Category: Issue Comments

Canadian Utilities Limited has announced:

that it will redeem on June 30, 2012 all of its outstanding Cumulative Redeemable Second Preferred Shares Series X at a price of $25.00 per share plus accrued and unpaid dividends per share. The $150 million aggregate cost of redemption will be funded from the net proceeds of the Series AA Preferred Share offering and cash.

CU.PR.B was last mentioned on PrefBlog when it was the first Straight Perpetual to crawl back into premium territory after a long period below par during the Credit Crunch.

CU.PR.B has been tracked by HIMIPref™ and is a member of the PerpetualPremium subindex.

DBRS has announced that it:

has today downgraded Yellow Media Inc.’s (Yellow Media or the Company) Issuer Rating to CCC from B (low); its Medium-Term Notes rating to CCC from B (low), with an RR4 recovery rating; and its Exchangeable Subordinated Debentures to CC (high) from CCC, with an RR6 recovery rating. The trend on all ratings remains Negative.

DBRS notes that Yellow Media’s unsecured debt continues to have average recovery prospects (RR4; 30% to 50% expected recovery), while its subordinated debt has poor recovery prospects (RR6; 0% to 10% expected recovery) under a base case default/recovery scenario.

The decline in Yellow Media’s print revenue continues and is expected to be even more rapid and enduring than previously anticipated. The Q1 2012 results support this view and the trend is expected to continue. As such, Yellow Media performed an asset impairment test in relation to its most recent results and trends and recorded a goodwill impairment charge of $3 billion.

The reduced expectations for revenue, operating income and cash flow, combined with the Company’s first scheduled debt maturity in February 2013, leads DBRS to believe that the likelihood that Yellow Media’s financing activities in 2012 will involve some form of compromise for existing creditors has increased further than anticipated in the previous rating action on April 2, 2012. The Negative trend reflects the likelihood that Yellow Media’s ratings will be further downgraded with the passage of time or in the event that the Company pursues some form of recapitalization.

Yellow Media has the following issues of preferred shares outstanding: YLO.PR.A and YLO.PR.B (both retractible and both convertible into common at the company’s option, on terms that may now be considered onerous); and YLO.PR.C and YLO.PR.D (both FixedResets without the company having a conversion option).

These issues were last mentioned on PrefBlog when S&P downgraded debt to CCC; preferreds to D. These issues are all tracked by HIMIPref™ but are assigned to the Scraps index on credit concerns.

Northland Power Inc. has announced:

the closing of the previously announced offering of 4.8 million Cumulative Rate Reset Preferred Shares, Series 3 (the “Series 3 Preferred Shares”), at a price of $25.00 per share, for aggregate gross proceeds of $120 million, on a bought deal basis to a syndicate of underwriters led by CIBC, BMO Capital Markets and Scotiabank.

The Series 3 Preferred Shares commence trading on the TSX today under the symbol NPI.PR.C.

Northland intends to use the net proceeds of the offering to fund the equity portion of its first six ground mounted solar projects, fund additional ground mounted solar project development, repay bank indebtedness, replenish working capital, and for general corporate purposes.

NPI.PR.C is a FixedReset, 5.00%+346, announced May 14. It will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The issue traded 473,424 shares today in a range of 25.00-09 before closing at 25.04-07, 10×32. Vital statistics are:

Manulife Financial has announced:

that it has completed its offering of 10 million Non-cumulative Rate Reset Class 1 Shares Series 9 (the “Series 9 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $250 million.

The offering was underwritten by a syndicate of investment dealers co-led by Scotiabank, CIBC and RBC Capital Markets. The Series 9 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.I.

The Series 9 Preferred Shares were issued under a prospectus supplement dated May 16, 2012 to Manulife’s short form base shelf prospectus dated September 3, 2010.

MFC.PR.I is a FixedReset, 4.40%+286, announced May 16. The issue will be tracked by HIMIPref™ and assigned to the FixedReset subindex. In accordance with HIMI’s other analysis on DeemedRetractibles, a “DeemedMaturity” on 2022-1-31 at 25.00 has been added to the call schedule.

The issue traded 263,530 shares in a range of 24.85-91 before closing at 24.76-90, 11×246. Vital statistics are:

Standard & Poor’s has announced:

• We are revising our outlook on New York-based information solutions 1provider Thomson Reuters Corp. to negative from stable due to the weaker-than-expected operating performance of the company’s Financial & Risk (F&R) segment.
• We are also affirming all our ratings on the company, including our ‘A-‘ long-term corporate credit rating.
• The negative outlook reflects Standard & Poor’s view of the weaker-than-expected operating performance within the F&R segment and hurdles Thomson Reuters faces in returning this business to healthy and sustainable revenue growth given the slow economic recovery and intensely competitive operating conditions.

The negative outlook reflects Standard & Poor’s view of the weaker-than-expected operating performance within the F&R segment and hurdles Thomson Reuters faces in returning this business to healthy and sustainable revenue growth given the slow economic recovery and intensely competitive operating conditions. A downgrade could result from further execution issues in the F&R segment; weak revenue and EBITDA growth trends for the company as a whole or specifically in F&R; or adjusted debt to EBITDA at or above 2.5x on a consistent basis. Alternatively, we could revise the outlook to stable if Thomson Reuters demonstrates sustainable improvement in F&R’s operating performance, as well as its other business segments, while maintaining adjusted debt to EBITDA below 2.5x.

Thomson Reuters is the issuer of TRI.PR.B. This issue is tracked by HIMIPref™ but is relegated to the Scraps index on volume concerns.

Shareholders of US Financial 15 Split Corp. approved a reorganization in April:

The primary purpose of the meeting, as more fully described in the Company’s March 21, 2012 press release and the Management Information Circular dated March 9, 2012, was to consider and, if thought advisable, to approve a special resolution to reorganize the Company which includes amend the articles of the Company to extend the termination date to December 1, 2018. Class A Shareholders voted 98.4% in favour of the resolution and Preferred Shareholders voted 97.1% in favour of the resolution, and therefore the resolution was approved.

Details are:

As part of the capital reorganization, the Company will be creating one new class of shares to be designated as 2012 Preferred Shares, and two series of warrants (the “2013 Warrants” and the “2014 Warrants”) to acquire one 2012 Preferred Share and one Class A Share (together, a “Unit”). It is intended that the 2012 Preferred Shares, 2013 Warrants and 2014 Warrants will be issued on or about June 28, 2012, and will commence trading on the TSX at the opening of trading on such date.

Holders of the existing Preferred Shares will receive the following securities for each Preferred Share held on or about June 28, 2012 (the “Conversion Date”):

One 2012 Preferred Share – paying fixed cumulative preferential monthly dividends in an amount equal to 5.25% per annum of the net asset value per Unit calculated as at the end of the preceding month, up to a monthly dividend of $0.04375 per 2012 Preferred Share, and having a repayment objective on the termination date of $10.00;

One 2013 Warrant – each 2013 Warrant can be exercised to purchase one Unit for an exercise price of the lesser of $5.50 and 103% of the net asset value of the Company on the Conversion Date (the “2013 Warrant Subscription Price”) on any business day during the period commencing at market open (Eastern time) on the day following the Conversion Date and ending at 5:00 p.m. (Eastern time) on June 3, 2013; and

One 2014 Warrant – each 2014 Warrant can be exercised to purchase one Unit for an exercise price of 105% of the 2013 Warrant Subscription Price on any business day during the period commencing at market open (Eastern time) on the day following the Conversion Date and ending at 5:00 p.m. (Eastern time) on June 2, 2014.

Class A Shareholders will continue to hold their current Class A Shares and would participate in any further increases in the net assets over $10.00 per Unit.

In connection with the reorganization, the Company’s investment manager, Quadravest Capital Management Inc. (“Quadravest”), will be lowering its annual management fee from 0.85% to 0.75% per annum of the net asset value of the Company. In addition, the discount to net asset value applicable to monthly redemptions of Shares will be decreased from 4% to 2% and the amount of this reduced discount would be paid to Quadravest and not retained by the Company. These measures are intended to lower ongoing expenses of the Company and improve trading prices relative to the net asset value for the Company.

Shareholders are being given a special retraction right (the “2012 Special Retraction Right”) as a result of the approval of this capital reorganization, which is in addition to the regular monthly retraction at the end of April 2012 and the dissent rights which Shareholders had in respect of the special meeting under the Business Corporations Act (Ontario).

Shareholders who do not wish to remain invested in the Company under its reorganized share structure will have until the close of business on May 17, 2012 to provide the Company with notice through their CDS participant that they wish to have their Preferred Shares or Class A Shares redeemed pursuant to the 2012 Special Retraction Right, and to surrender their Shares for retraction. On such a special retraction, each holder of a Preferred Share will receive the lesser of (i) $10.00 and (ii) the net asset value per Unit calculated on May 31, 2012; while holder of a Class A Share will receive the net asset value per Unit calculated on May 31, 2012, less $10.00. Shareholders interested in exercising such retraction right should contact the CDS Participant through which they hold the Shares for further information and instructions as to how to exercise this right. Shareholders should note that the requirements of any particular CDS Participant may vary, and that Shareholders may need to inform their CDS Participant of any intention to exercise this retraction right in advance of the May 17 deadline. Payment for the Class A Shares or Preferred Shares so tendered for retraction pursuant to the 2012 Special Retraction Right will be made no later than June 19, 2012.

If more Class A Shares are tendered for retraction under the 2012 Special Retraction Right than Preferred Shares, the outstanding Preferred Shares will be consolidated so that following the retraction pursuant to the 2012 Special Retraction Right there would be an equal number of Preferred Shares and Class A Shares outstanding. Similarly, if more Preferred Shares are tendered for retraction than Class A Shares, the outstanding Class A shares will be consolidated so that again there would be an equal number of Preferred Shares and Class A Shares outstanding following implementation of the 2012 Special Retraction Right. The Company may implement this consolidation by adjusting the number of 2012 Preferred Shares, 2013 Warrants and 2014 Warrants to be issued to holders of Preferred Shares, in the event a consolidation of Preferred Shares is required.

Additional information regarding the capital reorganization is contained in the Management Information Circular dated March 14, 2012 prepared in respect of the special meeting, available on SEDAR at www.sedar.com or on the Company’s website www.financial15.com.

FTU.PR.A has a NAV of 4.81 Net of Preferred share accrued dividends as of April 30. FTU.PR.A was last mentioned on PrefBlog when the 2010 Annual Report was discussed. FTU.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Four and a half months after downgrading FTN.PR.A (which is a significantly better credit), DBRS has finally gotten around to downgrading FFN.PR.A to the same level:

DBRS has today downgraded the rating of the Preferred Shares issued by Financial 15 Split Corp. II (the Company) to Pfd-4 (high) from Pfd-3 (low).

In September 2004, the Company issued 6.4 million Preferred Shares (at $10 each) and an equal number of Class A Shares (at $15 each). Although these shares were offered separately, together they form a Unit. The redemption date for both classes of shares issued was initially December 1, 2009, but was extended to December 1, 2014, at a special meeting of shareholders in April 2007.
…
On September 6, 2011, DBRS confirmed the ratings on the Preferred Shares at Pfd-3 (low) due to the fairly stable level of downside protection available to holders of the Preferred Shares, despite the NAV and downside protection decreasing gradually in the months leading up to the confirmation. However, the downside protection continued to decline after the rating confirmation until the beginning of the first quarter of 2012. From January to March 2012, the NAV has experienced some recovery, but the downside protection has not increased significantly enough over the past few months to offset its previous underperformance. Furthermore, the downside protection declined again in April to 26.1% due to the negative performance of most financial institutions in the Portfolio. The dividend coverage ratio is currently around 0.56, which results in a grind on the Portfolio. As a result, the rating has been downgraded to Pfd-4 (high).

The scheduled final maturity date of the Preferred Shares is December 1, 2014. DBRS will continue to closely monitor changes in the credit quality of the Preferred Shares and provide rating updates as required.

On 2012-4-30 the NAV of FFN.PR.A was 13.54 (the equivalently rated FTN.PR.A’s NAV was 14.41).

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

Brompton Split Banc Corp. has released its Annual Report to December 31, 2011.

I suggest the reported outperformance probably has more to do with the poor performance of insurers over the past five years than with any manifestation of investment skill; on the other hand, the fund has handsomely outperformed BK / BK.PR.A for the past five years, even allowing for the one month difference in period end.

Figures of interest are:

MER: 0.98% of the whole unit value, “excluding the cost of leverage and the issuance costs.”

Average Net Assets: We need this to calculate portfolio yield. The Total Assets of the fund at year end was $119.9-million, compared to $128.1-million a year prior, so call it an average of $124-million.

Underlying Portfolio Yield: Investment income of $5.188-million received divided by average net assets of $124-million is 4.18%.

Income Coverage: Net investment income of $5.188-million less expenses of $1.253-million is $3.934-million, to cover preferred dividends of 3.149-million is about 125%.

SBC.PR.A was last mentioned on PrefBlog when a term extension of up to five years was approved last March.