Category: Issue Comments

SJR.PR.A, the 4.50%+200 FixedReset announced May 18 settled today, trading 603,924 shares in a range of 25.00-19 before closing at 25.10-13, 20×22.

Vital statistics are:

SJR.PR.A is tracked by HIMIPref™, but is assigned to the Scraps index on credit concerns.

Standard & Poor’s has announced:

•We are raising the ratings on DundeeWealth Inc., including the long-term counterparty credit rating to ‘A’ from ‘BBB-‘, and removing the ratings
from CreditWatch positive where they had been placed following Scotiabank’s Nov. 22, 2010, acquisition announcement.

The upgrade reflects our view the company is “strategically important” to Scotiabank and its wealth management operations and thus benefits from the implied support from being associated with a higher rated entity; we applied three notches of support to the stand-alone rating for being strategically important.

The stable outlook reflects our expectation that DundeeWealth will maintain or improve its position in the Canadian wealth management sector.

This is a rather stunning 4-notch upgrade on the Preferred scale, to P-2(high) from P-3, and from BB to BBB+ on the global scale.

DBRS continues to rate the issue Pfd-3 (Review-Positive).

DW.PR.A was last mentioned on PrefBlog when the acquisition by Scotia was announced. DW.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on (rather dubious) credit concerns.

The Canadian Imperial Bank of Commerce has announced:

that it intends to seek to have its non-cumulative Class A preferred shares, Series 26, 27 and 29 (the Convertible Preferred Shares) treated as non-viability contingent capital (NVCC) for the purposes of determining regulatory capital under Basel III.

The Office of the Superintendent of Financial Institutions (OSFI) has indicated that it is not aware of a factual basis that would question the compliance of the Convertible Preferred Shares with the principles specified in OSFI’s draft advisory on NVCC published in February 2011 (the NVCC Advisory), provided that:

• (i) CIBC irrevocably renounces its rights to convert the Convertible Preferred Shares into CIBC common shares by way of a deed poll except in circumstances that would be a “Trigger Event” as described in the NVCC Advisory; and
• (ii) CIBC provides an undertaking to OSFI that CIBC will immediately exercise its rights to convert each of the Convertible Preferred Shares into CIBC common shares upon the occurrence of a Trigger Event.

OSFI has indicated that certain features of the Convertible Preferred Shares will not be acceptable terms and conditions for future instruments to be considered NVCC.

CIBC intends to seek formal confirmation from OSFI regarding the capital treatment of the Convertible Preferred Shares after OSFI finalizes the NVCC Advisory. These actions do not restrict CIBC’s existing redemption rights under the terms of the Convertible Preferred Shares.

By renouncing CIBC’s conversion rights except upon the occurrence of a Trigger Event, the Convertible Preferred Shares will continue to not be dilutive to earnings per share following the adoption of International Financial Reporting Standards (IFRS) commencing November 1, 2012 nor for the portion of the IFRS comparative year ending October 31, 2011 that is subsequent to the renunciation date.

“NVCC Status”, as defined in the OSFI draft advisory, was discussed on PrefBlog in the post OSFI Releases Contingent Capital Draft Advisory. This change, if enacted, will mean these issues will no longer be considered DeemedRetractibles and require a re-think of the issues considered to be members of this group.

This plan is made possible by prospectus language that states, in the case of CM.PR.D:

The Series 26 Shares will not be convertible at the option of CIBC prior to April 30, 2008. On or after this date, CIBC may, subject to the approval, if required, of the stock exchanges upon which any shares of CIBC are listed, convert all, or from time to time any part, of the outstanding Series 26 Shares to be converted into that number of freely-tradeable Common Shares determined (per Series 26 Share) by dividing the then applicable redemption price per Series 26 Share, together with declared and unpaid dividends to the date fixed for conversion, by the greater of $2.00 and 95% of the weighted average trading price of the Common Shares on the TSX for the 20 trading days ending on: (i) the fourth day prior to the date specified for conversion, or (ii) if such fourth day is not a trading day, the last trading day prior to such fourth day. Fractional Common Shares will not be issued on any conversion of Series 26 Shares but in lieu thereof CIBC will make cash payments.

Update, 2011-12-17: Other issues with similar prospectus provisions entitling them to make a similar application are ELF.PR.G, ELF.PR.F, RY.PR.W, TD.PR.M and TD.PR.N.

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%.