Category: Issue Comments

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.
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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.

Industrial Alliance Insurance and Financial Services Inc. has announced:

that it has the intention to redeem, on December 31, 2013, all of its Non-Cumulative 5-Year Rate Reset Class A Preferred Shares Series C (the “Series C Preferred Shares”) then outstanding. The redemption price will be $25.00 for each Series C Preferred Share plus an amount equal to all declared and unpaid dividends, less any tax required to be deducted and withheld by Industrial Alliance. There are 4,000,000 Series C Preferred Shares outstanding as of today.

A formal notice and instructions for the redemption of the Series C Preferred Shares will be sent to all registered shareholders in accordance with the rights, privileges, restrictions and conditions attached to the Series C Preferred Shares. The redemption of the Series C Preferred Shares is subject to the approval of the Autorité des marchés financiers.

IAG.PR.C is a FixedReset, 6.20%+338, which commenced trading at a very bad time for the markets; in fact, the underwriters had great difficulty unloading the issue. It has been tracked by HIMIPref™ and is a constituent of the FixedReset subindex.

Standard & Poor’s has announced:

• We are lowering our ratings on Westcoast Energy Inc., including our long-term corporate credit rating to ‘BBB’ from ‘BBB+’.
• We are also removing the ratings from CreditWatch, where they were placed with negative implications June 17, 2013.
• The ratings on Westcoast reflect those on parent Spectra Energy Corp.
• We downgraded Spectra to ‘BBB’ from ‘BBB+’ today, reflecting the drop-down of assets to subsidiary Spectra Energy Partners L.P.

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The ratings on Westcoast primarily reflect Standard & Poor’s view of parent company Spectra, as well as Westcoast’s “strong” business risk profile and “significant” financial risk profile. Furthermore, the credit profiles of both companies are very similar, in our view. Westcoast has what we believe is a diverse group of gas infrastructure assets that have a broad customer base, generate mostly fee-based revenue that reinforces stability, and benefit from regulatory protection to various degrees — all of which also support the strong business risk profile.

We have equalized our ratings on Westcoast with those on parent Spectra. We link the parent and operating company’s credit profiles based on our methodology for holding company structures. Accordingly, any rating action on Spectra would likely flow through to our ratings on Westcoast.

The stable outlook on Westcoast reflects that on Spectra.

The previous CreditWatch-Negative was reported on PrefBlog.

Westcoast is the proud issuer of two series of preferred shares, W.PR.H and W.PR.J, both Straight Perpetuals. Both are tracked by HIMIPref™ and both are currently assigned to the PerpetualDiscount subindex; both will be relegated to “Scraps” at the next index rebalancing at the end of November.

Interestingly, S&P affirmed UNG:

• We are affirming our ratings, including our ‘BBB+’ long-term corporate credit rating, on Union Gas Ltd.
• We are also removing the ratings from CreditWatch, where they were placed June 17, 2013.
• The rating action follows our downgrade to Spectra Energy Corp. to ‘BBB’ from ‘BBB+’ after the drop-down of assets to subsidiary Spectra Energy Partners L.P.
• Based on our ‘a-‘ stand-alone credit profile at Union Gas, the ‘BBB’ rating on Spectra Energy Corp., and our assessment of the regulatory insulation from the parent, we believe that a one-notch differential between the ratings on the parent and that on Union Gas is warranted.

Union Gas is the proud issuer of two preferred shares: UNG.PR.C and UNG.PR.D, which have been discussed in passing on PrefBlog, but neither is tracked by HIMIPref™. The commencement of CreditWatch-Negative status for UNG was reported on PrefBlog.

TD.PR.Z, a FloatingReset +168 just converted from TD.PR.Y, reached only a very small premium over TD.PR.Y on its debut today.

The issue traded 8,500 shares in a range of 25.00-09 before settling at 25.00-08, 15×5.

TD.PR.Z will be tracked by HIMIPref™ and is assigned to the brand-new FloatingReset subindex.

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

So TD.PR.Y has the smallest premium of the lot, eclipsed even by the previous low of BNS.PR.Q/BNS.PR.B Is the bloom is off the rose as far as FloatingResets are concerned?

Vital Statistics are:

Quadravest has announced:

Financial 15 Split Corp. (the “Company”) 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 (“Preferred Shares”) and class A shares (“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 $8.50 per Class A Share to yield 17.7%. The closing price of each of the Preferred Shares and the Class A Shares on October 29, 2013 on the TSX was $9.38 and $10.13, respectively.

The proceeds of the secondary offering, net of expenses and the Agents’ 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 8:30 a.m. EST on October 31, 2013.

A copy of the preliminary short form prospectus is available from National Bank Financial Inc., CIBC World Markets Inc. and RBC Capital Markets.

FTN.PR.A was last mentioned on PrefBlog in connection with its Semi-Annual Report 13H1.

FTN.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

DBRS has announced that it:

has today downgraded Thomson Reuters Corporation’s (Thomson Reuters or the Company) Issuer Rating, Unsecured Debentures and Unsecured Medium-Term Notes ratings to BBB (high) from A (low), Commercial Paper rating to R-2 (high) from R-1 (low) and Preferred Shares rating to Pfd-3 (high) from Pfd-2 (low). The trends are all Stable. This action follows the Company’s change in financial management guidelines. As part of a broader plan to improve its business mix and cost structure while returning value to shareholders, the Company now intends to target a net debt-to-EBITDA ratio of up to 2.5 times (x) from 2.0x prior.
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The downgrade reflects DBRS’s view that the Company’s target net debt-to-EBITDA ratio of up to 2.5x results in a credit risk profile that is no longer consistent with the A (low) rating category. Going forward, DBRS will continue to monitor the progress of Thomson Reuters’ strategic initiatives related to product simplification, cost cutting, non-core asset dispositions and the effective rollout of the Company’s financial data provision platforms. Thomson Reuters’ revised ratings with Stable trends reflect the Company’s entrenched market position, the diverse nature of its customer base and its predominantly subscription-based revenue model. The ratings also reflect the need for constant innovation, exposure to changing technology, intensifying competition in key segments and the risks associated with the Company’s acquisition and divestiture program.

TRI.PR.B was last mentioned on PrefBlog when S&P put it on Trend-Negative in May 2012.

Standard & Poor’s also downgraded the company but preferreds were not affected:

• We are lowering our corporate credit rating on New York-based Thomson Reuters Corp. to ‘BBB+’ from ‘A-‘ given the company’s shift in financial policy, which will result in higher debt leverage.
• In addition, we are assigning our ‘A-2′ global scale short-term rating to Thomson Reuters’ commercial paper program.
• We expect Thomson Reuters’ adjusted debt leverage will remain above our 2.5x maximum threshold for the ‘A-‘ corporate credit rating in the medium term.
• We also expect the company to use all of its discretionary cash flow and additional debt to repurchase up to US$1 billion in shares next year, as well as pay dividends, make acquisitions, and fund a US$350 million one-time charge.
• The stable outlook reflects our belief that Thomson Reuters’ operating
  performance will improve in the next year; that the company will successfully complete its Financial & Risk division transformation in
  2014, resulting in healthy and sustainable revenue and EBITDA growth; and that credit ratios will remain in line with our expectations in the medium term, including adjusted debt to EBITDA below 3x on a sustainable basis.

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“The downgrade reflects the company’s shift in its financial policy to allow for a higher level of debt leverage, namely a maximum of 2.5x net debt to EBITDA from the prior target of 2.0x,” said Standard & Poor’s credit analyst Lori Harris. Adding our adjustments, we believe Thomson Reuters’ debt leverage will remain above our maximum 2.5x threshold for the company at the ‘A-‘ rating level. We expect Thomson Reuters to use all of its discretionary cash flow and additional debt this year and next for share repurchases, one-time charges, material pension plan contributions, dividends, and acquisitions. Specifically, management has announced plans for a US$350 million one-time charge mostly for its F&R division and a US$500 million contribution to its defined benefit pension plans this year, as well as up to US$1 billion in share repurchases next year.

TRI.PR.B is tracked by HIMIPref™ and is currently included in the Floaters subindex. It will be moved to Scraps at the regular monthly rebalancing on October 31, on credit concerns.

BNS.PR.B, a FloatingReset +170 just converted from BNS.PR.Q, reached only a very small premium over BNS.PR.Q on its debut today.

The issue traded 17,400 shares in a range of 24.70-15 before settling at 24.85-05, 1×11.

BNS.PR.B will be tracked by HIMIPref™ and is temporarily assigned to the FixedReset subindex. When TD.PR.Z settles on October 31 all FloatingResets will be transferred from the FixedReset subindex to a new FloatingReset subindex.

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

So BNS.PR.B has the smallest premium of the lot. It will be most interesting to see whether the bloom is off the rose as far as FloatingResets are concerned!

Vital Statistics are: