Category: Issue Comments

BCE Inc. has sent out its conversion notices for BCE.PR.C and BCE.PR.D:

As of March 1, 2013, the Series AC Preferred Shares, should they remain outstanding, will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be determined by BCE Inc. on February 4, 2013 but which shall not be less than 80% of the five-year Government of Canada Yield (as defined in BCE Inc.’s articles) compounded semi-annually and computed on February 4, 2013 by two investment dealers appointed by BCE Inc. The annual dividend rate applicable to the Series AC Preferred Shares will be published on February 6, 2013 in the national edition of The Globe and Mail, the Montreal Gazette and La Presse and will be posted on BCE Inc.’s website at www.bce.ca.

As far as deadlines for conversion go:

In order to convert your shares, you must exercise your right of conversion during the conversion period, which runs from January 15, 2013 to February 19, 2013, inclusively.

Note that brokerages will have their own deadlines for notice, which may be a few days earlier than the date on which BCE must be notified – so if you’re contemplating conversion, check well in advance!

There are no huge interconversion profits available to arbitrageurs this time around – the difference in expected dividends appears to be covered by the bid-ask spreads.

I will make a recommendation of which issue is preferable once the new dividend rate for the FixedFloater, BCE.PR.C, has been announced.

Dividend 15 Split Corp. II has released its Annual Report to November 30, 2011.

Using the S&P TSX 60 index rather than “Dividend Aristocrats” seems a little odd to me – but we’ll let them choose their benchmark!

Figures of interest are:

MER: 1.27% of the whole unit value

Average Net Assets: We need this to calculate portfolio yield. No change in Number of Units Outstanding, so the average of the beginning and end of year figures can be used: $81.0-million

Underlying Portfolio Yield: Dividends received of 3,201,530 divided by average net assets of 81.0-million is 3.90%

Income Coverage: Net Investment Income of 2,131,609 divided by Preferred Share Distributions of 2,655,975 is 80%.

According to the 12H1 Semi-Annual Statement:

MER: 1.53% of the whole unit value. The reason for the increase is not discussed, but appears to be due to an increase in legal fees and shareholder reporting costs.

Average Net Assets: We need this to calculate portfolio yield. No change in Number of Units Outstanding, so the average of the beginning and end of period figures can be used: $78.5-million

Underlying Portfolio Yield: Dividends received of 1,558,606 divided by average net assets of 78.5-million is 1.98% for the half, or call it 3.95% annualized.

Income Coverage: Net Investment Income of 960,503 divided by Preferred Share Distributions of 1,327,988 is 72%.

Missed this when it came out, but better late than never!

GlobalBanc Advantaged 8 Split Corp. has announced:

that the Company will terminate on December 17, 2012 (the “Final Redemption Date”) in accordance with its articles.

Until the Final Redemption Date, the Company will continue to pursue its investment strategy by providing exposure, through the use of a forward agreement, to a portfolio of eight international banks. The forward agreement will be settled on the Final Redemption Date in connection with the termination of the Fund.

The Class A Shares and the Preferred Shares will be redeemed by the Company on the Final Redemption Date in accordance with the redemption provisions of the shares. Pursuant to these provisions, the Preferred Shares will be redeemed at a price per share equal to the lesser of $10.00, plus any accrued and unpaid distributions on a Preferred Share and the net asset value (the “NAV”) per Preferred Share as at the Final Redemption Date. The Class A Shares will be redeemed at a price for every Class A Share equal to the amount, if any, by which the NAV per Unit, being one Class A Share and one Preferred Share, exceeds $10.00 and any accrued and unpaid distributions on a Preferred Share as at the Redemption Date. If the NAV per Unit is less than or equal to $10.00 and any accrued and unpaid distributions on a Preferred Share, the Class A Shares will have no value on redemption. As at November 16, 2012, the Company’s NAV per Unit was $4.39.

All redemption payments (if any) are expected to be made on or about December 28, 2012. It is expected that the Class A Shares and the Preferred Shares will be delisted from the Toronto Stock Exchange at the close of trading on December 17, 2012.

According to the company’s still operational website, the NAV on December 17 was $4.61, so there was a significant loss from the $10.00 par value.

GBA.PR.A was last mentioned on PrefBlog when the DBRS rating was discontinued in 2009. GBA.PR.A was not tracked by HIMIPref™.

Scotia Managed Companies has announced:

Allbanc Split Corp. (the “Company”) announced today that the final condition required to extend the term of the Company for an additional five years to March 9, 2018 has been met as holders of 85.6% of Class A Capital Shares have elected to extend. Holders of Class A Capital Shares on December 13, 2012 approved the extension of the term of the Company subject to the condition that a minimum of 361,000 Class A Capital Shares remain outstanding after giving effect to the special retraction right (the “Special Retraction Right”).

Under the Special Retraction Right, 104,212 Class A Capital Shares were tendered to the Company for retraction on March 8, 2013. The holders of the remaining 617,252 Class A Capital Shares will continue to enjoy the benefits of a leveraged participation in the capital appreciation of the Company’s portfolio of publicly listed common shares of Bank of Montreal, Canadian Imperial Bank of Commerce, Royal Bank of Canada, The Bank of Nova Scotia and The Toronto-Dominion Bank while potentially deferring any capital gains tax liability which would otherwise be realized on the redemption of their Class A Capital Shares.

The Company’s Class B preferred shares will be redeemed by the Company on March 8, 2013 in accordance with the redemption provisions as detailed in the Company’s March 3, 2008 prospectus. Pursuant to these provisions, the Class B preferred shares will be redeemed at a price per share equal to the lesser of $26.75 and the Unit Value. In order to maintain the leveraged “split share” structure of the Company, the Company intends to create and issue a new series of Class C preferred shares, which are expected to be issued following this redemption. In addition, the Company may also undertake a concurrent public offering of additional Class A Capital Shares at the same time the Class C preferred shares are offered.

Capital Shares and Class B preferred shares of Allbanc Split Corp. are listed for trading on the Toronto Stock Exchange under the symbols “ABK.A” and “ABK.PR.B”, respectively.

ABK.PR.B is a fairly small issue, with less than half a million shares outstanding with a par value of $26.75 each.

ABK.PR.B was last mentioned on PrefBlog when they proposed this transaction. ABK.PR.B is not tracked by HIMIPref™.

Updated, 2013-1-28: New issue provisionally rated Pfd-2(low) by DBRS.

Brookfield Office Properties has announced:

that it intends to redeem all 8,000,000 of its outstanding Class AAA Preference Shares, Series F (TSX: BPO.PR.F), all of which are beneficially held by CDS & Co., as nominee of CDS Clearing and Depositary Services Inc., for cash on January 31, 2013. The redemption price for each such share is C$25.00 plus accrued and unpaid dividends thereon of C$0.1233 (excluding declared dividends with a record date prior to January 31, 2013), representing a total redemption price of C$25.1233 per share.

Notice of Redemption has been sent to CDS & Co. Payment of the redemption price will be made to all beneficial holders of the Series F Shares on or after January 31, 2013 through the facilities of CDS & Co.

This consumates their announcement of intent in September, which was reported on PrefBlog.

Update, 2013-1-23: To be removed from TXPR.

Yellow Media Limited has announced:

that its previously announced recapitalization (the “Recapitalization”) has been implemented and is now effective.

Pursuant to the Recapitalization, Yellow Media Inc.’s former securities and all entitlements relating thereto have been exchanged and cancelled for, as applicable, cash, new common shares (TSX: Y) and warrants (TSX: Y.WT) of Yellow Media Limited, the new public parent company resulting from the Recapitalization, and new senior secured notes and new senior subordinated exchangeable debentures (TSX: YPG. DB) of YPG Financing Inc., the entity previously named Yellow Media Inc. and now a wholly-owned subsidiary of Yellow Media Limited.

Accordingly, trading in the company’s securities was halted:

The following issues have been halted by IIROC:

Company: Yellow Media Inc.

TSX Symbol: YLO (all issues)

Reason: Pending Delisting

Halt Time (ET): 8:58 AM ET

S&P then declared YLO in default:

• •Montreal-based media and marketing solutions provider Yellow Media Inc. (YMI) has implemented its amended debt recapitalization plan following necessary stakeholder and court approvals.
• •The recapitalization comprises the sub-par exchange of the company’s existing debt with cash, new debt, and shares of a recapitalized YMI (new YMI), and constitutes an event of default as per Standard & Poor’s criteria.
• •Accordingly, we are lowering our long-term corporate credit rating on YMI
  and its related entities to ‘D’ (default) from ‘CC’.

• •At the same time, we are lowering our issue-level rating on the company’s medium-term notes to ‘D’ from ‘CC’, and lowering our ratings on the company’s convertible subordinated debentures outstanding to ‘D’ from ‘C’. The recovery ratings on these debt obligations are unchanged.

… and DBRS discontinued the ratings, which they had already declared defaulting:

DBRS has today discontinued Yellow Media Inc.’s (Yellow Media) Issuer Rating, Medium-Term Notes, Exchangeable Subordinated Debentures and Cumulative Preferred Shares ratings, all of which were at D. This action follows the successful implementation of Yellow Media’s recapitalization on December 20, 2012.

The following issues were, but are no longer, tracked by HIMIPref™: YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D.

The reorganization was last discussed on PrefBlog when the effective date of December 20 was announced.

Capital Power Corporation has announced:

that it has closed its previously announced offering of 6,000,000 Cumulative Rate Reset Preference Shares, Series 3 (the “Series 3 Shares”) at a price of $25 per Series 3 Share for aggregate gross proceeds of $150 million on a bought deal basis with a syndicate of underwriters, led by TD Securities Inc. and BMO Capital Markets.

CPX.PR.C is a FixedReset, 4.60%+323, announced December 6. It will be tracked by HIMIPref™ but assigned to the Scraps index on credit concerns. The issue size of $150-million means that the $50-million greenshoe was not exercised.

DBRS has announced that it:

has today assigned a rating of Pfd-3 (low) with a Stable trend to Capital Power Corporation’s (CPC or the Company) $150 million Cumulative Rate Reset Preference Shares, Series 3 (the Series 3 Preferred Shares).

The issue traded 252,702 in a range of 24.84-00 before closing at 24.88-90, 40×59. Vital statistics are:

Sun Life Financial has announced:

the execution of a definitive agreement whereby Delaware Life Holdings, a company owned by shareholders of Guggenheim Partners, will purchase Sun Life’s domestic U.S. annuity business and certain life insurance businesses for a base purchase price of US$1.35 billion, as adjusted to reflect the performance of the business through closing.
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The transaction is expected to close by the end of Q2 2013 subject to regulatory approvals and customary closing conditions.

Dean A. Connor, President and Chief Executive Officer, Sun Life Financial, stated, “This transaction represents a transformational change for Sun Life. It significantly advances our strategy of reducing Sun Life’s risk profile and earnings volatility, focuses our U.S. operations on our areas of greatest strength and opportunity, and crystallizes future earnings and capital releases that will further support our growth and shareholder value creation. It also transfers this business to a financially strong buyer that understands and is committed to the annuity and life insurance sectors, which will benefit customers and the outstanding employees who will continue to support them.”

Sean B. Pasternak of Bloomberg points out:

Asset managers such as Guggenheim, Apollo Global Management LLC (APO) and Harbinger Capital Partners LLC have invested in annuities operations to get access to funds for investment- management businesses. Insurers including Hartford Financial Services Group Inc. (HIG) and Genworth Financial Inc. (GNW) have scaled back from annuities because obligations to clients can increase when stock markets fall. Also, low interest rates make it harder for providers to generate profit on funds held to back the policies.

Annuities are contracts that offer guaranteed income for retirees. Asset managers including Apollo and Guggenheim are betting they can invest the assets at a return higher than what’s needed to service obligations.

Guggenheim Partners, run by Chief Executive Officer Mark Walter, has expanded from a family office with a handful of employees into a $160 billion global asset manager through deals including the acquisitions of Claymore Group and Rydex ETF owner Security Benefit Corp. Talks to buy parts of Deutsche Bank AG’s asset management fell apart earlier this year.

That’s what Hymas Investment Management needs to do to get assets in the door! Buy them!

DBRS has announced that it:

has reviewed the announcement made by Sun Life Financial Inc. (SLF or the Company, senior rating of AA (low)) of its decision to sell the Sun Life Assurance Company of Canada U.S. subsidiary (SLA (US)) to Delaware Life Holdings, a company owned by shareholders of Guggenheim Partners, for a base purchase price of US$1.35 billion, as adjusted to reflect the performance of the business through closing. There are no implications for the current ratings at this time, most of which remain Under Review with Negative Implications, where they were placed on September 7, 2012.

SLA (US) houses the Company’s U.S. fixed and variable annuity business, as well as certain institutional life insurance lines including variable life insurance. In total, the business represents between 10% and 15% of the Company’s normalized earnings and a similar percentage of balance sheet assets (between $30 billion and $40 billion). However, the business also accounted for much of the earnings volatility experienced by the Company over the past five years, brought on by deteriorating credit market conditions and equity market volatility.

Since the Company announced its decision in late 2011 to cease writing most of the products housed in SLA (US), DBRS has expected that a review of options such as that announced today was possible, if only to de-risk the Company in the event of further capital market deterioration. Correspondingly, exposure to equity markets following the closing of this sale transaction is estimated by the Company to fall by 50%, and exposure to lower interest rates by 35%. DBRS notes that despite imperfect hedges, the Company had already been given credit for satisfactorily managing these risks.
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In September 2012, following, but not in response to, the Company’s decision to de-risk its U.S. business, DBRS put the ratings of the Company and its affiliates Under Review with Negative Implications. The purpose of this review was to stand back from the specific financial performance of the Company and to put it into context vis-à-vis the ratings of SLF’s peer group and broader developments in the Canadian life insurance industry. DBRS remains concerned about the strategic position of the industry in a difficult economic environment. Over the past year, SLF has become more concentrated on its successful Canadian franchise. Strategic initiatives in Canada could well continue to support the Company’s core profitability. However, DBRS has yet to be convinced that the Company’s earnings projections for other businesses will be achieved in line with SLF’s proposed schedule.

The September review by DBRS was reported on PrefBlog.

Sun Life Financial was put on Outlook Negative by S&P last February, where it remains.

Moody’s has announced:

has downgraded to Baa2 from A3 the insurance financial strength (IFS) rating of Sun life Assurance Company of Canada (U.S.) (Sun Life US), the wholly-owned U.S. life insurance subsidiary of Sun Life Financial Inc. (TSX; SLF: preferred stock at Baa3 (hyb) review for possible upgrade ). The rating was also placed on review for further possible downgrade. In the same rating action, the Baa1 senior secured debt rating of Sun Life Financial Global Funding III, L.P. (SLFGF III) was placed under review with direction uncertain. Moody’s also affirmed the Aa3 IFS rating of SLF’s Canadian insurance subsidiary, Sun Life Assurance Company of Canada (SLA), and the ratings of other Canadian affiliates, with the outlook for the Canadian ratings (excluding SLF) remaining negative. Finally, the rating agency placed SLF’s preferred stock Baa3 (hyb) rating on review for possible upgrade.
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The sale of Sun Life US will — once completed — alleviate the rating agency’s concerns related to the execution risks of the runoff strategy for the U.S. businesses and that any further charges arising from Sun Life US’ closed blocks would remain a drag on SLF’s and possibly SLA’s earnings and capital generation. “Moody’s views the transaction as credit positive for SLA as it eliminates the potential for additional capital support being needed at Sun Life US, which is the primary driver of the negative outlook” said Vice President and Senior Credit Officer, David Beattie. Moody’s expects to resolve the negative outlook on the Aa3 IFS ratings of SLA and other Canadian-affiliated companies upon closing of the transaction and the elimination of the runoff business risk.

Moody’s has had the Negative Outlook in place since January.

SLF has a lot of preferreds outstanding: SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D and SLF.PR.E (DeemedRetractible) as well as SLF.PR.F, SLF.PR.G, SLF.PR.H and SLF.PR.I (FixedReset). All are tracked by HIMIPref™ and all are assigned to the indices noted.

DBRS has announced that it:

has today confirmed Emera Inc.’s (Emera) Issuer Rating, Medium-Term Notes and Preferred Shares – Cumulative at BBB (high), BBB (high) and Pfd-3 (high), respectively, and changed the trends on all to Stable from Negative. This trend change reflects DBRS’s expectations that Emera will continue to reduce its non-consolidated debt-to-capital ratio, in the medium term, to below 30% to be in line with its rating category. The resolution of the Negative trend followed a full assessment of Emera’s overall financing strategy on proposed projects and plans to reduce its non-consolidated debt to levels commensurate with its current rating. Emera is currently on track to deleverage its non-consolidated balance sheet, as reflected by (1) a $250 million preferred shares offering in June 2012 and (2) a bought deal offering of approximately $200 million, which settled on December 14, 2012. Pro forma the bought deal offering, Emera’s unconsolidated debt-to-capital is approximately 38% (versus approximately 41.5% as of June 30, 2012).

The credit quality of Emera is based on its low business risk and is supported by its strong portfolio of diversified regulated businesses operating in a reasonable regulatory environment. Emera’s business risk profile is viewed as strong. Emera’s earnings and cash flow are largely generated by its relatively low-risk regulated subsidiaries. Furthermore, dividends and interest income flowing up from its operating subsidiaries continue to adequately cover Emera’s interest and operating costs.

On April 3, 2012, DBRS changed the trend on Emera’s rating to Negative from Stable. This rating action reflected DBRS’s concern regarding the ongoing high degree of non-consolidated leverage at the holding company level for the current rating.

The company’s preferred shares outstanding are EMA.PR.A and EMA.PR.C, both tracked by HIMIPref™ and both assigned to the Scraps index on credit concerns. The assignment of a negative trend in April 2012 was reported on PrefBlog.

Standard & Poor’s has announced:

• •We believe that the Canadian banking sector is encountering incremental pressure from headwinds facing the Canadian economy, which is heightening economic risk in the banking system.
• •We also believe that industry risk for the Canadian banking sector is increasing. We expect that intensifying competition for loans and deposits will lead to pressure on profitability growth, especially in banks’ retail businesses.
• •We are affirming our ‘AA-/A-1+’ long- and short-term issuer credit ratings on Toronto-Dominion Bank (TD Bank), and revising the outlook to stable from negative.
• •The stable outlook reflects our expectation that TD Bank will maintain its current credit profile in the next 24 months.

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The ratings are also based on our assessment of TD Bank’s funding as “average” (revised from “above average”) and of its liquidity position as “adequate”. The revision of our assessment of TD Bank’s funding profile recognizes its favorable deposit position, particularly in the U.S., counterbalanced by notable reliance on wholesale funding, as is the case with other large Canadian banks. The resulting SACP of ‘a+’ is adjusted upward one notch in arriving at the ‘AA-‘ issuer credit rating, reflecting our expectation for potential extraordinary government support in a stress scenario.
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The stable outlook reflects Standard & Poor’s view that TD Bank’s core retail-oriented franchise spanning both Canadian and U.S. markets incorporates sufficient resilience to weather a range of economic environments, even recognizing the potential for more drawn-out recoveries in both markets.

S&P’s prior negative outlook was reported on PrefBlog.

TD has the following preferred share issues outstanding: TD.PR.A (Series AA); TD.PR.C (Series AC); TD.PR.E (Series AE); TD.PR.G (Series AG); TD.PR.I (Series AI); TD.PR.K (Series AK); TD.PR.O (Series O); TD.PR.P (Series P); TD.PR.Q (Series Q); TD.PR.R (Series R); TD.PR.S (Series S) and TD.PR.Y (Series Y).