Category: Issue Comments

Yellow Media Inc. has announced:

that, in connection with its proposed recapitalization, it has amended the plan of arrangement to be considered and voted upon by the Company’s debtholders and shareholders at the meetings scheduled to be held this coming Thursday, September 6, 2012.

The Board of Directors of Yellow Media has decided to amend the plan of arrangement pursuant to Section 6.3 thereof so that the Company’s existing convertible unsecured subordinated debentures will be exchanged, as part of the recapitalization, for an increased number of existing common shares, on the basis of 50 shares, up from 12.5 shares, for each $100 principal amount of existing subordinated debentures. This amendment is supported by the holders of the Company’s existing medium term notes that have executed support agreements in favour of the recapitalization. The revised exchange ratio is the same as the exchange ratio used to determine the consideration to be received pursuant to the recapitalization by holders of the Company’s existing preferred shares. The Board has made this decision after giving consideration to the numerous representations made to the Company regarding the recapitalization, in particular by holders of existing subordinated debentures. Yellow Media is of the view that the recapitalization, after giving effect to the amendment, is responsive to the comments which have been received and strikes a better balance between the interests of stakeholders having regard to available alternatives while recognizing the imperative of moving forward with the recapitalization in order to provide the Company with the necessary financial flexibility to pursue its ongoing business transformation.
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The amendment does not affect the relative treatment of senior debtholders under the recapitalization. As such, in order to preserve the allocation to senior debtholders under the recapitalization and to account for the increased number of new common shares to be issued, the number of new common shares to be issued to senior debtholders pursuant to the recapitalization will increase from 21,295,090 to 23,062,947, the exercise price of the warrants will be reduced from $31.67 to $29.25, and the exchange price of the senior subordinated exchangeable debentures to be issued to senior debtholders pursuant to the recapitalization will be reduced from $21.95 to $20.27. The aggregate number of new common shares to be issued pursuant to the recapitalization will thus rise from 25,812,230 to 27,955,088.
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So it used to be that preferred shareholders would be getting 1.8-million new common shares out of 25.8-million, or 7% of the company … now they’re getting 1.83-million out of 27.96-million, or 6.5%.

I have previously recommended that preferred shareholders should vote against the plan:

YLO has four series of preferred shares outstanding: YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D. I recommend that preferred shareholders vote against the plan, on the grounds that they are being treated as if they have all be forcibly converted into common at the YLO.PR.A / YLO.PR.B rates prior to the conversion of the old common into new securities. That’s reasonable for YLO.PR.A and YLO.PR.B, but not so much for YLO.PR.C and YLO.PR.D, which are not convertible by the company. And, even for the A & B holders – you’re not getting paid to vote yes, so why give it away? If the company wants a yes vote from you, they should provide a little sweetener; the offer that’s on the table is already a worst-case scenario.

Tim Kiladze of the Globe and Mail reports:

Yellow Media’s hopes of amending its restructuring proposal have been smacked down by a Quebec court just days before the company faces a vote on its much-criticized plan.

Early last week, Yellow Media put together a conference call to threaten that it would seek creditor protection in order to reduce almost $2-billion of debt should stakeholders vote against its current restructuring proposal. Those efforts were shot down just a few days later by judge Robert Mongeon, who delivered his ruling just a few hours before the long weekend started.

The sequence of events is a bit tricky to follow, but the gist of the story is that Yellow Media’s restructuring proposal has been filed under the Canada Business Corporations Act (CBCA). Last week, Yellow Media chief executive officer Marc Tellier tried to complicate the matter by amending the current resolution to implement the plan through the Companies’ Creditors Arrangement Act (CCAA) if the current effort “appears for any reason impracticable.”
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Judge Mongeon didn’t let that language influence him. “I am of the view that the proposed amendment should not be part of the process currently envisaged under the CBCA inasmuch as it deals only with another proceeding under a different statute and which is, at this time, purely hypothetical.”

He explained his reasoning in detail. First, the judge noted that even Yellow Media admits that the proposed amendment isn’t necessary to pursue arrangement currently up for debate under the CBCA. Second, the CBCA and CCAA have different tests of admissability and different procedures, so having one proposal technically apply to both would be very tricky.

I am, of course, not a lawyer, but it’s my understanding that the CBCA is for solvent companies and the CCCA is for insolvent ones. Different admissabilities indeed!

I have previously recommended that preferred shareholders should vote against the plan:

YLO has four series of preferred shares outstanding: YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D. I recommend that preferred shareholders vote against the plan, on the grounds that they are being treated as if they have all be forcibly converted into common at the YLO.PR.A / YLO.PR.B rates prior to the conversion of the old common into new securities. That’s reasonable for YLO.PR.A and YLO.PR.B, but not so much for YLO.PR.C and YLO.PR.D, which are not convertible by the company. And, even for the A & B holders – you’re not getting paid to vote yes, so why give it away? If the company wants a yes vote from you, they should provide a little sweetener; the offer that’s on the table is already a worst-case scenario.

The Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Class A Preferred Shares Series 18 for cash. The redemptions will occur on October 29, 2012. The redemption price is $25.00 per Series 18 share.

The $0.33811 per share dividend declared on August 30, 2012 will be the final dividend on the Series 18 shares for the period from August 1, 2012 to October 29, 2012, and will be paid on October 29, 2012 to shareholders of record on September 28, 2012.

Beneficial holders who are not directly the registered holder of these shares should contact the financial institution, broker or other intermediary through which they hold their shares to confirm how they will receive their redemption proceeds. Formal notices and instructions for the redemption of Series 18 shares will be forwarded to registered shareholders.

Brookfield Asset Management has announced:

Brookfield intends to use the net proceeds of the issue of Preferred Shares, Series 34 to redeem its Class A Preference Shares, Series 11 and for general corporate purposes.

BAM.PR.I is an OperatingRetractible – there goes another one! However, it paid 5.50% and had been redeemable at par since 2012-6-30, so it was clearly living on borrowed time.

The newly issued Series 34 shares are a FixedReset 4.20%+263.

Update, 2012-9-7: Official Announcement:

Brookfield Asset Management Inc. (TSX: BAM.A) (NYSE:BAM); (EURONEXT:BAMA) announced today the redemption of its Class A Preference Shares, Series 11 (the “Series 11 Shares”) for cash, with a redemption date of September 30, 2012. The redemption price will be C$25.00 per Series 11 Share, plus any accrued and unpaid dividends thereon.

Notice of redemption has been sent to all registered holders of the Series 11 Shares. Payment will be made to all beneficial holders of the Series 11 Shares on or after October 1, 2012 through the facilities of CDS & Co., and to all other registered holders on October 1, 2012.

Scotia Managed Companies has announced:

Allbanc Split Corp. (the “Company”) announced today that its Board of Directors has retained Scotiabank to advise the Company on a possible extension and reorganization of the Company. There is no guarantee after such review an extension will be proposed and if proposed, will be approved by shareholders.

The Company is a mutual fund corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. Class A 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. It is scheduled for redemption 2013-3-8.

ABK.PR.B was last mentioned on PrefBlog in connection with their partial call for redemption in February. ABK.PR.B is not tracked by HIMIPref™.

The Financial Post had a piece by Barry Critchley on August 15:

Late Tuesday, the syndicate of lenders to Yellow Media issued a statement saying it “would be best for the company to withdraw its proposed Canada Business Corporations Act plan of arrangement and to enter into further negotiations with its stakeholders. The syndicate is of the view that certain aspects of the proposed plan can be improved upon for stakeholders.”

Earlier this month, the syndicate filed a motion in the Quebec Superior Court asking the interim order granted to Yellow Media be revoked. That motion, together with a similar motion filed by the convertible debentureholders, was essentially held over until after the Sept. 6 vote of security holders.

In Tuesday’s statement , McMillan LLP, counsel for the lenders, noted Yellow Media’s Q2 results showed “the company continues to generate significant cash flows,” adding Yellow Media did not include cash flow forecasts as part of the information circular filed with the court on Aug. 3. Accordingly, “the company’s future cash flow forecasts should be disclosed to affected stakeholders so that they can better assess the merits of the company’s proposed plan.”

The McMillan statement notes:

The Syndicate’s objective is to work with the other stakeholders on a more level informational playing field to develop a plan that could be lawfully implemented and that would allow the Company to pursue its business plan, while still reflecting prudent commercial lending standards and an appropriate allocation of value for senior creditors. Such a plan could offer junior creditors and equity holders an opportunity to retain a material stake in the Company with upside in the future.

Implementation of the Company’s current plan is not urgent. The Company has disclosed that it does not project any imminent cash shortfall.

PricewaterhouseCoopers Inc. (“PwC”) is assisting the Syndicate in developing a response to be provided to the Company on its reorganization plan. Interested stakeholders are invited to contact PwC to share their ideas and views.

With no specific contact information provided, one wonders just how eager the principals are to have ideas and views shared with them! A search for “yellow” on their Canadian website doesn’t yield much joy!

In another story, Barry Critchley also highlighted the efforts of Glen Bradford:

If nothing else Glen Bradford, a U.S. investor based in Indianapolis, is determined. And he has a plan to show that determination: to get proxies from owners of 5% of the shares at Yellow Media to call a special meeting of the company that has put forward a recapitalization proposal to be voted on early next month.

Bradford, who owns more than 250,000 Yellow Media preferred shares — and who claims that he has received proxies for more than two million in total — wants shareholders to fill out a form “so that I can call a shareholder meeting with the sole purpose of ensuring that there is a management team in place that understands what fiduciary responsibility is and understands who owns the company.”

Bradford advises the potential form-fillers that “by filling out this form, you agree to oppose the recapitalization plan and believe that it is a breach of fiduciary

Mr. Bradford’s interest in Yellow Media has been discussed on PrefBlog in the post YLO: The Jostling Starts, the Rumours Swirl:

There doesn’t seem to be much on the web about Glen Bradford or ARM Holdings by way of performance numbers, but I dug up his resume.

Since that post, the website has been abandoned and the link is broken.

Somebody using a gMail address purporting to be Mr. Bradford contacted me last night and asked me to post a link to his petition:

If you fill out this form and do not attend the meeting in person, I, Glen Bradford, will assume responsibility for your shares and vote according to my perception of what is best for common shareholders.

By filling out this form, you agree to oppose the recapitalization plan and believe that it is a breach of fiduciary responsibility.

Fill out what you can. I am going to need to be able to tie the share ownership back to you to call the meeting.

I really wouldn’t want to guess whether filling out the form is a valid form of proxy. I think the answer is probably no. I suggest that if you want to give Mr. Bradford your proxy, you should specify this on the form provided to you by the company – but not only am I not a lawyer, but the person purporting to be Mr. Bradford advises me that in addition to not having a website, he also doesn’t have a lawyer. He does, however, have a link to a resume.

I have verified that there is an “ARM Holdings LLC” with CEO Glen Bradford that has filed a Form D with the SEC. but what checking the SEC did and whether there is any connection between the filer of the form and the guy getting all the ink from Barry Critchley is something I simply do not know.

I’m not filling out the Internet form, nor will I be naming Mr. Bradford my proxy when I fill out the proxy documents. While I wish him the best of luck, the campaign is just a shade too Mickey-Mouse for my tastes.

YLO has four series of preferred shares outstanding: YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D. I recommend that preferred shareholders vote against the plan, on the grounds that they are being treated as if they have all be forcibly converted into common at the YLO.PR.A / YLO.PR.B rates prior to the conversion of the old common into new securities. That’s reasonable for YLO.PR.A and YLO.PR.B, but not so much for YLO.PR.C and YLO.PR.D, which are not convertible by the company. And, even for the A & B holders – you’re not getting paid to vote yes, so why give it away? If the company wants a yes vote from you, they should provide a little sweetener; the offer that’s on the table is already a worst-case scenario.

Transalta Corporation has announced:

it has completed its public offering of 9,000,000 Cumulative Redeemable Rate Reset First Preferred Shares, Series E (the “Series E Shares”) at a price of $25.00 per Series E Share.

The offering, previously announced on August 2, 2012, resulted in gross proceeds to TransAlta of $225 million. The net proceeds of the offering will be used to partially fund capital projects, for other general corporate purposes, and to reduce short term indebtedness of the Corporation and its affiliates.

The Series E Shares were offered to the Canadian public through a syndicate of underwriters led by CIBC, RBC Capital Markets and Scotiabank by way of a prospectus supplement that was filed with securities regulatory authorities in Canada under TransAlta’s short form base shelf prospectus dated November 15, 2011.

Holders of Series E Shares are entitled to receive a cumulative quarterly fixed dividend yielding 5.00% annually for the initial period ending September 30, 2017. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 3.65%. Holders of Series E Shares will have the right, at their option, to convert their shares into Cumulative Redeemable Rate Reset First Preferred Shares, Series F (the “Series F Shares”), subject to certain conditions, on September 30, 2017 and on September 30 every five years thereafter. Holders of Series F Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.65%. The Series E Shares are listed on the Toronto Stock Exchange under the ticker symbol TA.PR.H.

They announced on August 3:

that further to its bought deal financing (the “Offering”) announced on August 2, 2012, the syndicate of underwriters led by CIBC, RBC Capital Markets and Scotiabank have exercised the underwriters’ option (the “Option”) granted to them. Pursuant to the exercise of the Option, TransAlta Corporation will issue an additional 3,000,000 Cumulative Redeemable Floating Rate Reset First Preferred Shares, Series E (the “Series E Shares”) for aggregate gross proceeds of $75 million, bringing the aggregate gross proceeds of the Offering to $225 million.

TA.PR.H is a FixedReset, 5.00%+365, announced August 2. The issue will be tracked by HIMIPref™ but assigned to the Scraps index on credit concerns.

TA was recently downgraded to P-3 by S&P and placed on Review-Developing by DBRS.

TA.PR.H traded 236,734 shares today in a range of 24.70-85 before closing at 24.70-73, 3×16. Vital statistics are:

DBRS has announced that it:

has today published an updated report on Capital Power Corporation (CPC or the Company). The Company’s Preferred Shares rating is based on the credit quality of its subsidiary, Capital Power L.P. (CPLP; rated BBB by DBRS). The one-notch differential in the ratings of CPC and CPLP reflects structural subordination at CPC, which is largely dependent on its own resources and dividends from CPLP. Dividends from CPLP could be curtailed if the viability of CPLP needs to be safeguarded.
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DBRS is increasingly concerned about the continued challenging merchant power market environment that could materially add to the Company’s existing challenges in the medium term. In addition, the Sundance Unit 1 and 2 restarts, which are expected in late 2013, could place more pressure on the merchant power market environment in Alberta. The continued downward pressure on natural gas prices, which make natural gas combined-cycle plants more cost effective in terms of both capital and fuel costs, are expected to pressure CPLP’s merchant power earnings.

CPC has no debt issued at the parent level and is not expected to issue any debt in the foreseeable future. The Company has $122 million of preferred shares outstanding as of June 30, 2012. Preferred shares, as a percentage of common equity, are within the 20% threshold (defined as the percentage of preferred shares outstanding divided by total equity, excluding preferreds). For the six months ended June 30, 2012, CPC distributed $3 million to its preferred shareholders and $37 million to its common shareholders ($6 million and $51 million to preferred and common shareholders, respectively for fiscal 2011).

DBRS confirmed CPX.PR.A at Pfd-3(low) on July 24.

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

BCE Inc. has announced:

BCE Inc. will, on September 1, 2012, continue to have Cumulative Redeemable First Preferred Shares, Series AA outstanding if, following the end of the conversion period on August 22, 2012, BCE Inc. determines that at least 2.5 million Series AA Preferred Shares would remain outstanding. In such a case, as of September 1, 2012, the Series AA Preferred Shares 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 based on an annual fixed dividend rate equal to 3.45%.

BCE.PR.A is interconvertible with BCE.PR.B on September 1, and notice of conversion is required to be with BCE by August 22, 2012. Note that brokerages and other custodians will have deadlines slightly in advance of this – so if contemplating conversion, find out your deadline immediately! The Notice of Conversion was discussed on PrefBlog.

I recommend that holders of BCE.PR.A convert to BCE.PR.B. The total dividends paid over the next five years will greater for the latter issue if the average prime rate exceeds 3.45% (provided that this issue continues to pay 100% of prime, which it will do unless the current price of $21 increases to over $25). This condition will be met if prime increases steadily to 4% at the end of five years. This is a reasonably good bet, even with the Fed announcing continued financial repression through the end of 2014. Additionally, I judge the chance of an overshoot of this figure to be much greater than the chance of an extreme undershoot; in other words, I judge the chances of average prime being 5% to be much greater than the chance of average prime being 2%.