Category: Issue Comments

Financial 15 Split Inc. has released its Semi-Annual Report to May 31, 2011.

There’s an interesting line item in the statement of expenses: Capital tax, $7,103. I can’t figure that one out, and it’s not mentioned anywhere else in the document … but it’s minor, so we’ll let it go.

Figures of interest are:

MER: 1.22% of the whole unit value.

Average Net Assets: We need this to calculate portfolio yield. [147.6-million (NAV, beginning of period) + 147.8-million (NAV, end of period)] / 2 = about 148-million.

Underlying Portfolio Yield: Dividends received (net of withholding) of 2,216,733, times two (semi-annual) divided by average net assets of 148-million is 3.00%

Income Coverage: Net Investment Income of 1,286,575 divided by Preferred Share Distributions of 2,428,897 is 53%.

Financial 15 Split Corp. II has released its Semi-Annual Report to May 31, 2011.

Figures of interest are:

MER: 1.16% of the whole unit value

Average Net Assets: We need this to calculate portfolio yield. No change in Number of Units Outstanding, so just calculate as [83.1-million (NAV at beginning of period) + 84.6-million (NAV at end of period)] / 2 = 84-million, more or less.

Underlying Portfolio Yield: Dividends received (net of withholding) of 1,203,296 times two because it’s only half a year divided by average net assets of 84-million is 2.86%

Income Coverage: Net Investment Income of 703,329 divided by Preferred Share Distributions of 1,493,166 is 47%.

Yellow Media has announced:

the successful completion of the sale of Trader Corporation’s automotive segment to Funds advised by Apax Partners. The transaction, previously announced on March 25, 2011, was completed for a net purchase consideration of $708 million, net of expenses and estimated working capital, fees and other adjustments.

This divestiture will enable the Company to strengthen its capital structure and focus all of its efforts on YPG’s digital transformation and organic execution in its core business. The proceeds from the sale will be largely used to reduce indebtedness and for general corporate purposes.

I’ve been checking every day since the Trader Corp. debt issue closed on July 22! As noted on July 27, their 11Q2 financials will be released on August 4.

This is not the kind of thing I usually report on PrefBlog … but the YLO issues have been … somewhat volatile in recent months. YLO has four issues outstanding, the retractibles YLO.PR.A and YLO.PR.B; and the FixedResets YLO.PR.C and YLO.PR.D. All are tracked by HIMIPref™; all are relegated to the Scraps index on credit concerns.

The June edition of PrefLetter contained a short appendix on YLO; I won’t decide until I look at the financials, but I suspect that the August edition will have another.

DundeeWealth Inc. has announced:

that it has called a special meeting of shareholders of DundeeWealth for September 7, 2011 to consider 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. If the proposed amendment is approved, the redemption will occur on September 8, 2011 (or, if the special meeting is adjourned or postponed, on the business day immediately following any such adjourned or postponed meeting).

The Series 1 Shares are currently redeemable by DundeeWealth at a price of $26.25 per Series 1 Share plus accrued and unpaid dividends thereon up to but excluding the redemption date, provided that circumstances exist where holders of the Series 1 Shares are entitled to vote separately as a class or series by law. Commencing on March 13, 2012, DundeeWealth will have the right to redeem the Series 1 Shares at a price of $26.00 per Series 1 Share plus accrued and unpaid dividends thereon, without any requirement for a vote.

The proposal provides holders of Series 1 Shares with an opportunity to realize on their investment in DundeeWealth at a premium of $0.25 over the current redemption price and a premium of $0.50 over the redemption price that will apply commencing on March 13, 2012. In addition, the redemption price contemplated by the proposal represents a premium of $0.50 over the 20-day volume weighted average trading price for the Series 1 Shares for the period ended July 26, 2011.

The Series 1 Shares are listed for trading on the Toronto Stock Exchange under the symbol “DW.PR.A”. If the special resolution is approved by shareholders, DundeeWealth intends to apply to delist the Series 1 Shares from trading on the Toronto Stock Exchange and to exercise its right to redeem its $200 million 5.10% series 1 notes due September 25, 2014. Upon the redemption of the Series 1 Shares and the series 1 notes, DundeeWealth will apply to cease to be a reporting issuer under the securities laws of each province of Canada in which it is currently a reporting issuer.

In order to become effective, the special resolution must be approved by: (i) two-thirds of the votes cast together by all holders of common shares, special shares, series C and first preference shares, series X present in person or represented by proxy at the meeting; and (ii) two-thirds of the votes cast by the holders of Series 1 Shares present in person or represented by proxy at the meeting voting as a class. The Bank of Nova Scotia owns all of the outstanding common shares, special shares, series C and first preference shares, series X as well as approximately 1.6% of the outstanding Series 1 Shares and has indicated that it intends to vote in favour of the special resolution. Accordingly, the approval referred to in (i) above is assured.

Details of the proposal will be outlined in an information circular to be sent to shareholders in connection with the special meeting. Copies of the information circular will be available on the SEDAR website at www.sedar.com.

DW.PR.A was last mentioned on PrefBlog when it was upgraded to P-2(high) by S&P.

The proposed redemption price of $26.50 to be paid 2011-9-8 implies a yield of 3.52% (quarterly compounding) until the par call date of 2016-3-13. Note that:

Any redemption before March 13, 2012 is limited to circumstances where the Series 1 Shares are entitled to vote separately as a class or series by law.

If redeemed 2012-3-13 at 26.00, the yield to par call would be 3.92%.

So basically, although 3.52% seems like a fat yield for the company (compared to, say, the 1.98% that National got on its tender offer) or the YTWs on investment grade operating retractibles, it’s probably as good as you’re gonna get. I recommend voting ‘Yes’.

BCE Inc. has announced:

that 3,245,010 of its 14,000,000 fixed-rate Cumulative Redeemable First Preferred Shares, Series AI (series AI preferred shares) have been tendered for conversion on August 1, 2011, on a one-for-one basis, into floating-rate Cumulative Redeemable First Preferred Shares, Series AJ (series AJ preferred shares). Consequently, BCE will issue 3,245,010 new series AJ preferred shares on August 1, 2011.

The remaining series AI preferred shares will continue to be listed on The Toronto Stock Exchange under the symbol BCE.PR.I. The series AI preferred shares will pay on a quarterly basis, for the five-year period beginning on August 1, 2011, as and when declared by the Board of Directors of BCE, a fixed dividend based on an annual dividend rate of 4.15%.

The series AJ preferred shares will pay a monthly floating adjustable cash dividend for the five-year period beginning on August 1, 2011, as and when declared by the Board of Directors of BCE. The monthly floating adjustable dividend for any particular month will be calculated based on the prime rate for such month and using the Designated Percentage for such month representing the sum of the adjustment factor (based on the market price of the series AJ preferred shares in the preceding month) and the Designated Percentage for the preceding month. The series AJ preferred shares will be listed on The Toronto Stock Exchange under the symbol BCE.PR.J and will start trading at the opening of the market on August 2, 2011.

BCE.PR.I is tracked by HIMIPref™, but is assigned to the Scraps index on credit concerns. BCE.PR.J will be tracked by HIMIPref™ when it commences trading. The issues and exchange potential were discussed on PrefBlog in the post BCE.PR.I: Rate Change to 4.15%; Exchangeable to Ratchets

Intact Financial Corporation has announced:

that it has closed its bought deal offering (the “Offering”) of Non-cumulative Rate Reset Class A Shares Series 1 (the “Series 1 Preferred Shares”) underwritten by a syndicate of underwriters led by CIBC, RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc., and including BMO Nesbitt Burns Inc., National Bank Financial Inc., Canaccord Genuity Corp., GMP Securities L.P., Macquarie Capital Markets Canada Ltd., HSBC Securities (Canada) Inc. and Raymond James Ltd. (the “Underwriters”), resulting in gross proceeds (including the over-allotment option proceeds) to IFC of $250,000,000.

IFC entered into an underwriting agreement dated June 27, 2011 with the Underwriters under which the Underwriters agreed to purchase from IFC and sell to the public 9,000,000 Series 1 Preferred Shares at a price of $25.00 per Series 1 Preferred Share for gross proceeds to IFC of $225,000,000. The Underwriters have exercised their over-allotment option and purchased an additional 1,000,000 Series 1 Preferred Shares at a price of $25.00 per Series 1 Preferred Share for gross proceeds to IFC of $25,000,000.

The net proceeds from the Offering, together with borrowings under acquisition credit facilities previously arranged by IFC, the proceeds of a previously announced subscription receipt offering, the net proceeds from a previously announced private placement of medium term notes and a portion of IFC’s existing cash resources are intended to be used by IFC to fund the purchase price for its previously announced acquisition of all of the issued and outstanding shares of AXA Canada Inc. (the “Acquisition”). The closing of the Acquisition is expected to occur in the fall of 2011 and is subject to receipt of required competition and insurance regulatory approvals and the satisfaction of certain closing conditions. The Offering is not conditional upon closing of the Acquisition; if the Acquisition is not completed, the net proceeds of the Offering will be used for general corporate purposes.

The holders of Series 1 Preferred Shares will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of IFC, on a quarterly basis (with the first quarterly dividend to be paid on September 30, 2011), for the initial fixed rate period ending on December 31, 2017, based on an annual rate of 4.20%. The dividend rate will be reset on December 31, 2017 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 1.72%.

Holders of the Series 1 Preferred Shares will have the right, at their option, to convert their Series 1 Preferred Shares into Non-cumulative Floating Rate Class A Shares Series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on December 31, 2017 and on December 31 every five years thereafter. The holders of Series 2 Preferred Shares will be entitled to receive floating rate non-cumulative preferential cash dividends, as and when declared by the Board of Directors of IFC, at a rate equal to the 90-day Canadian Treasury Bill rate plus 1.72%.

DBRS Limited has assigned a rating of Pfd-2(low) with a Stable trend for the Series 1 Preferred Shares.

The Series 1 Preferred Shares will commence trading on the Toronto Stock Exchange on July 12, 2011 under the symbol IFC.PR.A.

IFC.PR.A is a FixedReset, 4.20%+172 announced June 22. The issue traded 542,720 shares today in a range of 24.95-17 before closing at 25.08-15.

IFC.PR.A is tracked by HIMIPref™ and has been assigned to the FixedReset index. As Intact Financial is an insurance holding company and the issue does not have an NVCC clause, a DeemedMaturity entry has been added to the call schedule for this issue – see the January, February, March and June editions of PrefLetter for discusion.

Vital Statistics are:

BCE announced earlier:

Beginning on June 17, 2011 and ending on July 22, 2011, holders of Series AI Preferred Shares will have the right to choose one of the following options with regards to their shares:

1. To retain any or all of their Series AI Preferred Shares and continue to receive a fixed quarterly dividend; or
2. To convert, on a one-for-one basis, any or all of their Series AI Preferred Shares into BCE Inc. Cumulative Redeemable First Preferred Shares, Series AJ (the “Series AJ Preferred Shares”) and receive a floating monthly dividend.

Effective August 1, 2011, the fixed dividend rate for the Series AI Preferred Shares will be set for a five-year period as explained in more detail in paragraph 5 of the attached Notice of Conversion Privilege. Should you wish to continue receiving a fixed quarterly dividend for the five-year period beginning August 1, 2011, you do not need to take any action with respect to this notice. However, should you wish to receive a floating monthly dividend, you must elect to convert your Series AI Preferred Shares into Series AJ Preferred Shares as explained in more detail in the attached Notice of Conversion Privilege.

Today BCE announced the chosen rate:

BCE Inc. will, on August 1, 2011, continue to have Cumulative Redeemable First Preferred Shares, Series AI outstanding if, following the end of the conversion period on July 22, 2011, BCE Inc. determines that at least two million Series AI Preferred Shares would remain outstanding. In such a case, as of August 1, 2011, the Series AI Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on an annual fixed dividend rate equal to 4.15%.

If converted, the symbol for the Ratchet Rate issue will be BCE.PR.J, which does not currently exist.

S Split Corp. has released its Annual Report to December 31, 2010.

Figures of interest are:

MER: 2.26% of the whole unit value

Average Asset Value: $82-million

Underlying Portfolio Yield: When fully invested will be equal to BNS common: 3.63%

Income Coverage: 0.5:1 – they have often kept a lot of cash on the books.

PrefBlog’s awesome power has been illustrated yet again, as Faircourt Asset Management, the Manager of Faircourt Split Trust , has announced:

that $13,996,390 in aggregate principal amount of the Trust’s outstanding 6.25% Preferred Securities (the “Preferred Securities”) will be redeemed on July 22, 2011 (the “Redemption Payment Date”). The record date of the Preferred Securities partial redemption is July 15, 2011.

Proceeds from the Preferred Securities redemption will amount to $10.0377 for each $10.00 principal amount of Securities, being equal to the aggregate of (i) $10.00 (the “Redemption Price”), and (ii) all accrued and unpaid interest hereon to but excluding the Redemption Payment Date (collectively, the “Total Redemption Price”).

The interest upon the principal amount of Preferred Securities called for redemption shall cease to be payable from and after the Redemption Payment Date, unless payment of the Total Redemption Price shall not be made on presentation for surrender of such Preferred Securities on or after the Redemption Payment Date or prior to the setting aside of the Total Redemption Price pursuant to the Indenture.

Securities will be redeemed pro rata from each beneficial holder of Securities pursuant to the procedures of CDS Clearing and Depository Services Inc. Beneficial holders of Preferred Securities should contact their broker with any questions regarding the redemption.

The size of the preferred share redemption exactly counterbalances the unmatched Capital Unit retraction discussed on PrefBlog in the post FCS.PR.B Credit Quality to Deteriorate.

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

Scotia Managed Companies, the sponsor of BNS Split Corp. II has announced:

the completion of its warrant offering.

The gross proceeds from the exercise of the warrants totaled $63.0 million, representing 100% of the maximum available subscription amount.

The net proceeds from the exercise of the warrants will be invested in accordance with the investment objectives of the Company.

BNS Split Corp. II is a mutual fund corporation created to hold a portfolio of common shares of The Bank of Nova Scotia. The 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.

This doubles the size of the issue, meaning that there are now about 2.6-million shares outstanding with a par value of 18.85. This is sufficient to provide meaningful liquidity – not great, but meaningful – and the issue has been added to HIMIPref™ effective on the date of original issue, 2010-9-22. Purists will object to the backdating on the grounds that this increases selection bias in the HIMIPref™ universe; purists are invited to go take a running jump.

Issue information has been taken from the prospectus of the original issue.

BSC.PR.B was last mentioned on PrefBlog when I reported the imminent expiration of the warrants. BSC.PR.B is currently included in the Scraps index.