Category: Issue Comments

Split Yield Corporation (run by Quadravest):

Split Yield Corporation (the “Company”) provides final redemption prices pursuant to the termination of the Company effective February 1, 2012.

As more fully described in the December 6, 2011 press release, the Company’s annual information form,
financial statements and other continuous disclosure documents, the final formula to calculate the termination payment is as follows: Each Class I Preferred share (YLD.PR.A) will be valued at the lesser of (i) $20; and (ii) the Net Assets per unit for the Company on the termination date. Each Class II Preferred share (YLD.PR.B) will be valued at the amount, if any, of the difference between the Net Assets per unit of the Company and $20 (the original issue price of the Class I Preferred shares) subject to a maximum value of $15 per share. Capital shares (YLD) will receive no payment unless the unit value was in excess of $35 per unit at termination date.

The final net asset value per unit as at February 1, 2012 was $18.6989. As a result of the final redemption formula outlined above, a payment of $18.6989 per Class I Preferred share (YLD.PR.A) will be made on February 16, 2012. No payment will be made to Class II Preferred shares (YLD.PR.B) or Capital shares (YLD) as a result of the formula above.

Class I Preferred shareholders have received total dividends of $15.17 per share since inception. The final quarterly dividend of $0.275 to Class I Preferred shareholders was made on January 31, 2012. Class II Preferred shareholders have received total dividends of $10.54 per share since inception. Capital shares have received total dividends of $7.25 per share since inception. Overall, a total of $32.96 per unit in distributions was made since inception.

Payment of the redemption prices as applicable are expected to be made on February 16, 2012 and will be paid to the beneficial holders of such shares through payment to the CDS participant through which such shares are held.

According to DBRS:

DBRS has today downgraded the rating of the 5.5% Class I Cumulative Preferred Shares (the Class I Preferred Shares) issued by Split Yield Corporation (the Company) from Pfd-5 to D and confirmed the rating of the 7.0% Class II Cumulative Preferred Shares (the Class II Preferred Shares) issued by the Company at D.

On December 6, 2011, the Company announced that all of its outstanding Class I and Class II Preferred Shares would be redeemed as scheduled on February 1, 2012 (the Redemption Date), in accordance with the redemption provisions of the shares. Quadravest Capital Management, manager of the Company, began liquidating the portfolio during the latter half of January 2012 in preparation for the final redemption.

On February 1, 2012, all outstanding Class I and Class II Preferred Shares were redeemed. The final redemption prices were $19.00 and $0.005 for the Class I and II Preferred Shares, respectively, which were less than the issue prices of the Class I and Class II Preferred Shares. As a result, the holders of the Class I and Class II Preferred Shares suffered a loss on their principals.

These issues were last mentioned on PrefBlog in the post YLD.PR.A, YLD.PR.B Redemption Announced; Default Almost Certain. YLD.PR.A and YLD.PR.B have both been tracked by HIMIPref™, but have been relegated to the Scraps index on credit concerns.

Brompton Split Banc Corp. has announced:

that its board of directors (the “Board”) has approved a proposal to extend the term of SBC beyond its current final redemption date of November 30, 2012. Under the proposal, the term of SBC may be extended for an additional term of up to 5 years, as determined by the Board. In addition, the termination date may be extended further for successive terms of up to 5 years thereafter, as determined by the Board. The distribution rates on the preferred shares and class A shares for the new term will be announced prior to the extension of the term. If the proposal is approved, class A shareholders and preferred shareholders will be provided a special retraction right which is designed to provide shareholders with an additional option to retract either preferred shares or class A shares at the end of each term (and each successive term thereafter) and receive a retraction price that is calculated in the same way that such price would be calculated if SBC were to terminate on November 30, 2012.

SBC invests in a portfolio, on an approximately equal weight basis, in common shares of 6 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.

SBC will hold a special meeting of holders of preferred shares and class A shares on March 29, 2012 to consider and vote upon the proposal. Shareholders of record at the close of business on February 28, 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. The proposal is also subject to any required regulatory approvals.

I recommend a favourable vote, assuming that there is nothing material in the final documents that isn’t in the press release. Credit quality is good, with a NAV of 20.74 as of 2012-1-26 and the special retraction right is good.

On January 6, Connor, Clark & Lunn Capital Markets Inc. announced:

that that CANADIAN Financials & Utilities Split Corp. (the “Company”) will redeem its Preferred Shares and Class A Shares as scheduled on January 31, 2012 (the “Maturity Date”).

The redemption price payable by the Company for a Preferred Share will be equal to the lesser of (i) $10.00 plus any accrued and unpaid distributions in respect of the Preferred Shares, and (ii) the NAV of the Company on that date divided by the number of Preferred Shares then outstanding.

The redemption price payable by the Company for a Class A Share on that date will be equal to the greater of (i) the NAV per Unit on that date minus the sum of $10.00 plus any accrued and unpaid distributions on the Preferred Shares, and (ii) nil. One Unit means one Preferred Share and one Class A Share.

As at December 31, 2011, the NAV per Unit of the Company was estimated to be $15.33, which equates to $5.33 per Class A Share and $10.00 per Preferred Share.

The Company’s Preferred Shares and Class A Shares are listed on the TSX under the symbols CFS.PR.A and CFS, respectively.

This was a tiny little issue with less than 1-million shares outstanding. It was added to the HIMIPref™ database because I really liked the credit quality when the issue was announced – but alas, the sponsor was unable to sell enough of them to make the effort worthwhile.

Rating discontinued by DBRS.

DBRS has announced:

has today downgraded the rating of the Preferred Shares issued by Canadian Life Companies Split Corp. (the Company) to Pfd-4 (low) from Pfd-3 (low).

In April 2003, the Company issued 8.2 million Preferred Shares (at $10 each) and an equal number of Class A Shares (at $15 each). The termination date for both classes of shares issued is December 1, 2012.

The Company holds a portfolio consisting primarily of common shares of the four largest publicly traded Canadian life insurance companies: Manulife Financial Corporation, Sun Life Financial Inc., Great-West Lifeco Inc., and Industrial Alliance Insurance and Financial Services Inc. (each a Portfolio Company and collectively, the Portfolio). Each Portfolio Company generally represents no less than 10% and no more than 30% of the net asset value (NAV) of the Portfolio. Up to 20% of the net asset value (NAV) of the Company may be invested in equity securities of foreign life insurance companies or other Canadian or foreign financial services corporations other than the Portfolio Companies. The Portfolio is actively managed by Quadravest Capital Management Inc.

The Preferred Shares pay a fixed cumulative monthly dividend of $0.04375 per Preferred Share, yielding 5.25% annually on their issue price of $10 per share. Holders of the Class A Shares are expected to receive regular monthly targeted cash distributions of $0.10 per Class A Share, yielding 8% annually on their issue price of $15 per share. However, these Class A Share distributions have been suspended since May 31, 2011, due to the NAV per Unit falling below the $15 threshold. In addition, no special year-end dividends will be paid if, after such payment, the NAV of the Portfolio would be less than $25.

On September 6, 2011, DBRS confirmed the ratings on the Preferred Shares at Pfd-3 (low) due to the sufficient level of downside protection at the time. However, over the past few months, the NAV of the Portfolio has experienced significant decline, due to the negative performance of Canadian life insurance companies over the previous quarter. The downside protection available to the Preferred Shares has fallen from 23.3% on August 31, 2011, to 8.5% on December 30, 2011, and stands at 12.05% as of January 13, 2012. 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 (low).

The scheduled final maturity date of the Preferred Shares is December 1, 2012. DBRS will continue to closely monitor changes in the credit quality of the Preferred Shares and provide rating updates as required.

It’s about time! The NAV was 11.37 as of January 13.

LFE.PR.A was last mentioned on PrefBlog when their warrants expired out of the money in October 2010. LFE.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Brookfield Asset Management has engaged in a very familiar transaction – shuffling assets down the line:

Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) (TSX: BEP.UN) and Brookfield Asset Management (“Brookfield”) (TSX: BAM.A, NYSE: BAM) today announced a bought-deal secondary offering with a syndicate of underwriters led by Scotia Capital Inc. and TD Securities Inc., through which a wholly-owned subsidiary of Brookfield has agreed to sell 11,430,000 L.P. units of Brookfield Renewable at an offering price of $26.25 per L.P. unit. The Underwriters have been granted an over-allotment option to purchase up to an additional 1,714,500 L.P. units from Brookfield at the offering price, under the same terms, exercisable for a period of 30 days from closing of the Offering.

Brookfield currently owns approximately 73% of Brookfield Renewable on a fully-exchanged basis. Upon the completion of the offering, but before giving effect to the over-allotment option, it is anticipated that Brookfield will own, directly and indirectly, 179,465,109 L.P. units, representing approximately 68% of Brookfield Renewable on a fully-exchanged basis.

Boyd Ermann of the Globe & Mail comments:

Brookfield Asset’s cash hoard will increase by about 18 per cent after it takes in the proceeds of the sale. As of the end of the third quarter, Brookfield Asset listed cash and financial assets of $1.7-billion (U.S.).

Look for the money to head across the Atlantic. On the company’s last quarterly conference call, chief executive officer Bruce Flatt said Brookfield expects “to find opportunities to acquire international assets from European companies which are endeavoring to deleverage their balance sheets, and we’re working with a number of excellent companies to assist them in this regard.”

BAM has issued a host of preferreds: BAM.PR.B, BAM.PR.E, BAM.PR.G, BAM.PR.H, BAM.PR.I, BAM.PR.J, BAM.PR.K, BAM.PR.M, BAM.PR.N, BAM.PR.O, BAM.PR.P, BAM.PR.R, BAM.PR.T, BAM.PR.X and BAM.PR.Z are all tracked by HIMIPref™.

DBRS has announced that it:

has today downgraded the rating of the Preferred Shares issued by SL Split Corp. (the Company) to Pfd-5 from Pfd-4 (low).

In November 2007, the Company issued 1.055 million Preferred Shares (at $25.78 each) and 2.11 million Capital Shares (at $15.26 each), raising gross proceeds of $59.4 million. The termination date for both classes of shares issued is January 31, 2013.

The Company holds a portfolio consisting of common shares of Sun Life Financial Inc. (Sun Life). Dividends received from the portfolio are used to fund a fixed cumulative quarterly dividend to the holders of the Preferred Shares yielding 5% annually on their issue price of $25.78 per share. Holders of the Capital Shares are expected to receive all excess dividend income after Preferred Share distributions and Company expenses have been paid.

On September 6, 2011, DBRS confirmed the ratings on the Preferred Shares at Pfd-4 (low) due to the sufficient level of downside protection available at the time, despite the net asset value (NAV) and downside protection having gradually decreased in the months leading up to the confirmation. However, since the rating confirmation, the NAV has continued to decline, due to the negative performance of Canadian life insurance companies as a whole over the previous quarter, with the common shares of Sun Life in particular declining in value by 28.2% from $26.31 on September 1, 2011, to $18.90 on December 30, 2011. The downside protection available to the Preferred Shares has fallen from 1.7% on September 1, 2011, to -37.9% on December 30, 2011. As a result of the magnitude of the level of negative downside protection available to holders of the Preferred Shares and the overall negative trend observed since the previous rating action, the Preferred Shares have been downgraded to Pfd-5 from Pfd-4 (low).

The scheduled final maturity date of the Preferred Shares is January 31, 2013. DBRS will continue to closely monitor changes in the credit quality of the Preferred Shares and provide rating updates as required.

The NAVPU is now 20.38 to cover a preferred share obligation of 25.78, so the Asset Coverage Ratio is currently 0.8-:1. SLS.PR.A was last mentioned on PrefBlog when there was a small call for redemption in January 2011. SLS.PR.A is not tracked by HIMIPref™.

I have heard from multiple authoritative sources that a big holder of BCE.PR.F is selling 2-million shares at 24.25 through a syndicate of dealers. They were last quoted at 24.53-60, 3×48, having traded 8,206 shares today in a range of 24.46-60.

BCE.PR.F was last mentioned on PrefBlog when the BCE.PR.E / BCE.PR.F Conversion Results were announced on 2010-1-19. BCE.PR.F is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

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.