Category: Issue Comments

Scotia Managed Companies has announced:

Allbanc Split Corp. (the “Company”) announced today that it has called 239,120 Preferred Shares for cash redemption on March 9, 2012 (in accordance with the Company’s Articles) representing approximately 24.893% of the outstanding Preferred Shares as a result of the special annual retraction of 239,120 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on March 7, 2012 will have approximately 24.893% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $26.75 per share.

In addition, holders of a further 284,500 Capital Shares and 284,500 Preferred Shares have deposited such shares concurrently for retraction on March 9, 2012. As a result, a total of 523,620 Capital Shares and 523,620 Preferred Shares, or approximately 42.05499% of both classes of shares currently outstanding, will be redeemed.

Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including March 9, 2012.

Payment of the amount due to holders of Preferred Shares will be made by the Company on March 9, 2012. From and after March 9, 2012 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.

Allbanc Split Corp. is a mutual fund Corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. Class A Capital Shares and Class B Preferred Shares of Allbanc Split Corp. are listed for trading on The Toronto Stock Exchange under the symbols ABK.A and ABK.PR.B respectively.

ABK.PR.B was last mentioned on PrefBlog on February 27, when DBRS confirmed their credit rating. ABK.PR.B is not tracked by HIMIPref™.

Power Corporation of Canada has announced:

the successful completion and closing of an offering of 8,000,000 5.60% Non-Cumulative First Preferred Shares, Series G (the “Series G Shares”) priced at $25.00 per share to raise gross proceeds of $200 million.

The issue was bought by an underwriting syndicate co-led by BMO Capital Markets, RBC Capital Markets and Scotiabank.

The Series G Shares will be listed and posted for trading on the Toronto Stock Exchange under the symbol “POW.PR.G”. Proceeds from the issue will be used to supplement Power Corporation of Canada’s financial resources and for general corporate purposes.

POW.PR.G is a 5.60% Straight Perpetual announced February 15.

POW.PR.G traded 594,733 shares today in a range of 25.37-48 before closing at 25.47-48, 10×4. The issue will be tracked by HIMIPref™ and is assigned to the PerpetualPremium index. Vital statistics are:

Standard & Poor’s has announced:

• In December 2011, Sun Life announced it would cease issuing individual life and annuity contracts in the U.S.We believe Sun Life’s U.S. business segment, including the run-off operations, will likely generate more than C$300 million annually in pretax operating earnings that supports earnings diversity.
• Accordingly, we are removing our ‘A’ ratings on Sun Life Financial Inc. from CreditWatch and affirming them, and affirming our ‘AA-‘ ratings on its core North American subsidiaries.
• The negative outlook on holding company Sun Life Financial Inc. reflects that fixed charge coverage may not rebound to the levels we expect in 2012.

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“The rating action reflects our opinion that the group’s (Sun Life) 2012 after-tax operating earnings will come in between $C1.4 billion and C$1.5 million expected for the ratings following depressed results in 2011,” said Standard & Poor’s credit analyst Robert Hafner.
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Furthermore, we expect that the U.S. business segment, including the operations the group placed in run-off in December as a result of the cessation of U.S. individual life and annuity contract sales, is likely to contribute more than C$300 million annually to consolidated earnings. This will adequately support earnings quality and diversification at SLF that helps satisfy our expectations for maintaining the two-notch difference between our ratings on SLF and SLA. Normally, there is a three-notch difference between the ratings on North American insurance holding companies and the ratings on subsidiaries. Although the earnings from the U.S. run-off operations will gradually decline, we expect the results to provide ample opportunity for the organization to generate replacement earnings from other businesses.

In addition, Sun Life’s mutual fund platform (MFS) generated C$271 million of after-tax operating earnings in 2011. Although we view mutual fund earnings to be of lower quality than insurance earnings, MFS does contribute to earnings diversification and is an unregulated source of earnings.
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The negative outlook on SLF is because we could widen the notching between the company and its core operating insurance companies to three notches from two by lowering the ratings on SLF if fixed charge coverage does not rebound to expected levels in 2012. We could lower the ratings if we believe that it will not maintain earnings diversification as the U.S. individual life and annuity business runs off by replacing U.S. earnings with other sources. We could revise the outlook to stable and affirm the ratings if SLF restores fixed charge coverage to more than 5x.

The Negative Watch was reported on PrefBlog on December 14. In the interim, Moody’s downgraded SLF. S&P rates the preferreds P-2(high); DBRS viewed the 11Q4 results as non-material and maintains the preferreds at Pfd-1(low).

SLF has the following preferred shares outstanding: SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D and SLF.PR.E (DeemedRetractible) and SLF.PR.F, SLF.PR.G, SLF.PR.H and SLF.PR.I (FixedReset). All are tracked by HIMIPref™ and assigned to their respective indices.

Power Financial Corporation has announced:

the successful completion and closing of an offering of 10,000,000 5.50% Non-Cumulative First Preferred Shares, Series R (the “Series R Shares”) priced at $25.00 per share to raise gross proceeds of $250 million.

The issue was bought by an underwriting syndicate co-led by BMO Capital Markets, RBC Capital Markets and Scotiabank.

The Series R Shares will be listed and posted for trading on the Toronto Stock Exchange under the symbol “PWF.PR.R”. Proceeds from the issue will be used to supplement Power Financial Corporation’s financial resources and for general corporate purposes.

PWF.PR.R is a 5.50% Straight Perpetual announced February 13.

PWF.PR.R traded 901,316 shares in a range of 24.95-25 before closing at 25.22-34, 2×100. The issue will be tracked by HIMIPref™ and is assigned to the PerpetualPremium index. Vital statistics are:

Manulife Financial Corporation has announced:

that it has completed its offering of 10 million Non-cumulative Rate Reset Class 1 Shares Series 7 (the “Series 7 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 Scotia Capital Inc., RBC Capital Markets and TD Securities. The Series 7 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.H.

The Series 7 Preferred Shares were issued under a prospectus supplement dated February 14, 2012 to Manulife’s short form base shelf prospectus dated September 3, 2010.

MFC.PR.H is a FixedReset, 4.60%+313 announced February 14.

The issue traded 649,139 shares today in a range of 24.90-05 before closing at 25.00-03, 25×141. The issue will be tracked by HIMIPref™ and assigned to the FixedReset index. Vital statistics are:

Great West Lifeco has announced:

the closing of its previously announced offering of 10,000,000 Non-Cumulative First Preferred Shares, Series P (the “Series P Shares”) through a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets, and Scotiabank for gross proceeds of $250 million. The Series P Shares will be posted for trading on the Toronto Stock Exchange under the symbol “GWO.PR.P”.

GWO.PR.P is a Straight Perpetual, coupon 5.40%, announced February 10.

The issue traded 648,620 shares today in a range of 24.95-09 before closing at 25.01-03, 24×21. This issue will be tracked by HIMIPref™ and assigned to the DeemedRetractibles index. Vital statistics are:

Standard & Poor’s has announced:

• On Feb. 21, 2012, Fortis Inc. announced it entered into an agreement to acquire all of the shares of CH Energy Group Inc. for about C$1.5 billion.
• As a result, we are placing our ratings, including our ‘A-‘ long-term corporate credit rating, on Fortis Inc. on CreditWatch with negative implications.
• The CreditWatch reflects our expectation of increased debt at the holding company level to finance the acquisition and that post-acquisition, deconsolidated credit metrics may be below our established thresholds.

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“We will resolve the CreditWatch once greater details related to the transaction become available, including a financing plan, and the transaction closes,” said Standard & Poor’s credit analyst Gavin MacFarlane. We could lower the ratings if debt levels increase as a result of the transaction and the company is unable to meet established thresholds we associate with the current ratings, including company-level debt coverage from cash flows from its subsidiaries of more than 20% and consolidated adjusted funds from operations to debt of more than 10%. However, while less likely, we could still affirm the ratings on Fortis and return to a stable outlook if a very meaningful component of the financing plan consists of equity and we conclude
that forecast credit metrics are at levels consistent with the current ratings.

Fortis’ preferreds are currently rated P-2 [Watch Negative] by S&P and Pfd-2(low) [Review Developing] by DBRS.

Fortis has several series of preferred shares outstanding: FTS.PR.C & FTS.PR.E (Operating Retractible); FTS.PR.F (PerpetualPremium); FTS.PR.G & FTS.PR.H (FixedReset). All are tracked by HIMIPref™ and assigned to the indicated indices.

Canadian Life Companies Split Corp has announced:

that a special meeting of the holders of the Company’s Preferred Shares and Class A Shares will be held at 10:00 a.m. (Eastern standard time) on April 16, 2012. The purpose of the meeting is to consider a special resolution to approve a reorganization of the Company which includes among other things, a capital reorganization of the Preferred Shares and extending the mandatory termination date for the Company from December 1, 2012 to December 1, 2018. Shareholders of record at the close of business on March 6, 2012 will be provided with the notice of meeting and management information circular in respect of the meeting and will be entitled to vote at the meeting. Details of the matters to be voted on at the special meeting will be provided in the management information circular for the meeting to be mailed to shareholders on or about March 16, 2012.

The Company invests in a portfolio of four publicly traded Canadian life insurance companies as follows: Great-West Life, Industrial Alliance, Manulife Financial and Sun Life Financial. Shares held within the portfolio are expected to range between 10-30% in weight but may vary at any time.

A capital reorganization of the Preferred Shares, eh? Not too surprising seeing as the company’s NAV is only 11.64 as of February 15. We will see on March 16 just what exactly capital reorganization of the Preferred Shares entails, but the fact that the directors were too embarrassed to write it down in the press release is not a good sign.

LFE.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-4(low) by DBRS. LFE.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

NB Split Corp has announced:

the redemption prices for all outstanding Capital Shares and Preferred Shares as follows:

– Redemption Price per two Capital Shares: $43.94

– Redemption Price per Preferred Share: $32.72

Holders of 34,600 Capital Shares requested delivery of and will receive their pro rata share of National Bank shares in payment for their Capital Shares instead of cash.

All redemption payments are expected to be made on or about February 21, 2012.

DBRS has discontinued the rating.

NBF.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-3(high) by DBRS. NBF.PR.A was not tracked by HIMIPref™.

Moody’s Investors Service has announced:

a review of 17 banks and securities firms with global capital markets operations. Underpinning this review is Moody’s view that these firms face challenges that are not fully captured in their current ratings. Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions. These difficulties, together with inherent vulnerabilities such as confidence-sensitivity, interconnectedness, and opacity of risk, have diminished the longer term profitability and growth prospects of these firms.
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The rationale behind the review is discussed below and in a report titled “Challenges for Firms with Global Capital Markets Operations: Moody’s Rating Reviews and Rationale,” published today. Today’s announcement also follows the publication on 19 January 2012 of a report titled “Why Global Bank Ratings Are Likely to Decline in 2012.”
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LONG-TERM RATINGS AND STANDALONE CREDIT ASSESSMENTS– PLACED UNDER REVIEW
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Royal Bank of Canada
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During its review Moody’s will consider the structural vulnerabilities in the business models of global investment banks, which include the confidence-sensitivity of customers and funding counterparties, risk-management and governance challenges, as well as a high degree of interconnectedness and opacity. In addition, rapidly changing risk positions expose these firms to unexpected losses that can overwhelm the resources of even the largest, most diversified groups. Such challenges caused several issuers to fail, or to avoid failure only upon the receipt of external support, during the 2008 financial crisis.

Additional challenges have now emerged for banks with significant capital markets activities; these include more fragile funding conditions, higher credit spreads, increased regulatory burdens and very challenging macroeconomic and market environments. Some of these risks have been partly mitigated by changes to business models, and higher regulatory capital and liquidity requirements, but they have not been eliminated. Furthermore, these adverse trends have placed acute pressure on these firms’ profitability and increased the scope of restructuring required in their core businesses to generate the level of return on equities expected by shareholders.

The combination of changed operating conditions and increased regulatory requirements and restrictions has diminished these firms’ longer-term profitability and growth prospects. While we had initially expected their standalone credit profiles to recover once the acute phase of the crisis had passed, we now view these challenges as structural features of global investment banks. Our credit analysis is reflecting these challenges through greater emphasis on certain key rating factors in our methodologies, as discussed in more detail in the report “Challenges for Firms with Global Capital Markets Operations: Moody’s Rating Reviews and Rationale,” published today.

RY has a large number of preferred shares outstanding: RY.PR.A, RY.PR.B, RY.PR.C, RY.PR.D, RY.PR.E, RY.PR.F, RY.PR.G & RY.PR.H (DeemedRetractible) and RY.PR.I, RY.PR.L, RY.PR.N, RY.PR.P, RY.PR.R, RY.PR.T, RY.PR.X & RY.PR.Y (FixedReset) and RY.PR.W (PerpetualPremium). All are tracked by HIMIPref™ and assigned to their respective indices.

Update: RY is irritated:

The announcement — which could result in a downgrade of as much as two notches for the Canadian bank — comes a little over a year after the bank was last cut by Moody’s.

“We are surprised to be included in this review; our inclusion is unwarranted,” RBC said in an emailed statement on Thursday. “This action does nothing to help investors differentiate between strong banks and weak ones. RBC’s credit rating and capital base are among the strongest of all banks globally.”