Category: Issue Comments

Quadravest has announced:

that all of its outstanding Equity Dividend shares (TSX: STR.E) and all of its outstanding Capital Yield shares (TSX: STR) will be redeemed effective February 1, 2011. This redemption is required by the provisions of the Company’s articles of incorporation, as amended, and has previously been discussed in the Company’s annual information form, financial statements, and other continuous disclosure documents and also in a December 22, 2010 press release.

The capital repayment forward agreement which the Company has with an affiliate of the Toronto-Dominion Bank will, assuming due payment thereunder, provide the Company with the funds necessary to redeem the Capital Yield shares at a redemption price of $25.00 per share, which was the initial issue price of those shares in October 2000.

Holders of the Equity Dividend shares will receive their pro rata share of the net asset value of the Company calculated as at the close of business on January 31, 2011, less $25.00 per Capital Yield share required for the Company to make the redemption payments owing on the Capital Yield shares.

Based on the most recently calculated net asset value of the Company per Unit (a unit consisting of one Equity Dividend share and one Capital Yield share) of $34.78, holders of Equity Dividend shares would be entitled to receive approximately $9.78 per Equity Dividend share if this value was maintained to January 31,2011. All portfolio securities have now been liquidated and the final net asset value per unit as at January 31, 2011 will be subject to all the standard final year end accounting accruals.

Payment of the redemption prices owing on the Equity Dividend and the Capital Yield shares are expected to be paid on February 11, 2011, and will be paid to the beneficial holders of such shares through payment to the CDS participant through which such shares are held.

Over the life of the Company, Equity Dividend shareholders have received 122 monthly distributions for a total of $17.88 per Equity dividend share and Capital Yield shareholders have received $4.25 in total distributions per Capital Yield share.

The Company anticipates that trading in the Equity Dividend shares and the Capital Yield shares on the Toronto Stock Exchange will be halted at the opening of trading on February 1, 2011 and that such shares would then be de-listed from the Exchange effective the close of trading on that date. Once all necessary tax clearance certificates are obtained and other corporate formalities observed, it is expected that the Company will then be dissolved.

These shares were issued at 25.00 in October 2000. I will leave computation of the achieved rate of return as an exercise for the student.

There is some disagreement as to whether this structured investment was indeed a preferred share. The TMX refused to allow a “.PR” symbol, but DBRS discontinued rating them in 2008 (when they were last mentioned on PrefBlog) after downgrading them to Pfd-5(low) in 2005 following an initial rating of Pfd-2. So take your choice.

STR.E was tracked by HIMIPref™, but was relegated to the Scraps index on credit concerns.

DBRS has announced that it:

has today changed the trends on all ratings of HSBC Bank Canada to Stable from Negative, following the trend change on the long-term issuer rating of HSBC Holdings plc (the Parent). (Please see the related DBRS press release for HSBC Holdings plc released today.)

DBRS ratings of HSBC Bank Canada are based on the relationship it has with its ultimate parent, HSBC Holdings plc, which is one of the largest global banking groups. DBRS’s long-term issuer rating of HSBC Holdings plc is now AA (high) with a Stable trend.

Under DBRS’s bank rating methodology, DBRS has assigned HSBC Bank Canada a support assessment of SA1, reflecting a strong expectation of timely support from HSBC Holdings plc. The guaranteed debts are rated at the same level as the Parent.

Given the strategic nature of the relationship between HSBC Bank Canada and HSBC Holdings plc but lack of an explicit guarantee, the non-guaranteed long-term deposits and senior debt rating of HSBC Bank Canada has been assigned a rating one notch lower than HSBC Holdings plc.

HSB issues were last mentioned on PrefBlog when they were downgraded to Pfd-2(high) [Trend Negative] by DBRS as part of a mass downgrade of Canadian banks’ preferreds and IT1C paper.

HSB currently has three preferred share issues outstanding: HSB.PR.C and HSB.PR.D (PerpetualDiscount) and HSB.PR.E (FixedReset). All are tracked by HIMIPref™ and incorporated within the indicated indices.

Northland Power has announced (some time ago, actually):

that the conversion of Northland Power Income Fund (the “Fund”) from an income trust to a corporation became effective on January 1, 2011.

As a result, Northland is now the Canadian public corporation which will continue to carry on the business of the Fund. The Fund’s trust units have been converted into common shares of Northland on a one-for-one basis and will trade under the TSX symbol NPI. The Series 1 Preferred Shares of Northland Power Preferred Equity Inc. have been converted into Series 1 Preferred Shares of Northland on a one-for-one basis and will trade under the TSX symbol NPI.PR. The two series of convertible debentures of the Fund have become convertible debentures of Northland and will continue to trade under the TSX symbols of NPI.DB and NPI.DB.A.

As an income trust, Northland and its Unit holders benefited under Canadian income tax law from advantages available to income trusts. Canadian legislation phased out those advantages at December 31, 2010.

In 2009, the Fund merged with its manager, Northland Power Inc. In addition to internalized management, this merger brought the manager’s development expertise and a robust pipeline of thermal, solar, wind and hydro development projects.

NPP.PR.A was last mentioned on PrefBlog when it settled in July, 2010. NPI.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

RioCan Real Estate Investment Trust has announced:

that it has successfully completed the issuance of 4 million Cumulative Rate Reset Preferred Trust Units, Series A (the “Series A Units”) at a price of $25 per unit for aggregate gross proceeds of $100 million. The underwriters have also been granted an over-allotment option, exercisable in whole or in part within 30 days following closing which, if fully exercised, would result in the issuance of an additional 1 million Series A Units issued at a price of $25 per unit for additional gross proceeds of $25 million. The underwriting syndicate for the offering was co-led by RBC Capital Markets, Macquarie Capital Markets Canada Ltd. and Scotia Capital.

The offering was made under RioCan’s amended and restated base shelf prospectus dated December 21, 2010. The terms of the offering are described in a prospectus supplement dated January 19, 2011, which was filed with Canadian securities regulators.

“The completion of this offering adds a new form of capital for RioCan that, used judiciously, enhances our ability to remain competitive in Canada and the United States for acquisitions,” said Edward Sonshine, Q.C. President and CEO of RioCan. “We view the use of Preferred Units as a complementary addition to RioCan’s capital structure. One that provides investors with a competitive yield and one that enhances RioCan’s financial flexibility and improves RioCan’s already strong balance sheet.”

This is a FixedReset, 5.25%+262 announced January 17 but the taxes are peculiar.

Taxation of Preferred Unitholders

A Preferred Unitholder is required to include in computing his or her income for tax purposes in each year the amount of income and net taxable capital gains, if any, paid or payable, or deemed to be paid or payable, to the Preferred Unitholder in the year by the Trust to the extent that the Trust deducts such amount in computing its income for tax purposes. The Trust’s income and net taxable gains for the purposes of the Tax Act will be allocated to the holders of Units and Preferred Units in the same proportion as the distributions received by such holders.

The amount of the non-taxable portion of any net realized capital gains of the Trust that is paid or payable to a Preferred Unitholder in a taxation year will not be included in computing the Preferred Unitholder’s income for the year. The Preferred Unitholder will not be required to reduce the adjusted cost base of the Preferred Unitholder’s Series A or Series B Units by such an amount.

Any other amount in excess of the income for tax purposes of the Trust that is paid or payable to a Preferred Unitholder in that year generally will not be included in the Preferred Unitholder’s income for the year. However, where such an amount is paid or payable to a Preferred Unitholder, the Preferred Unitholder will be required to reduce the adjusted cost base of the Preferred Unitholder’s Series A or Series B Units, as the case may be, by that amount. To the extent that the adjusted cost base of a Series A or Series B Unit would otherwise be a negative amount, the negative amount will be deemed to be a capital gain and the adjusted cost base of the Series A or Series B Unit to the Preferred Unitholder will then be nil. The taxation of capital gains is described below (see ‘‘Capital Gains and Capital Losses’’).

The company cannot be bothered to give a breakdown of their prior distributions by taxation status on their “Distribution Info” page, or in their 2009 Annual Report but, as previously reported there is a credible estimate:

BMO analyst Karine MacIndoe ran the numbers and found that RioCan has a historical five-year tax-deferral average of about 50 per cent. Applying that figure over a five-year horizon in the future, the pref units’ 5.25 per cent yield equates to a 4.82 per cent dividend yield on an after-tax return basis.

If we assume marginal rates for an Ontario investor with $150,000 income of 46.41% income, 23.20% capital gains and 26.57% eligible dividends, then, when holding $100 pv of this issue:

$5.25 distribution received.
$2.625 income, keep 53.59% = $1.407
$2.625 CG on disposition, assume immediate disposition, keep 76.80% = $2.016
Total kept after tax = $3.423

Equivalent to pre-tax eligible dividends of $4.662, or 4.66% of the $100 notional par value. Note that the dividend-equivalent yield will increase according to your estimate of the period of tax deferral until the units have sold, and increase according to your estimate of the time value of money in the interim.

REI.PR.A traded 389,944 shares today in a range of 25.05-65 before closing at 25.52-55, 4×8.

Vital statistics are:

REI.PR.A will be tracked by HIMIPref™ and valued with the assumption that all distributions are taxable as interest. It will be relegated to the Scraps index on credit concerns.

First National has announced:

the closing of its previously announced offering of 4,000,000 Class A Preference Shares, Series 1 (the “Series 1 Shares”) for gross proceeds of $100,000,000 (the “Offering”).

The net proceeds of the Offering will be used to repay current indebtedness as well as for general corporate purposes.

The Series 1 Shares will commence trading on the Toronto Stock Exchange on January 25, 2011 under the symbol FN.PR.A.

The Offering was completed through a syndicate of underwriters led by RBC Capital Markets and Scotia Capital Inc.

This is a FixedReset 4.65%+207 announced on January 17.

The issue traded 4,030 shares today in a range of 24.45-50 before closing at 24.35-50, 9×125.

Vital Statistics are:

FN.PR.A will be tracked by HIMIPref™, but relegated to the Scraps index on credit concerns.

SL Split Corp. has announced:

that it has called 1,950 Preferred Shares for cash redemption on January 31, 2011 (in accordance with the Company’s Articles) representing approximately 0.210% of the outstanding Preferred Shares as a result of the special annual retraction of 3,900 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 January 28, 2011 will have approximately 0.210% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $25.78 per share.

In addition, holders of a further 94,800 Capital Shares and 47,400 Preferred Shares have deposited such shares concurrently for retraction on January 31, 2011. As a result, a total of 98,700 Capital Shares and 49,350 Preferred Shares, or approximately 5.0551% 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 January 31, 2011.

Payment of the amount due to holders of Preferred Shares will be made by the Company on January 31, 2011. From and after January 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.

SLS.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-4 by DBRS. SLS.PR.A is not tracked by HIMIPref™.

Dividend 15 Split Corp. announced on December 21 that it:

completed its secondary offering of 2,500,000 Preferred Shares and 2,500,000 Class A Shares of the Company for aggregate gross proceeds of $55,000,000, bringing the Company’s net assets to approximately $326 million. Shares will continue to trade on the Toronto Stock Exchange under the existing symbols DFN (Class A Shares) and DFN.PR.A (Preferred Shares).

The Preferred Shares were offered at a price of $10.00 per share to yield 5.25% based on current distribution policy. The Class A Shares were offered at a price of $12.00 per share to yield 10.00% based on current distribution policy. RBC Capital Markets and CIBC World Markets were co-lead agents for the offering.

Additionally, they announced on January 7 that they:

issued an additional 157,000 Class A Shares and 157,000 Preferred Shares of the Company for aggregate gross proceeds of $3,454,000. This brings the Company’s net assets to approximately $328 million. The additional shares trade on the Toronto Stock Exchange under the existing symbols DFN (Class A Shares) and DFN.PR.A (Preferred Shares).

DFN.PR.A was last mentioned on PrefBlog when the offering was announced. DFN.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

CIX Split Corp has announced:

that it will redeem all of its outstanding Priority Equity Shares and Class A Shares (the “Shares”) on January 31, 2011 (the “Redemption Date”) as contemplated by the constating documents of the Corporation. The Corporation will request that its Shares be delisted from the Toronto Stock Exchange after the close of trading on January 31, 2011. The redemption proceeds for the Shares will be paid by the Corporation on or about February 7, 2011 through CDS Clearing and Depository Services Inc. It is anticipated that the Priority Equity Shares will be redeemed at $10.00 and that the Class A Shares will be redeemed at their net asset value per share on the Redemption Date.

The Corporation’s Priority Equity Shares and Class A Shares are listed on the Toronto Stock Exchange under the symbols CXC.PR.A and CXC respectively.

CXC.PR.A was last mentioned on PrefBlog in the post CXC.PR.A Holders Give Christmas Present to the Capital Units. CXC.PR.A is not tracked by HIMIPref™.

Update, 2011-2-3: Matured.

Allbanc Split Corp. II has announced:

that the final condition required to extend the term of the Company for an additional five years to February 28, 2016 has been met as holders of 65.2% of Class A Capital Shares have elected to extend. Class A Capital shareholders previously approved the extension of the term of the Company subject to the condition that a minimum of 2,667,000 Class A Capital Shares remain outstanding after giving effect to the special retraction right (the “Special Retraction Right”).

Under the Special Retraction Right, 2,318,164 Class A Capital Shares were tendered to the Company for retraction on February 28, 2011. The holders of the remaining 4,349,412 Class A Capital Shares will continue to enjoy the benefits of a leveraged participation in the capital appreciation of the Company’s portfolio of publicly listed common shares of selected Canadian chartered banks and will defer realization of any capital gains which would otherwise have been realized on the redemption of their Class A Capital Shares.

The Class A Preferred Shares will be redeemed by the Company on February 28, 2011 in accordance with the redemption provisions as detailed in the January 25, 2006 prospectus. Pursuant to these provisions, the Preferred Shares will be redeemed at a price per share equal to the lesser of $25.00 and the Net Asset Value per Unit. In order to maintain the leveraged “split share” structure of the Company, the Company intends to create and issue a new series of Class B Preferred Shares to be called the Series 1 Preferred Shares, which are expected to be issued following this redemption.

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.A respectively.

ALB.PR.A was last mentioned on PrefBlog when the reorganization proposal was conditionally approved. ALB.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.