Category: Issue Comments

Credit Suisse is Broker #72. It is, of course, unclear as to whether CS’s traders actually saw or advised on these orders or whether it was someone with Direct Market Access for their code.

CM.PR.L – last ten trades
Time Trade Price Size Change Buyer Seller
4:15 PM EST 26.610 42,600 -0.590 002 072
3:59 PM EST 26.610 100 -0.590 001 072
3:59 PM EST 26.620 100 -0.580 079 072
3:59 PM EST 26.620 800 -0.580 080 072
3:59 PM EST 26.900 500 -0.300 001 072
3:59 PM EST 26.910 700 -0.290 080 072
3:59 PM EST 27.000 1,000 -0.200 079 072
3:59 PM EST 27.010 1,500 -0.190 001 072
3:59 PM EST 27.020 700 -0.180 080 072
3:57 PM EST 27.070 200 -0.130 007 072

They had a huge offer for CM.PR.L at the close, but it was cancelled or filled prior to last quotation. Looks like RBC (broker #2) (or somebody using their DMA) made a really nice purchase in the extended trading session.

TD.PR.I

4:15 PM EST 26.320 4,300 -1.180 001 072
4:15 PM EST 26.320 4,500 -1.180 001 072
4:15 PM EST 26.320 1,500 -1.180 080 072
4:15 PM EST 26.320 4,000 -1.180 001 072
3:59 PM EST 26.320 800 -1.180 065 072
3:59 PM EST 26.320 800 -1.180 065 072
3:59 PM EST 26.320 800 -1.180 065 072
3:59 PM EST 26.320 800 -1.180 065 072
3:59 PM EST 26.320 800 -1.180 065 072
3:59 PM EST 26.320 800 -1.180 065 072

There may be more, but I won’t know until I do the day’s update.

More! MFC Deemed Retractibles

Less dramatic, but no less indicative of a complete absence of intelligence, are the last ten trades in MFC.PR.B:

3:58 PM EST 23.900 100 0.450 072 007
3:57 PM EST 23.910 100 0.460 072 007
3:51 PM EST 23.910 100 0.460 072 007
3:50 PM EST 23.910 100 0.460 072 007
3:46 PM EST 23.920 100 0.470 072 080
3:45 PM EST 23.920 100 0.470 072 080
3:43 PM EST 23.930 200 0.480 072 007
3:42 PM EST 23.940 100 0.490 072 080
3:39 PM EST 23.940 100 0.490 072 080
3:37 PM EST 23.890 100 0.440 072 033

That looks like an algorithm. So does the last ten trades in MFC.PR.C:

3:58 PM EST 23.440 100 0.100 072 079
3:57 PM EST 23.440 100 0.100 072 079
3:56 PM EST 23.440 100 0.100 072 079
3:54 PM EST 23.440 100 0.100 072 079
3:52 PM EST 23.440 100 0.100 072 079
3:51 PM EST 23.440 100 0.100 072 079
3:49 PM EST 23.440 100 0.100 072 079
3:47 PM EST 23.440 100 0.100 072 079
3:45 PM EST 23.440 100 0.100 072 079
3:43 PM EST 23.450 100 0.110 072 002

More! GWO.PRN

This time it was somebody with – or through – TD that was alert and pounced during the extended trading session:

4:16 PM EST 23.810 23,400 -0.780 007 072
4:15 PM EST 23.810 5,000 -0.780 001 072
3:59 PM EST 23.810 1,500 -0.780 080 072
3:59 PM EST 23.810 200 -0.780 001 072
3:59 PM EST 23.850 600 -0.740 007 072
3:59 PM EST 23.850 1,500 -0.740 007 072
3:59 PM EST 24.000 1,500 -0.590 007 072
3:59 PM EST 24.000 1,500 -0.590 007 072
3:59 PM EST 24.000 2,000 -0.590 007 072
3:59 PM EST 24.010 200 -0.580 002 072

Non-moronic Credit Suisse purchase! SLF.PR.I!

3:59 PM EST 25.000 56 0.010 072 036
3:58 PM EST 25.000 34,300 0.010 072 009
3:57 PM EST 25.000 900 0.010 007 009
3:57 PM EST 24.990 700 0 009 002
3:56 PM EST 25.000 400 0.010 007 002
3:56 PM EST 25.000 300 0.010 007 009
3:56 PM EST 24.990 700 0 009 002
3:55 PM EST 24.990 700 0 009 002
3:54 PM EST 24.990 700 0 009 085
3:53 PM EST 24.990 700 0 009 002

Another non-moronic Credit Suisse purchase! BAM.PR.Z

4:20 PM EST 26.200 40,000 0.110 009 009
3:59 PM EST 26.200 48 0.110 072 052
3:58 PM EST 26.200 600 0.110 072 001
3:58 PM EST 26.200 5,000 0.110 072 001
3:58 PM EST 26.200 23,200 0.110 072 009
3:57 PM EST 26.190 600 0.100 009 002
3:56 PM EST 26.190 600 0.100 009 002
3:55 PM EST 26.190 600 0.100 009 002
3:53 PM EST 26.190 600 0.100 009 002
3:51 PM EST 26.190 600 0.100 009 002

Update! Moronic selling of TA.PR.D (hat tip: Bobsterr in the comments)

4:15 PM EST 24.870 19,200 -0.810 002 072
4:15 PM EST 24.870 10,000 -0.810 001 072
3:59 PM EST 24.870 500 -0.810 065 072
3:59 PM EST 24.870 500 -0.810 065 072
3:59 PM EST 24.870 40 -0.810 002 036
3:59 PM EST 24.870 40 -0.810 002 036
3:59 PM EST 24.870 600 -0.810 002 072
3:59 PM EST 25.000 500 -0.680 002 072
3:59 PM EST 25.000 500 -0.680 002 072
3:59 PM EST 25.000 500 -0.680 002 072

Nice catch in the Extended Trading Session RBC (#002) and Anonymous (#001)!

The Bank of Montreal has announced:

its intention to redeem all of its US$300,000,000 Non-cumulative Perpetual Class B Preferred Shares Series 10 (“Preferred Shares Series 10”) on February 25, 2012.

Having satisfied all conditions precedent, the Preferred Shares Series 10 are redeemable at Bank of Montreal’s option on February 25, 2012, at a redemption price of US$25.00 per share plus all declared and unpaid dividends up to but excluding the date fixed for redemption. Because February 25, 2012, is a Saturday, payment of the redemption price will be made by Bank of Montreal on or after February 27, 2012, upon surrender of the Preferred Shares Series 10.

Separately from the payment of the redemption price, the final quarterly dividend of US$0.371875 per share for the Preferred Shares Series 10 will be paid in the usual manner on February 27, 2012, to shareholders of record on February 1, 2012.

Notice will be delivered to holders of the Preferred Shares Series 10 in accordance with the terms outlined in the Preferred Shares Series 10 prospectus.

This is a rather peculiar issue, since the USD / CAD exchange rate was much different on issue date ten years ago than it was today! Hence, as previously noted, the paid up capital on these shares is somewhere around CAD $39.44.

I have been attempting to get an authoritative opinion on the tax implications, if any, of this unusual situation, but to date without successs.

BMO.PR.V is not tracked by HIMIPref™.

Enbridge Inc. has announced:

it has closed its previously announced public offering of cumulative redeemable preferred shares, Series F (the “Series F Preferred Shares”) by a syndicate of underwriters co-led by Scotia Capital Inc., RBC Capital Markets and TD Securities Inc. Enbridge issued 20 million Series F Preferred Shares for gross proceeds of $500 million. The Series F Preferred Shares will begin trading on the TSX today under the symbol ENB.PR.F. The proceeds will be used to partially fund capital projects, to reduce existing indebtedness and for other general corporate purposes.

ENB.PR.F is a 4.00%+251 FixedReset announced January 9. The announced size was 12-million shares with a 2-million greenshoe … so it’s clear that the market said ‘Supersize me!’ Now that I look, I see that this upsizing was announced on January 9:

Enbridge Inc. (TSX:ENB)(NYSE:ENB) today announced that as a result of strong investor demand for its previously announced offering of cumulative redeemable preference shares, series F (the “Series F Preferred Shares”), the size of the offering has been increased to 20 million shares. The aggregate gross proceeds will be $500 million.

The issue traded 1,146,325 shares today in a range of 25.00-19, joining the list of 176 other million-plus trading days I’ve recorded since 1993-12-31. It closed at 25.12-13, 9×280. Vital statistics are:

ENB.PR.F will be tracked by HIMIPref™. It is assigned to the FixedResets index.

Update 2012-1-20: Rated Pfd-2(low) [Stable Trend] by DBRS.

The company wrote to shareholders in October, 2011:

You are invited to a special meeting (the “meeting”) of shareholders of Canadian Banc Recovery Corp. (the “Company”) to be held at 10:00 am (Eastern standard time) on Thursday, November 3, 2011 at the offices of Blake, Cassels & Graydon LLP, 199 Bay Street, 40th floor, Commerce Court West, Toronto, Ontario.

The primary purpose of the meeting is to consider and vote upon a special resolution that would allow shareholders to maintain their investment beyond the scheduled termination date of December 1, 2012.

If the special resolution is approved, the termination date would initially be extended to December 1, 2018.

The Information Circular was published.

The vote was favourable:

Class A Shareholders voted 98.3% in favour of the resolution and Preferred Shareholders voted 86.9% in favour of the resolution, and therefore the resolution to extend the termination date to December 1, 2018 and to provide holders with the Special Retraction Right and all other resolution items was approved at the meeting held earlier today.

The company decided not to call any preferreds:

In order to maintain the requirement that the same number of each class of shares remain outstanding after completion of the Special Retraction, it is expected that any required equalization adjustments will be done by making an adjustment to the number of Class A shares outstanding. Any such adjustment to the number of Class A shares held by each Class A investor will not affect the value of their investment.

Preferred shareholders lost a big chunk of downside protection:

This special retraction right allowed both classes of shareholders to tender one or both classes of shares and receive a retraction price based on the December 30, 2011 net asset value per Unit ($10 per Preferred Share, $10.68 per Class A Share and $20.68 per Unit, as applicable). In aggregate, there were more Class A shares tendered for retraction than Preferred shares. Since Canadian Banc is required to maintain an equal number of shares outstanding for each Class as per the prospectus, the Company must increase the Class A shares to match the number of Preferred shares.

Immediately after the special retraction payment on January 16, 2012, there will be 6,772,453 Preferred shares and 5,737,131 Class A shares outstanding. In order to restore an equal amount of shares outstanding for each Class, Class A shareholders on record as at January 17, 2012 will receive approximately 1.180459885 Class A shares for each Class A share outstanding. The increase in shares (subdivision) is a non taxable event.

DBRS notes:

Canadian Banc Recovery Corp.: On November 3, 2011, Canadian Banc Recovery Corp. (the Company) announced that 98.3% of Class A shareholders and 86.9% of preferred shareholders had approved the extension of the termination date of the Company by an additional six years from December 1 2012, to December 1, 2018. Holders of the Class A shares and preferred shares were provided with a special retraction right that would allow them to retract their shares on December 1, 2012, as originally intended if they do not wish to continue participating. This resolution also allows the Board of Directors to provide subsequent fi ve-year termination date extensions along with the same retraction rights to shareholders without the need to hold a special shareholder meeting. The Board will also be able to adjust dividend distributions for future extensions to refl ect market conditions at that time.

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

As previously reported, PDV.PR.A was to vote on a term extension.

The company wrote to shareholders in October, 2011:

You are invited to a special meeting (the “meeting”) of shareholders of Prime Dividend Corp. (the “Company”) to be held at 11:00 am (Eastern standard time) on Thursday, November 3, 2011 at the offices of Blake, Cassels & Graydon LLP, 199 Bay Street, 40th floor, Commerce Court West, Toronto, Ontario.

The primary purpose of the meeting is to consider and vote upon a special resolution that would allow shareholders to maintain their investment beyond the scheduled termination date of December 1, 2012.

If the special resolution is approved, the termination date would initially be extended to December 1, 2018.

The Information Circular was published.

The vote was successful:

Class A Shareholders voted 96.1% in favour of the resolution and Preferred Shareholders voted 90.2% in favour of the resolution, and therefore the resolution to extend the termination date to December 1, 2018 and to provide holders with the Special Retraction Right and all other resolution items was approved at the meeting held earlier today.

There was no call for redemption on the preferreds.

In order to maintain the requirement that the same number of each class of shares remain outstanding after completion of the Special Retraction, it is expected that any required equalization adjustments will be done by making an adjustment to the number of Class A shares outstanding. Any such adjustment to the number of Class A shares held by each Class A investor will not affect the value of their investment.

The retraction right turned out to be based on a NAV of 16.76 per Unit.

DBRS notes:

Prime Dividend Corp.: On November 3, 2011, Prime Dividend Corp. (the Company) announced that 96.1% of Class A shareholders and 90.2% of preferred shareholders had approved the extension of the termination date of the Company by an additional six years from December 1, 2012, to December 1, 2018. Holders of the Class A shares and preferred shares were provided with a special retraction right that would allow them to redeem their shares on December 1, 2012, as originally intended if they do not wish to extend their investment. This resolution also allows the Board of Directors to provide subsequent fi ve-year termination date extensions along with the same retraction rights to shareholders without the need to hold a special shareholder meeting. The Board will also be able to adjust dividend distributions for future extensions to refl ect market conditions at that time.

PDV.PR.A is not tracked by HIMIPref™.

R Split III Corp. has announced:

it has approved a proposal to reorganize the Company. The reorganization will permit holders of Capital Shares to extend their investment in the Company beyond the scheduled redemption date of May 31, 2012 for an additional five years. The Preferred Shares will be redeemed on the same terms originally contemplated in their share provisions on May 31, 2012. Holders of Capital Shares who do not wish to extend their investment and all holders of Preferred Shares will have their shares redeemed on May 31, 2012.

The reorganization will involve (i) the extension of the originally scheduled redemption date, (ii) a special retraction right to enable holders of Capital Shares to retract their shares as originally contemplated should they not wish to extend their investment and (iii) the issuance of a new class of preferred shares in order to provide continuing leverage for the Capital Shares.

A special meeting of holders of the Capital Shares will be held on March 14, 2012 to consider and vote upon the proposed reorganization. Details of the proposed reorganization will be outlined in an information circular to be prepared and delivered to holders of Capital Shares of record on February 6, 2012 in connection with the special meeting and will be available on www.sedar.com. Implementation of the proposed reorganization will also be subject to applicable regulatory approval including the Toronto Stock Exchange.

R Split III Corp. is a mutual fund corporation created to hold a portfolio of common shares of the Royal Bank of Canada. Capital Shares and Preferred Shares of R Split III Corp. are listed for trading on The Toronto Stock Exchange under the symbols RBS and RBS.PR.A respectively.

RBS.PR.A was last mentioned on PrefBlog when there was a partial redemption in May, 2011. RBS.PR.A is not tracked by HIMIPref™.

Multiple well-informed sources have advised me that TLM.PR.A, a 4.20%+277 Fixed Reset announced December 5 and which closed on December 13 to general disdain, is being blown out at 23.75.

BAM Split Corp., issuer of BNA.PR.B, BNA.PR.C, BNA.PR.D and BNA.PR.E, has released its Annual Report to September 30, 2011.

Figures of interest are:

MER: (excluding dividends on preferred shares, issue costs and Class A Preferred Share redemption premium) 0.0%. You don’t see that number very often! A more precise calculation from the Income Statement shows that the expenses totalled $312,000 for the year, or about 2bp p.a. on assets.

The expenses are wel itemized, however, and are a delight for voyeurs. I found the Listing Fees of $101,000 and Rating Fees of $20,000 to be most interesting.

Average Net Assets: This must be calculated if we’re to find the second decimal point on the MER. On 2011-9-30, total assets were 1.541-billion; on 2010-9-30, 1.547-billion. I used the lower figure.

Underlying Portfolio Yield: Given the fund’s portfolio composition and investment policy, deviations from the raw yield on BAM.A will not be material. This is currently 1.865%

Income Coverage: Dividends & Interest of $27.307-million less expenses (before amortization of issue costs) of $0.312-million is $26.995-million, to cover preferred dividends of $24.297-million is 111%.

A noteworthy disclosure in the report is:

0n December 8, 2011, the board of directors authorized the company to exchange $200 million capital shares for $200 million newly created Junior Preferred Shares. The Junior Preferred Shares will be retractable at the option of the holder, will pay a noncumulative quarterly dividend at an annual rate of 5.00% and will rank junior to the publicly held Class A, Class AA and Class AAA Preferred Shares. The company expects to complete the exchange of capital shares for Junior Preferred Shares in January 2012.

There is no further information available on these Junior Preferreds, but it’s probably safe to assume that the new shares will have a par value of $25, and that the capital units outstanding will be adjusted so that a Unit continues to be one preferred and one capital unit.

This means that the $200-million in new preferreds will be comprised of 8-million shares, so there will be 8-million new units outstanding with no new money in the fund. There are now 19.713-million units outstanding, so there will soon be 27.713-million units outstanding and the NAVPU will decline so that it is 19713 / 27713 of its current value, or 71.1%.

Thus, the “diluted NAVPU” will decline to about 53.78 from its Dec. 30 level of 75.65 and Asset Coverage will therefore decline to 2.2-:1 from its current level of 3.0+:1.

This is nasty stuff. BNA has always been notable for its extremely high Asset Coverage and now it’s being smacked down to levels that are simply adequate for its investment-grade rating. More insidiously, it seems to me that the junior preferreds are retractible at any time; in times of trouble they could sneak ahead of the senior issues which are retractible for cash only at a given time in the future.

However, DBRS confirmed the preferreds at Pfd-2(low) on December 13 and must have known about the plans at that time:

The downside protection available to the Class AA Preferred Shares is approximately 66.0%, based on the market value of the BAM Shares as of November 25, 2011. The dividend coverage ratio is approximately 1.1 times. As a result, the Company will initially be able to fund the Class AA Preferred Shares distributions without relying on other methods for generating income or reverting to the sale of common shares in the Portfolio. In the event of a shortfall, the Company will sell some of the BAM Shares or write covered call options to generate sufficient income to satisfy its obligations to pay the Class AA Preferred Shares dividends.

The Pfd-2 (low) ratings of the Class AA Preferred Shares are primarily based on the downside protection and dividend coverage available to the Class AA Preferred Shares.

The main constraints to the ratings are the following:

(1) The downside protection available to holders of the Class AA Preferred Shares depends solely on the market value of the BAM Shares held in the Portfolio, which will fluctuate over time.

(2) There is a lack of diversification as the Portfolio is entirely made up of BAM Shares.

(3) Changes in the dividend policy of BAM may result in reductions in Class AA Preferred Shares dividend coverage.

(4) As the BAM Shares pay dividends in U.S. dollars, the Company is exposed to foreign currency risk relating to the Canadian-U.S. exchange rate – specifically, the appreciation of the Canadian dollar versus the U.S. dollar – which may have a negative impact on the dividend coverage ratio of the Class AA Preferred Shares as these dividends are paid in Canadian dollars.

BNA has the following preferred share issues outstanding: BNA.PR.B, BNA.PR.C, BNA.PR.D and BNA.PR.E.

Dominion Bond Rating Service has announced that it:

has today downgraded the rating of the Preferred Shares issued by Financial 15 Split Corp. (the Company) to Pfd-4 (high) from Pfd-3.
…
On September 6, 2011, DBRS confirmed the ratings on the Preferred Shares at Pfd-3 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, since the rating confirmation, the NAV has continued to decline, with downside protection falling from 28.3% on August 31, 2011, to 23.4% on November 30, 2011. The dividend coverage ratio is currently around 0.68, but the Company has also written covered call options in order to generate additional income for distributions. However, the current level of downside protection available to the Preferred Shares, together with its trend, is not commensurate with the previously assigned Pfd-3 rating, and as a result of the downside protection dropping below acceptable levels for a sustained period of time, the rating has been downgraded to Pfd-4 (high).

The scheduled final maturity date of the Preferred Shares is December 1, 2015.

The NAV per $10 preferred share is 12.83 as of December 15.

Update: Oddly, the very similar FFN.PR.A, with a NAV per $10 preferred share of 12.10, continues to be rated Pfd-3(low) by DBRS – which doesn’t make any sense at all.