Category: Issue Comments

Yellow Media Inc. has announced:

it reached a settlement with the lenders under its senior unsecured credit facility who were opposing the Company’s proposed recapitalization (the “Recapitalization”). Pursuant to the settlement, such lenders agreed to notify the Québec Superior Court (the “Court”) that they do not object to the implementation of the Recapitalization and agreed to facilitate its implementation.

The Company has agreed to propose to the Court that the terms of the Recapitalization be amended such that:

• upon implementation of the Recapitalization, the Company will pay to the lenders, the holders of its existing medium term notes and the holders of its existing convertible unsecured subordinated debentures all accrued and unpaid interest up to but excluding the date of implementation of the Recapitalization, and pay to the lenders the $25 million amortization payment on the outstanding balance of the non-revolving tranche of the credit facility originally due on October 1, 2012;
• the lenders will receive $25 million additional principal amount of new senior secured notes pursuant to the Recapitalization;
• in exchange for the payment of the additional $25 million amortization amount on the non-revolving tranche of the credit facility and the issuance of the additional $25 million principal amount of new senior secured notes to the lenders upon implementation of the Recapitalization, the principal amount of the outstanding credit facility debt will be reduced by $58 million, from $369 million to $311 million, for purposes of calculating the pro rata distribution of the consideration under the Recapitalization;
• the holders of the existing convertible unsecured subordinated debentures will receive $5 million additional principal amount of new senior subordinated exchangeable debentures pursuant to the Recapitalization;
• the annual interest rate on the new senior secured notes will be increased from 9.00% to 9.25%;
• the mandatory redemption provisions in respect of the new senior secured notes will be amended to provide, notably, that:
  • o the Company will use an amount equivalent to 75% (up from 70%) of its consolidated excess cash flow (as determined pursuant to the indenture governing the new senior secured notes) for the immediately preceding two fiscal quarters, on a semi-annual basis on the last day of May and November of each year, commencing on May 31, 2013, to redeem the new senior secured notes at par on a pro rata basis;
  • o the Company will make minimum annual aggregate mandatory redemption payments thereunder of $100 million for the combined payments due on May 31, 2013 and November 30, 2013, $75 million for the combined payments due on May 31, 2014 and November 30, 2014, and $50 million for the combined payments due on May 31, 2015 and November 30, 2015; and
  • o for purposes of determining consolidated excess cash flow, deductions for capital expenditures and information systems/information technology (IS/IT) expenses will each be subject to an annual deduction limit of $50 million;
• the Board of Directors of New Yellow Media will be comprised of ten directors (instead of nine) and the lenders will have the right to nominate one member of the initial Board of Directors of New Yellow Media, who will also be a member of the initial audit committee of New Yellow Media.

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As a result of the settlement, the Recapitalization is now expected to be implemented and become effective on December 20, 2012, subject to a number of conditions, including the approval of the Toronto Stock Exchange and the receipt of the final approval from the Court in respect of the Recapitalization, which is no longer being contested by any party before the Court.
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As a result of the Recapitalization becoming effective, the Company will not redeem any existing cumulative redeemable first preferred shares, series 1 that have been or may be tendered for redemption by holders in accordance with the terms of such preferred shares beginning as of December 31, 2012, and will therefore not pay any retraction price nor any accrued and unpaid dividends in respect thereof. Pursuant to the Recapitalization, the holders of all of Yellow Media’s existing preferred shares, other than the preferred shares, series 7, will be entitled to receive the same consideration (as described above) in exchange for each preferred share and all related entitlements.
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In the course of negotiations with the lenders in connection with the Recapitalization, the Company disclosed confidential information to the lenders pursuant to signed confidentiality agreements.
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According to the 5-Year Plan, forecasted earnings before interest, taxes, depreciation and amortization (“EBITDA”) during the five-year period should be sufficient to enable the Company to meet its obligations and give effect to its announced business plan notwithstanding that those forecasts showed fiscal 2013 EBITDA being substantially lower than forecasted fiscal 2012 EBITDA.

The company has four series of preferred shares outstanding, YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D. These shares will be wiped out in exchange for shares representing 6.5% of the outstanding common together with some warrants.

Dundee Corporation has announced:

that it has chosen to discontinue the services of each of Standard & Poor’s and DBRS with regards to maintaining a credit rating for the Corporation. The Corporation has determined that since it has limited amounts of public debt outstanding, and no current intention to issue additional public debt, there is no need for it to maintain the credit ratings, nor incur the significant associated costs of maintaining such ratings.

Accordingly, DBRS has announced that it:

has today discontinued its public ratings on Dundee Corporation including both the Issuer Rating and Preferred Shares rating.

Both DC.PR.A and DC.PR.B are tracked by HIMIPref™, but relegated to the Scraps index on credit concerns.

Update, 2012-12-10: S&P follows:

On Dec. 10, 2012, Standard & Poor’s Ratings Services affirmed its ‘BBB-‘ issuer credit rating on Dundee Corp. Subsequently, we withdrew the rating at the issuer’s request following its announcement that it currently has no intention of issuing public debt.

National Bank of Canada has announced:

its intention to redeem on January 15, 2013 all of its Non-cumulative Fixed Rate First Preferred Shares Series 15 (the “Preferred Shares Series 15”). The redemption price, as provided for in shares conditions, is $25.00 per share, together with declared and unpaid dividends. As the normal quarterly dividend would have been due on February 15, 2013, the Bank has declared a dividend for the period from November 15, 2012 to January 15, 2013 of $0.24442 per Preferred Share Series 15; as a result, holders will receive upon redemption an amount of $25.24442 per share.

Formal notice will be issued to shareholders in accordance with the share conditions. The redemption of the Preferred Share Series 15 is subject to the approval of the Office of the Superintendent of Financial Institutions and is part of the Bank’s ongoing management of its regulatory capital.

Update, 2013-1-8: S&P has announced:

S&P Canadian Index Services will make the following changes in the S&P/TSX Canadian Indices:

National Bank of Canada (TSX:NA) has announced that it will redeem for $CDN25.00 cash per share all of the outstanding shares of its Non-Cumulative Fixed Rate First Preferred Shares, Series 15 (TSX:NA.PR.K) at the close on January 15, 2013. The shares of this issue will be removed from the S&P/TSX Preferred Share Index and the S&P/TSX North American Preferred Stock Index after the close of trading on Tuesday, January 15, 2013.

Enbridge Inc. has announced:

it has closed its previously announced public offering of Cumulative Redeemable Preference Shares, Series R (the “Series R Preferred Shares”) by a syndicate of underwriters led by Scotiabank, RBC Capital Markets and TD Securities Inc. Enbridge issued 16 million Series R Preferred Shares for gross proceeds of C$400 million. The Series R Preferred Shares will begin trading on the TSX today under the symbol ENB.PR.T. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.

Note that while it is Series R the symbol is ENB.PR.T. Seems to me that a business that cared about its ultimate customers would coordinate better with the company and underwriters, so that series-letters and ticker symbols would be better coordinated.

ENB.PR.T is a FixedReset, 4.00%+250, announced November 26. It will be tracked by HIMIPref™ and assigned to the FixedReset subindex.

ENB.PR.T traded 968,467 shares today in a range of 24.96-05 before closing at 25.00-01, 29×28. Vital statistics are:

Manulife Financial Corporation has announced:

that it has completed its offering of 8 million Non-cumulative Rate Reset Class 1 Shares Series 11 (the “Series 11 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 Scotiabank, RBC Capital Markets and TD Securities Inc. The Series 11 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR .J.

The Series 11 Preferred Shares were issued under a prospectus supplement dated November 27, 2012 to Manulife’s short form base shelf prospectus dated July 18, 2012.

MFC.PR.J is a FixedReset, 4.00%+261, announced November 27. It will be tracked by HIMIPref™ and is assigned to the FixedReset sub-index.

As this issue is issued by an Insurance Holding Company and has no NVCC Clause – not surprising, given OSFI’s continued foot-dragging regarding clarification of this issue – I have followed my usual practice and have inserted a “DeemedMaturity” entry into the call schedule; analytics will be performed as if the issue was set to mature 2022-1-31 at par. This entry may have its date changed, or even disappear completely, as the mystery unfolds.

MFC.PR.J traded 375,718 shares today in a range of 24.87-07 before closing at 25.01-05, 20×70. Vital statistics are:

Strathbridge Asset Management has announced (although not yet on their website):

Premium Income Corporation (the “Fund”)(TSX: PIC.A)(TSX:PIC.PR.A)(TSX:PIC.RT) is pleased to announce that beginning Monday December 3, 2012 through Tuesday December 11, 2012 the Fund will be calculating and publishing on its website, a daily Net Asset Value per share with respect to its Class A Shares and Preferred Shares. This is being done to assist shareholders in making a fully informed investment decision regarding the exercise of Rights recently issued and which expire on December 11, 2012.

Under the Rights offering two Rights entitle the holder to acquire one Class A Share and one Preferred Share upon payment of the subscription price of $20.88 prior to the expiry date of December 11, 2012. Any Rights not exercised by December 11, 2012 will expire and be of no value. To exercise Rights holders should contact their advisors or dealers. Please note that some dealers may have an earlier deadline in order to process the exercise request.

After the expiry of the Rights on December 11, 2012 the Fund will revert to calculate its Net Asset Value on a weekly basis.

For further information, please contact Investor Relations at 416.681.3966, toll free at 1.800.725.7172 or visit www.strathbridge.com.

The rights issue was reported on PrefBlog.

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

Brookfield Asset Management has announced:

the completion of its previously announced 4.85% perpetual Class A Preference Shares, Series 36 (“Preferred Shares”) issue in the amount of CDN$200,000,000. Brookfield issued 8,000,000 Preferred Shares at a price of CDN$25.00 per share, for total gross proceeds of CDN$200,000,000. The Preferred Shares will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BAM.PF.C.

BAM.PF.C is a Straight Perpetual, 4.85%, announced November 20. The issue size of $200-million indicates that the greenshoe option was exercised in full.

The issue traded 384,725 shares today in a range of 24.64-95 before closing at 24.70-73, 7×40.

BAM.PF.C will be tracked by HIMIPref™ and initially assigned to the PerpetualDiscount index. Vital statistics are:

Standard & Poor’s has announced:

• •We are withdrawing our ‘BB’ issue-level rating, and ‘4’ recovery rating, on Bombardier Inc.’s proposed US$1 billion of unsecured notes. The company has decided to not issue these notes.
• •We are also affirming our ‘BB’ long-term corporate rating on Bombardier.
• •While Bombardier’s decision to not issue debt at this time will mean a somewhat better leverage ratio, with an adjusted debt-to-EBITDA ratio of about 6.3x compared with 7.0x for 2012, the company will not benefit from
  US$1 billion in additional liquidity.

• •We continue to view Bombardier’s current liquidity position, with a US$2.1 billion cash balance, as adequate, but there is less cushion if capital expenditures were to increase due to delays in the CSeries programs.
• •The stable outlook reflects our expectations that the company will continue to generate strong cash flows and credit metrics will improve over the next two years.

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Under the current business conditions, we believe an upgrade is unlikely in the near term. Nevertheless, when what we view as more normal and stable market conditions return and the company successfully launches the CSeries, we could consider revising the outlook to positive or raising the rating on Bombardier if in turn the company improves its financial measures, with adjusted debt to EBITDA falling below 4x or adjusted FFO to debt reaching 20% on a sustained basis.

Last week’s S&P downgrade was discussed on PrefBlog. Neither of these announcements had any direct effect on preferreds, but market effect was very negative, with BBD.PR.C down about 10% at the lows.

BBD has three series of preferred outstanding: BBD.PR.B, BBD.PR.C and BBD.PR.D.

Standard & Poor’s has announced:

• •We are lowering our long-term corporate credit and senior unsecured debt ratings on Capital Power Corp. (CPC) and subsidiary Capital Power L.P. to
  ‘BBB-‘ from ‘BBB’.

• •We are also lowering our global scale preferred stock rating on CPC to ‘BB’ from ‘BB+’, and our Canada scale rating to ‘P-3’ from ‘P-3(High)’.
• •We base the downgrade on weakness in the Alberta power market, which we forecast will not improve materially in the medium term.
• •The lower amount of hedging the partnership is undertaking with respect to its Alberta merchant power heightens its significant exposure to lower Alberta forecast prices.
• •The stable outlook reflects our view that adjusted funds from operations-to-debt will remain below the 20% threshold we associate with the ‘BBB’ rating.

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The ratings on CPC and CPLP reflect Standard & Poor’s opinion of the partnership’s strong business risk profile and significant financial risk profile. Providing key support to the ratings is a more measured perspective on growth and a moderately diversified generation portfolio, which consists of a relatively young fleet. Moreover, the partnership recently completed the Quality Wind project under budget, reducing construction risk and demonstrating strong project development capability. We also believe CPLP benefits from a portion of its cash flow from long-term power purchase contracts with predominantly creditworthy counterparties, which add predictability. In our view, offsetting these strengths is a high degree of leverage, notwithstanding the partnership’s efforts to reduce leverage through such things as equity issuance, which exposes it to weakening in power prices, particularly in light of a relatively large open position. We believe this heightens the volatility of cash flow.