Category: Issue Comments

DBRS has announced that it:

has today downgraded Yellow Media Inc.’s (Yellow Media or the Company) Issuer Rating to D from C (high). DBRS has also downgraded the Company’s Medium-Term Notes rating to D from C (high) and is discontinuing its recovery rating of RR4; the Company’s Exchangeable Subordinated Debentures rating to D from C (low) and is discontinuing its recovery rating of RR6; and the Company’s Cumulative Preferred Shares rating to D from Pfd-5 (low).

On July 23, 2012, DBRS noted that Yellow Media’s ratings were placed Under Review with Negative Implications pending the final approval of its proposed recapitalization. The recapitalisation was approved by debtholders and shareholders on September 6, 2012, and was intended to close by the end of September 2012, subject to a number of conditions, including the receipt of the Court’s final approval. On September 10, 2012, Yellow Media announced that the hearing for the final approval by the Québec Superior Court had been postponed and is set by the Court to begin on October 15, 2012.

On September 14, 2012, the Québec Superior Court granted the Company a safeguard order suspending its obligation to pay accrued and unpaid interest in respect of Yellow Media’s convertible debentures, including the October 1, 2012, interest payment or pay any principal or interest or any similar payment accruing on or after September 30, 2012, under its existing credit facilities and medium-term notes. The safeguard order is effective until ten days following the judgment of the Québec Superior Court on the final orders sought at the hearing for the final approval of its proposed recapitalization, subject to any further order of the Court.

Accordingly, Yellow Media did not pay its October 1, 2012, interest payment on its convertible debentures nor did the Company pay the $25 million principal repayment due October 1, 2012, under its existing credit facilities. As such, Yellow Media’s issuer and securities ratings have been downgraded to D in accordance with DBRS policy.

The company has four series of preferred shares outstanding, YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D. The recapitalization plan has won shareholder and creditor approval and, if approved by the Quebec Superior Court, will more-or-less wipe out common and preferred shareholders who will now hold a combined stake in the reorganized company of a little under 16%.

Brompton Split Banc Corp has announced:

At a special meeting held on March 29, 2012, shareholders of Brompton Split Banc Corp. (the “Fund”) approved a special resolution to allow the Board of Directors to extend the term of the Class A Shares and the Preferred Shares for up to 5 years and to determine the distribution rates for the extended term. The Board of Directors is pleased to announce that it has approved a 5 year extension to the term of the Class A Shares and Preferred Shares to November 29, 2017. The Fund was originally scheduled to terminate on November 30, 2012. The distribution rate for the Fund’s Preferred Shares for this new 5 year term which commences on December 1, 2012 will be $0.45 per annum paid in equal quarterly amounts. The new Preferred Share distribution rate is based on current market rates for preferred shares with similar terms. The Preferred Share distribution for the quarter ended December 31, 2012 is expected to be $0.12493 per Preferred Share which takes into account the new distribution rate for December and the previous distribution rate for October and November. In addition, the Fund intends to maintain the targeted monthly Class A Share distribution at $0.10 per Class A Share.

The extension allows shareholders to continue to enjoy the benefit of the Fund’s portfolio of common shares of six Canadian Banks: Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, The Bank of Nova Scotia and The Toronto-Dominion Bank. Canadian banks have stood out amongst their global peers as examples of stability over the long term and through the credit crisis. Canadian banks continue to have attractive dividend yields and return on equity. As well, the extension of the term of the Fund is not a taxable event and enables shareholders to defer potential capital gains tax liability that would have otherwise been realized on the redemption of the Class A Shares or Preferred Shares until such time as such shares are disposed of by shareholders.

In connection with the extension, those shareholders who do not wish to continue their investment in the Fund, may retract their Preferred Shares or Class A Shares on November 30, 2012 pursuant to a special retraction right and receive a retraction price that is calculated in the same way that such price would be calculated if the Fund were to terminate on November 30, 2012. The notice expiry for the special retraction is October 31, 2012 at 5:00 p.m. (Toronto time).

The favourable vote for the extension was reported on PrefBlog. SBC.PR.A was last mentioned on PrefBlog in connection with its semi-annual report for 12H1. The issue was recently confirmed at Pfd-3 by DBRS.

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

Standard & Poor’s has announced:

• •We are revising our outlook on Montreal-based Transcontinental Inc. to negative from stable.
• •We base the outlook revision on our view of the ongoing headwinds the company faces in the medium term, with possible declines in both organic revenue and profitability given challenging industry fundamentals.
• •We are also affirming our ratings on the company, including the ‘BBB’ long-term corporate credit rating.
• •The negative outlook reflects Standard & Poor’s view that Transcontinental could continue to experience declining organic revenue and margin pressure in the medium term.

…
Transcontinental’s operating performance was below our expectations in the nine months ended July 31, 2012, with reported revenue and adjusted operating profit declining 2.5% and 15.5%, respectively, on an organic basis, compared with the same period in 2011. We believe that soft economic conditions in the past few years have accelerated the digital substitution of content and advertising from print, which will continue pressuring the company’s print and publishing-related businesses in the medium term.
…
The negative outlook reflects Standard & Poor’s view that Transcontinental might experience continued declining organic revenue and margin pressure given difficult industry fundamentals. We could lower the ratings if Transcontinental’s operating performance remains soft or if we believe secular risks have increased to an extent that changes our view of the company’s business risk profile or if debt leverage approaches 2.5x. Alternatively, we could revise the outlook to stable if Transcontinental demonstrates sustainable improvement in its operating performance, while maintaining adjusted debt to EBITDA between 1.5x-2.0x.

Transcontinental has a single preferred share issue outstanding: TCL.PR.D, which S&P upgraded to P-3(high) in December 2010. The issue commenced trading October 2, 2009 and is a FixedReset, 6.75%+416. The issue was recently downgraded to Pfd-3 by DBRS.

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

Financial 15 Split Inc. has released its Semi-Annual Report to May 31, 2012.

Figures of interest are:

MER: 1.03% of the whole unit value, “excluding the one time initial offering expenses and performance fees.”

Average Net Assets: We need this to calculate portfolio yield. The number of units did not change over the half, so the average of the beginning and end of year’s net assets will be close enough: ($120.8-million + $124.2-million) / 2 = $122.5-million.

Underlying Portfolio Yield: Dividends received (net of withholding) of 2.191-million divided by average net assets of 122.5-million is 1.79%, annualized is 3.58%

Income Coverage: Net Investment Income of 1.525-million divided by Preferred Share Distributions of 2.429-million is 63%.

FTN.PR.A was last mentioned on PrefBlog when the 2011 Annual Report was discussed. FTN.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Brompton Split Banc Corp. has released its Semi-Annual Report to June 30, 2012, which in conjuntion with the Annual Report to December 31, 2011 allows preparation of the following table:

I suggest the reported outperformance probably has more to do with the poor performance of insurers over the past five years than with any manifestation of investment skill; on the other hand, the fund has handsomely outperformed BK / BK.PR.A for the past five years, even allowing for the one month difference in period end.

Figures of interest are:

MER: 1.14% of the whole unit value, “excluding the cost of leverage and the issuance costs.”

Average Net Assets: We need this to calculate portfolio yield. The Total Assets of the fund at year end was $119.9-million and 118.2-million on June 30, so call it an average of $119-million.

Underlying Portfolio Yield: Investment income of $2.622-million received divided by average net assets of $119-million is 2.20%, annualized is 4.40%

Income Coverage: Net investment income of $2.622-million less expenses of $0.696-million is $1.927-million, to cover preferred dividends of 1.574-million is about 122%.

SBC.PR.A was last mentioned on PrefBlog when it was confirmed at Pfd-3(high) by DBRS. SBC.PR.A is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Brompton Life & Banc Split Corp. has released its Semi-Annual Report to June 30, 2012, with updated performance numbers which allow construction of the following table in conjunction with the Annual Report to December 31, 2011.

Note that according to the implementation by iShares, the capped financial index is about 76% banks and 19% insurance, so the fund is by design overweight insurers relative to this benchmark – and insurers have underperformed over the past few years.

Figures of interest are:

MER: 0.98% of the whole unit value, “excluding the cost of leverage and issuance costs.”

Average Net Assets: We need this to calculate portfolio yield. The Total Assets of the fund at year end was $204.4-million, and 203.8-million at June 30. Easy enough (no interim warrant offerings this time!) so call the average net assets 204.2-million.

Underlying Portfolio Yield: Investment income of $4.79-million received divided by average net assets of $204.2-million is 2.35% for the six months, or 4.70% annualized.

Income Coverage: Net investment income after expenses of $3.758-million, to cover preferred dividends of 3.582-million is about 105%.

LBS.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-3(low) by DBRS. LBS.PR.A is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Enbridge Inc. has announced:

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

ENB.PR.P is a FixedReset, 4.00%+250, announced September 4. It will be tracked by HIMIPref™ and assigned to the FixedReset index.

The issue traded 567,120 shares today in a range of 24.84-90 before closing at 24.88-91, 246×50. Vital statistics are:

Brookfield Office Properties has announced:

the completion of its previously announced Preferred Shares, Series T issue in the amount of C$250 million. The offering was underwritten by a syndicate led by CIBC, RBC Dominion Securities Inc., Scotia Capital Inc. and TD Securities Inc.

Brookfield Office Properties issued 10.0 million Preferred Shares, Series T at a price of C$25.00 per share yielding 4.60% per annum for the initial 6.25-year period ending December 31, 2018. Net proceeds from the issue will be added to the general funds of Brookfield Office Properties and be used to redeem its 8.0 million Preferred Shares, Series F and for general corporate purposes. Until such time as Brookfield Office Properties redeems the Preferred Shares, Series F, a portion of the net proceeds may temporarily be used to reduce short term borrowings.

The Preferred Shares, Series T will commence trading on the Toronto Stock Exchange on September 13, 2012 under the ticker symbol BPO.PR.T.

BPO.PR.T is a FixedReset, 4.60%+316, announced September 5. It will be tracked by HIMIPref™, but relegated to the Scraps index on credit concerns.

The issue traded 713,956 shares today in a range of 25.00-18 before closing at 25.10-12, 1×22. Vital statistics are: