Category: Issue Comments

Manulife Financial Corporation has announced:

that it has completed its offering of 8 million Non-cumulative Rate Reset Class 1 Shares Series 5 (the “Series 5 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $200 million.

The offering was underwritten by a syndicate of investment dealers co-led by RBC Capital Markets and Scotia Capital Inc. The Series 5 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.G.

The Series 5 Preferred Shares were issued under a prospectus supplement dated November 29, 2011 to Manulife’s short form base shelf prospectus dated September 3, 2010.

The $200-million issue size implies that not a single dollar of the $50-million greenshoe was exercised.

MFC.PR.G is a 4.40%+290 FixedReset announced November 29. This issue will be tracked by HIMIPref™ and is assigned to the FixedReset index.

The issue traded 93,042 shares today in a range of 23.66-56, a very high range for an investment-grade opening day, before closing at 24.10-28, 11×5.

Vital statistics are:

Split Yield Corporation (managed by Quadravest) has announced:

Notice of Final Redemption of all Shares Effective February 1, 2012

Split Yield Corporation (the”Company” hereby provides formal notice that all of its outstanding Class I Preferred shares (YLD.PR.A), Class II Preferred shares (YLD.PR.B) and Capital shares (YLD) will be redeemed effective February 1, 2012. This redemption is required by and will occur in accordance with the provisions of the Company’s articles of incorporation, as amended, and has previously been discussed in the Company’s annual information form, financial statements and other continuous disclosure documents filed earlier this year.

As more fully described in the Company’s annual information form, financial statements and other continuous disclosure documents, the Class I Preferred shares rank in priority to the Class II Preferred shares and the Class II Preferred shares rank in priority to the Capital shares with respect to the payment of dividends and repayment of capital upon the winding up of the Company. The final formula to calculate the termination payment is as follows: Each Class I Preferred share 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 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. As such, if the net asset value per unit remains below $20 per unit on termination date, this would mean that each Class II Preferred share would receive no payment. Capital shares will receive no payment unless the unit value was in excess of $35 per unit at termination date. The net asset value per unit as at November 30, 2011 was $17.74. Any retractions received under the January 2012 monthly retraction privilege will be calculated in the same manner as the final termination amount for each class of share.

Class I Preferred shareholders have received total dividends of $14.90 per share since inception. The final quarterly dividend of $0.275 to Class I Preferred shareholders will be made on January 31, 2012. Class II Preferred shareholders have received total dividends of $10.54 per share since inception. Any quarterly Class II Preferred share dividends suspended since July 2008 cannot be declared or made payable if the net asset value is below $20 per unit due to the priority ranking of the Class I Preferred shares. Capital shares have received total dividends of $7.25 per share since inception. Overall, a total of $32.69 per unit in distributions was made since inception.

The Manager will begin liquidating the portfolio during the latter half of January 2012 in preparation for the final redemption. A final net asset value will be calculated as at January 31, 2012 and will be used to determine the final redemption prices.

Payment of the redemption prices as applicable are expected to be made no later than 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.

The Company anticipates that trading in all three classes of shares on the Toronto Stock Exchange will be halted at the opening of trading on February 1, 2012 and that such shares would then be de-listed from the Exchange effective the close of trading on that date. Once all necessary tax clearance certificates are obtained and other corporate formalities observed, it is expected that the Company will then be dissolved.

So in a nutshell, YLD.PR.A gets the first $20, YLD.PR.B gets the next $15 and YLD gets the balance. Trouble is the NAV is currently only 17.74.

YLD.PR.A and YLD.PR.B have both been tracked by HIMIPref™, but have been relegated to the Scraps index on credit concerns. Tracking of YLD.PR.B will cease immediately, but tracking of YLD.PR.A is expected to continue until redemption. YLD.PR.A and YLD.PR.B were last discussed on PrefBlog in connection with the 09H1 Financial Statements.

If we look at the January 2011 Annual Report, we can get a good feel for how this happened:

Standard & Poor’s has announced:

• Deteriorating operating performance, combined with substantially weakened access to capital markets, has materially affected the credit quality of Montreal-based classified directory publisher Yellow Media Inc., in our
  opinion.

• As a result, we are lowering our long-term corporate credit rating on Yellow Media to ‘BB-‘ from ‘BB+’ and placing the company on CreditWatch with negative implications.
• At the same time, we are lowering various issue-level ratings on Yellow Media and putting these ratings on CreditWatch, reflecting the downgrade on the company.
• The CreditWatch listing reflects our concerns about Yellow Media’s
  deteriorating cash flows and weakened access to the capital markets, which have increased the risk associated with the company’s ability to refinance its future debt maturities.

…
At the same time, we lowered our issue-level rating on the company’s senior unsecured debt to ‘BB-‘ (the same as the corporate credit rating on Yellow Media) from ‘BB+’, and revised our recovery rating on the debt to ‘4’ from ‘3’. A ‘4’ recovery rating indicates our expectation for average (30%-50%) recovery in the event of a default.

We also lowered our issue-level rating on Yellow Media’s subordinated debt to ‘B’ (two notches below the corporate credit rating) from ‘BB-‘. The recovery rating on this debt is unchanged at ‘6’, indicating our expectation of negligible (0%-10%) recovery in a default situation.

Finally, we lowered our Canada scale rating on the company’s preferred shares to ‘P-4 (Low)’ from ‘P-4 (High)’. All of the issue level ratings have been placed on CreditWatch negative, reflecting the downgrade on the company.
…
“The downgrade and CreditWatch listing reflect our concerns about a further deterioration in operating performance and rising refinancing risks at Yellow Media,” said Standard & Poor’s credit analyst Madhav Hari. “Specifically, we now believe that print declines will accelerate beyond our low-to-mid teens percent expectations and that the company will be challenged to increase its online revenue at the levels we had imputed in our previous assumptions,” Mr. Hari added.

As such, erosion of overall revenue could be steeper in the near term while visibility for the timing of revenue stabilization or turnaround is very poor. More important, given print acceleration and the greater degree of investment needed to even sustain a lower pace of online growth, we now believe operating margins could prove to be below our previous expectations of about 50%. Consequently, we expect discretionary operating cash flow to weaken, which would limit the company’s financial flexibility. Given significant uncertainty with regard to the company’s ability to renew or extend its bank facilities beyond February 2013, and arguably poor access to the capital markets (as evidenced by pricing of the company’s equity and debt securities), we believe refinancing risks associated with the company’s future debt maturities, including the C$255 million medium-term notes due 2013, has increased meaningfully.

YLO has four issues of preferreds outstanding: YLO.PR.A & YLO.PR.B (OperatingRetractible) and YLO.PR.C & YLO.PR.D (FixedReset).

These issues were last mentioned on PrefBlog when I published a transcript of the 11Q3 Conference Call. All issues are tracked by HIMIPref™; all are relegated to the Scraps index on credit concerns.

RioCan Real Estate Investment Trust has announced:

that it has successfully completed its issuance of an aggregate of 5,980,000 Cumulative Rate Reset Preferred Trust Units, Series C (the “Series C Units”) at a price of $25.00 per Series C Unit for aggregate gross proceeds of $149,500,000. The aggregate offering was comprised of the previously announced issuance of 5,200,000 Series C Units at $25.00 per Series C Unit for gross proceeds of $130,000,000, together with the option granted to underwriters, which was exercised in full, for an issuance of an additional 780,000 Series C Units for $25.00 per Series C Unit for additional gross proceeds of $19,500,000. The underwriting syndicate for the offering was co-led by RBC Capital Markets, CIBC and TD Securities Inc.

The offering was made under RioCan’s amended and restated base shelf short form prospectus dated December 21, 2010 amending and restating the base shelf short form prospectus dated July 6, 2010. The terms of the offering are described in a prospectus supplement dated November 21, 2011, which was filed with Canadian securities regulators.

REI.PR.C is an interest-bearing FixedReset, 4.70%+318 announced November 18. The issue size was announced as $130-million and a greenshoe for 19.5-million, which has been fully exercised. The issue will be tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

The issue traded 101,982 shares in a range of 24.62-00 today before closing at 24.90-94, 28×1. Vital Statistics are:

TransAlta Corporation has announced:

it has completed its public offering of 11,000,000 Cumulative Redeemable Rate Reset First Preferred Shares, Series C (the “Series C Shares”) at a price of $25.00 per Series C Share.

The offering, previously announced on November 22, 2011, resulted in gross proceeds to TransAlta of $275 million. The net proceeds of the offering will be used to partially fund capital projects, for other general corporate purposes, and to reduce short term indebtedness of the company and its affiliates. TransAlta may invest funds that it does not immediately require in short term marketable debt securities.

The Series C Shares were offered to the Canadian public through a syndicate of underwriters led by CIBC World Markets Inc., RBC Capital Markets and Scotia Capital Inc. by way of a prospectus supplement that was filed with securities regulatory authorities in Canada under TransAlta’s short form base shelf prospectus dated November 15, 2011.

Holders of Series C Shares are entitled to receive a cumulative quarterly fixed dividend yielding 4.60% annually for the initial period ending June 30, 2017. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 3.10%. Holders of Series C Shares will have the right, at their option, to convert their shares into Cumulative Rate Reset First Preferred Shares, Series D (the “Series D Shares”), subject to certain conditions, on June 30, 2017 and on June 30 every five years thereafter. Holders of Series D Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.10%. The Series C Shares are listed on the Toronto Stock Exchange under the ticker symbol TA.PR.F.

TA.PR.F is a FixedReset, 4.60%+310, announced 2011-11-22. TA.PR.F will be tracked by HIMIPref™, but relegated to the Scraps index on credit concerns.

The issue traded 219,150 shares in a range of 24.85-95 today before closing at 24.87-92, 1×13. Vital statistics are:

Standard and Poor’s has announced:

• Following a review under Standard & Poor’s revised bank criteria (published on Nov. 9, 2011), we have lowered our long- and short-term ratings on U.K.-based HSBC Holdings PLC (HSBC or “the group”) to ‘A+/A-1’ from ‘AA-/A-1+’ and the long-term ratings on the group’s core operating subsidiaries to ‘AA-‘ from ‘AA’.
• Other rating actions on debt issues and subsidiaries are listed below.
• The group’s ‘a+’ stand-alone credit profile reflects our view of its very strong business position, adequate capital and earnings, strong risk position, average funding, and adequate liquidity.
• The ratings also reflect its high systemic importance in the U.K.
• The stable outlook on the group reflects our view that the group’s strengths should enable it to withstand any softening in global economic conditions or setbacks in the rundown of its U.S. consumer finance portfolio.

They specifically noted that the P-1(low) rating on the local scale for the preferred stock was affirmed.

HSB has three preferred share issues outstanding: HSB.PR.C and HSB.PR.D (Straight Perpetual) and HSB.PR.E (FixedReset).

Enbridge Inc. has announced:

it has closed its previously announced public offering of cumulative redeemable preferred shares, Series D (the “Series D Preferred Shares”) by a syndicate of underwriters co-led by TD Securities Inc, RBC Capital Markets and Scotia Capital Inc. Enbridge issued 18 million Series D Preferred Shares for gross proceeds of $450 million. The Series D Preferred Shares will begin trading on the TSX today under the symbol ENB.PR.D. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.

ENB.PR.D is a FixedReset, 4.00%+237, announced November 14. The issue traded 1,353,175 shares today in a range of 25.05-20 before closing at 25.10-13, 12×5.

For those interested in market trivia, this is the 88th highest daily share volume in the HIMIPref™ database of 632,706 entries.

ENB.PR.D will be tracked by HIMIPref™ and is assigned to the FixedReset index. Vital statistics are:

For those interested, I commissioned a transcript of the YLO 11Q3 conference call. Hymas Investment Management makes no representation or warranties regarding the accuracy or completeness of this transcript – use it at your own risk.

The company has made the call available only as a webcast. The Thomson-Reuters transcript is selling for $54 at time of writing – it was offered earlier for $106.

YLO has four preferred share issues trading on the Toronto Stock Exchange: YLO.PR.A & YLO.PR.B (OperatingRetractible) and YLO.PR.C & YLO.PR.C (FixedReset). All are tracked by HIMIPref™, all are relegated to the Scraps index on credit concerns. The first three issues listed were removed from the TXPR index in October. DBRS downgraded all the issues by four notches in September.