Category: Issue Comments

GMP Capital has announced:

the completion of its offering of 4,000,000 Cumulative 5-Year Rate Reset Preferred Shares, Series B ( the “Series B Shares”) of GMP at a purchase price of $25.00 per Series B Share, for aggregate gross proceeds of $100,000,000. The Series B Shares are expected to commence trading on the Toronto Stock Exchange on February 22, 2011 under the trading symbol “GMP.PR.B”.

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

GMP has granted to the underwriters an over-allotment option, exercisable for a period of 30 days following closing, to purchase up to an additional 600,000 Series B Shares which, if exercised in full, would increase the gross proceeds to $115,000,000.

GMP intends to use the net proceeds from the offering for general corporate purposes, which will include the redemption of the senior unsecured notes issued on November 1, 2006 by Griffiths McBurney L.P., an indirect wholly-owned subsidiary of GMP, in the aggregate principal amount of $60 million, such redemption to occur in accordance with the note indenture governing the notes, and may include acquisitions and investments with a view to growing or expanding GMP’s businesses.

GMP.PR.B is a FixedReset 5.50%+289 announced February 1. The issue traded 183,700 shares today in a range of 24.63-90 before closing at 24.68-69, 4×20.

Vital Statistics are:

GMP.PR.B will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Update, 2011-3-1: Despite a quote of 24.75-87 and the fact that the high since issue date is 24.90, they were able to announce full take-up of the greenshoe:

GMP Capital Inc. (“GMP”) (TSX: GMP) announced today that it has closed the over-allotment option granted to the underwriters in connection with GMP’s bought deal public offering of Cumulative 5-Year Rate Reset Preferred Shares, Series B (the “Series B Shares”), which closed on February 22, 2011. As a result of the exercise of the over-allotment option, GMP sold an additional 600,000 Series B Shares at a price of $25.00 per share for additional gross proceeds of $15,000,000. In total, GMP has issued 4,600,000 Series B Shares for aggregate gross proceeds of $115,000,000. The Series B Shares trade on the Toronto Stock Exchange under the trading symbol “GMP.PR.B”.

GMP intends to use the net proceeds from the offering for general corporate purposes, which will include the redemption of the senior unsecured notes issued on November 1, 2006 by Griffiths McBurney L.P., an indirect wholly-owned subsidiary of GMP, in the aggregate principal amount of $60 million, such redemption to occur in accordance with the note indenture governing the notes, and may include acquisitions and investments with a view to growing or expanding GMP’s businesses.

I have been under the impression that BNS.PR.Z has a Regulatory Event clause and made mention of this when the issue was posted for trading. This assertion was based on the December 2 Material Documents:

Lock-Up Agreeement (Material Document, English, Dec. 2, 2010, 310K)

Upon the occurrence of a Regulatory Event, BNS may, at its option, with the prior approval of the Superintendent, on not more than 60 nor less than 30 days’ notice, redeem all or any number of the then outstanding Floating Rate Preferred Shares upon payment in cash for each Floating Rate Preferred Share so redeemed of an amount equal to $25.00 per Floating Rate Preferred Share together with all declared and unpaid dividends to the date fixed for redemption.

“Regulatory Event” means the receipt by BNS of a notice or advice from the Superintendent that all or any portion of the Floating Rate Preferred Shares no longer qualify as Tier 1 capital under the Canadian bank capital guidelines issued by the Superintendent or other governmental authority in Canada concerning the maintenance of adequate capital reserves by Canadian chartered banks, including BNS, from time to time.

Support Agreement (Material Document – English, December 2, 2010, 374K)

Upon the occurrence of a Regulatory Event, the Offeror may, at its option, with the prior approval of the Superintendent, on not more than 60 nor less than 30 days’ notice, redeem all or any number of the then outstanding Offeror Reset Preferred Shares upon payment in cash for each Offeror Reset Preferred Share so redeemed of an amount equal to $25.00 per Offeror Reset Preferred Share together with all declared and unpaid dividends to the date fixed for redemption.

“Regulatory Event” means the receipt by the Offeror of a notice or advice from the Superintendent that all or any portion of the Offeror Reset Preferred Shares no longer qualify as Tier 1 capital under the Canadian bank capital guidelines issued by the Superintendent or other governmental authority in Canada concerning the maintenance of adequate capital reserves by Canadian chartered banks, including the Offeror, from time to time.

However, when looking for definitive, prospectus-like, language to quote to exemplify a Regulatory Event I found:

Security Holders Documents – English, February 1, 2011:

Nothing. There is nothing I can see in the Security Holders’ Documents that would indicate that the bank has the option to call at par given the occurance of a Regulatory Event.

There is also nothing in the Offer to Purchase … DundeeWealth dated 2010-12-15, which is linked on the Scotia preferred share page as the “Prosp.”.

There is also nothing in the similarly linked Share Terms, which I believe is idential to the the “Security Holders Documents” on SEDAR.

So what happened?

Brompton Group’s Life & Banc Split Corp. has announced:

that it has filed a final prospectus for an offering of warrants to Class A shareholders of the Company. Each Class A shareholder of record on February 22, 2011 will receive one half of one warrant for each Class A share held.

One warrant will entitle the holder to purchase a Unit (consisting of one Class A share and one Preferred share of the Company) upon payment of the subscription price of $18.87, which is the sum of:
a) the most recently calculated NAV per Unit prior to the date of filing the preliminary prospectus; and
b) the estimated per Unit fees and expenses of the offering.

Warrants may be exercised on or before the expiry date of March 24, 2011. The Company has applied to list the warrants on the TSX under the ticker symbol LBS.WT. Warrants will be distributed to client accounts on a best-efforts basis after the February 22, 2011 record date. There is no additional subscription privilege under this offering. A holder of warrants may only subscribe for Units by exercising their warrants by the expiry date. The closing prices on February 9, 2011 for both the Class A shares ($9.96) and Preferred shares ($10.40) amounted to $20.36, which was above the subscription price.

The filing of the preliminary prospectus has been previously reported. LBS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Brookfield Asset Management has announced:

the completion of its previously announced Preferred Shares, Series 28 issue in the amount of CDN$215 million.

Brookfield issued 8,600,000 Preferred Shares, Series 28 at a price of $25.00 per share, for gross proceeds of CDN$215,000,000. Holders of the Preferred Shares, Series 28 will be entitled to receive a cumulative quarterly fixed dividend yielding 4.60% annually for the initial period ending June 30, 2017. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 1.80%. The Preferred Shares, Series 28 will commence trading on the Toronto Stock Exchange on February 8, 2011 under the ticker symbol BAM.PR.X.

Brookfield has granted the underwriters an over-allotment option, exercisable for a period of 30 days following closing, to purchase up to an additional 1,290,000 Preferred Shares, Series 28 which, if exercised, would increase the gross offering size to CDN$247,250,000.

The net proceeds of the issue will be used for general corporate purposes, including funding a portion of the company’s acquisition of additional common shares in U.S. mall operator General Growth Properties Inc.

The issue is a FixedReset, 4.60%+180, announced January 19.

The issue traded 206,559 shares today in a range of 24.63-88 before closing as 24.70-75.

Vital statistics are:

BAM.PR.X will be tracked by HIMIPref™ and incorporated in the FixedReset index.

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.