Category: Issue Comments

Canaccord Financial Inc has announced:

the completion of its previously announced offering of 4,000,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series A ( the “Series A Preferred Shares”) at a purchase price of $25.00 per Series A Preferred Share, for aggregate gross proceeds of $100 million. The Series A Preferred Shares are expected to commence trading on the Toronto Stock Exchange on June 23, 2011 under the trading symbol “CF.PR.A”.

The offering was underwritten on a bought deal basis by a syndicate of underwriters co-led by CIBC World Markets Inc. and Canaccord Genuity Corp. that included BMO Nesbitt Burns Inc., National Bank Financial Inc., RBC Dominion Securities Inc., Scotia Capital Inc., GMP Securities L.P., Macquarie Capital Markets Canada Ltd., HSBC Securities (Canada) Inc., Raymond James Ltd., Wellington West Capital Markets Inc., Cormark Securities Inc., Desjardins Securities Inc., Dundee Securities Ltd., Haywood Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

Canaccord has granted the underwriters an over-allotment option, exercisable, in whole or in part, for a period of 30 days following today’s closing, to purchase up to an additional 600,000 Series A Preferred Shares which, if exercised in full, would increase the gross proceeds of the offering to $115 million.

Canaccord intends to use the net proceeds from the offering for general corporate purposes and may use all or a portion of such net proceeds with a view to growing or expanding its businesses.

CF.PR.A is a 5.50%+321 FixedReset announced June 6. CF.PR.A traded 187,001 shares today in a range of 24.75-98 before closing at 24.88-90, 2×12.

Vital statistics are:

CF.PR.A is tracked by HIMIPref™. It is assigned to the Scraps index on credit concerns.

Update, 2011-7-7:Greenshoe exercised:

Canaccord Financial Inc. (“Canaccord”, TSX: CF, AIM: CF.) announced today that it has closed the over-allotment option granted to the underwriters in connection with Canaccord’s bought deal public offering of Cumulative 5-Year Rate Reset First Preferred Shares, Series A (the “Series A Preferred Shares”), which closed on June 23, 2011. As a result of the exercise of the over-allotment option, Canaccord sold an additional 540,000 Series A Preferred Shares at a purchase price of $25.00 per Series A Preferred Share for additional gross proceeds of $13,500,000. In total, Canaccord has issued 4,540,000 Series A Preferred Shares for aggregate gross proceeds of $113,500,000. The Series A Preferred Shares trade on the Toronto Stock Exchange under the trading symbol “CF.PR.A”.

Canaccord intends to use the net proceeds from the offering for general corporate purposes and may use all or a portion of such net proceeds with a view to growing or expanding its businesses.

It will be most interesting to see how they choose between growing or expanding their business!

Standard & Poor’s has announced:

• •Brookfield Office Properties has a high-quality office portfolio located in generally comparatively healthier global office markets that benefits from long-term leases to good-quality tenants.
• •We have tolerance for the recent dip in Brookfield’s fixed-charge coverage because we believe a recent acquisition bolsters the company’s strong business profile and will generate very stable cash flow.
• •We revised our outlook on Brookfield and Brookfield Office Properties Canada to stable from negative because we expect Brookfield’s recent high leasing volume and further modest deleveraging will lead to a gradual improvement in currently weak debt coverage measures over the next few years.
• •We affirmed our ‘BBB’ corporate credit ratings and our ‘BB+/P-3 (High)’ preferred stock ratings on the two companies.

There are quite a few listed issues: BPO.PR.F, BPO.PR.H, BPO.PR.I, BPO.PR.J, BPO.PR.K, BPO.PR.L, BPO.PR.N and BPO.PR.P. All are tracked by HIMIPref™; all are relegated to the Scraps index on credit concerns.

There was no mention of BPO Properties (BPP) its wholly owned subsidiary.

Standard & Poor’s has announced:

• •We are placing our ‘BBB’ long-term corporate credit ratings on Capital Power Income L.P. (CPI) and CPI Preferred Equity Ltd. (CPIPE) on
  CreditWatch with negative implications.

• •At the same time, we are placing our ‘BBB’ issue-level ratings on CPI’s and Curtis Palmer LLC’s senior unsecured debt, and our ‘BB’ global scale and ‘P-3(High)’ Canada scale ratings on CPIPE’s preferred shares on CreditWatch with negative implications.
• •These rating actions follow the June 20, 2011, joint announcement by CPI and Atlantic Power Corp. (ATP, not rated) of an agreement for ATP to acquire CPI, subject to a favorable vote by CPI’s unitholders and ATP’s shareholders and the necessary regulatory approval. We expect the transaction to be completed in fourth-quarter 2011.
• •The rating actions reflect our view that, if the transaction occurs, the combined entity operating both ATP’s and CPI’s assets could potentially have a business risk or financial risk profile weaker than that of CPI.
• •We will resolve the CreditWatch when we are certain of the outcome in the voting and approval processes and upon greater clarity on the combined entity’s capital structure, business strategy, and financial policies.

DBRS maintained CZP.PR.A and CZP.PR.B at Pfd-3, Review-Negative:

DBRS has maintained the Under Review with Negative Implications status on the BBB (high) Senior Unsecured Debt & Medium-Term Notes rating of Capital Power Income L.P. (the Partnership or CPILP) and the Pfd-3 Cumulative Preferred Shares rating of CPI Preferred Equity Ltd., where they were placed on October 5, 2010.

The rating action follows the joint announcement by Atlantic Power Corporation (Atlantic Power; not rated by DBRS) and CPILP that that they have entered into an arrangement agreement (the Agreement) pursuant to which Atlantic Power intends to acquire, directly and indirectly, all of the outstanding limited partnership units of CPILP for $19.40 per limited partnership unit (the Transaction). APC will pay the purchase price of approximately $1.1 billion using a combination of cash and APC shares, with the cash component capped at $507 million. APC has stated that while it has obtained committed debt financing sufficient to pay the cash portion of the acquisition, it intends on raising approximately $423 million of debt and $200 million in equity to fund the cash component, as well as to refinance certain of CPILP’s bank facilities. The Transaction is a result of the strategic review process undertaken by the Partnership, which was publicly announced on October 5, 2010. The agreed-upon price represents a 4% premium to the CPILP closing price on June 17, 2011.

BNS Split Corp. II has announced:

that it will be hosting an investor update conference call on Thursday, June 23, 2011, with Brian McChesney, President and CEO of Scotia Managed Companies Administration Inc. (the “Administrator”).

The conference call will provide an update on the Company’s performance. Investors and investment advisors are reminded that the Company currently has warrants outstanding which expire on July 7, 2011 at 5:00 p.m. (Toronto time). Note that investment dealers may have deadlines earlier than July 7, 2011.

Conference Call Details
Thursday, June 23 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: 3583283#

A replay of the conference call will be available at 905-694-9451 or 1-800-408-3053, passcode 3644732#.

Each warrant entitles the holder to purchase one Unit, each Unit consisting of two Capital Shares and one Preferred Share, for a subscription price of $50.84 per Unit. The warrants are listed on the Toronto Stock Exchange under the ticker symbol BSC.WT.

Holders of Preferred Shares are entitled to receive quarterly fixed cumulative distributions equal to $0.2003 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 BNS Shares 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.

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

BSC.PR.B was last discussed on PrefBlog when the warrants were issued. BSC.PR.B is not tracked by HIMIPref™.

Newgrowth Corp. has announced:

that it has called 803,467 Preferred Shares for cash redemption on June 24, 2011 (in accordance with the Company’s Articles) representing approximately 22.620% of the outstanding Preferred Shares as a result of the special annual retraction of 803,467 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 June 23, 2011 will have approximately 22.620% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $13.70 per share.

In addition, holders of a further 849,325 Capital Shares and 849,325 Preferred Shares have deposited such shares concurrently for retraction on June 24, 2011. As a result, a total of 1,652,792 Capital Shares and 1,652,792 Preferred Shares, or approximately 37.5521% 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 June 24, 2011.

Payment of the amount due to holders of Preferred Shares will be made by the Company on June 24, 2011. From and after June 24, 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.

Huh. It was only two months ago that their warrant offering was completely subscribed and only three months ago that I was so pleased with the growth in shares outstanding that I added it to the HIMIPref™ database. Market timing … market schmiming, that’s what I say!

NEW.PR.C is tracked by HIMIPref™ and is assigned to the SplitShare index.

It has been announced that GLOBAL X FUNDS LAUNCHES FIRST CANADA PREFERRED ETF (CNPF):

Global X Funds, the New York based provider of exchange traded funds, today launched the Global X Canada Preferred ETF (Ticker: CNPF). This is the first ETF to target Canadian companies that issue preferred stock.

For investors seeking income, preferred shares are an asset class worth considering due to their unique combination of bond and equity characteristics. Like bonds, preferred shares generally pay stable dividends with more frequent distributions than common shares. Like equity, preferred shares trade on an exchange and have the potential to appreciate in value, offering additional income growth potential for investors. Moreover, preferred shareholders have priority over common shareholders with regard to claims on company earnings and assets, which provide some downside protection.

In addition, preferred shares of Canadian companies offer investors an opportunity to diversify outside the U.S. and increase their international issuer and currency exposure, which may help reduce overall portfolio risk. A shrinking budget deficit paired with strong economic growth and higher commodity prices make Canada a strong contender for investment dollars when compared to the current budget and debt issues of its southern neighbor (Wall Street Journal, 2011).

“CNPF provides a relatively efficient way for investors to reap the benefits of this hybrid asset class as well as receive international exposure via the Canadian issuers traded on the Toronto Stock Exchange,” said Bruno del Ama, chief executive officer of Global X Funds. “We are pleased to expand our global offering to income generating asset classes.”

The Global X Canada Preferred ETF tracks the Solactive Canada Preferred Stock Index, which is designed to measure the performance of preferred stocks from Canadian issuers traded on the Toronto Stock Exchange. The Underlying Index does not seek to directly reflect the performance of the companies issuing the preferred stock. The Underlying Index is comprised of preferred shares that meet certain criteria relating to size, liquidity, issuer rating, maturity and other requirements as determined by Structured Solutions AG. As of May 16, 2011, the three largest components of the index were Transcanada Corp., Manulife Financial Corp., and Canadian Imperial Bank.

I can think of some people who just may take issue with the statement that “This is the first ETF to target Canadian companies that issue preferred stock.”! Michael Johnson of ETFdb notes:

There are multiple ETFs listed in Canada offering exposure to the country’s preferred stock market; the Claymore S&P/TSX CDN Preferred Share Trust has more than $600 million in AUM, and the actively-managed Horizons AlphaPro Preferred Share ETF (HPR) is another options for accessing this asset class. iShares filed earlier this year for an international preferred stock ETF that would include a heavy tilt towards Canadian securities, along with issuers from Japan, New Zealand, and the U.K.

The Solactive Canada Preferred Stock Index is admirably transparent. The indexing agent is Structured Solutions AG, which is based in Frankfurt. My, aren’t we getting international! They appear to do a lot of business with Global X, a New York based firm that has a hatful of thinly sliced ETFs.

At 58bp, this ETF doesn’t have anything special going for it on the fee side. I have not yet checked – and may never check! – the composition of the index, so I won’t comment on that. I am also being lazy and not checking whether Canadian dividends will retain their character for Canadian investors when routed through a US ETF, but it’s something I would find out before plunking any money down! In the meantime, I’m wondering (a) why Americans would buy Canadian preferreds on a passive basis, when they have no tax advantage, and (b) when the first Canadian listed US Municipal bond ETF will start up.

Barron’s gave the fund a civil mention. ETFdb reports the fund has $3.75-million in market cap.

CNPF is NYSE listed and, according to Yahoo!, closed today at 14.20-12, 10×2. If that spread is any indication of normality, it might be fun to make a market in it!

Many thanks to Assiduous Reader NS for bringing this to my attention. He’s wondering whether this listing is a sign of doom … maybe it is, but more likely for the increasingly ridiculous ETF market than for Canadian preferreds.

Allbanc Split Corp. has announced:

the completion of its warrant offering. The gross proceeds from the exercise of the warrants previously issued totaled $26.9 million, representing 40% 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.

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

As previously noted, the warrants were significantly in-the-money, but sometimes that doesn’t mean the money comes in!

Sadly, this leaves the preferred shares with only about $34-million worth outstanding … getting up there, but still a little on the small side to be included in the HIMIPref™ universe. Maybe next time!

On an unrelated thread, Assiduous Reader prefhound writes in and says:

Why is BPO.PR.I still outstanding? As of Jan 1 this year, the company could have redeemed at par $25 and the investor could have retracted at a discount for common shares of value $26.04.

In spite of this, the pref trades at a dividend adjusted price of about $25.10. Why wouldn’t the “astute” buyer buy the pref, retract and pocket an expected $1 profit (all be it with a bit of risk on the common performance until paid)?

Why is BPO sitting on the fence? It either wants the balance sheet equity from conversion (so would call the issue), or it doesn’t.

How do these issues normally evolve at and past retraction (“maturity”) date and how do you calculate a YTW?

The 2010 Annual Report shows 7,130,228 shares outstanding, the same as is currently reported by the TMX. So none have been cancelled since year-end.

Prospectus:

On and after December 31, 2008, the Corporation may, at its option: (i) upon not less than 30 days and not more than 60 days prior written notice, redeem for cash the Series I Preference Shares, in whole at any time or in part from time to time, at $25.75 per share if redeemed before December 31, 2009, at $25.50 per share if redeemed on or after December 31, 2009, but before December 31, 2010, and at $25.00 per share if redeemed thereafter, plus, in each case, all accrued and unpaid dividends up to but excluding the date fixed for redemption; or (ii) upon not less than 30 days and not more than 60 days prior notice, subject, if required, to stock exchange approvals, convert the outstanding Series I Preference Shares into freely tradeable Common Shares. The number of Common Shares into which each Series I Preference Share may be so converted will be determined by dividing the then applicable redemption price per Series I Preference Share, together with all accrued and unpaid dividends up to but excluding the date fixed for conversion, by the greater of $2.00 and 95% of the then Current Market Price (as defined herein) of the Common Shares at such time. See ‘‘Details of the Offering’’.

On and after December 31, 2010, upon at least 30 days notice, each Series I Preference Share will be convertible at the option of the holder on the last day of each of March, June, September and December in each year into that number of freely tradeable Common Shares determined by dividing $25.00, together with all accrued and unpaid dividends up to but excluding the date fixed for conversion, by the greater of $2.00 and 95% of the then Current Market Price (as defined herein) of the Common Shares. If a holder of Series I Preference Shares elects to convert any of such shares into Common Shares, the Corporation may, on not less than 20 days notice prior to the conversion date, elect to redeem such Series I Preference Shares for cash or arrange for the sale of those shares to substitute purchasers. See ‘‘Details of the Offering’’.

prefhound later wrote:

Hmmm, I think I have my answer:

According to the prospectus, BPO can give $25 cash to a pref owner who wants to convert to common, or get a third party to buy the pref for $25. Obviously, if the price is $25.10 it won’t be hard to find such parties!

Thus, it seems to me that this clause means that YTW should be based on a $25 maturity price, not $26.04.

How common is this type of clause?

Thoughts?

Yes, you’re quite right – but the YTW is always based on the $25.00 rather than the $26.04, since the issuer always has the right to pre-empt retractions for shares. Always? Well, as far as I know.

Note that this “Mexican stand-off” is inherently unstable: the company has to be prepared to pay cash at any time, so the issue is basically a demand loan; and the shareholders have to be prepared to get cash at any time, but can treat the investment as (rather low-grade) money market paper. But for now the arrangement seems to meet the needs of both parties.

HIMIPref™ calculates the YTW by assuming OptionCertainty one month hence on all calculation dates.

Manulife Investments / Manulife Financial has issued a press release:

AIC Global Financial Split Corp. (TSX: ASC/ASC.PR.A) (the “Corporation”) today announced that the Corporation completed the redemption of all of its outstanding Preferred Shares and Class A Shares and terminated on May 31, 2011 (the “Termination Date”), as contemplated by the constating documents of the Corporation. In connection therewith, the Corporation redeemed each Class A Share for $.0643 per share. Preferred Shares were redeemed for $10.00 per share plus any accrued dividends. The redemption proceeds will be paid by the Corporation on or about June 6, 2011 through CDS Clearing and Depository Services Inc.

ASC.PR.A was last mentioned on PrefBlog in the post ASC.PR.A Holders to Get Partial Dividend on Redemption. 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. Hey guys – just a little friendly advice: if I should ever advertise an opening for an entry credit analysis position, don’t spend a lot of money express-posting your resume, OK?

ASC.PR.A was tracked by HIMIPref™ prior to its maturity.

Yellow Media has announced:

is issuing this press release regarding certain market speculation at the request of the Investment Industry Regulatory Organization of Canada, on behalf of the Toronto Stock Exchange.

Yellow Media Inc. is today providing an update on the status of its definitive agreement to sell Trader Corporation to funds advised by Apax Partners announced on March 25, 2011. While it is Yellow Media Inc.’s policy not to comment on market rumours or speculation, the company is today confirming that the transaction is proceeding as planned and in accordance with the terms of the definitive agreement entered into between Yellow Media Inc. and Apax Partners. The transaction is subject to regulatory approvals and other customary conditions.

Under the terms of the definitive agreement, Yellow Media Inc. has agreed to sell Trader Corporation to funds advised by Apax Partners for a purchase price consideration of $745 million in cash, subject to working capital and other adjustments. The proceeds from the sale will be largely used to reduce indebtedness and for general corporate purposes. For more information about this transaction, refer to the press release issued on March 25, 2011 at: http://www.ypg.com/en/newsroom/488-yellow-media-inc-announces-the-divestiture-of-trader-corporation.

The company reaffirms its cash dividend of $0.65 annually per common share. The company has a stated dividend payout policy representing between 60% and 70% of Adjusted Earnings per share. The dividend policy is reviewed periodically by the Board of Directors of Yellow Media Inc. taking into account a number of factors including, among others, the current and prospective performance of the business.

YLO has four issues of preferred shares outstanding: YLO.PR.A, YLO.PR.B (Operating Retractible) and YLO.PR.C & YLO.PR.D (FixedReset). All are tracked by HIMIPref™ and all are assigned to the Scraps index on credit concerns.

The recent precipituous decline in these issues has been highly entertaining and was reported on PrefBlog on May 25, May 26, May 27, May 30 and May 31.