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 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.

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: