Category: Issue Comments

Great-West Lifeco has announced:

that it will seek the consent of the holders of its 6.67% Debentures due March 21, 2033 (the “2033 Debentures”) to amend the trust indenture dated as of March 21, 2003, between Great-West Lifeco and Computershare Trust Company of Canada, as trustee, as amended and supplemented. The consent will eliminate the replacement capital covenants and related provisions applicable to certain of Great-West Lifeco’s preferred shares, the 5.691% Subordinated Debentures due June 21, 2067 issued by Great-West Lifeco Finance (Delaware) LP and the 7.127% Subordinated Debentures due June 26, 2068 issued by Great-West Lifeco Finance (Delaware) LP II.

Great-West Lifeco is seeking to remove the replacement capital covenants in order to have greater flexibility to manage its capital structure. Removal of the replacement capital covenants would provide Great-West Lifeco with the ability to be responsive to credit rating agency considerations and emerging regulatory capital developments. The proposed changes do not imply that Great-West Lifeco intends to take any future action with respect to the redemption of any of the securities currently subject to the replacement capital covenants.

Great-West Lifeco will solicit consents from holders of record of the 2033 Debentures as of 5:00 p.m., Toronto time, on October 11, 2013. The proposed amendments require the consent of holders of not less than 66 2/3% of the outstanding principal amount of the 2033 Debentures. The terms and conditions of the consent solicitation will be included in the consent solicitation statement and the accompanying form of consent.

Certain information regarding the 2033 Debentures and the terms of the offer and the consent solicitation is summarized in the table below:

Debentures CUSIP No. Principal Amount Outstanding Consent Fee (per $1,000
principal amount)
6.67% Debentures due March 21, 2033 39138CAD8 $400,000,000 $12.50

Great-West Lifeco will pay a consent fee of $12.50 in cash for each $1,000 in principal amount of 2033 Debentures for which Great-West Lifeco has received a valid (and unrevoked) consent prior to the expiration of the solicitation, subject to the conditions of the solicitation. Assuming receipt of the requisite 66 2/3% consent, payments of the consent fee are anticipated to be made to holders of the 2033 Debentures that provide valid (and unrevoked) consents on the third business day following the expiration of the solicitation. If the proposed amendments are approved, the amendments will bind all holders of the 2033 Debentures, including those that did not provide a consent.

The solicitation will expire at 5:00 p.m. (Toronto time) on October 30, 2013, unless extended by Great-West Lifeco at its discretion (such time on such date, as the same may be extended, the “Expiration Date”).

Great-West Lifeco will make an announcement by press release of any extension of the Expiration Date prior to 9:00 a.m. (Toronto time), on the next business day after the previously scheduled Expiration Date. Holders may deliver their consents with respect to the solicitation at any time prior to the Expiration Date. Holders may revoke their consents until the earlier of the Expiration Date and the date that the proposed amendment to the trust indenture is executed and becomes effective. Any holder who validly revokes a consent will not be eligible to receive the consent fee, unless such consent is redelivered and accepted by Great-West Lifeco prior to the Expiration Date.

Great-West Lifeco has retained RBC Dominion Securities Inc. to serve as the solicitation agent for the solicitation, Georgeson Shareholder Communications Canada Inc. to serve as the information agent and Computershare Trust Company of Canada to serve as the tabulation agent. Questions regarding the solicitation may be directed to RBC Dominion Securities Inc. at (416) 842-6311.

This is rather interesting – a vote to change a bond indenture doesn’t come up very often and the consent fee – of over a dollar a bond – is quite attractive.

According to the Consent Solicitation Statement:

The principal effect of the replacement capital covenant is to require that a specified portion of any funds used to repurchase, redeem or repay the Preferred Stock, GWL-LP Subordinated Debentures and GWL-LP II Subordinated Debentures must be obtained by the Corporation through the issuance of common shares or other equity or equity-like securities, in each case within a specified time period prior to the applicable repurchase, redemption or repayment.

The replacement capital covenants were provided by the Corporation voluntarily. For that reason, consent of the Holders of the 2033 Debentures was not required under the Indenture. The replacement capital covenants afforded Great-West Lifeco enhanced credit rating agency capital treatment. Subsequent changes to credit rating methodology means this benefit is no longer available to Great-West Lifeco. Accordingly, Great-West Lifeco is seeking to remove the replacement capital covenants in order to have greater flexibility to manage its capital structure without being subject to the restrictions and constraints of the replacement capital covenants.

So why don’t they just redeem these sub-debs, with their enormous (by current standards) coupon? A look at the prospectus (available on SEDAR, dated March 14, 2003; I am not allowed to link to this prospectus due to the bank-owned CDS’ abuse of the monopoly granted to it by the regulators) reveals:

The Corporation may, at its option, redeem Debentures on not less than 30 nor more than 60 days’ prior notice to the registered holder, in whole at any time or in part from time to time, at a redemption price equal to the greater of the Canada Yield Price and par, together in each case with accrued and unpaid interest to the date fixed for redemption. In cases of partial redemption of Debentures issued under a Trust Indenture, the Debentures to be redeemed will be selected by the Trustee pro rata or in such manner as it shall deem equitable. Any Debentures that are redeemed by the Corporation will be cancelled and will not be reissued.
…
‘‘Canada Yield Price’’, shall mean a price which, if the Debentures were to be issued at such price on the redemption date, would provide a yield thereon from the redemption date to March 21, 2018 in the case of 2018 Debentures and March 21, 2033 in the case of 2033 Debentures, equal to the Government of Canada Yield, plus 24 basis points for the 2018 Debentures and 30 basis points for the 2033 Debentures, compounded semi-annually and calculated on the day that is three business days prior to the date of redemption.

So say that 20-year Canadas are now at 3.00% (approximately) then the Canada Yield is 3.30% and the Canada Price is around $148 per $100 bond – a pretty fat premium and illustrative of just how wonderful Canada Calls are, as opposed to regular calls. Paying a premium of $1.25 (plus expenses) to change the indenture is a lot cheaper.

But just why they are doing this is a little mysterious. Given that 400-million par value of these things is outstanding, GWO is prepared to spend $5-million (plus expenses of … what? half a million?) to get this flexibility. While this is hardly crippling to a company the size of GWO, it’s not pocket change either. While they say The proposed changes do not imply that Great-West Lifeco intends to take any future action with respect to the redemption of any of the securities currently subject to the replacement capital covenants that’s a little bit of a fuzzy statement, if you look at it carefully … and besides, a contingency plan with a 99.999% chance of being executed is still only a contingency.

They have a few Straight Perpetuals with fat coupons outstanding, led by GWO.PR.F at 5.9% which is currently callable at par. Of more immediate interest is GWO.PR.J, a FixedReset, 6.00%+307, which has its first Exchange Date on 2013-12-31. This certainly looks like it should be called on economic grounds, but they may not wish to issue new securities to replace the capital; and it may be worth $5.5-million to them to avoid the necessity. In addition:

The Canada Life Assurance Company has one subordinated debenture outstanding with a face amount of $100 million. Great-West Lifeco Finance (Delaware) LP has one subordinated debenture outstanding with a face amount of $1 billion. Great-West Lifeco Finance (Delaware) LP II has one subordinated debenture outstanding with a face amount of $500 million. Great-West Life & Annuity Insurance Capital, LP has one subordinated debenture outstanding with a face amount of US$175 million, and Great-West Life & Annuity Insurance Capital, LP II has one subordinated debenture outstanding with a face amount of US$300 million.

From the 2012 Annual Report:

The Company regards the Series F, G, H, I, L, M, P, Q and R preferred shares as part of its core or permanent capital. The Series F, G, H, I, L and M preferred shares have a replacement capital covenant, the Company only intends to redeem these shares with proceeds raised from new capital instruments representing equal or greater benefit than the shares currently outstanding. The Series P, Q and R preferred shares do not have a replacement capital covenant. The Company regards the two series of subordinated debentures totaling $1,500 million issued by two subsidiary companies, Great-West Lifeco Finance (Delaware) LP and LPII, as comprising part of its core or permanent capital. As such the Company only intends to redeem the subordinated debentures prior to maturity with new capital instruments with a similar or more junior ranking security. The terms and conditions of the $1,000 million subordinated debentures due June 21, 2067 bear interest at a rate of 5.691% until 2017 and, thereafter at a rate equal to the Canadian 90-day Bankers’ Acceptance rate plus 1.49%, unsecured. The terms of the $500 million subordinated debentures due June 26, 2068 bear interest at a rate of 7.127% until 2018 and, thereafter, at a rate equal to the Canadian 90-day Bankers’ Acceptance rate plus 3.78%, unsecured.

I consider it rather odd that the Series J preferreds are not regarded as core capital, but this – contrary to my initial expectations – is not a new thing: they are omitted from the list in each of the past four Annual Reports. None of the words “permanent”, “replacement” or “indenture” occurs anywhere in the Series J prospectus, dated Nov 13 2008, but there’s nothing of interest in the Series M prospectus dated February 24, 2010, either, so that doesn’t mean much.

So anyway, I will admit that I am perplexed by this solicitation. The most facile answer is that they want to redeem GWO.PR.F (with its 5.9% coupon) and don’t want to issue replacement capital (or want to have the option to do this), but I wouldn’t place any large bets on that possibility.

Another possibility is that the covenant somehow violates OSFI rules and they have to get rid of it in order to qualify the preferreds, or perhaps even the sub-debs themselves, as quality – or consider that there is a high enough probability of this being a requirement that they want to get it out of the way.

Any opinions on possible motivations for this action will be most welcome!

GWO has the following preferred shares outstanding: GWO.PR.F, GWO.PR.G, GWO.PR.H, GWO.PR.I, GWO.PR.J, GWO.PR.L, GWO.PR.M, GWO.PR.N, GWO.PR.P, GWO.PR.Q and GWO.PR.R.

Update, 2013-11-7: GWO increased the consent fee…

Great-West Lifeco Inc. is amending the terms of its consent solicitation of the holders of its 6.67% Debentures due March 21, 2033 (the “2033 Debentures”) to eliminate the replacement capital covenants and related provisions applicable to certain of Great-West Lifeco’s preferred shares, the 5.691% Subordinated Debentures due June 21, 2067 issued by Great-West Lifeco Finance (Delaware) LP and the 7.127% Subordinated Debentures due June 26, 2068 issued by Great-West Lifeco Finance (Delaware) LP II.

The consent solicitation is amended to provide that Great-West Lifeco will pay a consent fee of $17.50 in cash for each $1,000 in principal amount of 2033 Debentures to all holders of 2033 Debentures provided that it has received the requisite consent from 66 2/3% of the holders of the 2033 Debentures. If the proposed amendments are approved, the amendments will bind all holders of the 2033 Debentures, including those that did not provide a consent.

All other terms of the solicitation remain in effect unamended including the expiration of the solicitation at 5:00 p.m. (Toronto time) on Wednesday, October 30, 2013.

… and obtained consent:

Great-West Lifeco Inc. successfully completed its consent solicitation of the holders of its 6.67% Debentures due March 21, 2033 (the “2033 Debentures”). The holders of the 2033 Debentures approved the elimination of the replacement capital covenants and related provisions applicable to certain of Great-West Lifeco’s preferred shares, the 5.691% Subordinated Debentures due June 21, 2067 issued by Great-West Lifeco Finance (Delaware) LP and the 7.127% Subordinated Debentures due June 26, 2068 issued by Great-West Lifeco Finance (Delaware) LP II.

The Bank of Nova Scotia has announced:

that 5,960,732 of its 14,000,000 Non-cumulative 5-Year Rate Reset Preferred Shares Series 20 of Scotiabank (the “Preferred Shares Series 20”) have been elected for conversion on October 26, 2013, on a one-for-one basis, into Non-cumulative Floating Rate Preferred Shares Series 21 of Scotiabank (the “Preferred Shares Series 21”). Consequently, on October 26, 2013, Scotiabank will have 8,039,268 Preferred Shares Series 20 and 5,960,732 Preferred Shares Series 21 issued and outstanding. The Preferred Shares Series 20 and Preferred Shares Series 21 will be listed on the Toronto Stock Exchange under the symbols BNS.PR.Q and BNS.PR.B, respectively.

I had previously recommended conversion of BNS.PR.Q to BNS.PR.B.

Canadian General Investments Limited has released its Semi-Annual Report to June 30, 2013.

Figures of interest are:

MER: The MER per unit of the Fund, excluding the cost of leverage, was 1.76% as at June 30, 2013.

Average Net Assets: We need this figure to calculate portfolio yield. [(456.1-million (NAV, beginning of period) + 443.9-million (NAV, end of period)] / 2 = about $450.0-million.

Underlying Portfolio Yield: Total income of 7.340-million times two (semi-annual) divided by average net assets of 450.0-million is 3.26%

Income Coverage: Total Investment Income of 7.340-million divided by Expenses and Preferred Share Distributions of 7.224-million is 102%.

Unit Value: To use the Split Share Credit Quality Model, we need a unit value, but the company does not keep the number of capital units equal to the number of preferred shares. However, shareholders’ equity is 442.1-million, compared to preferred shares outstanding of 150-million, so we can say that the Unit Value is 3.95x the preferred share value, so call it (equivalent to) 98.68.

Capital Unit Dividends: Dividends of 2.503-million were paid to capital unitholders in 13H1; this was 34% of total investment income, which we determined above was 3.26% of total assets. Therefore 1.11% of total assets were paid as capital unit dividends. Total assets can be modelled as 25.00 (preferred) + 98.68 (capital units) = 123.68 and 1.11% of that is $1.37.

CGI has two series of preferred shares outstanding: CGI.PR.C and CGI.PR.D.

Dividend Growth Split Corp. has released its Semi-Annual Report to June 30, 2013.

Figures of interest are:

MER: The MER per unit of the Fund, excluding the cost of leverage, was 1.03% as at June 30, 2013.

Average Net Assets: We need this figure to calculate portfolio yield. [(106.7-million (NAV, beginning of period) + 108.9-million (NAV, end of period)] / 2 = about $108-million.

Underlying Portfolio Yield: Total income of 2,347,802 times two (semi-annual) divided by average net assets of 108-million is 4.35%

Income Coverage: Net Investment Income of 1,789,415 divided by Preferred Share Distributions of 1,653,042 is 108%.

Standard & Poor’s has announced:

• We are raising our long-term corporate credit rating on Algonquin Power & Utilities Corp. (APUC) and subsidiaries Algonquin Power Co. (APCO) and Liberty Utilities Co. to ‘BBB’ from ‘BBB-‘.
• We are also raising our senior unsecured debt rating on APCO to ‘BBB’ from ‘BBB-‘.
• In addition, we are raising our global scale and Canada scale preferred stock ratings on APUC to ‘BB+’ and ‘P-3 (High)’ from ‘BB’ and ‘P-3’, respectively.
• We base the upgrade on the increase in regulated cash flow, which is currently at 40%-45% of consolidated cash flow and which we forecast will continue to increase in the medium term.
• The stable outlook reflects our assessment of relatively stable cash flows supported by regulated cash flow from Liberty’s regulated utility business and APCO’s largely contracted power asset portfolio.

…
The stable outlook reflects our assessment of relatively stable cash flows, supported by regulated cash flow from Liberty’s regulated utility business, and APCO’s largely contracted power asset portfolio.

We could take a negative rating action if APUC fails to execute its development projects and acquisitions with financing arrangements that allow it to maintain its key financial measures. We expect APUC to achieve AFFO-to-total debt of greater than 15% within the next 12 to 24 months, with at least 45% of its consolidated cash flows supported by regulated cash flows from Liberty. Failure to achieve this expectation could also result in a negative rating action.

We could raise the rating if APUC achieves sustained AFFO-to-debt of greater than 25%, with a higher proportion of cash flow contributions from Liberty, all else being equal.

Standard & Poor’s has announced:

• Brookfield Property Partners L.P. (BPY) announced a proposal to acquire Brookfield Office Properties (BPO) by way of tender offer for any or all of the common shares it does not presently own.
• We placed our ratings for BPO on CreditWatch with developing implications, including our ‘BBB-‘ corporate credit, ‘BB+’ unsecured debt, and ‘BB’ preferred stock ratings. The developing CreditWatch listing means the ratings could be raised, lowered, or affirmed.
• We do not currently rate BPY, a large, diversified, recently listed and globally focused real estate company, which is majority owned and externally managed by Brookfield Asset Management (BAM).
• To resolve the CreditWatch, we will seek to meet with BPY management in the coming month to ascertain the impact, if any, of the proposed acquisition on BPO’s credit profile.

…
BPY’s proposal has stated that BPO’s rated unsecured debt securities would remain in place, but that some convertible preferred shares could be exchanged for equivalent shares of a BPY subsidiary. It is not clear to us whether the debt securities would be guaranteed by BPY and the extent to which BPO’s current operating and financial strategies as well as its legal structure could change once absorbed into the BPY platform.

We currently see downside risk to ratings as somewhat less likely, given the potential benefits of BPY’s larger, more diverse platform. However, the expected growth and financing strategies for BPY’s other operating platforms is at this time unknown to us. We will seek to meet with management of BPY in the coming month to gain clarity on these issues, so as to ascertain the impact, if any, of the proposed acquisition on BPO’s credit profile.

The bid was previously reported on PrefBlog.

BPO was downgraded to P-3 by S&P in July, 2013. I remain concerned about the knock-on effects on BAM’s credit rating if the flow of dividends from the subsidiaries to the parent should be considered less reliable as a result of increased leverage at the subsidiary level.

The ultimate parent, Brookfield Asset Management, has the following preferred shares outstanding:
FixedResets BAM.PF.A, BAM.PF.B, BAM.PR.P, BAM.PR.R, BAM.PR.T, BAM.PR.X, BAM.PR.Z
Floaters BAM.PR.B, BAM.PR.C, BAM.PR.K
RatchetRate BAM.PR.E
FixedFloater BAM.PR.G
OperatingRetractible BAM.PR.J
Straight Perpetual BAM.PR.M, BAM.PR.N, BAM.PF.C

BPO has the following preferred share issues outstanding:
OperatingRetractible BPO.PR.H, BPO.PR.J, BPO.PR.K,
FixedReset BPO.PR.L, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T,
Floaters BPO.PR.W, BPO.PR.X, BPO.PR.Y

In the event of a successful bid, the BPO Operating Retractibles might be the object of an exchange offer.

Reset? Well, I couldn’t think of another word to use!

Brompton Funds announced in April that the term would be extended and the dividend changed on November 29; they announced the new rate on August 14:

At a special meeting held on April 11, 2013, shareholders of Life & Banc Split Corp. (“LBS” or the “Fund”) approved a special resolution to allow the Board of Directors to extend the term of the Class A Shares and the Preferred Shares for up to 5 years and to determine the distribution ratesfor the extended term. The Board of Directors is pleased to announce that it has approved a 5 year extension to the term of the Class A Shares and Preferred Shares to November 29, 2018. The Fund was originally scheduledto terminate on November 29, 2013. The distribution rate for the Fund’s Preferred Shares for this new 5 year term which commences on November 30, 2013 will be $0.475 per annum paid in equal quarterly amounts. The new Preferred Share distribution rate is based on current market rates for preferred shares with similar terms. The Preferred Share distribution for the quarter ended December 31, 2013 is expected to be $0.12690 per Preferred Share which takes into account the new distribution rate for December and the previous distribution rate for October and November. In addition, the Fund intends to maintain the targeted monthly Class A Share distribution at $0.10 per Class A Share.

LBS invests in a portfolio, on an approximately equal weight basis, of common shares of 6 Canadian Banks: Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, The Bank of Nova Scotia and The Toronto-Dominion Bank and 4 Canadian life insurance companies: Great-West Lifeco Inc., Industrial Alliance Insurance and Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc. The extension of the term of the Fund is not a taxable event and enables shareholders to defer potential capital gains tax liability that would have otherwise been realized on the redemption of the Class A Shares or Preferred Shares until such time as such shares are disposed of by shareholders.

In connection with the extension, those shareholders who do not wish to continue their investment in the Fund and do not wish to sell their shares through the TSX, may retract their Preferred Shares or Class A Shares on November 29, 2013 pursuant to a special retraction right and receive a retraction price that is calculated in the same way that such price would be calculated if the Fund were to terminate on November 29, 2013. Such retraction price will be approximately equal to the net asset value per share less certain costs including trading commissions. The notice expiry for the special retraction is October 31, 2013 at 5:00 p.m. (Toronto time). Shareholders are reminded that Class A Shares and Preferred Shares have traded at an average premium to net asset value of 8.7% and 1.2%,respectively, over the past 12 months to July 31.

The new rate of 4.75% represents a modest decline from the previous rate of 5.25%.

LBS.PR.A currently has asset coverage of 1.8-:1 and income coverage of 100%. The reduced dividend on the preferreds will move income coverage over the 100% mark.

I recommend that holders retain their shares.

Pembina Pipeline Corporation has announced:

that it has closed its previously announced public offering of 6,000,000 cumulative redeemable rate reset class A preferred shares, series 3 (the “Series 3 Preferred Shares”) for aggregate gross proceeds of $150 million (the “Offering”).

The Offering was first announced on September 23, 2013 when Pembina entered into an agreement with a syndicate of underwriters led by RBC Capital Markets and Scotiabank.

Proceeds from the Offering will be used to partially fund capital projects, to reduce short-term indebtedness and for other general corporate purposes of the Company and its affiliates.

The Series 3 Preferred Shares will begin trading on the Toronto Stock Exchange today under the symbol PPL.PR.C.

PPL.PR.C is a FixedReset, 4.70%+260 announced September 23. It will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The issue traded 232,472 shares today in a range of 24.44-54 before closing at 24.45-50, 16×22. Vital statistics are:

The Toronto-Dominion Bank has announced:

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset Preferred Shares, Series Y (the “Series Y Shares”) and Non-Cumulative Floating Rate Preferred Shares, Series Z (the “Series Z Shares”).

With respect to any Series Y Shares that remain outstanding after October 31, 2013, holders of the Series Y Shares will be entitled to receive quarterly fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the 5-year period from and including October 31, 2013 to but excluding October 31, 2018 will be 3.5595%, being equal to the 5-Year Government of Canada bond yield determined as at October 1, 2013 plus 1.68%, as determined in accordance with the terms of the Series Y Shares.

With respect to any Series Z Shares that may be issued on October 31, 2013, holders of the Series Z Shares will be entitled to receive quarterly floating rate non-cumulative preferential cash dividends, calculated on the basis of the actual number of days elapsed in such quarterly period divided by 365, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the floating rate period from and including October 31, 2013 to but excluding January 31, 2014 will be 2.666%, being equal to the 90-day Government of Canada Treasury Bill yield determined as of October 1, 2013 plus 1.68%, as determined in accordance with the terms of the Series Z Shares.

Beneficial owners of Series Y Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right on or prior to the deadline for exercise, which is 5:00 p.m. (Toronto time) on October 16, 2013.

The new rate of 3.5595%, is $0.889875 p.a. This represents a steep decline from the original rate of 5.10% (or $1.275 p.a.), so my mailbox will be filling up shortly with outraged queries from casual investors.

We can examine the comparables with the help of the Pairs Equivalency Calculator:

The closing bid for TD.PR.Y yesterday was 25.06; assuming this holds after the conversion privilege is no longer available then the average implied three-month bill rate of 2.36% calculated above in turn implies a bid on the new issue of 25.58.

So, as of right now, it looks like conversion is recommended. Naturally, investors will want to wait until the last moment before making a decision.

Additionally, it will be noted that although the deadline for notifying the company is October 16, intermediary brokers will almost always have earlier internal deadlines. Also, it is normal that trades must be settled before notice can be given … so for most brokers, I suggest that the last day for trading the issue in the hopes of reaping enormous profits on conversion will be Wednesday October 9 (remember there is a skip-day for Thanksgiving). This strategy didn’t work very well for the BMO.PR.M / BMO.PR.R conversion, when the price of BMO.PR.M was supported by the conversion privilege and promptly sank after the last trading day to settle prior to the notification date.

On the other hand, the current bid of 25.06 for TD.PR.Y gives a current yield of 3.55% (calculated from the new 3.5595% coupon rate), compared to an average Current Yield of 3.42% for the FixedResets noted above. On that basis – without looking at anything else – TD.PR.Y looks cheap.

On the other hand, the FloatingReset resulting from TD.PR.Y conversion will pay three-month bills +168. BMO.PR.R pays +165 and is bid at 25.11; TD.PR.S pays +160 and is bid at 25.38; both are above today’s bid on TD.PR.Y, but certainly nothing to run around mortgaging the farm for.

So … some might wish to speculate, on the basis that TD.PR.Y should be priced higher than it is and the FloatingReset issue that results from conversion should be higher still. Just remember it’s a speculation!

Brompton Group has announced:

Dividend Growth 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 and preferred shares. The class A and preferred share offering prices will be set at levels that ensure that existing unitholders are not diluted.

Dividend Growth Split Corp. invests in a portfolio of common shares of high quality, large capitalization companies, which have among the highest dividend growth rates of those companies included in the S&P/TSX Composite Index. Currently, the portfolio consists of common shares of the following 20 companies:

Great-West Lifeco Inc.	The Bank of Nova Scotia	AGF Management Limited	Shaw Communications Inc.
Industrial Alliance Insurance and Financial Services Inc.	Canadian Imperial Bank of Commerce	IGM Financial Inc.	TELUS Corporation
Manulife Financial Corporation	National Bank of Canada	Power Corporation of Canada	Canadian Utilities Limited
Sun Life Financial Inc.	Royal Bank of Canada	Manitoba Telecom Services	Enbridge Inc.
Bank of Montreal	The Toronto-Dominion Bank	Rogers Communications Inc.	TransCanada Corporation

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 currently in the amount of $0.13125 per preferred share, representing a yield on the original issue price of 5.25% per annum, and to return the original issue price to holders of preferred shares on the original November 30, 2014 maturity date.

The Company is also pleased to announce that the board of directors has approved an extension of the maturity date of the class A and preferred shares of the Company for an additional 5 year term to November 28, 2019. The preferred share dividend rate for the extended term will be announced at least 60 days prior to the original November 30, 2014 maturity date. The new dividend rate will be determined based on then-current market yields for preferred shares with similar terms.

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