Category: Issue Comments

Huh. It’s not too long ago that the float of BSC.PR.B doubled – now it’s been more than halved.

BNS Split Corp. II has announced:

that it has called 842,301 Preferred Shares for cash redemption on September 22, 2011 (in accordance with the Company’s Articles) representing approximately 46.440% of the outstanding Preferred Shares as a result of the special annual retraction of 1,684,602 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 September 20, 2011 will have approximately 46.440% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $18.85 per share.

In addition, holders of a further 1,320,922 Capital Shares and 660,486 Preferred Shares have deposited such shares concurrently for retraction on September 22, 2011. As a result, a total of 3,005,574 Capital Shares and 1,502,787 Preferred Shares, or approximately 60.641% 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 September 22, 2011.

Payment of the amount due to holders of Preferred Shares will be made by the Company on September 22, 2011. From and after September 22, 2011 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.

BNS Split Corp. II is a mutual fund corporation whose principal undertaking is to invest in common shares of The Bank of Nova Scotia. Capital Shares and Preferred Shares of BNS Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols BSC and BSC.PR.B respectively.

BSC.PR.B was last mentioned on PrefBlog when the warrant issue doubled the float about nine weeks ago. BSC.PR.B is tracked by HIMIPref™ but relegated to the Scraps index on volume concerns.

DundeeWealth Inc. has announced:

that at a special meeting of shareholders of DundeeWealth held earlier today, its shareholders approved a special resolution authorizing an amendment to the Company’s articles to permit the Company to redeem all of the issued and outstanding first preference shares, series 1 (the “Series 1 Shares”) at a price of $26.50 plus accrued and unpaid dividends up to but excluding the redemption date. Of the 2,795,594 votes cast by the holders of Series 1 Shares at the meeting, 99.65% voted in favour of the special resolution. All of the common shares, special shares, series C and first preference shares, series X were voted in favour of the special resolution. On September 8, 2011, the Series 1 Shares will be redeemed by the Company and delisted from trading on the Toronto Stock Exchange.

The potential for redemption was discussed on PrefBlog when the Special Meeting was announced.

DW.PR.A was tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

In the post YLO Discloses August Preferred Share BuyBacks, I noted:

As pointed out by Assiduous Reader radamesb, it appears that the company has reached – and even gone beyond! – its NCIB limit for the two retractibles; it looks like any further purchases of YLO.PR.A and YLO.PR.B will have to be done by public tender (such as was done for the NA high-coupon FixedResets, but – heh-heh – with a lower price).

Assiduous Reader radamesb suggested in the comments (edited to reflect correction):

Cangator pointed out to me in an email that using May 13 June 13 as the start date for Series 1 & 2 comes out to exactly the right amount of Series A shares, and leaves room for Series B if the cancellation of 490,904 shares on May 14 is counted towards the previous year’s buyback (since the original purchases were made before May 13). It seems that while they calculated the volume based on the same dates, that they were permitted to finish the previous year’s buyback before starting the new one, leaving different end dates as well.

I sent an eMail to YLO’s Investor Relations Department:

I have calculated totals for your shares purchased in the past few months, as disclosed on SEDI.

I calculate a total of 1,232,948 YLO.PR.A since May 13, compared to your NCIB annual maximum of 1,127,882.

Similarly, I calculate 771,888 YLO.PR.B since May 13, compared to the NCIB maximum of 684,028.

Can you explain these discrepencies?

The IR department has now responded:

Thank you for your interest in Yellow Media Inc.

Please note that the amount of Series 1 & 2 preferred shares purchased through the NCIB from May 13, 2011 to June 10, 2011 followed the NCIB approved by the TSX on June 8, 2010.

The amount of Series 1 & 2 preferred shares purchased through the NCIB since June 13, 2011 followed the NCIB approved by the TSX on May 11, 2011.

Prime Dividend Corp. has announced (although not yet on their website):

that a special meeting of the holders of the Company’s Preferred Shares and Class A Shares will be held at 11:00 a.m. (Eastern standard time) on Thursday, November 3, 2011. The purpose of the meeting is to consider a special resolution to extend the mandatory termination date for the Company from December 1, 2012 to December 1, 2018. Shareholders of record at the close of business on September 29, 2011 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.

If the extension is approved, Class A Shareholders and Preferred Shareholders will be provided with a Special Retraction right which is designed to provide Shareholders with an opportunity to retract their Shares and receive a retraction price that is calculated in the same way that such price would be calculated if the Company were to terminate on December 1, 2012 as originally contemplated.

PDV.PR.A was last mentioned on PrefBlog in August 2009. PDV.PR.A is not tracked by HIMIPref™ – the issue size is simply too small.

Brookfield Office Properties has announced:

the completion of its previously announced Preferred Shares, Series R issue in the amount of C$250 million. The offering was underwritten by a syndicate led by RBC Capital Markets, CIBC, Scotia Capital Inc. and TD Securities Inc.

Brookfield Office Properties issued 10.0 million Preferred Shares, Series R at a price of C$25.00 per share yielding 5.10% per annum for the initial five-year period ending September 30, 2016. Net proceeds from the issue will be added to the general funds of Brookfield Office Properties and be used for general corporate purposes, including, but not limited to, the repayment or refinancing of debt, acquisitions, capital expenditures and working capital needs.

The Preferred Shares, Series R will commence trading on the Toronto Stock Exchange on September 2, 2011 under the ticker symbol BPO.PR.R.

BPO.PR.R is a 5.10%+348 FixedReset, announced August 25. It will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The issue traded 279,850 shares today in a relatively wide range of 24.70-05 before closing at 24.95-99, 5×25. Vital statistics are:

Details from SEDI.

Normal Course Issuer Bid (NCIB) information from YLO Press Release 2011-5-11.

As pointed out by Assiduous Reader radamesb, it appears that the company has reached – and even gone beyond! – its NCIB limit for the two retractibles; it looks like any further purchases of YLO.PR.A and YLO.PR.B will have to be done by public tender (such as was done for the NA high-coupon FixedResets, but – heh-heh – with a lower price).

However, the Exchange reports the usual batch of 3,134 insider buys today, so I’m not sure what’s going on. Anybody who knows the rules better than I do – or can shake an answer out of YLO Investor Relations – may enlighten me in the comments.

Scotia Managed Companies has announced:

The Board of Directors of Energy Split Corp. Inc. (the “Company”) today declared a return of capital distribution of $0.23625 per Class B Preferred Share payable on September 16, 2011 to holders of record at the close of business on September 15, 2011.
In addition, the Board of Directors of the Company has declared a capital gains distribution of $0.1700 per Capital Yield Share, payable on September 16, 2011 to holders of record at the close of business on September 15, 2011.

Holders of Class B Preferred Shares are entitled to receive quarterly fixed cumulative distributions equal to $0.23625 per Preferred Share. The Capital Yield Shareholders are provided with a leveraged play on the yield and price performance from a fixed portfolio consisting of 15 oil and gas royalty trusts listed on the Toronto Stock Exchange. The Company’s Capital Yield Share distribution policy is to pay a quarterly distribution on the Capital Yield Shares equal to the excess of the distributions received on the royalty trust portfolio minus the Class B Preferred Share distributions and all administrative and operating expenses provided the net asset value per Unit at the time of declaration, after giving effect to the distribution, would be greater than the original issue price of the Class B Preferred Shares.

The Capital Yield Shares and Class B Preferred Shares will be redeemed by the Company on September 16, 2011 in accordance with the redemption provisions as detailed in the prospectus dated September 7, 2006. Pursuant to these provisions, the Class B Preferred Shares will be redeemed at a price per share equal to the lesser of $21.00 and the Net Asset Value per Unit. The Capital Yield Shares will be redeemed at a price equal to the amount by which the Net Asset Value per Unit exceeds $21.00. The Net Asset Value per Unit was $37.74 as at August 30, 2011.

A further press release will be issued by the Company in connection with the redemption prices on September 15, 2011. Payment of the amounts due to holders of Capital Yield Shares and Class B Preferred Shares will be made by the Company on September 16, 2011.

Capital Yield Shares and Class B Preferred Shares of Energy Split Corp. Inc. are listed for trading on The Toronto Stock Exchange under the symbols ES and ES.PR.B respectively.

ES.PR.B was last mentioned on PrefBlog when it was upgraded to Pfd-3 by DBRS in April. ES.PR.B is not tracked by HIMIPref™.

Update 2011-9-15: Redemption Prices:

Redemption Price per Class B Preferred Share: $21.00
Redemption Price per Capital Yield Share: $15.19

Faircourt Asset Management has announced:

that it has filed a final short form prospectus for an offering of warrants to unitholders of the Trust (the “Offering”). Each unitholder will receive one whole Series A warrant (each, a “Series A Warrant”) for each unit of the Trust (each, a “Unit”) on the record date of September 23, 2011.

Each Series A Warrant will entitle the holder thereof to purchase one Unit, one half of a 6.25% preferred security of the Trust (each, a “Preferred Security”) and one Series B warrant (each, a “Series B Warrant”) upon payment of the subscription price of $10.92 (which is the sum of (a) the most recently calculated NAV per Unit prior to the date of the preliminary short form prospectus, (b) $5.00 (which is one-half of the principal amount of a Preferred Security) and (c) the estimated per Unit fees and expenses of the Offering). The Series A Warrants may be exercised on a weekly basis every Friday commencing on September 30, 2011 and ending on December 2, 2011.

Each Series B Warrant will entitle the holder on and only on June 27, 2012 to subscribe for one Unit at the subscription price of $7.25. The Series B Warrants may be only exercised on June 27, 2012.

The TSX has conditionally approved this listing of the Series A Warrants distributed pursuant to the Offering, and the Units, Preferred Securities and Series B Warrants issuable upon the exercise thereof, on the TSX.

Successful completion of the Offering will (a) provide the Trust with additional capital that can be used to take advantage of attractive investment opportunities; (b) increase the trading liquidity of the Units; (c) reduce the leverage associated with the Preferred Securities of the Trust which has increased in recent years due to market conditions and the redemption of Units; (d) bring the Trust closer to achieving a matched position where the number of outstanding Units and Preferred Securities are equal; and (e) reduce the management expense ratio of the Trust.

Asset coverage for this issue has been a continuing matter of interest, with an unmatched retraction of capital units on June 30 being followed by a a matching redemption of preferred securities shortly afterwards. As with many other investment vehicles, the fund is now slightly behind where it was on May 31, the effective date of the retraction.

FCS.PR.B is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Details are available at SEDI.

The odd number for the total face value (a non-integral multiple of 1,000) has been previously discussed, so don’t start, OK? Totals include all filings commencing August 18.

The price paid for the 5.71% April 21, 2014 is considerably lower than they have paid before.

Readers of the August edition of PrefLetter will understand that I am bitterly disappointed with the company’s decision to pursue buybacks by private contract; I feel that a Dutch Auction Tender, for all issues in one big pot (with conversion factors on the prices of different issues to reflect differing desirability to the company of purchasing the issues) would be a far better way to go.

YLO has the following preferred issues outstanding: YLO.PR.A, YLO.PR.B, YLO.PR.C and YLO.PR.D; the Normal Course Issuer Bid for these issues is still being pursued vigorously.

World Financial Split Corp has released its Semi-Annual Report to June 30, 2011:

Distributions to Class A shareholders remained suspended in accordance with the terms of the prospectus which states: “No distribution will be paid to the Class A shares if (i) the distributions payable on the Preferred shares are in arrears; or (ii) after the payment of the distribution by the Fund, the net asset value per unit would be less than $15.00”.
…
During the six months ended June 30, 2011, the total return of the Fund was negative 4.1 percent reflecting a decline in value of the securities in the portfolio. The MSCI World Financials Index (the “Financials Index”) total return in Canadian dollar terms during the same period was negative 1.1 percent. As a result of the Fund being limited to a specific universe of stocks and utilizing a covered call writing strategy to generate income, comparison with a market index may not be appropriate. The Financials Index is calculated without the deduction of management fees and fund expenses, whereas the performance of the Fund is calculated after deducting such fees and expenses.

MER:

The MER for 2011 excluding warrant exercise fees and special resolution expense
is 1.65%.

Average Net Assets: This is difficult to calculate from the financial statements, but if we accept that MER is based on the average, and that the expenses used for this calculation were the “Subtotal Expenses” on the income statment, we arrive at Average Net Assets of 56.5-million, which looks like a reasonable figure.

Underlying Portfolio Yield: Investment income (sum of interest, dividends and withholding taxes) of $1.244-million received multiplied by two (since it’s a six month figure) divided by average net assets of $56.5-million is 4.40%.

Income Coverage: Net investment income of $1.244-million less expenses before special resolution expense of $0.932-million is $0.312-million, to cover preferred dividends of 1.894-million is about 16%.

With respect to the Monthly Retraction Right, the Special Resolution (which was approved) states:

If the Reorganization is approved and implemented, shares will have to be surrendered for retraction by a holder of Class A Shares or Preferred Shares at least ten business days prior to a Valuation Date in order to be retracted on such Valuation Date and such shareholder will receive payment on or before the tenth business day following such Valuation Date.
…
Shareholders whose Preferred Shares are retracted on a Valuation Date will be entitled to receive a retraction price per share (the “Preferred NAV Retraction Price”) equal to 96% of the lesser of (a) the NAV per Unit as of the applicable Valuation Date less the cost to the Fund of purchasing a Class A Share in the market for cancellation and (b) 10.00.
…
Under the Reorganization, the monthly retraction price for the Preferred Shares will be changed and shareholders whose Preferred Shares are retracted on a Valuation Date will be entitled to receive a retraction price per share equal to the lesser of:
(a) the Preferred NAV Retraction Price; and
(b) 96% of the lesser of (i) the Unit Market Price less the cost to the Fund of purchasing a Class A Share in the market for cancellation and (ii) $10.00.

For this purpose, the cost of the purchase of a Preferred Share or a Class A Share will include the purchase price of the share, commission and such other costs, if any, related to the liquidation of any portion of the Portfolio to fund the purchase of such share. Any declared and unpaid distributions payable on or before a Valuation Date in respect of Class A Shares or Preferred Shares tendered for retraction on such Valuation Date will also be paid on the retraction payment date. In addition, the following terms have the meanings set forth below.

Class A Market Price: means the weighted average trading price of the Class A Shares on the principal stock exchange on which the Class A Shares are listed (or, if the Class A Shares are not listed on any stock exchange, on the principal market on which the Class A Shares are quoted for trading) for the 10 trading days immediately preceding the applicable Valuation Date.

Preferred Market Price: means the weighted average trading price of the Preferred Shares on the principal stock exchange on which the Preferred Shares are listed (or, if the Preferred Shares are not listed on any stock exchange, on the principal market on which the Preferred Shares are quoted for trading) for the 10 trading days immediately preceding the applicable Valuation Date.

Unit Market Price: means the sum of the Class A Market Price and the Preferred Market Price.

This is somewhat more complex than it used to be! Using current figures from the Mulvihill site:
NAV: 10.29
Preferred Share Price: 8.66
Class A Share Price: 1.07

And assuming that the average trading price (determined after the shares are tendered) is equal to the current price and that the NAV also doesn’t change (always a risk with this type of retraction; sometimes significant!) we may derive:

Preferred NAV Retraction Price = 96% of lesser of (a) 10.29 – 1.07 and (b) 10.00
= 96% of 9.22
= 8.85

The Unit Market Price is 8.66+1.07 = 9.73; the cost to the fund of purchasing a class A share is assumed to be 1.07; so part (b) of the calculation is now
96% of the less of (i) 9.73 – 1.07 = 8.66
and (ii) 10.00
= 96% * 8.66
= 8.31

So, careful examination of the above will reveal that the monthly retraction privilege is now useless for preferred shareholders: the price you get may be assumed (given prudence) to be 96% of what you would get on the market, so what’s the point? Very clever, Mr. Mulvihill … but “Clever Dick came to a bad end” is a Victorian nursery proverb that comes to mind.