Category: Issue Comments

Talisman Energy Inc. has announced:

it has completed the sale to a syndicate of underwriters led by RBC Capital Markets and CIBC of 8,000,000 Cumulative Redeemable Rate Reset First Preferred Shares, Series 1 at a price of CAD$25.00 per share, pursuant to its previously announced public offering of the preferred shares in Canada.

There was a greenshoe for another 2-million shares which was not exercised.

TLM.PR.A is a FixedReset, 4.20%+277 announced December 5. The issue will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The issue traded 68,600 shares in a range of 24.25-88 before closing at 24.10-25. Vital statistics are:

Standard and Poor’s has announced:

• Following a review of The Toronto-Dominion Bank (TD Bank) under Standard & Poor’s revised bank criteria (published on Nov. 9, 2011), we are affirming our ratings on the bank, including the ‘AA-/A-1+’ long- and short-term issuer credit ratings. The outlook is stable.
• The ratings on TD Bank are based on its strong business position, adequate capital and earnings, adequate risk position, and above-average funding and adequate liquidity, compared with those of global peers with the same industry and economic risk scores.
• The ratings on TD Bank benefit from a one-notch uplift for potential extraordinary government support in a crisis.
• We expect stable performance from TD Bank’s retail-oriented Canadian and U.S. franchises, based on resilient asset quality and ongoing revenue growth opportunities, despite an uncertain economic outlook.

As we previously announced, on Dec. 13, 2011, Standard & Poor’s Ratings Services affirmed its ratings on The Toronto-Dominion Bank (TD Bank), including the ‘AA-/A-1+’ long- and short-term issuer credit ratings. The stand-alone credit profile (SACP) on TD Bank is ‘a+’. In addition, we lowered the rating on TD Bank’s nondeferrable subordinated debt to ‘A’ from ‘A+’ and the rating on its preferred shares to ‘A-‘ from ‘A’. The outlook is stable.

The Preferred Share Scale ratings for the issue remain at P-1(low).

TD has the following issues outstanding: TD.PR.O, TD.PR.P, TD.PR.Q and TD.PR.R (DeemedRetractible) and TD.PR.A, TD.PR.C, TD.PR.E, TD.PR.G, TD.PR.I, TD.PR.K, TD.PR.S and TD.PR.Y (FixedReset).

Standard & Poor’s has announced:

• Following a review of Bank of Montreal (BMO) under our revised bank criteria (published on Nov. 9, 2011), we are affirming our ‘A+/A-1’ issuer credit rating on BMO. The outlook is stable.
• Our rating on BMO reflects our adequate scores for the bank’s business position, capital and earnings, and risk position, and average funding and adequate liquidity.
• The issuer credit rating on BMO incorporates one notch of uplift, reflecting BMO’s high systemic importance in Canada and our assessment of the Canadian government as supportive.
• We expect the bank to continue to generate consistent earnings, supported by its stable retail banking operations and to benefit from its higher proportion of commercial lending with better growth prospects and manageable loan losses.

As we previously announced, on Dec. 13, 2011, Standard & Poor’s Ratings Services affirmed its ‘A+/A-1’ issuer credit rating on Bank of Montreal (BMO). The stand-alone credit profile (SACP) is ‘a’. At the same time, we lowered our ratings on the bank and its subsidiaries’ hybrid securities and preferred stock to ‘BBB+’ from ‘A-‘, two notches below the SACP, consistent with application of our revised bank hybrid capital criteria (published Nov. 1, 2011). The outlook is stable.

As a result of this, the global scale rating is now BBB+; the preferred scale rating is P-2(high); for all issues.

BMO has the following preferred share issues outstanding: BMO.PR.H, BMO.PR.J, BMO.PR.K and BMO.PR.L (DeemedRetractible); and BMO.PR.M, BMO.PR.N, BMO.PR.O, BMO.PR.P and BMO.PR.Q (FixedReset).

Standard & Poor’s has announced:

• Following a review under Standard & Poor’s revised bank criteria (published on Nov. 9, 2011), we have affirmed our ‘A+/A-1’ issuer credit rating on Canadian Imperial Bank of Commerce (CIBC). The outlook is
  stable.

• Our ratings on CIBC reflect our adequate assessments for its business position, capital and earnings, risk position, and liquidity, and average funding.
• The ratings on CIBC benefit from one notch of uplift for potential extraordinary government support in a crisis.
• We expect CIBC’s profitability to continue to improve as loan quality improves and the company further executes on its core banking strategy.

As we previously announced, on Dec. 13, 2011, Standard & Poor’s Ratings Services affirmed its ‘A+/A-1’ issuer credit rating (ICR) on CIBC. The outlook is stable. The stand-alone credit profile (SACP) is ‘a’. In addition, we lowered the rating on CIBC’s nondeferrable subordinated debt to ‘A-‘ from ‘A’ and the rating on its preferred stock to ‘BBB+’ from ‘A-‘. CIBC’s nondeferrable subordinated debt is rated one notch below the ‘a’ SACP as opposed to being notched from the ‘A+’ ICR, based on our new hybrid criteria. Nondeferrable subordinated debt is rated below a bank’s SACP in countries whose legal or regulatory frameworks may not support this type of debt in a stress scenario. Recent guidance from Canada’s Office of the Superintendant of Financial Institutions expresses an expectation that all Tier 1 and Tier 2 capital instruments “must be able to absorb losses in a failed financial institution.” We expect different treatment would apply to capital instruments and senior debt as a Canadian bank approaches a state of nonviability. Preferred stock is rated two notches below the ‘a’ SACP, consistent with our new hybrid criteria.

CM has the following preferred share issues outstanding: CM.PR.D, CM.PR.E and CM.PR.G (PerpetualPremium); CM.PR.I, CM.PR.J and CM.PR.P (DeemedRetractible); and CM.PR.K, CM.PR.L and CM.PR.M (FixedReset).

The change has affected the rating of the preferreds on the local scale: CM.PR.D and CM.PR.E are now P-2 (CM.PR.G is not rated by S&P): all other issues are now P-2(high).

Standard & Poor’s has announced:

• Following a review of the Bank of Nova Scotia (BNS) under Standard & Poor’s revised bank criteria (published on Nov. 9, 2011), we are affirming the ‘AA-/A-1+’ long- and short-term issuer credit ratings on
  BNS. The outlook is stable.

• Our ratings on BNS reflect the bank’s strong business position, adequate
  capital and earnings, strong risk position, and average funding and adequate liquidity, as our criteria define these terms.

• The ratings on BNS benefit from a one-notch uplift for potential extraordinary government support in a crisis.
• We expect the bank to continue to generate consistent earnings supported by its stable retail banking operations and manageable loan losses.

As we previously announced, on Dec. 13, 2011, Standard & Poor’s Ratings Services affirmed its ‘AA-/A-1+’ long- and short-term issuer credit ratings on The Bank of Nova Scotia. The outlook is stable. At the same time, we lowered the ratings on the bank and its subsidiaries’ hybrid securities and preferred stock to ‘A-‘ from ‘A’, two notches below the SACP, consistent with the application of our revised bank hybrid capital criteria (published Nov. 1, 2011).

The issues remain at P-1(low) on the Preferred Scale.

BNS has the following issues outstanding: BNS.PR.J, BNS.PR.K, BNS.PR.L, BNS.PR.M, BNS.PR.N and BNS.PR.O (DeemedRetractible) and BNS.PR.P, BNS.PR.Q, BNS.PR.R, BNS.PR.T, BNS.PR.X, BNS.PR.Y and BNS.PR.Z (FixedReset).

Standard & Poor’s has announced:

• Following a review of Royal Bank of Canada (RBC) under Standard & Poor’s revised bank criteria (published Nov. 9, 2011), we are affirming the ‘AA-/A-1+’ issuer credit ratings on the bank. The outlook is stable.
• Our ratings on RBC are based on its strong business position, moderate capital and earnings, strong risk position, and average funding and adequate liquidity, as our criteria define these terms.
• The issuer credit rating on RBC receives one notch of uplift, reflecting RBC’s high systemic importance in Canada and our assessment of the Canadian government as supportive.
• We expect the bank to continue to generate consistent earnings supported
  by its premier business franchises in Canada with its stable retail banking operations and manageable loan losses.

As we previously announced, on Dec. 13, 2011, Standard & Poor’s Ratings Services affirmed its ‘AA-/A-1+’ issuer credit ratings on Royal Bank of Canada (RBC). The stand-alone credit profile (SACP) is ‘a+’. The outlook is stable. At the same time, we lowered the ratings on the bank and its subsidiaries’ hybrid securities and preferred stock to ‘A-‘ from ‘A’, two notches below the SACP, consistent with application of our revised bank hybrid capital criteria (published Nov. 1, 2011).

We also lowered our ratings on RBC and its subsidiaries’ nondeferrable subordinated debt to ‘A’ from ‘A+’. RBC’s nondeferrable subordinated debt is rated off the ‘a+’ SACP as opposed to being notched from the ‘AA-‘ issuer credit rating, based on our new hybrid criteria. We stipulate that nondeferrable subordinated debt would be rated below a bank’s SACP in countries whose legal or regulatory frameworks may not support this type of debt in a stress scenario. Recent guidance from the Office of the Superintendent of Financial Institutions (OSFI) expresses an expectation that, after a transition period, all Tier 1 and 2 capital instruments “must be able to absorb losses in a failed financial institution”. Standard & Poor’s expects differentiated treatment would apply to capital instruments and senior debt as a Canadian bank approaches a state of nonviability.

The issues remain at P-1(low) on the Preferred Scale.

RY has the following preferred shares outstanding: RY.PR.A, RY.PR.B, RY.PR.C, RY.PR.D, RY.PR.E, RY.PR.F, RY.PR.G and RY.PR.H (DeemedRetractible); RY.PR.I, RY.PR.L, RY.PR.N, RY.PR.P, RY.PR.R RY,PR.T, RY.PR.X and RY.PR.Y (FixedReset); and RY.PR.W (PerpetualDiscount)

Sun Life Financial announced December 12:

the completion of a major strategic review of its businesses. Dean A. Connor, President and Chief Executive Officer, said the company will be repositioned to accelerate growth, improve return on shareholders’ equity and reduce volatility by concentrating its future growth into four key pillars:

• Continuing to build on its leadership position in Canada in insurance, wealth management and employee benefits;
• Becoming a leader in group insurance and voluntary benefits in the U.S.;
• Supporting continued growth in MFS Investment Management, and broadening Sun Life’s other asset management businesses around the world; and
• Strengthening Sun Life’s competitive position in Asia.

As a result of this strategic review, the Company announced that it will close its domestic U.S. variable annuity and individual life products to new sales effective December 30, 2011. The decision to discontinue sales in these two lines of business is based on unfavourable product economics which, due to ongoing shifts in capital markets and regulatory requirements, no longer enhance shareholder value. This decision reflects the Company’s intensified focus on reducing volatility and improving the return on shareholders’ equity by shifting capital to businesses with superior growth, risk and return characteristics.

Standard & Poor’s has announced:

• Sun Life Financial Inc. announced that it will discontinue sales of its U.S. variable annuity (VA) and U.S. individual life products effective Dec. 31, 2011.
• We have placed our ratings on Sun Life Financial Inc., including our ‘A’ counterparty credit rating, on CreditWatch with negative implications, reflecting the potential loss of earnings quality and diversification at the holding company.
• In addition, we have revised our view of Sun Life Assurance Co. of Canada (U.S.) and subsidiaries (SLUS) to nonstrategically important to Sun Life Financial Inc., from core.
• As a result, we lowered our long-term counterparty and financial strength rating on SLUS to ‘A-‘ and placed the ratings on CreditWatch with negative implications.
• The ratings on the Canadian entities within the group are unaffected.

…
We expect to resolve the CreditWatch within three months, following a more in-depth analysis of the SLUS prospective stand-alone capitalization, earnings, the details of the run-off plan, and the potential parental support.

We could affirm the ratings on Sun Life Financial if, upon further analysis, we believe the loss of earnings from SLUS is immaterial and coverage ratios and earnings diversification from remaining operations continue to support the current holding company notching. Otherwise, we could lower our ratings on the holding company by one notch, so that we would rate it three notches below the financial strength rating on the group’s core subsidiaries instead of the current two notches.

In contrast:

DBRS has today commented on the decision announced today by Sun Life Financial Inc. (SLF or the Company) to stop selling variable annuity and individual life insurance products in the U.S. market. DBRS views the decision favourably. There are no rating changes as a result of this action.

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.

Usually reliable sources tell me that the underwriters of MFC.PR.G are blowing out their inventory at 23.75.

MFC.PR.G is a 4.40%+290 FixedReset that settled December 6 to widespread revulsion and despair … the inventory blow-out is happening while the ink’s still wet on the certificate!

It is interesting to compare this with the BCE.PR.K reopening announced yesterday … BCE.PR.K is a 4.15%+188 FixedReset trading at around par.

I don’t get it.

You want to talk about BCE being a better credit than MFC? We can talk. You want to talk about BCE being non-financial and therefore having some scarcity value? We can talk. But is that worth A WHOLE FRIGGIN’ POINT of dividend after reset? Even before accounting for the price difference? You better talk real good!

A mere affirmation of a rating would not normally warrant a dedicated post, but I’ve spent so much of the past six months writing about the issue, it’s worth highlighting.

DBRS confirmed its ratings on YLO today:

DBRS has today confirmed Yellow Media Inc.’s (Yellow Media or the Company) Issuer Rating at BB, its Medium-Term Notes at BB with an RR4 recovery rating, its Exchangeable Subordinated Debentures at B (high) with an RR6 recovery rating and its Preferred Shares at Pfd-4 (low). The trend on its Issuer Rating, debt and preferred shares remains Negative (DBRS lowered its ratings on Yellow Media on September 28, 2011).

DBRS notes that Yellow Media’s unsecured debt has average recovery prospects while its subordinated debt has poor recovery prospects under a base case default/recovery scenario. As such, DBRS has confirmed Yellow Media’s Medium-Term Notes recovery rating at RR4 (30% to 50% expected recovery) with an instrument rating of BB and confirmed its Exchangeable Subordinated Debentures recovery rating at RR6 (0% to 10% expected recovery) with an instrument rating at B (high).
…
From a financial risk perspective, DBRS notes that Yellow Media’s limited financial flexibility and liquidity are compounded by little access to the capital markets. This puts the Company in a position of being largely reliant on its internally generated free cash flow as its primary source of liquidity to repay its debt maturities. While DBRS notes that reduced debt in 2011 (largely paid for with proceeds from the sale of Trader Corporation and LesPAC Inc., as well as free cash flow), the lower resulting interest expense and the reduction and ultimate elimination of its common share dividend in Q4 2011 will help in terms of free cash flow, these will only partially offset the aforementioned pressure on EBITDA as the print-to-digital transition continues. Despite these factors, DBRS expects the Company should be able to generate free cash flow of $200 million or more per year (DBRS has assumed cash taxes are paid in the year they are incurred) in 2012. However, DBRS notes that over the four years from 2013 to 2016, roughly two-thirds of Yellow Media’s total debt ($1.9 billion as at September 30, 2011) matures. In 2013, the Company faces its largest maturity year (likely to be approximately $400 million) as its credit facility matures in February, followed by notes in July and December.
…
DBRS notes that Yellow Media must demonstrate meaningful traction with its digital transition while attaining additional liquidity to help with refinancing needs to keep its Issuer Rating in the BB range. Alternatively, should its transition take longer while print pressure continues to accelerate, Yellow Media may not have the ability to handle its debt maturities by means of internally generated free cash flow as they mature.

Separately, the commercial paper rating was withdrawn:

DBRS had today discontinued its Commercial Paper rating of Yellow Media Inc. (Yellow Media or the Company) after all of the Company’s outstanding commercial paper was repaid upon maturity in November 2011.

DBRS does not expect Yellow Media to issue commercial paper in the near term.

YLO has four listed issues of preferred shares: YLO.PR.A and YLO.PR.B (OperatingRetractible) and YLO.PR.C and YLO.PR.D (FixedReset). All are tracked by HIMIPref™; all are relegated to the Scraps index on credit concerns.

These issues were last mentioned on PrefBlog when S&P downgraded them to P-4(low).