. DF.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Brompton Group has announced:

Life & Banc Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form prospectus with respect to a treasury offering of class A shares and preferred shares.

Life & Banc Split Corp. invests in a portfolio of common shares of the six largest Canadian banks (“Banks”) and the four major publicly traded Canadian life insurance companies (“Lifecos”). Currently, the portfolio consists of common shares of the following Banks and Lifecos:

The Bank of Nova Scotia	Royal Bank of Canada
National Bank of Canada	Industrial Alliance Insurance and Financial Services Inc.
The Toronto-Dominion Bank	Great-West Lifeco Inc.
Canadian Imperial Bank of Commerce	Manulife Financial Corporation
Bank of Montreal	Sun Life Financial Inc.

The investment objectives for the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per class A share and to provide the opportunity for growth in net asset value per class A share.

The investment objectives for the preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.475 per annum paid in equal quarterly amounts, representing a yield on the $10.00 par value of the preferred shares of 4.75% per annum, and to return the original issue price to holders of preferred shares on the current maturity date of November 29, 2018.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC, Scotiabank, and TD Securities Inc., and includes BMO Capital Markets, National Bank Financial Inc., GMP Securities L.P., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., Dundee Securities Ltd., and Mackie Research Capital Corporation.

LBS.PR.A was last mentioned on PrefBlog when the new dividend rate on the preferreds, 4.75%, was announced. LBS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Update, 2013-11-22:Priced.

Life & Banc Split Corp. (the “Company”) is pleased to announce that the Company’s treasury offering of class A and preferred shares has been priced at $10.31 per class A share and $10.09 per preferred share. The final class A share and preferred share offering prices were determined so as to be non-dilutive to the most recent calculated net asset value per unit of the Company on November 21, 2013, as adjusted for dividends, certain expenses accrued prior to or upon settlement of the offering, and voluntary payment of certain costs of the offering by the Manager

Manulife Financial Corp. has announced:

Manulife Asset Management Limited, the manager (the “Manager”) of Copernican World Banks Split Inc. (TSX: CBW.PR.A; CBW) (the “Fund”), today announced that securityholders have approved a special resolution proposed by the Manager.

By approving the special resolution, securityholders have approved the following:

• Extending the scheduled final redemption date for Preferred Shares and Class A Shares of the Fund from December 2, 2013 to December 2, 2018;
• Providing a special retraction right (the “Special Retraction Right”) to holders of Preferred Shares and Class A Shares of the Fund to enable them to retract their Shares on December 2, 2013 in a manner calculated on the same basis as would have applied had the Fund redeemed all Preferred Shares and Class A Shares in accordance with its existing terms;
• Providing for further extensions of additional terms of approximately five years each, if the Board of Directors of the Fund so determines, and providing holders of Preferred Shares and Class A Shares with a continuing special retraction right (the “Continuing Special Retraction Right”), beginning on December 2, 2018 or on such other date as may be determined by the Board of Directors of the Fund, in connection with such extension;
• Providing a special redemption right to the Fund in connection with the Special Retraction Right and Continuing Special Retraction Right that would permit the Fund to redeem Class A Shares and Preferred Shares on a pro rata basis, or take such other action as the Board of Directors of the Fund so determines, to maintain the same number of Class A Shares and Preferred Shares outstanding;
• Amending the management agreement effective December 1, 2013 for the Fund to provide for a reduction in the management fees paid to the Manager from the current 1.95% per annum of the net asset value (“NAV”) of the Fund (plus applicable taxes) to 1.65% per annum of the NAV of the Fund (plus applicable taxes);
• Broadening the investment strategy and removing an investment restriction for the Fund; and
• Permitting the Fund to be terminated prior to any scheduled final redemption date if the Preferred Shares or Class A Shares are delisted from the Toronto Stock Exchange or if the NAV of the Fund declines to less than $5 million for a period of 60 consecutive business days.

The fund has a NAVPU of $4.56 to cover a preferred share liability of $10.00 and furthermore sports a management fee of 1.65% as disclosed in the press release. Then there’s expenses on top of that, of about 2% p.a. according to a quick glance at their semi-annual report (the manager did absorb some expenses, essentially refunding their fee).

It’s not worth it. Two-points-plus is not worth it for what is essentially a mutual fund with a cap placed on possible gains (as the Capital Unitholders will get all value in excess of $10). I recommend holders exercise their retraction rights – but be quick! There’s not much time! According to the Management Information Circular (SEDAR, 2013-10-16):

To participate in the Special Retraction Right, Preferred Shares and Class A Shares must be surrendered during the period beginning on November 18, 2013 and ending on November 25, 2013 (the “Special Retraction Notice Period”) for retraction by the registered Shareholder to Computershare Investor Services Inc. in Toronto, Ontario (“Computershare” or “Transfer Agent”), as registrar and transfer agent, subject to the Funds’ right to suspend retractions (described below)

CBW.PR.A was last mentioned on PrefBlog when the term extension was proposed. CBW.PR.A is not tracked by HIMIPref™.

Manulife Financial Corporation has announced:

Manulife Asset Management Limited, the manager (the “Manager”) of Copernican International Financial Split Corp. (TSX: CIR.PR.A; CIR) (the “Fund”), today announced that securityholders have approved a special resolution proposed by the Manager.

By approving the special resolution, securityholders have approved the following:

• Extending the scheduled final redemption date for Preferred Shares and Class A Shares of the Fund from December 2, 2013 to December 2, 2018;
• Providing a special retraction right (the “Special Retraction Right”) to holders of Preferred Shares and Class A Shares of the Fund to enable them to retract their Shares on December 2, 2013 in a manner calculated on the same basis as would have applied had the Fund redeemed all Preferred Shares and Class A Shares in accordance with its existing terms;
• Providing for further extensions of additional terms of approximately five years each, if the Board of Directors of the Fund so determines, and providing holders of Preferred Shares and Class A Shares with a continuing special retraction right (the “Continuing Special Retraction Right”), beginning on December 2, 2018 or on such other date as may be determined by the Board of Directors of the Fund, in connection with such extension;
• Providing a special redemption right to the Fund in connection with the Special Retraction Right and Continuing Special Retraction Right that would permit the Fund to redeem Class A Shares and Preferred Shares on a pro rata basis, or take such other action as the Board of Directors of the Fund so determines, to maintain the same number of Class A Shares and Preferred Shares outstanding;
• Amending the management agreement effective December 1, 2013 for the Fund to provide for a reduction in the management fees paid to the Manager from the current 1.95% per annum of the net asset value (“NAV”) of the Fund (plus applicable taxes) to 1.65% per annum of the NAV of the Fund (plus applicable taxes);
• Broadening the investment strategy and removing an investment restriction for the Fund; and
• Permitting the Fund to be terminated prior to any scheduled final redemption date if the Preferred Shares or Class A Shares are delisted from the Toronto Stock Exchange or if the NAV of the Fund declines to less than $5 million for a period of 60 consecutive business days.

The fund has a NAVPU of $6.27 to cover the preferred share obligation of $10.00 and furthermore sports a management fee of 1.65% as disclosed in the press release and has expenses of about 50bp on top of that, according to a quick scan of their semi-Annual Report.

It’s not worth it. Two-points-plus is not worth it for what is essentially a mutual fund with a cap placed on possible gains (as the Capital Unitholders will get all value in excess of $10). I recommend holders exercise their retraction rights – but be quick! There’s not much time! According to the Management Information Circular (SEDAR, 2013-10-16):

To participate in the Special Retraction Right, Preferred Shares and Class A Shares must be surrendered during the period beginning on November 18, 2013 and ending on November 25, 2013 (the “Special Retraction Notice Period”) for retraction by the registered Shareholder to Computershare Investor Services Inc. in Toronto, Ontario (“Computershare” or “Transfer Agent”), as registrar and transfer agent, subject to the Funds’ right to suspend retractions (described below).

CIR.PR.A was last mentioned on PrefBlog when the term extension was proposed. CIR.PR.A is not tracked by HIMIPref™.

DBRS has announced that it:

has today downgraded the Issuer Rating and Senior Unsecured Debentures of Bombardier Inc. (BBD or the Company) to BB (low) and the Preferred Shares were downgraded to Pfd-4 (low). The trend on the Issuer Rating is Stable and DBRS has removed all ratings from Under Review with Negative Implications. Additionally, DBRS has discontinued the Company’s Senior Unsecured Debentures and Preferred Shares ratings effective immediately.

The rating actions mainly reflect the Company’s weak financial profile largely due to the ongoing cash burn at the Bombardier Aerospace (BA) division, with any material improvement pushed out for a longer time frame than originally expected. Today’s downgrade follows DBRS’s rating action on August 6, 2013, which placed the ratings Under Review with Negative Implications, reflecting DBRS’s view that the credit metrics have migrated outside of the previously assigned rating range due to large negative free cash flows associated with the C-series program, as well as elevated debt levels and weaker earnings. BBD released its quarterly results at the end of October 2013, further positioning the financial profile in the newly assigned BB (low) rating range. For the last 12 months (LTM) ended September 30, 2013, adjusted debt-to-EBITDA was 5.6 times (x) and adjusted cash flow-to-debt was 0.16x, with both metrics unchanged or slightly worse compared to the LTM period ended June 30, 2013.
…
The outlook for improvement in the financial profile is further burdened by the uncertainty of the amounts and timing of revenues from the C-series program. The length of the flight testing time frame is presently at a highly aggressive 12 months after first test flight. The potential extension of the 12-month flight-test window will make entry into service challenging before the end of 2014 (noting it was originally scheduled for the end of 2013). While the long-term outcomes of the program are yet to be determined, the recent challenges could also prove costly in terms of missed revenue opportunities from customers who are observing the C-series program from the sidelines. DBRS notes that firm orders for the C-series aircraft are at 177, far below the 300 unit target for the program. The Company has received no significant new firm orders since the Ilyushin Finance Company’s firm order for 32 CS300 aircrafts in June 2013.

In the near mid-term, the high capital expenditures, volatile aerospace market, delayed C-series deliveries and general profitability issues have further postponed the anticipated recovery in BBD’s financial profile until sometime beginning in 2015. DBRS believes that elevated capital outlays are likely to exceed the weaker cash flow from operations and free cash flow is therefore projected to be negative. Liquidity is likely to be sufficient to cover negative free cash flow over the next year, noting that total available liquidity resources totalled approximately $4.0 billion as at September 30, 2013. DBRS notes that it would not be unexpected for BBD to address its capital needs or to improve liquidity via further debt issuances, especially during the seasonally demanding quarters.

With continued elevated debt levels at September 30, 2013, and with limited ability of the BT division to cover the negative free cash flows of the BA division, especially in light of weaker profitability, the financial metrics have now fallen in line with a BB (low) rating.

The DBRS negative review was reported on PrefBlog. The issuer is rated Outlook Negative by S&P.

BBD has three issues of preferred shares outstanding: BBD.PR.B (RatchetRate), BBD.PR.C (Straight Perpetual) and BBD.PR.D (FixedFloater). All are tracked by HIMIPref™; all are relegated to the Scraps index on credit concerns.

Update, 2013-11-14: S&P has announced:

it corrected its global scale preferred share rating on Bombardier Inc.’s series 2 and 4 cumulative redeemable preferred shares by lowering the rating to ‘B’ from ‘B+’. Our Canada scale preferred share rating of ‘P-4’ is unaffected. In accordance with our criteria, when the corporate credit rating is non-investment-grade, we rate the preferred stock at least three notches (one rating category) below the corporate credit rating. Due to an error, we inadvertently did not revise the global rating on the preferred shares contemporaneously with the lowering of the corporate credit rating on Bombardier on Nov 14, 2012. Accordingly, we are revising the global rating at this time.

Great-West Lifeco has announced:

Series J Preferred Shares

Great-West Lifeco Inc. today approved the redemption of all of its issued and outstanding Series J Preferred Shares on December 31, 2013. A formal notice and instructions for the redemption will be sent to shareholders in accordance with the rights, privileges, restrictions and conditions attached to the Series J Preferred Shares. The redemption price will be $25.00 per share, plus an amount equal to all declared and unpaid dividends thereon, less any tax required to be deducted and withheld by the Corporation.

GWO.PR.J is a FixedReset, 6.00%+307, which was announced in early November, 2008 and closed with the greenshoe fully exercised. It is tracked by HIMIPref™ and is a member of the FixedReset subindex.