Category: Issue Comments

Brompton Split Banc Corp. has announced:

it has filed a preliminary short form prospectus with respect to a treasury offering of Preferred shares and Class A shares.

Brompton Split Banc Corp. invests in the common shares of the six largest Canadian banks with selective covered call writing in order to generate additional distributable income. Currently, the portfolio consists of common shares of:
Bank of Montreal
Royal Bank of Canada
Canadian Imperial Bank of Commerce
The Bank of Nova Scotia
National Bank of Canada
The Toronto-Dominion Bank

The closing price of the Preferred shares on the TSX on October 17, 2012 was $10.22. The investment objectives for the Preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.45 per annum paid in equal quarterly amounts, and to return the original issue price to holders of Preferred shares on the current maturity date of November 29, 2017.

The closing price of the Class A shares on the TSX on October 17, 2012 was $11.34. The investment objectives for the Class A shares are to provide holders with regular monthly cash distributions targeted to be $0.10 and to provide the opportunity for growth in net asset value per Class A share.

The final Class A and Preferred share offering prices will be announced in the final prospectus, and will be set at levels that ensure that existing unitholders are not diluted.

The syndicate of agents for the offering is being co-led by RBC Capital Markets and CIBC and includes BMO Capital Markets, National Bank Financial Inc., Scotiabank, TD Securities Inc., GMP Securities L.P., Macquarie Private Wealth Inc., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., and Mackie Research Capital Corporation.

SBC.PR.A recently announced the details of their term extension.

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

Standard & Poor’s has announced:

• •The combined operating performance of CFSL’s operating entities, CGIC and CLIC, has improved.
• •We view the capital adequacy for the consolidated Co-operators group as
  very strong.

• •We are affirming the financial strength and issuer credit ratings on CGIC and CLIC and the counterparty credit rating on CFSL.
• •We revised the outlook on all these ratings to positive from stable.

… that it affirmed its ‘BBB+’ long-term financial strength and issuer credit ratings on the operating companies of the Co-operators Group, Co-operators General Insurance Co. (CGIC) and Co-operators Life Insurance Co. (CLIC). We also affirmed our ‘BBB-‘ long-term counterparty credit rating on their immediate holding company Co-operators Financial Services Ltd. (CFSL). We revised the outlooks on all ratings to positive from stable.

“The positive outlooks reflect our view that the continued and improved capital strength at the consolidated Co-operators group is very strong,” said Standard & Poor’s credit analyst Jieqiu Fan. The significantly improved operating performance at CGIC in the past two years partially benefited from the Ontario Auto Reform that capped escalating accident benefit claims, and was offset somewhat by the weakening operating performance at CLIC. CGIC had underwriting losses in 2008-2010 driven by many claims from the Ontario auto sector. In 2011 CGIC generated underwriting profits, and continued to do so in the first six months of 2012.

The ratings are also based on the company’s strong competitive position as the fifth-largest property/casualty insurance company in Canada and its well-established multichannel distribution. Offsetting these strengths are its concentration in the highly regulated Ontario auto sector and expense ratios higher than peers’.
…
We expect CLIC’s operating performance to be marginal in 2012, but improve in 2013 to an after-tax return on equity of 4%-5%. We expect CFSL’s debt plus preferred-to-total capital ratio to remain less than 35% and its EBIT fixed-charge coverage to be near or more than 3.5x. In the next 12 months, if the company meets these expectations and we believe this performance level is sustainable, we could raise the ratings by one notch.
Alternatively, we could lower the ratings if the company significantly underperforms (five or more combined ratio points) the Canadian personal lines industry or experiences significant deterioration in its capital strength, reflecting a low ‘A’ level of consolidated capital adequacy.

Co-operators General Insurance Co. (referred to as CGIC in the press release) is the proud issuer of CCS.PR.C and CCS.PR.D. Both are tracked by HIMIPref™; both are relegated to the Scraps index on credit concerns.

S&P rates the preferreds at P-2(low). The company was upgraded to Pfd-3(high) by DBRS in July.

Great-West Lifeco Inc. has announced:

the completion of its offering of 8,000,000 Non-Cumulative First Preferred Shares, Series R through a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets, and Scotiabank for gross proceeds of $200 million. The Series R Shares will be posted for trading on the Toronto Stock Exchange under the symbol “GWO.PR.R”.

GWO.PR.R is a Straight Perpetual, 4.80%, announced October 3. As it is issued by an Insurance Holding Company and does not have a NVCC clause, it is considered to be a DeemedRetractible and a maturity entry – justified only by my analysis, not by anything in the prospectus – has been added to the options table, at par, effective 2022-1-31. The issue will be tracked by HIMIPref™ and assigned to the DeemedRetractible index.

The issue traded 332,564 shares today in a range of 24.97-00, closing at 24.99-00, 1×338. Vital statistics are:

Brookfield Renewable Energy Partners has announced:

the completion of the previously announced offering of 10,000,000 Class A Preference Shares, Series 3 (the “Series 3 Shares”), (including 2,000,000 Series 3 Shares sold pursuant to an underwriters’ option that was exercised in full prior to closing), at a price of CDN$25.00 per Series 3 Share, for total gross proceeds of CDN$250,000,000. The offering was underwritten by a syndicate led by TD Securities Inc., CIBC, RBC Capital Markets and Scotiabank.

A subsidiary of Brookfield Renewable issued the Series 3 Shares, which are guaranteed by Brookfield Renewable. Holders of the Series 3 Shares will be entitled to receive fixed cumulative dividends yielding 4.4% at the issue price annually and payable quarterly for the initial period ending July 31, 2019. Thereafter, the dividend rate will be reset every five years at a rate equal to the then five-year Government of Canada bond yield plus 2.94%.

Brookfield Renewable intends to use the net proceeds of the issue of the Series 3 Shares to repay outstanding indebtedness and for general corporate purposes.

The Series 3 Shares will commence trading today on the Toronto Stock Exchange under the ticker symbol BRF.PR.C.

BRF.PR.C is a FixedReset, 4.40%+294, announced October 1. This issue will be tracked by HIMIPref™, but assigned to the Scraps index on credit concerns.

The issue traded 552,596 shares today in a range of 24.99-05 before closing at 25.01-02, 14×359. Vital statistics are:

DBRS has announced that it:

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

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

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

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

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

Brompton Split Banc Corp has announced:

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

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

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

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

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

Standard & Poor’s has announced:

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

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

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

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

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

Figures of interest are:

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

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

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

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

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