Category: Issue Comments

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-‘ long-term and ‘A-1+’ short-term issuer credit ratings on Royal Bank of Canada as well as the ‘AA-‘ issue ratings on the bank’s senior unsecured debt. We are revising the outlook to stable from negative. We have affirmed the stand-alone credit profile on Royal Bank of Canada as the bank’s stronger Standard & Poor’s projected risk-adjusted capital ratio led to a reassessment of the capital and earnings score to “adequate” from “moderate”.
• •The stable outlook reflects our expectation that Royal Bank of Canada’s credit fundamentals will remain consistent with its current ratings over the next 24 months.

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RBC’s funding and liquidity positions are viewed as “average” and “adequate”, respectively, and reflect the bank’s stable domestic retail deposit franchise and its strengthening funding and liquidity positions to meet final Basel III liquidity and funding requirements while recognizing a material wholesale funding component.
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It is our view that RBC is a systemically important bank and that it would likely benefit from extraordinary government support in times of stress.
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The stable outlook reflects our expectations that RBC will continue to manage its balance sheet prudently, maintain peer-leading asset quality, and generate consistent though slower earnings growth through its premier business franchises in Canada and diversified revenue sources to support its RAC ratio, and for the funding and liquidity profile to strengthen further due to more stringent regulatory liquidity measures.

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

RY has the following preferred share issues outstanding: RY.PR.A (series AA); RY.PR.B (Series AB); RY.PR.C (Series AC); RY.PR.D (Series AD); RY.PR.E (Series AE); RY.PR.F (Series AF); RY.PR.G (Series AG); RY.PR.H (Series AH); RY.PR.I (Series AJ); RY.PR.L (Series AL); RY.PR.N (Series AN); RY.PR.P (Series AP); RY.PR.R (Series AR); RY.PR.T (Series AT); RY.PR.W (Series W); RY.PR.X (Series AV) and RY.PR.Y (Series AX).

Note that S&P does not discriminate between RY.PR.W and the other issues, even though RY.PR.W has a potential NVCC clause.

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 ‘A+/A-1’ long- and short-term issuer credit ratings on BMO and BMO Financial Corp., as well as the ‘A+’ issue rating on BMO’s senior unsecured debt. We are lowering our issue rating on BMO’s and BMO Financial’s subsidiaries’ nondeferrable subordinated debt to ‘BBB+’ from ‘A-‘, and our rating on its preferred shares and hybrid securities to ‘BBB’ from ‘BBB+’.
• •The stable outlook reflects our expectation that the bank’s credit fundamentals will remain consistent with its current ratings over the next 24 months.

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The resulting SACP of ‘a-‘ is adjusted upward two notches in arriving at the ‘A+’ issuer credit rating, reflecting our expectation for potential extraordinary government support in a stress scenario.
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We could revise the outlook to negative or lower the ratings if the Marshall & Ilsley acquisition pressures BMO’s operating performance through weakening asset quality and additional credit marks, making net charge-offs consistently and materially exceed those of its domestic peers. We could also revise the outlook to negative or lower the rating if the projected Standard & Poor’s RAC ratio falls below 7% for several consecutive quarters. We could revise the outlook to positive or raise the rating if BMO garners a stronger retail and commercial market position in Canada, becoming more closely aligned with the top performers (TD Bank and Royal Bank of Canada, in our view), or if its RAC ratio is consistently above 10%. We see this as unlikely at this time.

BMO has the following series of preferreds outstanding: BMO.PR.H (Series 5); BMO.PR.J (Series 13); BMO.PR.K (Series 14); BMO.PR.L (Series 15); BMO.PR.M (Series 16); BMO.PR.N (Series 18); BMO.PR.O (Series 21); BMO.PR.P (Series 23) and BMO.PR.Q (Series 25). All have been downgraded to P-2 from P-2(high).

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 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 lowering our long- and short-term issuer credit ratings on Bank of Nova Scotia to ‘A+/A-1’ from ‘AA-/A-1+’, following our revision of the stand-alone credit profile on the bank to ‘a’ from ‘a+’, and assigning a stable outlook.
• •The stable outlook reflects our expectation that Bank of Nova Scotia’s credit fundamentals will remain consistent with current ratings over the next 24 months.

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Consequently, we lowered our anchor SACP, which is the starting point for our ratings on financial institutions operating primarily in Canada, to ‘a-‘ from ‘a’ But the anchor for BNS was lowered to ‘bbb+’ from ‘a-‘, reflecting its operating footprint in countries that are weaker than Canada, in our view. This is reflected in our revision of Banking Industry Country Risk Assessment (BICRA) for Canada to group ‘2’ from ‘1’ and revised our industry risk score, a component of the BICRA, to ‘2’ from ‘1’ (see “Various Rating Actions Taken On Canadian Financial Institutions Due To Rising Industry and Economic Risks,” published Dec. 13, 2012, on RatingsDirect on the Global Credit Portal).
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The resulting SACP of ‘a’ is adjusted upward one notch in arriving at the ‘A+’ issuer credit rating to reflect our expectation for extraordinary government support in a crisis.

Hands up whoever feels good about sovereign support of BNS expansion into countries with weaker economies!

The prior negative outlook on BNS was reported on PrefBlog.

BNS has the following preferred shares outstanding: BNS.PR.J (Series 12); BNS.PR.K (Series 13); BNS.PR.L (Series 14); BNS.PR.M (Series 15); BNS.PR.N (Series 16); BNS.PR.O (Series 17); BNS.PR.P (Series 18); BNS.PR.Q (Series 20); BNS.PR.R (Series 22); BNS.PR.T (Series 26); BNS.PR.X (Series 28); BNS.PR.Y (Series 30) and BNS.PR.Z (Series 32). All have been downgraded from P-1(low) to P-2(high).

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 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 lowering our long- and short-term issuer credit ratings on Laurentian Bank to ‘BBB/A-2’ from ‘BBB+/A-2’, and assigning a stable outlook, following our revision of Laurentian Bank’s stand-alone credit profile to ‘bbb’ from ‘bbb+’. In conjunction with these actions, we are also lowering our issue ratings on Laurentian Bank’s senior unsecured debt to ‘BBB’ from ‘BBB+’ and its nondeferrable subordinated debt to ‘BBB-‘ from ‘BBB’, and its preferred shares and hybrids to ‘BB+’ from ‘BBB-‘.
• •The stable outlook reflects our expectation that Laurentian will maintain its current credit profile across a range of future scenarios.

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Our “weak” business position assessment of Laurentian recognizes the bank’s limited diversity of business lines and somewhat concentrated regional focus. Recent acquisitions to expand Laurentian’s B2B franchise may over time contribute to the resilience of Laurentian’s business position, although integration costs and risks offset the potential benefits in the near term.
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We view Laurentian Bank’s funding as “above average” and liquidity as “adequate”, given the bank’s relatively low reliance on more expensive and less reliable wholesale funds; competition for retail deposits will likely continue to impose margin pressure on Laurentian, however.

In distinction to their views on CM but similarly to NA, there is no allusion to LB being systemically important and no expectation of government support in times of stress.

S&P’s prior outlook of Negative on LB was reported on PrefBlog.

LB has three issues of preferreds outstanding: LB.PR.D (Series 9); LB.PR.E (Series 10); and LB.PR.F (Series 11). All have been downgraded from P-2(low) to P-3(high).

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 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 lowering our long- and short-term issuer credit ratings on National Bank of Canada to ‘A-/A-2’ from ‘A/A-1’, following our revision of the stand-alone credit profile on the bank to ‘a-‘ from ‘a’. The outlook is stable.
• •The stable outlook reflects our expectation that National Bank of Canada’s credit fundamentals will remain consistent with current ratings over the next 24 months.

In distinction to S&P’s views regarding CM, there is no allusion to NA being systemically important and no expectation of government support in times of stress.

S&P’s prior Negative Outlook on NA was reported on PrefBlog.

NA has the following preferred share issues outstanding: NA.PR.K (Series 15, called for redemption); NA.PR.L (Series 16); NA.PR.M (Series 20); NA.PR.N (Series 21); NA.PR.O (Series 24); NA.PR.P (Series 26); NA.PR.Q (Series 28). All have been downgraded to P-2 from P-2(high).

Standard and 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 ‘A+/A-1’ long- and short-term issuer credit ratings
  on CIBC, as well as the ‘A+’ issue rating on CIBC’s senior unsecured debt. We are lowering our issue rating on CIBC’s nondeferrable subordinated debt to ‘BBB+’ from ‘A-‘, and our rating on its preferred shares and hybrids to ‘BBB’ from ‘BBB+’.

• •The stable outlook reflects our expectation that the bank’s credit fundamentals will remain consistent with its current ratings over the next 24 months.

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It is our view that CIBC is a “systemically important” bank and that it would likely benefit from extraordinary government support in times of stress.

This results in the CM PerpetualPremiums, CM.PR.D (Series 26) and CM.PR.E (Series 27) being downgraded from P-2 to P-2(low). CM.PR.G (Series 29) can be taken as equivalent although it is not rated by S&P, oddly enough. These are the issues which have been recognized by OSFI has having a good enough NVCC clause.

CM’s other three issues outstanding are CM.PR.K (Series 33), CM.PR.L (Series 35) and CM.PR.M (Series 37), have been downgraged to P-2 from P-2(high)

Innergex Renewable Energy Inc. has announced that it:

has completed today the previously announced bought deal offering of Cumulative Redeemable Fixed-Rate Preferred Shares Series C (the “Series C Shares”).

The Corporation issued a total of 2,000,000 Series C Shares at a price of $25.00 per share, for aggregate gross proceeds of $50,000,000. The offering was made on a bought deal basis through a syndicate of underwriters co-led by TD Securities Inc., National Bank Financial Inc. and BMO Capital Markets.

The Series C Shares commence trading on the Toronto Stock Exchange today under the symbol INE.PR.C.

The Corporation intends to use the proceeds of the offering to repay a portion of its revolving term credit facility and for general corporate purposes.

The Series C Shares were distributed under a short form prospectus dated December 4, 2012 and details of the distribution are set out in the short form prospectus which is available on SEDAR at www.sedar.com.

INE.PR.C is a Straight Perpetual, 5.75%, announced November 21. It is rated Pfd-3(low) [Trend Negative] by DBRS.

INE.PR.C will be tracked by HIMIPref™ and assigned to the Scraps index on credit concerns.

INE.PR.C traded 136,220 shares today in a range of 24.45-76 before closing at 24.46-50, 50×35 – the volume was pretty good considering it’s only a $50-million issue! Vital statistics are:

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.