Category: Issue Comments

Brookfield Asset Management has announced:

the completion of its previously announced Class A Preference Shares, Series 32 issue in the amount of CDN$300,000,000. The offering was underwritten by a syndicate led by RBC Dominion Securities Inc., CIBC World Markets Inc., Scotia Capital Inc. and TD Securities Inc.

Brookfield issued 12,000,000 Series 32 Shares at a price of CDN$25.00 per share, for aggregate gross proceeds of CDN$300,000,000. Holders of the Series 32 Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.50% annually for the initial period ending September 30, 2018. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 2.90%. The Series 32 Shares will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BAM.PF.A.

Brookfield intends to use the net proceeds of the issue of Series 32 Shares to redeem its Class A Preference Shares, Series 10 and for general corporate purposes.

Doubtless you are wondering: What’s all this “.PF” guff? I wondered too:

In response to your inquiry – Brookfield Asset Management has issued so many pref share series that they had to use the “PF.A” extension. The Company could have re-used some old extensions for series that are no longer listed but decided to use the new extension to prevent confusion with the old series.

I have a vague recollection that at one time there was an explicit rule at the Toronto Exchange that you couldn’t have a “.PR” extension unless staff had determined to its satisfaction that the issue was, in fact, preferred over common. Now, while I wish to make it clear that there is no doubt whatsoever in my mind that these shares are ‘preferred’, I’m just wondering if the same policy or rule is still in place.

Now, as far as I’m concerned, it’s not really a big deal. When I buy something, I like to know what I’m buying and I don’t rely on the TMX’s “.PR.” extension, or the IOSCO “(sf)” or “(hyb)” suffix on credit ratings to give me an excuse not to look at the prospectus. But … if I am remembering correctly, there was at one time a formal commitment from the Exchange that they wouldn’t just go around slapping a “.PR” extension on just anything. I don’t know if this still applies, or if it now applies to the brand-new “.PF” extension. I can’t find anything relevant in the Company Handbook or TMX Rulebook.

To tell you the truth, I’m rather annoyed by this. I’m tracking 265 preferred shares. I’m sure there are at least 35 more that are too small for me, or otherwise not tracked. So that’s at least 300 preferred share issues trading on the Exchange. Until yesterday, every single one had a “.PR” extension. So they add a new extension – that’s OK, times change, I can deal with that. But does it occur to anybody – the company, the Exchange, anybody at all, to make a note of that and add a brief explanation? Anything at all, just to let the ultimate customers – that’s you and me, buddies – know what’s going on? Hell no, this is Canada. Fuck the customer, we’re in a meeting.

BAM.PF.A is a FixedReset, 4.50%+290, announced March 5. The issue will be tracked by HIMIPref™ and assigned to the FixedReset index. The issue is rated Pfd-2(low) by DBRS.

BAM.PF.A traded 487,690 shares today in a range of 24.90-05 before closing at 24.85-90, 50×4. Vital statistics are:

Financial 15 Split Inc. has released its Annual Report to November 30, 2011.

I am aware that “The portfolio has generally retained a 3/4 weighting in Canadian financial services stocks versus the U.S. financial services stocks during the year,” but have calculated a benchmark based on a 2/3 weighting as that’s the default. Overweighting Canada is an active-management decision.

Figures of interest are:

MER: 1.11% of thw whole unit value, excluding one time initial offering expenses.

Average Net Assets: We need this to calculate portfolio yield. The number of units did not change over the year, so the average of the beginning and end of year’s net assets will be close enough: ($120.8-million + $147.6-million) / 2 = $134.2-million.

Underlying Portfolio Yield: Dividends received (net of withholding) of 4,500,148 divided by average net assets of 134.2-million is 3.35%

Income Coverage: Net Investment Income of 2,940,086 divided by Preferred Share Distributions of 4,857,794 is 61%.

Canadian Banc Corp. has released its Annual Report to November 30, 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.

Figures of interest are:

MER: 1.57% of the whole unit value, excluding one time initial offering expenses.

Average Net Assets: We need this to calculate portfolio yield; unfortunately the number of units changesd, which makes it more approximate. The Total Assets of the fund at year end was $152.3-million, compared to $181.6-million a year prior, so call it an average of $167-million. Total Preferred Share Distribution in 2010 was $3.971-million, at $0.50/share implies an average of 7.942-million units, at an average NAV of ((20.17 + 22.09) / 2 = 21.13, so call it $167.8-million. Close enough! Call the Average Net Assets $167-million.

Underlying Portfolio Yield: Investment income of $6.606-million received divided by average net assets of $167-million is 3.96%.

Income Coverage: Net investment income of $6.606-million less expenses before issuance fees of $2.771-million is $3.835-million, to cover preferred dividends of 3.971-million is just under 97%.

BK.PR.A was last mentioned on PrefBlog when the Semi-annual report was examined.

Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Class A Preferred Shares Series 32 for cash. The redemptions will occur on April 30, 2012. The redemption price is $26.00 per Series 32 share.

The $0.281250 per share quarterly dividend declared on March 8, 2012 will be the final dividend on the Series 32 shares and will be paid on April 27, 2012 to shareholders of record on March 28, 2012.

Holders of the Series 32 shares should contact the financial institution, broker or other intermediary through which they hold the shares to confirm how they will receive their redemption proceeds.

Nexen Inc. has announced:

that we have completed our public offering of cumulative redeemable class A rate reset preferred shares, series 2 (the “Series 2 Shares”), which was announced on February 27, 2012.

With the underwriters fully exercising their option to acquire an additional 2 million Series 2 Shares, the size of the offering increased to a total of 8 million Series 2 Shares, resulting in gross proceeds of $200 million.

The net proceeds of the offering may be used to reduce Nexen’s indebtedness, for capital expenditures and for general corporate purposes.

The syndicate of underwriters was co-led by TD Securities Inc. and Scotiabank and included RBC Capital Markets, CIBC, BMO Capital Markets, National Bank Financial Inc., Desjardins Securities Inc. and HSBC Securities (Canada) Inc.

The Series 2 Shares will be listed on the Toronto Stock Exchange under the symbol “NXY.PR.A”.

NXY.PR.A is a FixedReset, 5.00%+359 announced February 27. It will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

NXY.PR.A traded 645,238 shares today in a range of 25.06-24 before closing at 25.22-23, 18×13. Vital statistics are:

Brookfield Asset Management has announced:

its intention to redeem all of its outstanding Class A Preference Shares, Series 10 (TSX: BAM.PR.H) for cash on April 5, 2012. The redemption price for each such share will be C$25.00 plus accrued and unpaid dividends thereon (for greater certainty, excluding declared dividends with a record date prior to the redemption date). Brookfield intends to use the net proceeds of the issue of Preferred Shares, Series 32 to redeem its Preference Shares, Series 10 and, to the extent the underwriters’ option is exercised, for general corporate purposes.

The issuance of the Series 32 (FixedReset, 4.50%+290) has been reported on PrefBlog.

Brookfield Office Properties has announced:

that that it intends to redeem all of its outstanding Class AAA Preference Shares, Series I (the “Series I Shares”) on March 30, 2012. The Redemption Price will be C$25.00 per Series I Share.

There are currently 6,138,022 outstanding Series I Shares, which are listed on the Toronto Stock Exchange under the symbol BPO.PR.I. All of the Series I Shares are held beneficially through CDS & Co., as nominee of CDS Clearing and Depositary Services Inc.

Notice of Redemption has been sent to CDS & Co. Payment of the Redemption Price will be made to all beneficial holders of the Series I Shares on or after March 30, 2012 through the facilities of CDS & Co.

BPO.PR.I is an interesting issue, since (as discussed in the post BPO.PR.I: What is the Meaning of Existence?), it has been both redeemable and retractible at par for quite some time … but both the issuer and the holders have been perfectly content to let it trade. BPO.PR.I is tracked by HIMIPref™ but has been relegated to the Scraps index on credit concerns.

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.

…
“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.
…
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.
…
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.