Category: Issue Comments

Manulife Financial Corp. has announced:

that it has completed its offering of 8 million Non-cumulative Rate Reset Class 1 Shares Series 13 (the “Series 13 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $200 million.

The offering was underwritten by a syndicate of investment dealers co-led by Scotia Capital Inc. and RBC Capital Markets. The Series 13 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.K.

The Series 13 Preferred Shares were issued under a prospectus supplement dated June 17, 2013 to Manulife’s short form base shelf prospectus dated July 18, 2012.

MFC.PR.K is a FixedReset, 3.80%+222, announced June 17. All told, the FixedReset subindex has lost 96bp since Monday’s close, so the issue has modestly underperformed, but nothing worth despairing over.

The issue traded 235,745 shares today in a range of 24.50-70 before closing at 24.55-64, 131×10.

MFC.PR.K will be tracked by HIMIPref™ and assigned to the FixedReset subindex. Since it is an insurance holding company issue without a NVCC clause, a Deemed Maturity at par as of 2025-1-31 has been added to the redemption schedule as is my normal practice. Vital statistics are:

Standard & Poor’s has announced:

• Following a review under our revised insurance criteria, we are raising our ratings on Co-operators Financial Services Ltd. and its operating subsidiaries Co-operators General Insurance Co. and Co-operators Life Insurance Co.
• Our ratings on the group reflect its strong business risk profile as a top multiline insurer in Canada with well-established multichannel distribution platforms, as well as its very strong financial profile.
• The stable outlook reflects our view that the group will sustain its strong competitive position and very strong capital adequacy.

…
In our view, Co-operators’ life insurance operations are exposed to low industry risks due to high barriers to entry in a market dominated by a small number of life insurers and a strong institutional framework where the primary regulator, the Office of the Superintendent of Financial Institutions (OSFI), maintains highly effective oversight of the industry. OSFI’s primary solvency metric, the minimum continuing capital and surplus requirements (MCCSR) ratio, comprehensively captures all insurance risks in each domestic life insurer and their respective international subsidiaries.

Insurance products in Canada generally have less aggressive guarantees, bolstering our view of low industry risk, which has a strong track record of very tight asset-liability matching. This matching is needed because of financial reporting and a regulatory framework that applies fair-value accounting principles equally to both sides of the balance sheet. The framework also tends to be pro-cyclical, leading to earlier recognition of
long-term adverse macroeconomic effects and reporting of relatively conservative financial results. But we see sensitivity to interest rates and equity-market volatility as somewhat offsetting these strengths and burdening long-term operating return prospects. We believe a weak global economy, persistent low interest rates, and established competition limit the sector’s growth prospects and potential for higher operating margins.

This follows the positive outlook announced in October 2012.

Cooperators’ is the proud issuer of CCS.PR.C and CCS.PR.D. The S&P rating on these issues is now P-2, up from P-2(low).

Standard and Poor’s has announced:

• We are placing our ratings on Union Gas Ltd. On CreditWatch with negative implications.
• The placement reflects that on parent Spectra Energy Corp.
• We will resolve this CreditWatch placement when we resolve the placement on Spectra.

The ratings on Union Gas, an Ontario-based natural gas distribution company, reflect Standard & Poor’s view of the consolidated credit profile of its ultimate parent, Spectra, and the parent’s “strong” business risk profile, “significant” financial risk profile, and “satisfactory” management and governance score. Union Gas’ monopoly-like market position, largely regulated asset base, and stable cash flow generation also support the ratings, in our opinion. We believe that the company’s significant financial risk profile and softer key credit ratios counterbalance these strengths.

I mentioned the review of Spectra on June 12, but was more concerned about Westcoast.

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.

Brookfield Asset Management has announced:

the completion of its previously announced 4.90% perpetual Class A Preference Shares, Series 37 (“Preferred Shares”) issue in the amount of C$200,000,000. Brookfield issued 8,000,000 Preferred Shares at a price of C$25.00 per share, for total gross proceeds of C$200,000,000. The Preferred Shares will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BAM.PF.D.

BAM.PF.D is a Straight Perpetual, 4.90%, announced May 28 … just before the floor dropped out of the market. Surprisingly, it seems that the greenshoe was fully exercised, so perhaps the underwriters weren’t left holding the bag on this one.

The issue will be tracked by HIMIPref™ and has been assigned to the PerpetualDiscount subindex.

BAM.PF.D traded 454,120 shares today in a range of 21.75-40 before closing at 22.30-35, 100×5000. Vital statistics are:

EMA.PR.A is a Straight Perpetual, 4.50%, announced May 30.

The issue traded 194,975 shares today in a range of 23.28-20 (!) before closing at 23.60-65, 100×500. I assume the underwriters are taking a bath on this issue. Sadly for them, they fully exercised their greenshoe of 1-million shares, taking the issue size up to $125-million; of which about 6% has just evaporated.

EMA.PR.E will be tracked by HIMIPref™ but assigned to the Scraps index on credit concerns. Vital statistics are:

Enbridge Inc. has announced:

it has closed its previously announced public offering of Cumulative Redeemable Preference shares, Series 3 (the “Series 3 Preferred Shares”) by a syndicate of underwriters led by TD Securities Inc., CIBC, RBC Capital Markets and Scotiabank. Enbridge issued 24 million Series 3 Preferred Shares for gross proceeds of CAD $600 million. The Series 3 Preferred Shares will begin trading on the TSX today under the symbol ENB.PR.Y. Proceeds will be used to partially fund capital projects, to reduce existing indebtedness and for other general corporate purposes of the Corporation and its affiliates.

ENB.PR.Y is a FixedReset, 4.00%+238, announced May 28.

The issue traded 1,492,004 shares today in a range of 25.03-18 before closing at 25.16-17, 67×20.

ENB.PR.Y will be tracked by HIMIPref™ and is assigned to the FixedResets subindex. Vital statistics are:

Dundee Corporation announced on May 28:

is confirming the terms of the preference shares to be issued by each of Dundee and DREAM Unlimited Corp. (“DREAM”) pursuant to the previously announced corporate restructuring of Dundee through a tax efficient plan of arrangement (the “Arrangement”).

Dundee’s First Preference Shares, Series 1 have a liquidation value of $25.00 per share. Pursuant to the Arrangement, holders of Dundee’s First Preference Shares, Series 1 will receive, for each such share held, (i) a new First Preference Share, Series 4 of Dundee with a liquidation amount of $17.84 (compared with $18.67, as previously estimated) and an annual dividend of 5%, and (ii) a First Preference Share, Series 1 of DREAM with a liquidation amount of $7.16 (compared with $6.33, as previously estimated) and an annual dividend of 7%, such shares having the redemption rights described below. The combined liquidation value of the two new shares that will be issued will equal the $25.00 original liquidation value of each of Dundee’s First Preference Shares, Series 1.

• • Dundee’s First Preference Shares, Series 4 – Redemption Rights
  • Dundee’s First Preference Shares, Series 4 will be redeemable, at the option of Dundee, at any time prior to June 30, 2013 at $18.38 per share, at any time on or after June 30, 2013 and prior to June 30, 2014 at $18.20 per share, at any time on or after June 30, 2014 and prior to June 30, 2015 at $18.02 per share, and at any time on or after June 30, 2015 at $17.84 per share. In addition, Dundee’s First Preference Shares, Series 4 will be redeemable, at the option of the holder, at any time on or after June 30, 2016 at $17.84 per share.
• • DREAM’s First Preference Shares, Series 1 – Redemption Rights
  • DREAM’s First Preference Shares, Series 1 will be redeemable, at the option of DREAM, at any time prior to June 30, 2013 at $7.37 per share, at any time on or after June 30, 2013 and prior to June 30, 2014 at $7.30 per share, at any time on or after June 30, 2014 and prior to June 30, 2015 at $7.23 per share, and at any time on or after June 30, 2015 at $7.16 per share. In addition, DREAM’s First Preference Shares, Series 1 will be redeemable, at the option of the holder, at any time on or after December 31, 2013 and prior to December 31, 2014 at $7.30 per share, at any time on or after December 31, 2014 and prior to December 31, 2015 at $7.23 per share, and at any time on or after December 31, 2015 at $7.16 per share.

Expected DREAM Capitalization

Based on the number of Class A Subordinate Voting Shares, Class B Common Shares and First Preference Shares, Series 1 of Dundee outstanding as of May 27, 2013, Dundee expects that there will be an aggregate 75,730,459 Class A Subordinate Voting Shares and Class B Common Shares of DREAM outstanding upon completion of the Arrangement, anticipated for May 30, 2013, and 6,000,000 First Preference Shares, Series 1, with an aggregate liquidation amount of approximately $43 million.

Both DC.PR.C and DRM.PR.A will be tracked by HIMIPref™ despite not having credit ratings. This is because they are derived from DC.PR.A, which used to have a credit rating, and has been grandfathered. They will be assigned to the Scraps index on credit concerns.

Vital statistics are:

Morgan Meighen & Associates has announced:

that it has completed its public offering of $75,000,000 (3,000,000 shares), 3.75% Cumulative Redeemable Class A Preference Shares, Series 4 (TSX symbol: CGI.PR.D).

The net proceeds of this offering will be used, together with available cash, to repay a short-term loan used to fund the previously announced redemption of its $75,000,000, 4.65% Cumulative Redeemable Class A Preference Shares, Series 2 (TSX symbol: CGI.PR.B), which was completed on May 29, 2013 for an aggregate amount of $75,716,610 (including accrued and unpaid dividends from March 15, 2013 to May 28, 2013). This redemption was in accordance with the terms of the governing short form prospectus.

CGI.PR.D is a SplitShare, 10-Year Retractible, 3.75%, announced April 29. The issue will be tracked by HIMIPref™ and is assigned to the SplitShares subindex.

CGI.PR.D traded 435,750 shares today in a range of 25.20-30 before closing at 25.25-35, 76×30. Vital statistics are: