Category: Issue Comments

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.

…
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.

…
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.

DBRS has announced that it:

has today confirmed the Pfd-3 (low) rating on the Preferred Share obligations of GMP Capital Inc. (GMP or the Company), but has changed the trend on the rating to Negative. The rating reflects the strength of the Company’s business franchise as a premier provider of investment banking and capital markets products and services to its targeted market of mid-sized Canadian companies, most of whom operate in the resource and energy sectors. The change in trend, however, reflects the current adverse market environment for the Company’s resource-oriented clients and DBRS’s belief that these conditions are not likely to turn favourable in the short term. While the Company has invested in geographical and business line diversification, largely through the 2011 acquisition of U.S.-based Miller Tabak Roberts Securities, LLC (MTR), which has provided new market opportunities and revenues, the weak market environment has caused earnings to remain weak since Q2 2011.
…
The slump in underwriting and trading activities, which DBRS does not expect to recover in the short-to-medium-term, given the weak global economic outlook and continued absence of investor confidence, suggests that a Negative trend is appropriate until the Company returns to a healthy and sustainable level of net income, steady capital accumulation and improving capitalization ratios. In the current environment, the Company’s 32.7% interest in Richardson GMP, a high net worth wealth management operation with over $14 billion in assets under administration (AUA), is operating at break-even and is therefore not a source of profitable diversification for the Company. Similarly, the failure of the Company’s investment in EdgeStone Capital Partners, L.P., removes some of its previous potential for earnings diversification

CU Inc. has announced:

that it will issue $200,000,000 of 3.857% Debentures maturing on November 14, 2052, at a price of $100.00 to yield 3.857%. This issue was sold by RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., TD Securities Inc. and Scotia Capital Inc. Proceeds from the issue will be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.

The bonds are rated “A” by S&P.

This is interesting because CIU.PR.A closed at 25.16-20 today to yield 4.57-56% to its limit maturity (although this issue is a PerpetualPremium, it doesn’t quite trigger a YTW scenario of a call in the HIMIPref™ analysis. The bid-YTW of 4.57% is equivalent to 5.94% interest at the standard conversion factor of 1.3x, so the pre-tax interest equivalent spread (in this context, the “Seniority Spread”) of the Straight Perpetual over the debenture is about 210bp – very close to the 220bp for long corporates vs. PerpetualDiscounts reported November 14.

So it would appear that despite all the problems with the lack of PerpetualDiscount issues and their poor quality (relative to what the index was before all the banks and insurers transformed into DeemedRetractibles), the Seniority Spread as calculted is still meaningful – at least as far as a single test is concerned!

Standard & Poor’s has announced:

• •We are lowering our long-term corporate rating on Bombardier Inc. to ‘BB’ from ‘BB+’.
• •The downgrade reflects what we view as the company’s significantly lower-than-expected cash generation in 2012 due to fewer customer advances and weaker operating profit given the global economy. This, combined with ongoing heavy capex on the C-Series programs (which are facing a six-month delay), will mean that Bombardier’s leverage ratio will remain high, over 6x, until 2014.
• •We are also assigning our ‘BB’ issue rating, and ‘4’ recovery rating, to Bombardier’s proposed US$1 billion of unsecured notes.
• •The stable outlook reflects our expectations of stable performance from the company’s rail segment and overall slight improvement in operating margins.

…
A further downgrade is possible, if lower customer advances and additional delays in the CSeries programs lead to greater-than-expected negative free cash generation. This could ultimately lead to delays in any improvement to the adjusted leverage ratio from our current expectations in the next year-and-a-half.

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 funds from operations to debt reaching 20%.

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