Category: Issue Comments

R Split III Corp. has announced:

that it has called 138,250 Preferred Shares for cash redemption on May 31, 2011 (in accordance with the Company’s Articles) representing approximately 8.9583729% of the outstanding Preferred Shares as a result of the annual retraction of 276,500 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 May 30, 2011 will have approximately 8.9583729% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $29.22 per share.

In addition, holders of a further 150,000 Capital Shares and 75,000 Preferred Shares have deposited such shares concurrently for retraction on May 31, 2011. As a result, a total of 426,500 Capital Shares and 213,250 Preferred Shares, or approximately 13.1778% 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 May 31, 2011.

Payment of the amount due to holders of Preferred Shares will be made by the Company on May 31, 2011. From and after May 31, 2011 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any rights in respect of such shares except to receive the amount due on redemption.

R Split III Corp. is a mutual fund corporation created to hold a portfolio of common shares of Royal Bank of Canada. Capital Shares and Preferred Shares of R Split III Corp. are listed for trading on The Toronto Stock Exchange under the symbols RBS and RBS.PR.A respectively.

RBS.PR.A was last mentioned on PrefBlog when there was a partial call for redemption in May, 2010. RBS.PR.A is not tracked by HIMIPref™.

Allbanc Split Corp has announced:

Allbanc Split Corp. (the “Company”) is pleased to announce that it will be hosting an investor update conference call on Tuesday, May 24, 2011, with Brian McChesney, President and CEO of Scotia Managed Companies Administration (the “Administrator”).
The conference call will provide an update on the Company’s portfolio and performance.

Investors and investment advisors are reminded that the Fund currently has warrants outstanding which expire on June 6, 2011 at 5:00 p.m. (Toronto time). Note that investment dealers may have deadlines earlier than June 6, 2011.

Conference Call
Tuesday, May 24, 2011 at 11:00 a.m. (EST)
Featuring Brian McChesney, President and CEO of the Administrator
Dial-in Numbers: 416-340-2217 or 1-866-696-5910
Passcode: 6138843#

A replay of the conference call will be available at 905-694-9451 or 1-800-408-3053, passcode 1365315#.
Each warrant entitles the holder to purchase one Unit, each Unit consisting of one Class A Capital Share and one Class B Preferred Share, for a subscription price of $62.78 per Unit. The warrants are listed on the Toronto Stock Exchange under the ticker symbol ABK.WT.

Holders of Class B Preferred Shares are entitled to receive quarterly fixed cumulative dividends equal to $0.3344 per Class B Preferred Share. The Company’s Capital Share dividend policy is to pay holders of Class A Capital Shares quarterly dividends in an amount equal to the dividends received on the underlying portfolio securities minus the dividends payable on the Class B Preferred Shares and all administrative and operating expenses provided the net asset value per Unit at the time of declaration, after giving effect to the dividend, would be greater than the original issue price of the Class B Preferred Shares.

Allbanc Split Corp. is a mutual fund corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. The Class A Capital Shares and Class B Preferred Shares of Allbanc Split Corp. are all listed for trading on The Toronto Stock Exchange under the symbols ABK.A and ABK.PR.B respectively.

The NAV as of May 12 was 66.86, sufficient for Asset Coverage of 2.5-:1, and making the warrants significantly in-the-money. The warrants issue was reported on PrefBlog.

ABK.PR.B was last mentioned on PrefBlog when there was a partial call for redemption in February. AKB.PR.B is not tracked by HIMIPref™ but if the warrant issue goes well – and there is every reason to believe it should – it will be added.

Allbanc Split Corp. II has announced:

the Company has issued one half warrant for every Capital Share to holders of Capital Shares of the Company of record as at the close of business on May 16, 2011.

Each whole warrant will entitle the holder to purchase one Unit, each Unit consisting of two Capital Shares and one Preferred Share, for a subscription price of $50.12 per Unit. Commencing May 17, 2011, warrants may be exercised at any time on or before 5:00 p.m. (Toronto time) on November 30, 2011. The warrants are listed on The Toronto Stock Exchange under the ticker symbol ALB.WT.

Holders of Preferred Shares are entitled to receive quarterly fixed cumulative distributions equal to $0.2316 per Preferred Share. The Company’s Capital Share dividend policy is to pay a quarterly dividend on the Capital Shares equal to the dividends received by the Company on the underlying portfolio securities minus the dividends payable on the Preferred Shares and all administrative and operating expenses provided the net asset value per Unit at the time of declaration, after giving effect to the dividend, would be greater than the original issue price of the Preferred Shares.

Allbanc Split Corp. II is a mutual fund corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. Capital Shares and Preferred Shares of Allbanc Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols ALB and ALB.PR.B respectively.

ALB.PR.B was last mentioned on PrefBlog when it was issued in February. ALB.PR.B is tracked by HIMIPref™ and comprises part of the SplitShare subindex.

Manulife Investments has announced:

that an accrued quarterly cash distribution in the amount of $0.08798 per Preferred Share of the Corporation will be included in the final redemption amount to be paid on or about June 6, 2011 to Preferred shareholders of record as of May 31, 2011. Such distribution will consist of $0.00443 of eligible Canadian dividends and $0.08355 return of capital and has been prorated to reflect the previously announced termination of the Corporation effective May 31, 2011. Class A shareholders are not entitled to this accrued cash distribution. It is not expected that the Corporation will declare any special capital gain dividends prior to the final redemption payment. As previously announced, at a special meeting held on April 4, 2011 the Corporation’s shareholders voted to terminate the Corporation effective May 31, 2011, in accordance with its constating documents. Shareholders need not take any action to receive the final redemption proceeds on termination of the Corporation. In advance of the termination of the Corporation, the Preferred Shares and the Class A Shares will be delisted from the Toronto Stock Exchange as at the close of trading on May 31, 2011.

The NAV of ASC.PR.A was 10.375 on 2011-5-6 – given the horrible credit quality of the preferreds, only a really, really stupid preferred shareholder would have voted in favour of the plan.

Preferred shareholders were victorious in the shareholder vote, despite a recommendation by the directors of the firm:

• Paul Lorentz
• Sheila Hart
• Jennifer Mercanti
• Warren Law

that they should vote in favour of the plan.

The plan, approved by the directors, was a really abusive piece of work.

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

I think a dividend-tilting index would have been a more appropriate benchmark for this fund than the Composite, but we’ll let that go.

Figures of interest are:

MER: 1.22% of the whole unit value

Average Net Assets: The fund more than doubled in size during 2010, making this calculation a little tricky; the value is required in order to calculate portfolio yield. The Net Asset Value at year end was $79.0-million, compared to $36.1-million a year prior, so call it an average of $57.6-million. Total Preferred Share Distribution was $1.60-million, at $0.525/unit implies an average of 3.05-million units, at an average NAV of (18.17 + 17.99) / 2 = 18.08, so call it $55.1-million. This is good agreement, call the average NAV $56-million.

Underlying Portfolio Yield: Dividends and interest received of $2.24-million divided by average net assets of 56-million is 4.0%.

Income Coverage: Dividends, Securities Lending Income & Interest of $2.24-million less expenses of $1.55-million is $0.7-million, to cover preferred dividends of $1.6-million is 44%.

BAM Split Corp. has not posted its 2010 Annual Report on its website, so investors must go to SEDAR to get it; it was filed on 2010-12-17.

The performance reporting is rather boring, since only the various preferred share issues (BNA.PR.B, BNA.PR.C, BNA.PR.D and BNA.PR.E) are listed; the returns for the capital units are not reported, nor is the return of the underlying portfolio – which is entirely BAM.A plus or minus a bit of cash drag anyway. The performance table will therefore not be reproduced here.

Figures of interest are:

MER: (excluding dividends on preferred shares, issue costs and Class A Preferred Share redemption premium) 0.0%. You don’t see that number very often! A more precise calculation from the Income Statement shows that the expenses totalled $333,000, or about 2bp on assets.

The expenses are wel itemized, however, and are a delight for voyeurs. I found the Listing Fees of $72,000 and Rating Fees of $20,000 to be most interesting.

Average Net Assets: There’s no point calculating this, since Portfolio Yield can be estimated directly from BAM.A

Underlying Portfolio Yield: Given the fund’s portfolio composition and investment policy, deviations from the raw yield on BAM.A will not be material. This is currently 1.60%

Income Coverage: Dividends & Interest of $28.8-million less expenses (before amortization of issue costs) of $0.3-million is $28.5-million, to cover preferred dividends of $19.9-million is 143%.

Dividend Growth Split Corp has announced:

that the board of directors has approved a private placement of 468,480 preferred shares at $10.30. The private placement is being made in order to maintain an equal number of outstanding preferred shares and class A shares of Dividend Growth Split Corp. following its merger with Brompton Equity Split Corp.

The closing of the private placement, as well as the merger, is expected to take place on May 18, 2011, subject to regulatory approvals. As a result of the private placement, there will be no requirement for Brompton Equity Split Corp. to redeem any of its class A shares, as more fully described in the joint management information circular of Brompton Equity Split Corp. and Dividend Growth Split Corp. dated March 11, 2011.

Based on the April 28, 2011 net asset values, the class A share exchange ratio for the merger is 1.493584 Dividend Growth Split Corp. class A shares for each Brompton Equity Split Corp. class A share. After giving effect to the private placement and the merger, Dividend Growth Split Corp. will have 6,374,149 class A shares and preferred shares outstanding.

I find it rather odd that the private placement was necessary: the implication is that a large number of preferred shareholders retracted at $10 rather than selling into the market at a higher price.

DGS.PR.A was last mentioned on PrefBlog when the merger and term extension were approved. DGS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

DBRS has revised the trend on the Pfd-3 rating of RON.PR.A from stable to negative:

DBRS has today changed the trend on the BBB Senior Unsecured Debt rating and Pfd-3 Preferred Shares rating of RONA inc. (RONA or the Company) to Negative from Stable. The rating action reflects DBRS’s concern that weak operating performance and a challenging consumer environment may result in RONA’s credit risk profile to deteriorate to a level that is no longer consistent with the current rating categories.

CA Bancorp Canadian Realty Finance Corporation has announced:

that the Class A and Series 1 Preferred Shareholders of the Corporation, each voting separately as a class, voted today to approve a special resolution to effect the following proposed transaction (the “Transaction”):

• •the acquisition of all of the issued and outstanding shares of C.A. Bancorp Ltd., the manager of the Corporation, (the “Manager”) by Green Tree Capital Management Corp. (“Green Tree”);
• •an amendment to the commitment agreement (the “Commitment Agreement”) dated January 31, 2008 between the Corporation and C.A. Bancorp Inc., the parent corporation of the Manager, (the “Parent”) to permit the assignment by the Parent of the Commitment Agreement to Green Tree and the release of the Parent from any further obligations under the Commitment Agreement; and
• •an amendment to the management agreement between the Manager and the Corporation to provide that the Manager is not entitled to payment of a termination fee where the management agreement is terminated by the Corporation in the context of a material breach or default.

The Transaction is expected to be completed on or about May 11, 2011.

I had recommended a “No” vote Ah, well, we’ll just have to see what happens.

RF.PR.A is not tracked by HIMIPref™.

As noted in the post RF.PR.A Special Meeting Adjourned, the special meeting to decide on the reorganization of C.A. BANCORP CANADIAN REALTY FINANCE CORPORATION was adjourned from the original date of April 25, 2011 until tomorrow, May 5, 2011 at 4:00 p.m. EST, due to lack of quorum.

Now, Barry Critchley reports:

Pref shareholders are concerned with the credit risk they are being asked to assume if Green Tree acquires the management contract. In short, despite what C.A. Bancorp says about Green Tree’s “experienced team” and “enhanced infrastructure,” no one knows how successful the new team will be.

Can they run the commercial mortgage business well enough to generate enough income to continue to pay out on the prefs? Currently, pref shareholders receive fixed quarterly distributions of $0.4219 per share or 6.75% per annum. At the end of 2010, the fair value of the prefs was $31.1 million, or $21.18 per share.

But there’s more to it than that! There’s an external party opposed to the reorganization that has been scooping up shares in the present manager, CABancorp:

One investor, New York-based CDJ Global Catalyst, which owns 15.1% of C.A. Bancorp, said last week it disagrees with the realization strategy and indicated in a release it has had discussions and exchanged correspondence with C.A. Bancorp’s directors. CDJ, which also indicated it may “initiate proposals and/or transactions with a view to enhancing and protecting shareholder value,” couldn’t be reached for comment. It has been a steady buyer of C.A. Bancorp shares with its most recent purchase (251,400 shares) being bought at an average price of $2.16 a share. Book value is $2.53.

CDJ has been diligently writing press releases; the most recent, released April 27, is titled CDJ Announces Acquisition of Shares of C.A. Bancorp Inc.:

CDJ Global Catalyst LLC (“CDJ”) announced that from March 10, 2011 until April 26, 2011, CDJ acquired, for one or more of its managed client accounts in respect of which it exercises sole discretion, an aggregate of 251,400 common shares of C.A. Bancorp Inc. (TSX:BKP) (“CAB”) representing approximately 2% of the total issued common shares of CAB. The common shares were purchased for an average price of $2.16.

Combined with the shares held by client accounts in respect of which CDJ exercises sole discretion, CDJ now has control over 1,856,651 common shares, representing approximately 15.1% of the total issued and outstanding common shares of CAB.
…
CDJ intends from time to time to seek to continue to have discussions with representatives of CAB and its investee, C.A. Bancorp Canadian Realty Finance Corporation, (the “Subsidiary”).

CDJ strongly disagrees with CAB’s proposed Realization Strategy (as such term is defined in CAB’s public record), including the proposed sale of its interest in C.A. Bancorp Canadian Realty Finance Corp.

As a result, CDJ may, either alone or with others, consider and/or initiate proposals and/or transactions with a view to enhancing and protecting shareholder value, including the value of its investment to date. Such alternative proposals and/or transactions may include CDJ, either alone or with others, (i) seeking to influence decisions of CAB’s management and directors including, without limitation, by seeking representation by membership or through observer status on the board of directors or otherwise; (ii) seeking to add nominees designated by the Offeror to CAB’s board of directors, which could include expanding the size of the board of directors and/or removing individuals from CAB’s board of directors; and (iii) acquiring some or all of the outstanding securities of CAB or the Subsidiary. Such alternative proposals and/or transactions may also include CDJ supporting others in an alternative proposal and/or transaction.

CDJ may, from time to time and at any time, acquire additional common shares of CAB and/or its Subsidiary and/or other equity securities of the Company or the Subsidiary (collectively, the “Securities”) in the open market or otherwise and reserves the right to dispose of any and all of its Securities in the open market or otherwise, at any time and from time to time, and to engage in hedging or similar transactions with respect to the Securities.

At the present time, CDJ does not intend to acquire 20% or more of any class of Securities of the Company or the Subsidiary.

I continue to recommend that preferred shareholders vote “No” to the change in manager.