Category: Issue Comments

Dundee Corporation has announced:

that it intends to commence a substantial issuer bid (the “Offer”) to purchase for cancellation from the holders thereof who choose to participate up to 975,610 of its Cumulative Floating Rate First Preference Shares, Series 3 in the capital of the Corporation (the “Series 3 Shares”) at a purchase price of C$20.50 (the “Purchase Price”) per Series 3 Share, for a maximum aggregate purchase price of C$20,000,005.

In connection with the Offer, the Corporation has entered into lock-up agreements (the “Lock-up Agreements”) with each of Stornoway Recovery Fund LP and Ravensource Fund (the “Locked-up Shareholders”) pursuant to which, among other things, and subject to the terms and conditions set out therein, the Locked-up Shareholders have agreed to tender to the Offer all of the Series 3 Shares held by them as at the date of the Lock-up Agreements. As at the date of the Lock-up Agreements, the Locked-up Shareholders hold an aggregate of 499,650 Series 3 Shares representing approximately 30.48% of the issued and outstanding Series 3 Shares as at November 20, 2023.

The Offer is expected to commence on November 22, 2023 and will expire at 11:59 p.m. (Toronto time) on December 27, 2023 or such later time and date to which the Offer may be extended by Dundee, unless varied or withdrawn by Dundee.

“This Offer is another important step towards the ongoing streamlining of our capital structure to support the successful execution of our strategic business plan with a focus on capital allocation in the junior mining industry. Reducing the call on our capital from the preferred share dividends preserves our capital base to pursue our core strategy,” said Jonathan Goodman, President and Chief Executive Officer.

“We believe this is an effective way to simplify our balance sheet, lower our overall cost of capital, and reduce our run-rate cash outflows which benefits all classes of shareholders,” said Lila Murphy, Executive Vice President and Chief Financial Officer.

The Board of Directors will continue to review various options for the allocation of capital, including any portion of the C$20,000,005 under the Offer remaining in excess of the aggregate purchase price payable pursuant to the Offer, with such options including, but not limited to, further repurchases of the Corporation’s securities, including without limitation, its Class A Subordinate Voting Shares and Series 2 Shares (as defined below). Beginning in early 2018, the Corporation has focused on the implementation of its strategy of rationalizing its portfolio of investments and monetizing non-core assets as it exists [sic] business lines which are no longer deemed to be aligned with its longer-term mining-focused strategy. As part of this process, the Corporation has taken significant steps to streamline its capital structure and strengthen its balance sheet. In line with the Corporation’s longer-term strategy and commitment to creating value for the Corporation, the Board of Directors believes that the purchase of Series 3 Shares under the Offer represents an attractive investment opportunity for Dundee and will be welcomed by certain holders of Series 3 Shares who may wish to reduce their share ownership positions.

Treatment of Declared Dividend

The Corporation previously announced on November 8, 2023, that the Board of Directors approved the payment of a quarterly cash dividend for the quarter ended December 31, 2023 of C$0.58351 per Series 3 Share, which is payable on January 2, 2024 to shareholders of record on December 19, 2023 (the “Series 3 Dividend Record Date”). Shareholders of record on the Series 3 Dividend Record Date will be entitled to receive the quarterly cash dividend declared by the Board of Directors for each Series 3 Share held on the Series 3 Dividend Record Date, whether or not such shareholders decide to deposit their Series 3 Shares under the Offer and whether or not all or any portion of their Series 3 Shares are taken up and paid for by the Corporation pursuant to the Offer, and whether or not such shareholders continue to hold some or all of such Series 3 Shares following the Series 3 Dividend Record Date. Such quarterly cash dividend will be paid by the Corporation on January 2, 2024 to shareholders of record on the Series 3 Dividend Record Date (less any tax required to be deducted or withheld by the Corporation) in accordance with the restated articles of the Corporation. Any shareholder who acquires Series 3 Shares after the Series 3 Dividend Record Date will not, in respect of such Series 3 Shares acquired by them after the Series 3 Dividend Record Date, under any circumstances be entitled to receive from the Corporation the quarterly cash dividend declared by the Board of Directors for the quarter ended December 31, 2023, nor will such shareholder be entitled to receive any pro-rata portion of such quarterly cash dividend, irrespective of whether or not such shareholder decides to deposit such Series 3 Shares under the Offer and whether or not all or any portion of such Series 3 Shares are taken up and paid for by the Corporation pursuant to the Offer. The terms of the Offer reflect and take into account that the quarterly cash dividend for the quarter ended December 31, 2023 of C$0.58351 per Series 3 Share will be paid by the Corporation to shareholders of record on the Series 3 Dividend Record Date on January 2, 2024 (less any tax required to be deducted or withheld by the Corporation) in accordance with the restated articles of the Corporation. Holders of record of Cumulative 5-Year Rate Reset First Preference Shares, Series 2 (the “Series 2 Shares”) on the dividend record date for the quarterly cash dividend declared by the Board of Directors on such Series 2 Shares for the quarter ended December 31, 2023 will be entitled to receive such quarterly cash dividend, with such quarterly cash dividend to be paid by the Corporation on January 2, 2024 (less any tax required to be deducted or withheld by the Corporation) in accordance with the restated articles of the Corporation. In accordance with the restated articles of the Corporation, the Corporation has set aside for payment out of cash on hand sufficient funds to satisfy all declared and unpaid dividends on outstanding Series 3 Shares and outstanding Series 2 Shares.

Additional Details of the Offer

The Corporation expects to fund any purchases of Series 3 Shares under the Offer using first the funds advanced under the Loan (as defined below) and then as necessary using the Corporation’s available cash on hand, and expects to fund any fees and expenses related to the Offer using the Corporation’s available cash on hand. All Series 3 Shares purchased by the Corporation under the Offer will be cancelled in due course.

If 975,610 or fewer Series 3 Shares are validly deposited on or before the expiry time of the Offer (and not properly withdrawn), then Dundee will, upon the terms and subject to the conditions of the Offer, purchase at the Purchase Price all such Series 3 Shares deposited. If more than 975,610 Series 3 Shares are validly deposited on or before the expiry time of the Offer (and not properly withdrawn), then upon the terms and subject to the conditions of the Offer, the Corporation will purchase the Series 3 Shares on a pro rata basis after giving effect to “odd lot” tenders (of holders beneficially owning fewer than 100 Series 3 Shares), which will not be subject to pro-ration. Series 3 Shares that are not purchased will be returned to shareholders.

The Offer and all deposits of Series 3 Shares are subject to the terms and conditions set forth in the offer to purchase, the accompanying issuer bid circular and the related letter of transmittal and notice of guaranteed delivery (all such documents, as amended or supplemented from time to time, collectively constitute and are herein referred to as, the “Offer Documents”). Further details of the Offer, including the terms and conditions thereof and instructions for tendering Series 3 Shares, will be included in the Offer Documents. The Offer Documents will be mailed to holders of Series 3 Shares, filed with the applicable Canadian securities regulatory authorities and made available without charge on SEDAR+ at www.sedarplus.ca in accordance with applicable securities laws, as well as being posted on the Corporation’s website at www.dundeecorporation.com, on November 22, 2023.

As of November 20, 2023, the Corporation had 1,639,022 Series 3 Shares issued and outstanding. The Series 3 Shares are listed and posted for trading on the Toronto Stock Exchange (the “TSX”) under the symbol “DC.PR.D”. On November 17, 2023, the last full trading day prior to the day the terms of the Offer were publicly announced, the closing price of the Series 3 Shares on the TSX was C$20.20.

The Offer will not be conditional upon any minimum number of Series 3 Shares being deposited. However, the Offer will be subject to certain conditions that are customary for transactions of this nature and as will be set out in more detail in the Offer Documents.

Dundee previously received approval from the TSX for normal course issuer bids (“NCIBs”) for its Series 2 Shares and Series 3 Shares through the facilities of the TSX from April 12, 2023 to April 11, 2024. The Corporation has suspended share repurchases under its NCIBs and the NCIBs will remain suspended until at least the day following the expiration of the Offer or the termination of the Offer.

Dundee has appointed Computershare Investor Services Inc. (the “Depositary”) to act as depositary for the Offer. Any questions or requests for information or assistance regarding the Offer may be directed to the Depositary at the contact details set out in the Offer Documents.

Additional Details of the Loan

In connection with the Offer, the Corporation has entered into a loan agreement dated November 17, 2023 (the “Loan Agreement”) among the Corporation, as borrower, Dundee Resources Limited, as guarantor, and Earlston Investments Corp., as lender. The loan, to be advanced by the lender, will be in a principal amount of up to C$20,000,000 and will be available to the Corporation upon satisfaction of certain customary conditions precedent (the “Loan”). The Loan will be guaranteed by Dundee Resources Limited and secured by a security interest over all present and after-acquired personal property of the Corporation and Dundee Resources Limited, including a pledge of the shares of Reunion Gold Corporation held by Dundee Resources Limited (such shares of Reunion Gold Corporation, the “Collateral”). The Loan Agreement provides that the Corporation shall use the proceeds of the Loan to repurchase all or any portion of the Series 3 Shares pursuant to the Offer, and for no other purpose, except with the prior written consent of the lender. Interest on the Loan will accrue: (i) at a rate equal to the greater of (a) The Toronto-Dominion Bank prime rate plus 1.95% per annum, and (b) 9.15% per annum, during the first 24 months of the Loan; and (ii) thereafter, at a rate equal to The Toronto-Dominion Bank prime rate plus 6.50% per annum. The Loan will be repayable on February 27, 2026. At any time after June 28, 2024, the Corporation may voluntarily prepay all or any portion of the Loan together with all interest accrued thereon without premium or penalty. The Corporation must repay (i) any portion of the Loan not used to fund the purchase of Series 3 Shares under the Offer, (ii) periodically, if the value of the Collateral is not at least 250% of the outstanding principal amount of the Loan plus overdue interest (if any), such amount as required to ensure the value of the Collateral is at least 250% of the outstanding principal amount of the Loan plus overdue interest (if any), and (iii) if Dundee Resources Limited sells any of the Collateral in certain circumstances as set out in the Loan Agreement, an amount equal to the net proceeds of such sale.

This news release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell any Series 3 Shares. The solicitation and the offer to buy Series 3 Shares will only be made pursuant to the Offer Documents filed with the Canadian securities regulatory authorities. The Offer will not be made to, nor will deposits be accepted from or on behalf of, shareholders in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of any such jurisdiction. However, Dundee may, in its sole discretion, take such action as it may deem necessary to make the Offer in any such jurisdiction and to extend the Offer to shareholders in any such jurisdiction.

The Board of Directors has authorized and approved the Offer. However, none of Dundee, the Board of Directors or the Depositary makes any recommendation to any shareholder as to whether to deposit or refrain from depositing any or all of such shareholder’s Series 3 Shares pursuant to the Offer. Shareholders are strongly urged to carefully review and evaluate all information provided in the Offer Documents, to consult with their own financial, legal, investment, tax and other professional advisors and to make their own decisions as to whether to deposit Series 3 Shares under the Offer and, if so, how many Series 3 Shares to deposit.

The affected issue is DC.PR.D, although the company may buy back other shares if there’s any money left over from the loan following the purchase of tendered shares.

Thanks to Assiduous Reader Dan Good for bringing this to my attention, to Avoid the Herd for foreshadowing the announcement and to DR, niagara and skeptical for helping me understand how this can make financial sense.

Update, 2023-11-24: The discussion initiated by Dan Good included some questioning regarding why DC.PR.B was not included in the SIB, given that it is interconvertible with DC.PR.D at the next Exchange Date, 2024-9-30. My guess is that the lock-up agreements referred to in the second paragraph of the press release played a role in this: the locked-up shareholeders, I presume, hold lots of DC.PR.D and want to dispose of them all at the favourable price they have negotiated; including DC.PR.B in the SIB would increase the chance that their tender would be pro-rated on closing.

DBRS has announced that it:

downgraded its credit rating on the Preferred Shares issued by Canadian Banc Corp. (the Company) to Pfd-3 (low) from Pfd-3. The Preferred Shares have experienced a reduction in downside protection. Macroeconomic factors, including central banks’ responses to inflation levels and geopolitical tensions like the Russia-Ukraine war, have led to increased volatility in equity markets for most of 2023. In addition, the closures of certain U.S. regional banks because of liquidity and solvency concerns led to widespread and significant declines in the equity market prices of financial services companies in the United States and Canada. Consequently, this affected both the Company’s net asset value (NAV) and downside protection, especially in 2023.

As of August 31, 2023, the Company invested in a portfolio of common shares of the six largest Canadian banks representing approximately 57.7% of the portfolio: Royal Bank of Canada (16.5%), The Toronto-Dominion Bank (13.3%), National Bank of Canada (9.2%), Bank of Montreal (8.8%), Canadian Imperial Bank of Commerce (5.0%), and Bank of Nova Scotia (4.9%). The Company may invest up to 20% of the NAV in equity securities of Canadian or foreign financial services corporations other than the core holdings mentioned above. As of August 31, 2023, 16.1% of the portfolio was invested in five well-known U.S. financial services companies (Morgan Stanley, JP Morgan Chase, Bank of America, Goldman Sachs, and Citigroup Inc.) and 26.0% was held in cash and cash equivalents. As mentioned above, 16.1% of the portfolio was invested in U.S. financial services entities and denominated in U.S dollar (USD). The Company has not hedged its USD exposure to currency fluctuations; however, it closely monitors USD/Canadian dollar currency movements.

Holders of the Preferred Shares receive monthly distributions at a rate of Prime + 1.5% per annum (minimum 5.0%, maximum 8.0%), currently 8.0%. Holders of the Class A Shares are entitled to receive monthly cash distributions targeted to be at a rate of 15% annually based on the volume weighted-average market price of the Class A Shares for the last three trading days of the preceding month. The Company announced the extension of the termination date for a further five-year period to December 1, 2028, from December 1, 2023. In connection with the term extension, the Company decided to maintain the distribution rate for the Preferred Shares at the existing rates. No monthly distributions to the Class A Shares will be made if the dividends of the Preferred Shares are in arrears or the NAV of the portfolio falls below $15 per unit.

Over the past 12 months, downside protection has been volatile. As of October 31, 2023, downside protection stood at 44.8%, down from 51.7% as of October 31, 2022. The Preferred Shares’ dividend coverage based on the current dividend yield on the portfolio was 0.6 times (x). Without giving consideration to the capital appreciation potential or any source of income other than the dividends earned by the portfolio, the targeted monthly distributions to the Class A Shares along with the Preferred Shares’ dividend coverage shortfall are likely to create an average annual grind on the portfolio’s NAV equivalent to 5.4% over the remaining term to maturity. To supplement portfolio income, the Manager may engage in covered call option writing on all, or a portion of, the securities held in the portfolio or rely on realized capital gains.

DBRS Morningstar notes the following announcements from the Company during the past 12 months:

The Company:

(1) On January 31, 2023
Completed an overnight treasury offering of Class A and Preferred Shares, raising approximately $45.1 million in gross proceeds. The Class A Shares were offered at a price of $13.75 per share for a yield to maturity of 14.47%, and the Preferred Shares were offered at a price of $10.00 per share for a yield to maturity of 7.95%.

(2) On March 2, 2023
Extended the termination date of the Company for a further five-year period to December 1, 2028, from December 1, 2023.

(3) On May 19, 2023
Renewed its at-the-market (ATM) Program effective until June 18, 2025, which allows maximum gross proceeds of $140 million. The ATM Program allows the Company to issue Class A Shares and Preferred Shares from time to time at the Company’s discretion.

(4) On May 25, 2023
Announced that the Toronto Stock Exchange (the TSX) has accepted its notice of intention to make a Normal Course Issuer Bid (the NCIB) to purchase its Preferred Shares and Class A Shares through the facilities of the TSX and/or alternative Canadian trading systems. The NCIB commenced on May 29, 2023, and will terminate on May 28, 2024.

(5) On September 21, 2023
Announced that it will maintain the distribution rates for both the Class A Shares and Preferred Shares at existing levels.

Giving consideration to the decline in downside protection, the extension of the Company’s termination date for a further five-year term, the projected grind in the portfolio from expected distributions on the Class A Shares and the Preferred Shares’ dividend coverage shortfall, concentration of the portfolio in one industry and the unhedged foreign exchange exposure, DBRS Morningstar downgraded the credit rating on the Preferred Shares to Pfd-3 (low) from Pfd-3.

The main constraints to the credit rating are the following:

(1) Market fluctuations resulting from high inflation and interest rate hikes could affect the Company’s NAV. Resulting volatility in prices along with changes in the dividend policies of the underlying issuers may result in significant reductions in the Preferred Shares’ dividend coverage or downside protection from time to time.

(2) Reliance on the Portfolio Manager to generate additional income, through option writing, to meet distributions and other trust expenses without having to liquidate the portfolio’s securities.

(3) The high concentration of the portfolio in one industry (banking).

(4) Potential foreign exchange risk because the income received on the portfolio is not hedged all the time.

(5) Stated monthly distributions on the Class A Shares may create a grind on the portfolio. This risk is mitigated by an asset coverage test of 1.5x that ensures sufficient levels of downside protection to the holders of the Preferred Shares.

This action was ‘preannounced’ by Quadravest yesterday.

The affected issue is BK.PR.A.

Quadravest has announced (emphasis added):

Canadian Banc Corp. (the “Company’) is pleased to announce it will undertake an offering of Preferred Shares (TSX: BK.PR.A) of the Company. The offering will be led by National Bank Financial Inc.

The sales period of this overnight offering will end at 9:00 a.m. EST on November 16, 2023. The offering is expected to close on or about November 23, 2023 and is subject to certain closing conditions including approval by the TSX.

The Preferred Shares will be offered at a price of $9.80 per Preferred Share to yield 8.16%.

The closing price on the TSX of the Preferred Shares on November 14, 2023 was $9.97.

Since the inception of the Company, 219 consecutive dividends have been declared for the Preferred shares. The aggregate dividends declared on the Preferred Shares total $9.97 per share. All distributions to date have been made in tax advantaged eligible Canadian dividends.

The Company has been advised by DBRS that effective November 17, 2023, the rating on the Preferred shares will be Pfd-3 (low).

The net proceeds of the offering will be used by the Company to invest in a portfolio consisting primarily of six publicly traded Canadian Banks as follows:

Bank of Montreal	Canadian Imperial Bank of Commerce	Royal Bank of Canada
The Bank of Nova Scotia	National Bank of Canada	The Toronto-Dominion Bank

The Company’s Preferred Share investment objectives are to:
i. provide holders with cumulative preferential floating rate monthly cash dividends at a rate per annum equal to the prevailing Canadian prime rate plus 1.50% (minimum annual rate of 5.0% and maximum annual rate of 8.0%) based on original $10 issue price; and
ii. on or about the termination date, currently December 1, 2028 (subject to further 5 year extensions and it has been extended in the past) to pay holders the original $10 issue price of those shares.

The affected issue is BK.PR.A.

Thanks to Assiduous Reader niagara for bringing this to my attention!

AltaGas Ltd. has announced:

that it is considering an offering of hybrid subordinated debt securities under its short form base shelf prospectus dated March 31, 2023.

If a successful offering is priced and completed, the Company intends to use the net proceeds of the offering to redeem or repurchase its outstanding cumulative redeemable five-year rate reset preferred shares, series E (TSX: ALA.PR.E). There is no certainty that AltaGas will ultimately complete the offering being considered or as to the timing or terms on which such an offering might be completed.

ALA.PR.E was issued as a FixedReset, 5.00%+317, that commenced trading 2013-12-13 after being announced 2013-12-4. The 2018-11-28 notice of extension was reported on PrefBlog. The issue reset at 5.393% effective December 31, 2018. I recommended against conversion and there was no conversion. The issue is tracked by HIMIPref™ but is relegated to the Scraps – FixedReset Discount subindex due to credit concerns.

The market seems to be ascribing a pretty fair chance of success with their refunding (which is reasonable, since the company will be very hesitant to announce a longshot): the issue was quoted at 22.20-22 at the ‘close’ (actually, 4:30pm) yesterday, opened at 22.20 today (some poor sucker with a GTC order? Or somebody bailing without seeing the news?), traded just below 24.50 at about 10:30am, and is now (11:20am) at 24.94. So some people are making a few bucks!

This is another example of just how cheap the preferred share market is nowadays against its comparables.

Thanks to the Assiduous Reader who brought this to my attention!

DBRS has announced that it:

placed its credit ratings on Laurentian Bank of Canada (LBC or the Bank), including the Bank’s Long-Term Issuer Rating of A (low), Under Review with Negative Implications following a series of recent adverse developments, including the departures of LBC’s chief executive officer (CEO) and chair of the board as well as a mainframe outage that lasted several days before being resolved. The Bank’s Intrinsic Assessment of A (low) and Support Assessment (SA) of SA3 remain unchanged. The SA3 designation reflects no expectation of timely external support.

KEY CREDIT RATING CONSIDERATIONS
The Under Review with Negative Implications designation reflects DBRS Morningstar’s view that these adverse series of events in aggregate have weakened LBC’s franchise strength and future growth prospects, pressuring the credit ratings. LBC’s Personal Banking business, which has already had weaker earnings than its peers, has been under pressure with customer attrition, shrinking loans, and stagnant deposits in recent years. In DBRS Morningstar’s view, the mainframe outage that disrupted online access to retail and business accounts for four days could make it even more difficult for current management to turn around the important Personal Banking segment.

DBRS Morningstar’s review will assess the extent the rapid succession of executive departures and operational missteps have had on the Bank’s franchise and risk profile, along with the Bank’s ability to improve earnings and future prospects in light of the uncertainty of its strategic direction moving forward.

CREDIT RATING DRIVERS
Given the credit ratings are Under Review with Negative Implications, credit rating upgrades are unlikely. DBRS Morningstar would confirm the credit ratings with Stable trends if DBRS Morningstar views recent events as having no impact on LBC’s financial performance or franchise.

The credit ratings would be downgraded if DBRS Morningstar views the executive departures and operational risks exposed by the extended mainframe outage as negatively affecting the franchise and the Bank’s ability to produce sustained improvement in its financial performance. Increased pressures on funding and liquidity or additional operational missteps would also result in a credit rating downgrade.

CREDIT RATING RATIONALE
Franchise Combined Building Block (BB) Assessment: Good/Moderate

LBC is Canada’s eighth-largest Schedule I bank with assets of $50.6 billion as at July 31, 2023. The Bank offers retail services in Québec through its branch network as well as commercial lending across Canada and in the U.S. LBC also distributes financial products to brokers and financial advisors across Canada through its wholesale arm, B2B Bank. Over the past few years through 2022, LBC’s Personal Banking business faced customer attrition, shrinking loans, and stagnant deposits. Almost two years into the current strategic plan that was unveiled on December 10, 2021, the Bank has undertaken a digital-first approach and introduced new and enhanced digital capabilities to close gaps in its Personal Banking business, particularly across mortgage, Visa, and deposit products. On October 2, 2023, following the mainframe outage, the Bank announced the sudden and unexpected departure of its president and CEO, Rania Llewellyn, and the resignation of its board chair, Michael Mueller. With Éric Provost only recently being appointed as president and CEO, there remains limited visibility on LBC’s long-term strategic direction, although the Bank’s current focus is on improving operating efficiency and simplifying the organizational structure.

Earnings Combined Building Block (BB) Assessment: Good/Moderate
Relative to its peers, LBC has demonstrated lower profitability although it has a higher share of noninterest income at about 28% of total revenue for the first nine months of F2023. The Bank’s net income decreased by about 12.0% year over year (YOY) to $150.5 million for the first nine months of F2023 as a result of lower noninterest income and higher provision for credit losses and operating expenses. While a decrease in noninterest income was driven by reduced capital market revenue, noninterest expenses increased on higher salaries, employee benefits, and ongoing investments in technology. As a result, the operating efficiency ratio deteriorated to 70.4% for the first nine months of F2023 from 67.6% for the same period of 2022. Partly offsetting the downward pressure on net earnings, net interest income grew 2.5% YOY to $563.4 million for the first nine months of F2023; however, the net interest margin as calculated by DBRS Morningstar compressed by 7 basis points (bps) to 1.52%, primarily from higher funding costs.

Risk Combined Building Block (BB) Assessment: Good
Amounting to $37.0 billion as at Q3 2023, gross loans saw sluggish growth of about 1.2% YOY compared with 10.9% in the prior-year period. Lower non-mortgage personal loans partly offset an increase in residential mortgages and commercial loans. The bulk of credit risk lies in the commercial book, which accounted for about 48% of total loans as at Q3 2023 and has concentrations in commercial real estate and inventory financing. Overall, the Bank’s asset quality is good with low impairments and loan losses. The gross impaired loans ratio marginally increased by 11 bps YOY to 55 bps at the end of Q3 2023, largely because of increased impairments in commercial mortgages. As with the rest of the banking sector, DBRS Morningstar expects asset quality metrics to further deteriorate from their current levels in the short to intermediate term amid the challenging macroeconomic environment. Furthermore, if not managed prudently, the Bank’s continued realignment of the loan portfolio and geographic expansion, as well as deficiencies in IT capabilities and uncertainties around its new strategic direction, could expose LBC to heightened levels of operational and credit risk.

Funding and Liquidity Combined Building Block (BB) Assessment: Good/Moderate
Despite recent events, LBC’s overall funding and liquidity position has remained stable. Accounting for about 66% of the funding base, total deposits, including capital market deposits, declined by 3.0% year to date to $26.3 billion for the first nine months of F2023 and were in line with a reduction in the loan book. Personal deposits, which represented 85% of total deposits, marginally increased to $22.4 billion for the first nine of months of F2023 on the back of an uptick in direct retail deposits, which were partly offset by a decline in broker-sourced deposits. The Bank expects to attract more direct client deposits on a national level in the coming years, which DBRS Morningstar would view favourably over broker deposits. Liquidity levels, which include cash and Government of Canada securities, are sufficient to meet the Bank’s needs, with liquid assets forming 24% of total assets as at Q3 2023.

Capitalisation Combined Building Block (BB) Assessment: Good/Moderate
LBC’s capital ratios under the standardized approach are above regulatory minimums and provide adequate buffers to absorb stressed levels of loan losses. DBRS Morningstar would view favourably a larger capital buffer, sufficient to absorb significant losses, especially as the Bank undertakes an “accelerated evolution of its strategic plan” and continues to grow its commercial loan book, which may be more susceptible to weakness in the event of a sustained economic downturn. The CET1 capital ratio increased to 9.8% as at Q3 2023, compared with 9.1% as at Q3 2022, primarily reflecting lower risk-weighted assets as well as internal capital generation.

The affected issue is LB.PR.H.

BCE Inc. has announced:

that the Toronto Stock Exchange (the “TSX”) has accepted a notice filed by BCE of its intention to renew its normal course issuer bid (“NCIB”) to purchase up to 10% of the public float of each series of BCE’s outstanding First Preferred Shares that are listed on the TSX (the “Preferred Shares”). The period of the NCIB will extend from November 9, 2023 to November 8, 2024, or an earlier date should BCE complete its purchases under the NCIB. BCE will pay the prevailing market price at the time of acquisition for any Preferred Shares purchased plus brokerage fees payable by BCE (except with respect to purchases made under an issuer bid exemption order, which will be at a discount to the prevailing market price), and all Preferred Shares acquired by BCE under the NCIB will be cancelled.

The actual number of Preferred Shares repurchased under the NCIB and the timing of such repurchases will be at BCE’s discretion and shall be subject to the limitations set out in the TSX Company Manual.

The NCIB will be conducted through a combination of discretionary transactions and purchases under an automatic securities purchase plan through the facilities of the TSX as well as alternative trading systems in Canada, if eligible, or by such other means as may be permitted by securities regulatory authorities, including pre-arranged crosses, exempt offers, private agreements under an issuer bid exemption order issued by securities regulatory authorities and block purchases of Preferred Shares. Purchases made under an issuer bid exemption order will be at a discount to the prevailing market price.

Under the NCIB, BCE is authorized to repurchase shares of each respective series of the Preferred Shares as follows:

					Maximum Number of Shares Subject to Purchase
Series	Ticker	Issued and Outstanding Shares(1)	Public Float(1)	Average Daily Trading Volume(2)	Total(3)	Daily(4)
R	BCE.PR.R	7,894,800	7,894,800	5,406	789,480	1,351
S	BCE.PR.S	2,064,967	2,064,967	1,499	206,496	1,000
T	BCE.PR.T	5,354,833	5,354,833	4,556	535,483	1,139
Y	BCE.PR.Y	6,667,052	6,667,052	4,878	666,705	1,219
Z	BCE.PR.Z	2,785,698	2,785,698	1,827	278,569	1,000
AA	BCE.PR.A	11,604,661	11,604,661	9,332	1,160,466	2,333
AB	BCE.PR.B	7,055,639	7,055,639	5,602	705,563	1,400
AC	BCE.PR.C	6,505,774	6,505,774	5,029	650,577	1,257
AD	BCE.PR.D	12,671,126	12,671,126	11,791	1,267,112	2,947
AE	BCE.PR.E	6,097,913	6,097,913	5,653	609,791	1,413
AF	BCE.PR.F	9,145,387	9,145,387	5,502	914,538	1,375
AG	BCE.PR.G	8,636,930	8,636,930	4,969	863,693	1,242
AH	BCE.PR.H	4,878,370	4,878,370	2,998	487,837	1,000
AI	BCE.PR.I	9,362,540	9,362,540	4,724	936,254	1,181
AJ	BCE.PR.J	4,279,960	4,279,960	1,509	427,996	1,000
AK	BCE.PR.K	22,455,312	22,455,312	15,074	2,245,531	3,768
AL	BCE.PR.L	1,761,188	1,761,188	795	176,118	1,000
AM	BCE.PR.M	10,253,978	10,253,978	6,779	1,025,397	1,694
AN	BCE.PR.N	1,042,322	1,042,322	741	104,232	1,000
AQ	BCE.PR.Q	8,410,414	8,410,414	8,561	841,041	2,140
(1) As of October 31, 2023.
(2) For the 6 months ended October 31, 2023.
(3) Represents approximately 10% of the public float in respect of each series of Preferred Shares.
(4)Represents the maximum number of shares of each series of Preferred Shares that may be purchased over the TSX (or alternative trading systems in Canada, if eligible) during the course of one trading day. This amount is equal to the greater of (i) 25% of the average daily trading volume on the TSX calculated in accordance with the rules of the TSX, and (ii) 1,000 shares. This limitation does not apply to purchases made pursuant to block purchase exemptions.

BCE is making this NCIB because it believes that, from time to time, the Preferred Shares may trade in price ranges that do not fully reflect their value. BCE believes that, in such circumstances, the repurchase of its Preferred Shares represents an appropriate use of its available funds.

As of October 31, 2023, under its current normal course issuer bid that commenced on November 9, 2022 and will expire on November 8, 2023, and for which the company received approval from the TSX, BCE purchased, through the facilities of the TSX and alternative eligible trading systems, Preferred Shares as follows:

Series	Ticker	Maximum Number of Shares Subject to Purchase	Number of Shares Purchased	Weighted Average Price Paid per Security
R	BCE.PR.R	799,890	104,100	$14.76
S	BCE.PR.S	212,826	63,300	$18.05
T	BCE.PR.T	587,013	515,300	$17.85
Y	BCE.PR.Y	807,929	353,200	$17.76
Z	BCE.PR.Z	191,850	191,850	$19.11
AA	BCE.PR.A	1,230,766	703,000	$16.83
AB	BCE.PR.B	768,873	633,100	$17.95
AC	BCE.PR.C	1,002,799	238,500	$16.61
AD	BCE.PR.D	996,320	575,800	$17.90
AE	BCE.PR.E	651,291	415,800	$18.22
AF	BCE.PR.F	948,148	336,100	$16.04
AG	BCE.PR.G	897,953	342,600	$15.15
AH	BCE.PR.H	501,757	139,200	$18.08
AI	BCE.PR.I	953,504	172,500	$15.12
AJ	BCE.PR.J	446,496	185,000	$18.22
AK	BCE.PR.K	2,319,031	735,000	$14.22
AL	BCE.PR.L	179,938	38,200	$16.25
AM	BCE.PR.M	1,043,997	186,000	$14.71
AN	BCE.PR.N	105,472	12,400	$17.16
AQ	BCE.PR.Q	920,000	789,586	$20.50

BCE will enter into an automatic securities purchase plan (“ASPP”) with a designated broker in relation to the NCIB on or about the commencement date of the NCIB. The ASPP will allow for the purchase of Preferred Shares, subject to certain trading parameters, at times when BCE ordinarily would not be active in the market due to applicable regulatory restrictions or self-imposed trading black-out periods. Outside of these periods, the Preferred Shares will be repurchased by BCE at its discretion under the NCIB.

Geez, I hate these press releases with big tables in them – they take forever to format into HTML! But worth it, in this case – this is a really meaningful NCIB!

Thanks to Assiduous Reader Peculiar_Investor for bringing this to my attention!

Enbridge Inc. has announced:

that it does not intend to exercise its right to redeem its currently outstanding Cumulative Redeemable Preference Shares, Series N (Series N Shares) (TSX: ENB.PR.N) on December 1, 2023. As a result, subject to certain conditions, the holders of the Series N Shares have the right to convert all or part of their Series N Shares on a one-for-one basis into Cumulative Redeemable Preference Shares, Series O of Enbridge (Series O Shares) on December 1, 2023. Holders who do not exercise their right to convert their Series N Shares into Series O Shares will retain their Series N Shares.

The foregoing conversion right is subject to the conditions that: (i) if Enbridge determines that there would be less than 1,000,000 Series N Shares outstanding after December 1, 2023, then all remaining Series N Shares will automatically be converted into Series O Shares on a one-for-one basis on December 1, 2023; and (ii) alternatively, if Enbridge determines that there would be less than 1,000,000 Series O Shares outstanding after December 1, 2023, no Series N Shares will be converted into Series O Shares. There are currently 18,000,000 Series N Shares outstanding.

With respect to any Series N Shares that remain outstanding after December 1, 2023, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The new annual dividend rate applicable to the Series N Shares for the five-year period commencing on December 1, 2023 to, but excluding, December 1, 2028 will be 6.696 percent, being equal to the five-year Government of Canada bond yield of 4.046 percent determined as of today plus 2.65 percent in accordance with the terms of the Series N Shares.

With respect to any Series O Shares that may be issued on December 1, 2023, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The dividend rate applicable to the Series O Shares for the three-month floating rate period commencing on December 1, 2023 to, but excluding, March 1, 2024 will be 1.94183 percent, based on the annual rate on three month Government of Canada treasury bills for the most recent treasury bills auction of 5.16 percent plus 2.65 percent in accordance with the terms of the Series O Shares (the Floating Quarterly Dividend Rate). The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial holders of Series N Shares who wish to exercise their right of conversion during the conversion period, which runs from November 1, 2023 until 5:00 p.m. (EST) on November 16, 2023, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary time to complete the necessary steps. Any notices received after this deadline will not be valid.

ENB.PR.N was issued as a FixedReset, 4.00%+265, that commenced trading 2012-7-17 after being announced 2012-7-9. The issue reset at 5.086% in 2018. I recommended against conversion and there was no conversion. ENB.PR.N is tracked by HIMIPref™ and assigned to the “Scraps – FixedResets (Discount)” subindex, relegated there due to credit concerns.

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!

Pembina Pipeline Corporation has announced:

that it does not intend to exercise its right to redeem the currently outstanding Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 1 (“Series 1 Shares”) (TSX: PPL.PR.A) on December 1, 2023.

As a result of the decision not to redeem the Series 1 Shares, and subject to certain terms of the Series 1 Shares, the holders of the Series 1 Shares will have the right to elect to convert all or part of their Series 1 Shares on a one-for-one basis into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 2 of Pembina (“Series 2 Shares”) on December 1, 2023 (the “Conversion Date”). Holders who do not exercise their right to convert their Series 1 Shares into Series 2 Shares will retain their Series 1 Shares.

As provided in the terms of the Series 1 Shares: (i) if Pembina determines that there would remain outstanding immediately following the conversion less than 1,000,000 Series 1 Shares, then all remaining Series 1 Shares will be automatically converted into Series 2 Shares on a one-for-one basis effective as of the Conversion Date; or (ii) if Pembina determines that there would be less than 1,000,000 Series 2 Shares outstanding immediately following the conversion, no Series 1 Shares will be converted into Series 2 Shares on the Conversion Date. There are currently 10,000,000 Series 1 Shares outstanding.

With respect to any Series 1 Shares that remain outstanding after the Conversion Date, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate for the Series 1 Shares for the five-year period from and including December 1, 2023, to, but excluding, December 1, 2028, will be 6.525 percent, being equal to the five-year Government of Canada bond yield of 4.055 percent determined as of today plus 2.47 percent, in accordance with the terms of the Series 1 Shares.

With respect to any Series 2 Shares that may be issued on the Conversion Date, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate applicable to the Series 2 Shares for the three-month floating rate period from and including December 1, 2023, to, but excluding, March 1, 2024, will be 7.631 percent, being equal to the annual rate of interest for the most recent auction of 90-day Government of Canada treasury bills of 5.161 percent plus 2.47 percent, in accordance with the terms of the Series 2 Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset on the first day of March, June, September and December in each year.

Beneficial holders of Series 1 Shares who wish to exercise their right of conversion during the conversion period, which runs from November 1, 2023, until 3:00 pm (MT) / 5:00 pm (ET) on November 16, 2023, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with the time to complete the necessary steps. Any notices received after this deadline will not be valid.

As previously announced, the dividend payable on December 1, 2023, to holders of the Series 1 Shares of record on November 1, 2023, will be $0.306625 per Series 1 Share. For more information on the terms of the Series 1 Shares and the Series 2 Shares, please see the prospectus supplement dated July 19, 2013, which can be found on SEDAR at www.sedarplus.ca.

PPL.PR.A was issued as a FixedReset, 4.25%+247, that commenced trading 2013-7-26 after being announced 2013-7-17. The issue reset at 4.906% in 2018. I recommended against conversion and there was no converesion. PPL.PR.A is tracked by HIMIPref™ and assigned to the “Scraps – FixedResets (Discount)” subindex, relegated there due to credit concerns.

Thanks to Assiduous Reader niagara for bringing this to my attention!

Bank of Montreal has announced:

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 44 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 44”) and Non-Cumulative Floating Rate Class B Preferred Shares, Series 45 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 45”).

With respect to any Preferred Shares Series 44 that remain outstanding after November 25, 2023, commencing as of such date, holders thereof will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on November 25, 2023 to, but excluding, November 25, 2028, will be 6.816 per cent. This dividend rate is equal to the sum of the five-year Government of Canada bond yield as at October 26, 2023 plus 2.68 per cent, as determined in accordance with the terms of the Preferred Shares Series 44.

With respect to any Preferred Shares Series 45 that may be issued on November 25, 2023, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, calculated on the basis of the actual number of days elapsed in each quarterly floating rate period divided by 365, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the three-month period commencing on November 25, 2023 to, but excluding, February 25, 2024, will be 7.841 per cent. This dividend rate is equal to the sum of the three-month Government of Canada Treasury bill yield as at October 26, 2023 plus 2.68 per cent, as determined in accordance with the terms of the Preferred Shares Series 45.

Beneficial owners of Preferred Shares Series 44 who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to ensure that they meet the deadline to exercise such right, which is 5:00 p.m. (ET) on November 10, 2023.

Conversion enquiries should be directed to BMO’s Registrar and Transfer Agent, Computershare Trust Company of Canada, at 1-800-340-5021.

BMO.PR.E was issued as a FixedReset, 4.85%+268, that commenced trading 2018-9-17 after being announced 2018-09-06. Notice of extension was reported a week ago. The issue is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

Thanks to Assiduous Reader NK for bringing this to my attention!

Bank of Montreal has announced:

that it does not intend to exercise its right to redeem the currently outstanding Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 44 (Non-Viability Contingent Capital (NVCC)) of the Bank (the “Preferred Shares Series 44”) on November 25, 2023. As a result, subject to certain conditions, the holders of Preferred Shares Series 44 have the right, at their option, to convert all or part of their Preferred Shares Series 44 on a one-for-one basis into Non-Cumulative Floating Rate Class B Preferred Shares, Series 45 (Non-Viability Contingent Capital (NVCC)) of the Bank (the “Preferred Shares Series 45”) on November 25, 2023. Holders who do not exercise their right to convert their Preferred Shares Series 44 into Preferred Shares Series 45 on such date will retain their Preferred Shares Series 44, unless automatically converted in accordance with the conditions below.

The foregoing conversions are subject to the conditions that:

(i) if, after November 10, 2023, the Bank determines that there would be fewer than 1,000,000 Preferred Shares Series 44 outstanding on November 25, 2023 after giving effect to such conversions, then all remaining Preferred Shares Series 44 will automatically be converted into an equal number of Preferred Shares Series 45 on November 25, 2023; and

(ii) alternatively, if the Bank determines that there would be fewer than 1,000,000 Preferred Shares Series 45 outstanding on November 25, 2023 after giving effect to such conversions, then no Preferred Shares Series 44 will be converted into Preferred Shares Series 45.

In either case, the Bank will give written notice to that effect to any registered holders of Preferred Shares Series 44 affected by the preceding minimums on or before November 17, 2023.

The dividend rate applicable to the Preferred Shares Series 44 for the 5-year period commencing on November 25, 2023 to, but excluding, November 25, 2028, and the dividend rate applicable to the Preferred Shares Series 45 for the 3-month period commencing on November 25, 2023 to, but excluding, February 25, 2024, will be determined and announced by way of a news release on October 26, 2023. The Bank will also give written notice of these dividend rates to the registered holders of Preferred Shares Series 44.

Beneficial owners of Preferred Shares Series 44 who, on or after October 25, 2023, wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (ET) on November 10, 2023.

Conversion inquiries should be directed to BMO’s Registrar and Transfer Agent, Computershare Trust Company of Canada, at 1-800-340-5021

BMO.PR.E was issued as a FixedReset, 4.85%+268, that commenced trading 2018-9-17 after being announced 2018-09-06. It is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.