Category: Issue Comments

Power Financial Corporation has announced:

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series T (the “Series T shares”) and Non-Cumulative Floating Rate First Preferred Shares, Series U (the “Series U shares”).

With respect to any Series T shares that remain outstanding after January 31, 2024, holders thereof will be entitled to receive quarterly fixed non-cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Power Financial. The dividend rate for the 5-year period from and including January 31, 2024 to but excluding January 31, 2029 will be 5.595%, being equal to the 5-year Government of Canada bond yield determined as of today plus 2.37%, in accordance with the terms of the Series T shares.

With respect to any Series U shares that may be issued on January 31, 2024, holders thereof will be entitled to receive quarterly floating rate non-cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Power Financial. The dividend rate for the 3-month floating rate period from and including January 31, 2024 to but excluding April 30, 2024 will be 7.407%, being equal to the 3-month Government of Canada Treasury Bill yield determined as of today plus 2.37%, calculated on the basis of the actual number of days in such quarterly period divided by 365, in accordance with the terms of the Series U shares.

Beneficial owners of Series T shares who wish to exercise their conversion right should communicate with their broker or other nominee to ensure their instructions are followed so that the registered holder of the Series T shares can meet the deadline to exercise such conversion right, which is 5:00 p.m. (Eastern Time) on January 16, 2024.

PWF.PR.T was issued as a FixedReset, 4.20%+237, that commenced trading 2013-12-11 after being announced 2013-12-2. PWF.PR.T reset at 4.215% effective 2019-1-31. I recommended against conversion and there was no conversion. Notice of extension was provided in December, 2023. The issue is tracked by HIMIPref™ and is assigned to the FixedReset Discount subindex.

Thanks to Assiduous Reader NK for bringing this to my attention!

S&P Global Ratings has announced:

• Brookfield Property Partners L.P.’s (BPY) credit quality has been impaired by persistent secular headwinds within its office segment and deteriorating metrics related to higher financing costs.
  Therefore, we lowered the issuer credit ratings on both BPY and Brookfield Properties Retail (BPR; a core subsidiary within BPY’s group structure) to ‘BB’ from ‘BBB-‘.
• We also lowered the issue-level rating on BPY’s unsecured notes to ‘BB-‘ from ‘BB+’ and assigned a ‘5’ recovery rating (rounded estimate: 10%) to the notes.
• In addition, we lowered the issue-level rating on BPR’s senior secured notes to ‘B+’ from ‘BB+’ and assigned a ‘6’ recovery rating (rounded estimate: 5%) to the notes.
• Lastly, we lowered our rating on the company’s preferred shares to ‘B’ from ‘BB’ to reflect increased subordination risk for speculative-grade issuers.
• The negative outlook reflects our view that BPY’s liquidity could be pressured by upcoming recourse maturities over the next two years, while secular headwinds within the office segment could further deteriorate its operating performance.

PRINCETON (S&P Global Ratings) Dec. 21, 2023– S&P Global Ratings today took the rating actions listed above.

Secular headwinds in the office sector have weakened our assessment of BPY’s business risk. BPY owns one of the largest real estate portfolios of any rated real estate company, with approximately $130 billion in total assets. Moreover, we view the company’s high-quality properties and its diversification across product type and geography favorably.

However, while BPY’s retail assets have recovered to pre- pandemic levels (occupancy was 95.1% as of Sept. 30, 2023), occupancy in the office portfolio has continued to erode. As of Sept. 30, 2023, occupancy in the office portfolio slipped to 85.4%, a year-over-year decrease of 140 basis points and well below pre-pandemic levels of 93%. We acknowledge that within the office segment, BPY’s core properties–64 out of its 131 assets, representing a majority of office segment net operating income (NOI)–continue to perform well (95.2% occupancy as of Sept. 30, 2023). The remaining assets (which BPY believes have significant value-add opportunities through development and leasing activities) have languished, with occupancy below 80%. Weighted by asset values, occupancy was 91.1% for BPY’s office assets, demonstrating resilience for premier class ‘A’ workplaces.

We expect sector headwinds facing commercial office real estate will generally remain in place over the next several years, with weaker tenant retention, lower occupancy, and heightened incentives (through tenant inducements) to attract new tenants. We expect occupancy at class ‘A’ properties to be more resilient as the bifurcation of performance between class ‘A’ and class ‘B’ widens. However, we believe capital expenditures (capex) to attract new tenants will reduce BPY’s future cash flows and operating metrics will also be slow to recover. As a result, we revised our business risk assessment on BPY to strong from excellent.

Refinancing risks are rising given BPY’s elevated near-term debt maturities.Excluding extension options, BPY’s weighted-average debt maturity shrunk below three years in recent quarters (to 2.6 years as of Sept. 30, 2023), which we believe poses elevated risks.

We acknowledge that the vast amount of upcoming debt is nonrecourse secured debt and most of the maturing debt contains extension options that BPY can exercise. We believe the company maintains a solid position with its lenders due to parent Brookfield Corp.’s (BN; A-/Stable/A-1) scale and platform (BN is a large owner of real assets with over $140 billion of its own invested capital, including a 75% ownership in Brookfield Asset Management [BAM], a global asset manager with $865 billion of assets under management). Moreover, we think banks are reluctant to take back any commercial real estate assets secured by loans in the current market.

While we believe banks are heavily scrutinizing new commercial real estate loans, particularly those secured by office properties, they are generally willing to refinance existing loans. For example, BPY successfully refinanced over $30 billion in loans across more than 120 individual transactions in 2023, and we expect the company to successfully refinance upcoming secured debt. In many cases, we expect banks to provide extensions on maturing debt.

In some cases, particularly when weaker operating fundamentals (low occupancy or high lease rollover risk) reduce asset values, we would expect BPY to hand back the asset. As of Sept. 30, 2023, BPY has suspended approximately 3% of its contractual payments on nonrecourse mortgage debt. We view this as a portfolio management exercise by BPY, not a default, but could view it more negatively if loan defaults became frequent because it would erode our view of the company’s asset quality. We revised our capital structure modifier score to negative from neutral given BPY’s elevated debt maturities over the next few years.

While BPY’s recourse corporate notes and bank loan maturities (revolving credit facilities and term loans) look manageable in 2024 (approximately $442 million of unsecured notes due in March), its maturities will increase in 2025 with approximately $2.3 billion of total debt coming due. Lack of progress in addressing these maturities well ahead of maturity could hinder our view of the company’s liquidity.

BPY’s relationship with BN enhances its credit. Following the privatization of BPY by BN in July 2021, we continue to view BPY’s group status to BN as moderately strategic. We believe BN would provide financial support to BPY under some circumstances and could help facilitate future refinancing efforts including repayment of its March 2024 bond maturity. BPY is BN’s main vehicle for real estate investments and its largest investment vehicle. This group support provides a one-notch uplift to BPY’s stand-alone credit profile.

The negative outlook indicates a one in three chance of a downgrade over the next 12 months. This reflects our view that upcoming recourse maturities over the next two years could pressure BPY’s liquidity, while secular headwinds within the office segment could further deteriorate operating performance. We project S&P Global Ratings-adjusted debt to EBITDA will be maintained in the 15x area in both 2023 and 2024, with fixed-charge coverage (FCC) sustained at about 1x.

We could lower our ratings on BPY by one notch if:

BPY fails to refinance its upcoming recourse maturities well in advance, pressuring our view of the company’s liquidity;
Its operating performance deteriorates, with occupancy in the company’s core office segment weakening to the low-80% area; or
Its key credit metrics weaken further, with FCC declining below 1x or S&P Global Ratings-adjusted debt to EBITDA rising back above 16x.
We could revise the outlook back to stable if:

BPY bolsters its liquidity, potentially through asset sales, such that upcoming recourse maturities don’t threaten our liquidity assessment;
Its operating performance improves modestly, with a recovery to office occupancy; and
Key credit metrics stabilize or strengthen, with FCC maintained comfortably above 1.0x.

This follows an earlier CreditWatch-Negative placed on the parent company on 2023-10-5.

• Brookfield Property Partners L.P.’s (BPY) fixed-charge coverage deteriorated to below 1.0x in the second quarter of 2023, and we don’t forecast material near-term improvement given our economists’ view that interest rates will remain higher for longer.
• The company also faces heightened refinancing risk, with a capital structure that has significant maturities over the next two years and outsized exposure to floating-rate debt.
• S&P Global Ratings placed all its ratings on the company, including the ‘BBB-‘ issuer credit rating, on CreditWatch with negative implications.
• The CreditWatch negative placement reflects our expectation that we could lower the ratings on BPY, possibly by more than one notch, if we don’t envision the company implementing a near-term plan to reduce refinancing risk and boost coverage levels.

BPY’s deteriorating credit protection measures are unlikely to recover materially over the next two years.As of June 30, 2023, BPY’s adjusted debt to EBITDA increased to 17.3x from 15.2x at year-end 2022 while fixed-charge coverage (FCC) fell to 0.9x from 1.4x. A notable portion of the deterioration was caused by the consolidation of one of its funds’ (BSREP IV) U.S. investments in December 2022 and foreign investments in January 2023, which added a material amount of new debt to BPY while EBITDA has not fully cycled through on our trailing-12 month adjusted metrics. BPY owns a 23% financial stake in the fund but fully consolidates it within its financial statements.

That said, interest rates have risen materially over the past year, and BPY’s substantial exposure to floating-rate debt (45% net of interest rate hedges as of June 30, 2023) has rapidly deteriorated coverage metrics. S&P Global Ratings economists expect interest rates to remain higher for longer, with one additional rate hike expected in 2023. While we acknowledge that BPY’s sizable liquidity position and consistent execution of asset sales mitigate the risk of the company not being able to pay its fixed charges over the near term, BPY has one of the weakest financial risk profiles within our North America real estate coverage given elevated leverage and thin interest coverage. We project adjusted debt to EBITDA to improve slightly to the low-16x area over the next two years but expect FCC to be sustained at about 1x. While we expect BPY to execute meaningful asset sales over the coming years, we anticipate that the majority of proceeds will continue to be distributed up to its parent Brookfield Corp. (BN; A-/Stable/A-1) rather than allocated for debt repayment.

Near-term maturities pose additional risks.BPY has substantial upcoming debt maturities that will need to be refinanced, likely at significantly higher rates. The company’s weighted average debt maturity was slightly below three years as of June 30, 2023 (not including extension options). We believe that BPY maintains a solid position with its lenders due to its parent’s scale and platform (BN is a global asset manager with over $850 billion of assets under management) and the reluctance of banks to take back any commercial real estate assets secured by loans in the current market. In many cases, we expect the banks to provide extensions on maturing debt, albeit at higher rates. In some cases, particularly when weaker operating fundamentals (low occupancy or high lease rollover risk) are reducing asset values, we would expect BPY to hand back the asset to the servicer. As of June 30, 2023, BPY has suspended approximately 3% of its contractual payments on non-recourse mortgage debt. We view this as a portfolio management exercise by BPY, not a default, but could view it more negatively if loan defaults became frequent because it would erode our view of the company’s asset quality.

That said, as one- to three-year extensions are granted by banks or exercised by BPY on its non-recourse CMBS loans, its weighted average debt maturity could narrow further. We believe BPY maintains access to the capital markets where it could issue unsecured debentures or preferred shares, but that its weakening capital structure adds a modest amount of refinancing risk.

The CreditWatch placement reflects the company’s deteriorating interest coverage metrics, continued secular challenges facing the company’s office properties, and a capital structure with a material amount of near-term, floating-rate debt. We will seek to resolve the CreditWatch placement within the next three months.

BPY is a global, diversified real estate company that was taken private by BN in July 2021. BPY is BN’s primary vehicle to make investments across the real estate sector and is also BN’s largest investment vehicle, with approximately $130 billion in total assets as of June 30, 2023. It is the largest real estate company that we rate by total assets. BPY invests primarily in high-quality office properties located in gateway markets and class-A malls in the U.S., with approximately 198 million square feet of office and retail properties (including active development projects) within its core office and core retail platforms.

It will be remembered that BPO’s preferreds are guaranteed by BPY, its parent. The issues remain at Pfd-3(low) by DBRS.

Affected issues are: BPO.PR.A, BPO.PR.C, BPO.PR.E, BPO.PR.G, BPO.PR.I, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T, BPO.PR.W, BPO.PR.X and BPO.PR.Y.

The market took the news badly, with BPO.PR.R down 9.34% on the day (close/close) and BPO.PR.N down 8.43%.

It will be interesting to see what happens with ZPR – as detailed in the December PrefLetter, ZPR’s weight in BPO was 3.10% in mid-November, while the index had exposure of 5.65%. ZPR’s extreme underweighting has been a huge factor in the index fund’s idiotic (positive) tracking error over the past year – but the regulatory problem remains the situation with reset date bucketting.

Thanks to Assiduous Reader hrseymour for bringing this to my attention.

Brompton Funds Limited has announced:

e that the name of Brompton Oil Split Corp. (the “Fund”) has changed to “Brompton Energy Split Corp.” and, commencing today, the class A shares and preferred shares of the Fund are trading under new Toronto Stock Exchange (“TSX”) ticker symbols: ESP and ESP.PR.A, respectively.

As previously announced, at a special meeting of preferred and class A shareholders (“Shareholders”) of the Fund held on December 5, 2023, Shareholders approved a special resolution to implement amendments to update and modernize the investment objectives and investment restrictions of the Fund, among other things (the “Amendments”), including the Fund’s name change.

Details regarding the Amendments are outlined in the Fund’s management information circular dated October 31, 2023 which is available at www.sedarplus.ca and www.bromptongroup.com.

The Fund invests in an actively managed portfolio consisting primarily of equity securities of dividend paying (at the time of investment) global energy issuers with a market capitalization of at least $2 billion (at the time of investment) which may include companies operating in energy subsectors and related industries such as oil & gas exploration and production, equipment, services, pipelines, transportation, infrastructure, utilities, among others. The Fund may also invest up to 25% of the value of the portfolio (as measured at the time of investment) in equity securities of other global natural resource issuers which include companies that own, explore, mine, process or develop natural resource commodities or supply goods and services to those companies, including directly or indirectly through exchange-traded funds.

The affected issue is OSP.PR.A, now ESP.PR.A.

DBRS has announced that it:

downgraded its credit ratings on Laurentian Bank of Canada (LBC or the Bank), including the Bank’s Long-Term Issuer Rating to BBB (high) from A (low). Concurrently, DBRS Morningstar confirmed the Bank’s Short-Term Issuer Rating at R-1 (low). The trend for all credit ratings is Negative. The Bank’s Intrinsic Assessment (IA) is BBB (high) while its Support Assessment (SA) remains SA3. The SA3 designation, which reflects no expectation of timely external support, results in the Bank’s Long-Term Issuer Rating being equivalent to the IA. These credit rating actions resolve the Under Review with Negative Implications status under which LBC was placed on November 3, 2023.

KEY CREDIT RATING CONSIDERATIONS
The credit rating downgrades and Negative trends reflect DBRS Morningstar’s view that LBC’s franchise strength and profitability prospects have significantly weakened with a limited visibility on the Bank’s long-term strategic path. The fundamental challenges faced by the Bank’s Personal Banking franchise in recent years has led to a sustained weakness in financial performance. Further, the Bank’s ability to improve earnings and growth prospects in the near to medium term will likely be affected by the adverse series of recent events, including the unexpected and sudden departure of the former President and CEO and the rapid succession of executive leadership departures, while there remains the uncertainty related to the delay in the Bank’s renewed strategic plan. Of note, LBC continues to report the lowest levels of profitability among Canadian medium-size banks rated by the DBRS Morningstar. The Bank is dealing with these fundamental changes and operational issues amid an uncertain economic environment with increasing headwinds. As a result, the challenging operating environment will likely make the timely and successful execution of a new strategic plan more complicated. The credit ratings also consider LBC’s relatively high proportion of brokered deposits and higher cost base.

Supporting its credit ratings, LBC has demonstrated good credit quality with low impairments and loan losses; however, DBRS Morningstar expects that asset quality metrics will deteriorate from current levels in F2024 as a result of the high interest rate environment, which has materially increased debt-servicing costs. Despite recent events, the Bank’s balance sheet fundamentals remain stable with higher levels of liquidity to deal with any potential deposit outflows. LBC’s capital position is adequate with sufficient buffers to absorb stressed levels of loan losses.

CREDIT RATING DRIVERS
Given the Negative trends, credit rating upgrades are unlikely. DBRS Morningstar would change the trends to Stable if LBC’s new leadership demonstrates a sustained improvement in the Bank’s franchise position and financial performance while maintaining a similar risk profile.

Conversely, additional operational missteps and/or a failure to execute on the strategic initiatives leading to further deterioration in franchise strength and earnings generation would result in a credit ratings downgrade. Furthermore, increased pressure on funding and liquidity would also result in a credit ratings downgrade.

CREDIT RATING RATIONALE
Franchise Combined Building Block (BB) Assessment: Good/Moderate
LBC is Canada’s eighth-largest Schedule I bank with assets of $49.9 billion as at October 31, 2023. The Bank offers retail services in Québec through its branch network as well as commercial lending across Canada and in the U.S. LBC also distributes financial products to brokers and financial advisors across Canada through its wholesale arm, B2B Bank. Over the past few years through 2022, LBC’s franchise has been faced with fundamental challenges in its Personal Banking business, which resulted in customer attrition, shrinking loans, and stagnant deposits. Two years into the current strategic plan that was unveiled on December 10, 2021, the Bank has undertaken a digital-first approach and introduced new and enhanced digital capabilities to close gaps in its Personal Banking business, particularly across mortgage, Visa, and deposit products. On October 2, 2023, following the mainframe outage, the Bank announced the sudden and unexpected departure of its president and CEO, Rania Llewellyn, and the resignation of its board chair, Michael Mueller. With Éric Provost only recently being appointed as president and CEO, DBRS Morningstar has limited visibility into LBC’s long-term strategic direction, although the Bank’s current focus is on improving operating efficiency and simplifying the organizational structure.

Earnings Combined Building Block (BB) Assessment: Moderate
Relative to its peers, LBC has demonstrated lower profitability although it has a higher share of noninterest income at about 27% of total revenue as at October 31, 2023. The Bank’s net income decreased by about 20.1% year over year (YOY) to $181.1 million in F2023 as a result of lower noninterest income and higher provision for credit losses and operating expenses. While a decrease in noninterest income was largely driven by reduced capital markets revenue, noninterest expenses increased on higher salaries, employee benefits, and ongoing investments in technology. Noninterest expenses included restructuring charges of $18.2 million resulting from changes in the Bank’s management structure, as well as strategic review-related charges of $5.9 million. As a result, the operating efficiency ratio deteriorated to 71.1% in F2023 from 67.7% in the prior year. Partly offsetting the downward pressure on net earnings, net interest income grew 1.8% YOY to $746.3 million in F2023; however, the net interest margin as calculated by DBRS Morningstar compressed by 6 basis points (bps) to 1.51% on higher funding costs, which outpaced growth in asset yields.

Risk Combined Building Block (BB) Assessment: Good
Amounting to $37.1 billion as at October 31 2023, gross loans contracted by 1.1% YOY in F2023, compared with 11.4% YOY growth in the prior-year period. A reduction in commercial and nonmortgage personal loans was partly offset by an increase in residential mortgages. The bulk of credit risk lies in the commercial book, which accounted for about 48% of total loans as at October 31, 2023 and has concentrations in commercial real estate and inventory financing. Overall, the Bank’s asset quality is good with low impairments and loan losses. The gross impaired loans ratio increased by 19 bps YOY to 62 bps in F2023, largely because of increased impairments in commercial mortgages. As with the rest of the banking sector, DBRS Morningstar expects asset quality metrics to further deteriorate from current levels amid the challenging macroeconomic environment. Furthermore, if not managed prudently, the Bank’s continued realignment of the loan portfolio and geographic expansion, as well as any additional deficiencies in IT capabilities and uncertainties around its new strategic direction, could expose LBC to heightened levels of operational and credit risk.

Funding and Liquidity Combined Building Block (BB) Assessment: Good/Moderate
LBC’s overall funding and liquidity position remains sound. Accounting for about 65% of the funding base, total deposits, including capital markets deposits, declined by 4.1% YOY to $26.0 billion in F2023. Personal deposits, which represented 86% of total deposits, remained broadly stable at $22.3 billion in F2023 on the back of an uptick in direct retail deposits. Broker-sourced deposits marginally declined to $10.7 billion and accounted for about 41% of total deposits. The Bank expects to attract more direct client deposits on a national level in the coming years, which DBRS Morningstar would view favourably over broker deposits. Liquidity levels are strong, with liquid assets forming 23% of total assets as at Q4 2023.

Capitalisation Combined Building Block (BB) Assessment: Good/Moderate
LBC’s capital ratios under the standardized approach are above regulatory minimums and provide adequate buffers to absorb stressed levels of loan losses. DBRS Morningstar would view favourably a larger capital buffer, sufficient to absorb significant losses, especially as the Bank undertakes an “accelerated evolution of its strategic plan” and continues to grow its commercial loan book, which may be more susceptible to weakness in the event of a sustained economic downturn. The CET1 capital ratio increased to 9.9% as at Q4 2023, compared with 9.1% for the same period of F2022, primarily reflecting lower risk-weighted assets as well as internal capital generation.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://www.dbrsmorningstar.com/research/425414.

The affected issue is LB.PR.H. It remains rated at P-3(low) by S&P.

AQN.PR.A’s reset rate was announced last week, but there was a problem: it looked like the company calculated the rate on the wrong day.

Following the lead of Assiduous Reader longtimelurker, I wrote the following eMail to Algonquin Power Investor Relations last week:

I understand from your press release at https://investors.algonquinpower.com/news-market-information/news/news-details/2023/Algonquin-Power–Utilities-Corp.-Announces-Dividend-Rates-on-Cumulative-Rate-Reset-Preferred-Shares-Series-A-and-Cumulative-Floating-Rate-Preferred-Shares-Series-B/default.aspx that the new dividend rate for AQN.PR.A has been set at 6.469%, based on a spread to five-year Canadas of 2.94% and, therefore, an implied yield of 3.529% for the Canadas.

According to the prospectus for the issue at [Link redacted because (i) it doesn’t work any more and (ii) links to SEDAR+ documents continue to violate the Terms of Use. Public documents are TOP SECRET!] :

i) “Subsequent Fixed Rate Period” means for the initial Subsequent Fixed Rate Period, the period from and including December 31, 2018 to, but excluding, December 31, 2023 and for each succeeding Subsequent Fixed Rate Period, the period commencing on the day immediately following the end of the immediately preceding Subsequent Fixed Rate Period to, but excluding, December 31 in the fifth year thereafter.

ii) “Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.

Since the first day of the “Subsequent Fixed Rate Period” just calculated is December 31, 2023, the “Fixed Rate Calculation Date” must be December 1, 2023, and

iii) “Annual Fixed Dividend Rate” means, for any Subsequent Fixed Rate Period, the annual rate (expressed as a percentage rounded to the nearest one hundred-thousandth of one percent (with 0.000005% being rounded up)) equal to the sum of the Government of Canada Yield on the applicable Fixed Rate Calculation Date plus 2.94%.

I find it surprising that your implied GOC rate of 3.529% is at such variance with another issuer, Capital Power Corporation, which in a press release December 1 (the day of calculation) announced a rate implying a GOC yield of 3.63%, while your press release was issued December 4.

Can you please confirm the “Fixed Rate Calculation Date” used for the calculation of the reset date for AQN.PR.A ?

Two follow-ups later, I received a reply:

You are correct; we have provided CDS with an amended notice for delivery to participants that updates the rate to 6.576% (an increase of 10.7 basis points), being the rate as of December 1, 2023.

So all’s well that ends well.

The Bank of Nova Scotia has announced:

its intention to redeem (i) all outstanding CDN $1,750 million 3.89% Subordinated Debentures (Non-Viability Contingent Capital (NVCC)) due January 18, 2029 (the “Debentures”) at 100% of their principal amount plus accrued and unpaid interest to but excluding the date fixed for redemption, and (ii) all outstanding Non-cumulative 5-Year Rate Reset Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) (“Series 40 Shares”) at a price equal to $25.00 per share together with dividends declared and unpaid prior to the redemption. The redemptions of the Debentures and Series 40 Shares will occur on January 18, 2024, and January 29, 2024, respectively. Formal notice will be delivered to the debenture holders in accordance with the terms and conditions set forth in the related trust indenture.

On November 28, 2023, the Board of Directors of Scotiabank declared a quarterly dividend of $0.303125 per Series 40 Share. This will be the final dividend of the Series 40 Shares and will be paid on January 29, 2024, to shareholders of record at the close of business on January 3, 2024, as previously announced. Subsequent to this final dividend payment, the Series 40 Shares will cease to be entitled to dividends.

The redemptions of the Debentures and Series 40 Shares have been approved by the Office of the Superintendent of Financial Institutions and will be financed out of the general funds of Scotiabank. These redemptions are part of the Bank’s ongoing management of its Tier 1 and Tier 2 capital.

BNS.PR.I is a FixedReset, 4.85%+243, NVCC, issue that commenced trading 2018-10-12 after being announced 2018-10-2. It has been tracked by HIMIPref™ and has been assigned to the FixedReset-Discount sub-index.

This obviously comes as a surprise, since the issue closed today with a quote of 23.20-25. Sometimes, Santa comes early!

Thanks to Assiduous Reader Peculiar_Investor for bringing this to my attention!

Power Financial Corporation has announced:

that it does not intend to exercise its right to redeem all or part of the currently outstanding 8,000,000 Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series T (the “Series T shares”) on January 31, 2024. As a result, subject to certain conditions, the holders of the Series T shares have the right to convert all or part of their Series T shares, on a one-for-one basis, into Non-Cumulative Floating Rate First Preferred Shares, Series U (the “Series U shares”) on January 31, 2024 (the “Conversion Date”) pursuant to the terms and conditions of the Series T shares.

Holders of Series T shares who do not exercise their right to convert their Series T shares into Series U shares on the Conversion Date will retain their Series T shares, subject to certain conditions.

The foregoing conversion rights are subject to the conditions that: (i) if Power Financial determines that there would be outstanding on the Conversion Date less than 1,000,000 Series U shares, after having taken into account all Series T shares tendered for conversion into Series U shares, then holders of Series T shares will not be entitled to convert their shares into Series U shares, and (ii) alternatively, if Power Financial determines that there would remain outstanding on the Conversion Date less than 1,000,000 Series T shares, after having taken into account all Series T shares tendered for conversion into Series U shares, then all remaining Series T shares will automatically be converted into Series U shares without the consent of the holders, on a one-for-one basis, on the Conversion Date. In either case, Power Financial will give written notice to that effect to the registered holder of Series T shares no later than January 24, 2024.

The dividend rate applicable to the Series T shares for the 5-year period from January 31, 2024 to but excluding January 31, 2029, and the dividend rate applicable to the Series U shares for the 3-month period from January 31, 2024 to but excluding April 30, 2024, will be determined and announced by way of a news release on January 2, 2024.

Beneficial owners of Series T shares who wish to exercise their conversion right should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from January 2, 2024 until January 16, 2024 at 5:00 p.m. (Eastern Time).

PWF.PR.T was issued as a FixedReset, 4.20%+237, that commenced trading 2013-12-11 after being announced 2013-12-2. PWF.PR.T reset at 4.215% effective 2019-1-31. I recommended against conversion and there was no conversion. It is tracked by HIMIPref™ and is assigned to the FixedReset Discount subindex.

Thanks to Assiduous Reader NK for bringing this to my attention!

Brookfield Infrastructure Partners L.P. has announced:

that it has determined the fixed distribution rate on its Cumulative Class A Preferred Limited Partnership Units, Series 11 (“Series 11 Units”) (TSX: BIP.PR.F) for the five years commencing January 1, 2024 and ending December 31, 2028.

Series 11 Units and Series 12 Units

If declared, the fixed quarterly distributions on the Series 11 Units during the five years commencing January 1, 2024 will be paid at an annual rate of 6.446% ($0.402875 per unit per quarter).

Holders of Series 11 Units have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on December 18, 2023, to reclassify all or part of their Series 11 Units, on a one-for-one basis, into Cumulative Class A Preferred Limited Partnership Units, Series 12 (“Series 12 Units”), effective December 31, 2023.

The quarterly floating rate distributions on the Series 12 Units will be paid at an annual rate, calculated for each quarter, of 2.92% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly distribution rate in respect of the January 1, 2024 to March 31, 2024 distribution period for the Series 12 Units will be 1.98505% (7.962% on an annualized basis) and the distribution, if declared, for such distribution period will be $0.4962625 per unit, payable on March 31, 2024.

Holders of Series 11 Units are not required to elect to reclassify all or any part of their Series 11 Units into Series 12 Units.

As provided in the unit conditions of the Series 11 Units, (i) if Brookfield Infrastructure determines that there would be fewer than 1,000,000 Series 11 Units outstanding after December 31, 2023, all remaining Series 11 Units will be automatically reclassified into Series 12 Units on a one-for-one basis effective December 31, 2023; or (ii) if Brookfield Infrastructure determines that there would be fewer than 1,000,000 Series 12 Units outstanding after December 31, 2023, no Series 11 Units will be reclassified into Series 12 Units. There are currently 9,936,190 Series 11 Units outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 12 Units effective upon reclassification. Listing of the Series 12 Units is subject to Brookfield Infrastructure fulfilling all the listing requirements of the TSX.

BIP.PR.F was issued as a FixedReset, 5.10%+292M510, that commenced trading 2018-9-12 after being announced 2018-09-05. As previously discussed, the issue’s distributions are complex (and may involve return of capital) and converting the issue may be a Deemed Disposition for tax purposes. It has been assigned to the FixedReset-Discount subindex.

Thanks to Assiduous Readers NK, CanSiamCyp and Fuzzybear for bringing this to my attention

Update, 2023-12-11: The information given in this post has been corrected by the company. The rate is actually 6.576%

Algonquin Power & Utilities Corp. has announced:

the applicable dividend rates for its Cumulative Rate Reset Preferred Shares, Series A (the “Series A Preferred Shares”) and Cumulative Floating Rate Preferred Shares, Series B (the “Series B Preferred Shares”).

With respect to any Series A Preferred Shares that remain outstanding after January 2, 2024, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the board of directors of the Company (the “Board”). The dividend rate for the 5-year period from and including December 31, 2023 to but excluding December 31, 2028 will be 6.469% [see note above; rate is actually 6.576%], being equal to the 5-year Government of Canada bond yield determined as of today plus 2.94%, in accordance with the terms of the Series A Preferred Shares.

With respect to any Series B Preferred Shares that may be issued on January 2, 2024, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board. The dividend rate for the 3-month floating rate period from and including December 31, 2023 to but excluding March 31, 2024 will be 7.982%, being equal to the 3-month Government of Canada Treasury Bill yield determined as of today plus 2.94%, calculated on the basis of the actual number of days in such quarterly period divided by 365, in accordance with the terms of the Series B Preferred Shares.

Beneficial owners of Series A Preferred Shares who wish to exercise their conversion right should communicate with their broker or other nominee to ensure their instructions are followed so that the registered holder of the Series A Preferred Shares can meet the deadline to exercise such conversion right, which is 5:00 p.m. (EST) on December 18, 2023.

AQN.PR.A was issued as a FixedReset, 4.50%+294, that commenced trading 2012-11-9 after being announced 2012-10-25. The 2018-11-28 notice of extension was reported on PrefBlog. The issue reset at 5.162% effective December 31, 2018. I recommended against conversion and there was no conversion. Notice of extension was issued in 2023. The issue is tracked by HIMIPref™, but relegated to the Scraps – FixedReset Discount index on credit concerns.

Thanks to Assiduous Reader Fuzzybear for bringing this to my attention!

Element Fleet Management Corp. has announced (in their Earnings Release of 2023-11-6; emphasis added):

To further optimize the Company’s balance sheet and mature its capital structure, the Company announced today its intention to redeem – in accordance with the terms of the 6.93% Cumulative 5-Year Rate Reset Preferred Shares Series A (the “Series A Shares”) as set out in the Company’s articles – all of its 4,600,000 issued and outstanding Series A Shares on December 31, 2023 (the “Redemption Date”) for a redemption price equal to $25.00 per Series A Share, for an aggregate total amount of approximately $115 million, together with all accrued and unpaid dividends up to but excluding the Redemption Date (the “Redemption Price”), less any tax required to be deducted and withheld by the Company.

The Company has provided notice today of the Redemption Price and the Redemption Date to the sole registered holder of the Series A Shares in accordance with the terms of the Series A Shares as set out in the Company’s articles. Non-registered holders of Series A Shares should contact their broker or other intermediary for information regarding the redemption process for the Series A Shares in which they hold a beneficial interest. The Company’s transfer agent for the Series A Shares is Computershare Investor Services Inc. Questions regarding the redemption process may be directed to Computershare Investor Services Inc. at 1-800-564-6253 or by email to corporateactions@computershare.com.

The Company also currently anticipates using a portion of its free cash flow to redeem all its outstanding 6.21% Cumulative 5-Year Rate Reset Preferred Shares Series C (due June 2024) and 5.903% Cumulative 5-Year Rate Reset Preferred Shares Series E (due September 2024) for approximate aggregate total amounts of $128 million and $133 million, respectively. Redeeming all the Company’s high-cost legacy preferred shares will eliminate approximately $5.9 million in cash dividends per quarter, once all redemptions are complete.

The Company also has approximately $168 million in 4.25% convertible debentures as of September 30, 2023, that are convertible into an aggregate of approximately 14.6 million common shares in June 2024.

Affected issues are EFN.PR.A, EFN.PR.C and EFN.PR.E.

EFN.PR.A was issued as a FixedReset, 6.60%+471, that was announced 2013-12-9; HIMIPref™ commenced tracking the issue in September 2015 after it received a DBRS rating. The notice of extension dated 2018-11-20 was reported on PrefBlog; EFN.PR.A reset at 6.933% effective 2018-12-31; I recommended against conversion; and there was no conversion. The issue is relegated to the Scraps – FixedReset Discount subindex on credit concerns.