Category: Issue Comments

Brookfield Asset Management has announced:

the completion of its previously announced Preferred Shares, Series 26 issue in the amount of CDN$250-million. The offering was underwritten by a syndicate of underwriters led by CIBC, RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc.

Brookfield Asset Management issued 10,000,000 Preferred Shares, Series 26 at a price of $25.00 per share, for aggregate gross proceeds of CDN$250,000,000. Holders of the Preferred Shares, Series 26 will be entitled to receive a cumulative quarterly fixed dividend yielding 4.50% annually for the initial period ending March 31, 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 2.31%. The Preferred Shares, Series 26 will commence trading on the Toronto Stock Exchange on October 29, 2010 under the ticker symbol BAM.PR.T.

The net proceeds of the issue will be added to the general funds of Brookfield Asset Management and be used for general corporate purposes.

BAM.PR.T is a FixedReset, 4.50%+231, announced October 21. The issue traded 229,985 shares in a range of 24.60-90 before closing at 24.83-86, 300×200.

Vital statistics are:

Premium Income Corporation has announced:

a consolidation of the Class A shares effective the opening of trading on November 1, 2010. The consolidation will ensure that an equal number of Class A shares and Preferred shares are outstanding subsequent to the special retraction. Each shareholder will receive 0.738208641 new Class A shares for each Class A share held. The total value of a shareholder’s investment will not change, however, the number of Class A shares reflected in the shareholder’s account will decline and the net asset value per share will increase proportionately. Investors are advised that the CUSIP number will change to 740910302. No fractional shares will be issued and shareholders are not required to take any action for the consolidation to be effective.

This is very significant news. The implication is that at least one-quarter of the outstanding PIC.PR.A were retracted – possibly more, depending on how many of the PIC.A capital units were also retracted.

The current Capital Unit NAV is $5.98 as of October 21, so after consolidation will become about $8, implying that Asset Coverage is now in excess of 1.5:1. Credit quality on the preferreds just got a whole lot better!

I confess to being surprised by the size of the retraction given that the month low for the preferreds was 14.90, just a dime under the retraction price. I would have thought more people would sell. One possible explanation is that a large portion of the retraction was by very large holders who were hesitant to unwind a large position in the market; another possibility is that holders with high transaction costs (e.g., clients of full service brokerages) took that into consideration.

PIC.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-5 last Friday; at that time, downside protection was about 27%. They might want to bump that up a notch now that the retraction implies (given a projected Capital Unit value of $8) downside protection of 35%!

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

I haven’t seen a press release yet, but LFE.WT, which was issued in January, expired today way, way, way, WAY out of the money.

Exercise price for full units of Canadian Life Companies Split was 15.65, while the NAVPU on October 15 was 13.64.

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

DBRS has announced that it:

has today downgraded the rating of the Preferred Shares issued by Mulvihill Premium Canadian Bank (the Company) to Pfd-5 from Pfd-4 (high).

The Company is a split share corporation that initially raised gross proceeds of $100 million in 1996 by issuing Preferred Shares and Class A Shares. The Company invests in a portfolio of common shares (the Portfolio) issued by Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and The Toronto-Dominion Bank.

The Preferred Shares and Class A Shares that are currently outstanding were issued in September 2003 and September 2004, and were scheduled to terminate on November 1, 2010. On August 20, 2010, the Company announced a proposal to extend the term of the Company for an additional seven years. On September 29, 2010, the Company announced that its shareholders had approved a reorganization to extend the term of the Company.

DBRS has completed its review of the Company’s reorganization. The rating of the Preferred Shares has been downgraded to Pfd-5, based on a number of factors:

– The income earned on the Portfolio, net of Company management fees and expenses, does not fully cover the distribution paid to the Preferred Shares. Furthermore, the Company intends to continue to pay quarterly cash distributions on the Class A Shares of $0.15 per share. As a result, there is an annual grind on the net asset value (NAV) of the Portfolio of more than 4%, absent share price appreciation (if any).

– The downside protection available to the Preferred Shares is approximately 27% (as of October 14, 2010). When adjusted to reflect the annual grind on the Portfolio, the downside protection is significantly lower than protection levels commensurate with preferred share ratings in the Pfd-4 rating category.

– There is not a NAV test that suspends distributions to the Class A Shares if the NAV drops below a specified value. Canadian split share companies generally include a NAV test if they pay regular distributions to the Class A Shares (or capital shares) greater than the excess income of the split share company.

The factors above existed prior to the reorganization of the Company; however, the extension of the term of the Company by seven years has increased the length of time for which holders of the Preferred Shares are exposed to grind on the NAV as well as common share price volatility.

PIC.PR.A was last mentioned on PrefBlog when the term extension was approved. There is a retraction right exercisable November 1, but I’m not sure what the notice period is and in any case it will vary according to dealer. However, those wishing to unload will note that the issue closed today at 14.94-99, 5×6, so if you missed it you haven’t missed much.

PIC.PR.A is tracked by HIMIPref™ but is relegate to the Scraps index on credit concerns.

Brookfield Office Properties has announced:

the completion of its previously announced Preferred Shares, Series P issue in the amount of C$300 million. The offering was underwritten by a syndicate led by RBC Capital Markets, CIBC, Scotia Capital Inc. and TD Securities Inc.

Brookfield Office Properties issued 12.0 million Preferred Shares, Series P at a price of C$25.00 per share yielding 5.15% per annum for the initial 6 ½-year period ending March 31, 2017. Net proceeds from the issue will be added to the general funds of Brookfield Office Properties and be used for general corporate purposes, including the possible redemption or repayment of corporate or other obligations. The Preferred Shares, Series P will commence trading on the Toronto Stock Exchange on October 21, 2010 under the ticker symbol BPO.PR.P.

$300-million! Boy, I haven’t seen such an appetite for junk since high-school!

This issue is a FixedReset, 5.15%+300, announced October 13 with an original issue size of $200-million with a $50-million greenshoe; it was biggie-sized to $300-million on the day of announcement.

BPO.PR.P traded 421,226 shares in a range of 24.90-04 before closing at 25.00-01, 15×9.

Vital statistics are:

DBRS has announced that it:

has today downgraded the rating of the Preferred Shares issued by World Financial Split Corp. (the Company) to Pfd-4 (low) from Pfd-4 (high). The rating has been removed from Under Review with Negative Implications, where it was placed on August 12, 2010.
…
The NAV and the dividend income of the Portfolio have declined significantly over the past few years because of the high Portfolio concentration in global financial institutions. The Portfolio does not generate enough income to cover the Preferred Share distributions; however, less than one year remains until the termination of the Company, mitigating the negative impact of the shortfall.

On August 12, 2010, DBRS placed the rating of the Preferred Shares Under Review with Negative Implications, noting that the resolution of the Under Review status would depend on the performance of the Portfolio during August and September. The NAV of the Company generally continued to fluctuate between $11 and $11.50, a significant decline from earlier in 2010. As of September 30, 2010, the NAV of the Company was $11.25, providing downside protection of approximately 11% to the Preferred Shares. As a result of the decreased protection available to the Preferred Shares, the rating has been downgraded to Pfd-4 (low) from Pfd-4 (high).

The final redemption date for both classes of shares issued is June 30, 2011

WFS.PR.A was last mentioned on PrefBlog when it was placed on review-negative by DBRS. WFS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

OK, you need a programme for this. Can’t tell your players without a programme!

Brookfield Asset Management (BAM) wholly owns Brookfield Renewable Power Inc.

Brookfield Renewable Power Inc. is the Manager of, and owns 42% of the units in, Brookfield Renewable Power Fund.

Brookfield Renewable Power Preferred Equity (BRF) is a wholly owned subsidiary of Brookfield Renewable Power Fund.

In a press release today:

Brookfield Renewable Power Fund (the “Fund”) and Brookfield Renewable Power Inc. (“BRPI”) today announced a bought-deal secondary offering, with a syndicate of underwriters led by CIBC and Scotia Capital Inc., through which BRPI, the selling unitholder, has agreed to sell 7,000,000 of its Fund units at an offering price of $21.85 per unit. The Underwriters have been granted an over-allotment option to purchase up to an additional 1,000,000 units at the offering price, under the same terms, exercisable for a period of 30 days from closing of the Offering.

BRPI and its affiliates currently own 45,190,838 Fund units or approximately 41.5% of the Fund’s units on a fully-exchanged basis. Upon the completion of the offering, but before giving effect to the over-allotment option, it is anticipated that BRPI will own 38,190,838 Fund units directly and indirectly, representing approximately 35.1% of the Fund’s units on a fully-exchanged basis, and remain its largest unitholder.

The proceeds from the offering will provide BRPI with additional liquidity.

The Fund will continue to be administered and managed by BRPI and remain Brookfield Asset Management Inc.’s exclusive vehicle for Canadian contracted operating and construction-ready hydro and wind power generation facilities.

DBRS comments:

The transaction does also not impact the ratings of the Fund (BBB (high), Stable trend, STA-2 (high)) nor those of the Fund’s affiliate Brookfield Renewable Power Preferred Equity Inc. (Pfd-3 (high), Stable trend) as BRP will remain the Fund’s Manager. As the transaction is a secondary offering, no sale proceeds will flow to the Fund.

This is reminiscent of the BPO Asset Shuffle of the summer.

It is of additional interest to learn:

DBRS has assigned a rating of BBB (high) with a Stable trend to the prospective issue by Brookfield Renewable Power Inc. (BRP) of $450 million of 5.14% Series 7 medium term notes due October 13, 2020 (the Notes).

The Notes are being offered pursuant to BRP’s Short Form Base Shelf Prospectus dated September 9, 2010, a Prospectus Supplement dated October 6, 2010, and a pricing supplement dated October 7, 2010. The Notes will rank equally with all other unsecured indebtedness of BRP. Proceeds from the offering will be used to refinance existing indebtedness, including BRP’s $400 million of 8.75% Series 5 notes, and for general corporate purposes. The offering is expected to close on October 13, 2010.

So “Inc” is raising another $50-million in debt, in addition to monetizing $150-million-odd in “Fund”. I wonder what will happen to the money?

Brookfield Renewable Power Preferred Equity has one series of preferreds outstanding, BRF.PR.A, a FixedReset relegated to Scraps on credit concerns.

Brookfield Asset Management has many preferred shares outstanding: BAM.PR.B & BAM.PR.K (floater); BAM.PR.E (Ratchet); BAM.PR.G (FixedFloater); BAM.PR.H, BAM.PR.I, BAM.PR.J & BAM.PR.O (Operating Retractible); BAM.PR.M & BAM.PR.N (PerpetualDiscount); and BAM.PR.P & BAM.PR.R (FixedReset)

BCE Inc. has announced:

As of December 1, 2010, the Series R Preferred Shares will, should they remain outstanding, pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on a fixed rate equal to the product of: (a) the yield to maturity compounded semi-annually (the “Government of Canada Yield”), computed on November 10, 2010 by two investment dealers appointed by BCE Inc., that would be carried by Government of Canada bonds with a 5-year maturity, multiplied by (b) the “Selected Percentage Rate”. The “Selected Percentage Rate” determined by BCE Inc. is 207%. The annual dividend rate applicable to the Series R Preferred Shares will be published on November 11, 2010 in the national edition of the Globe and Mail, the Montreal Gazette and La Presse and will be posted on the BCE Inc. website at www.bce.ca.

These shares are interconvertible to and from BCE.PR.Q, a ratchet rate issue which does not currently exist:

Beginning on October 18, 2010 and ending on November 17, 2010, holders of Series R Preferred Shares will have the right to choose one of the following options with regards to their shares:
1. To retain any or all of their Series R Preferred Shares and continue to receive a fixed quarterly dividend; or
2. To convert, on a one-for-one basis, any or all of their Series R Preferred Shares into BCE Inc. Cumulative Redeemable First Preferred Shares, Series Q (the “Series Q Preferred Shares”) and receive a floating monthly dividend.

Those trying to decide which way to jump may be interested in the Pairs Equivalency Calculator I published earlier this year. I will post again once the final rate is known.

BCE.PR.R, et al., were last mentioned on PrefBlog when BCE bought CTV. BCE.PR.R is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Premium Income Corporation has announced:

that its shareholders have approved a reorganization (“Reorganization”) to extend the term of the Fund for an additional seven years.

In connection with the Reorganization, holders of Class A Shares will continue to receive ongoing leveraged exposure to a high-quality portfolio consisting principally of common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and The Toronto-Dominion Bank, as well as attractive quarterly cash distributions. Currently, the Fund is paying quarterly Class A distributions at a rate of $0.60 per year. The Fund intends to continue to pay distributions at this rate until the net asset value (“NAV”) per Unit (a “Unit” being considered to consist of one Class A Share and one Preferred Share) reaches $22.50. At such time, quarterly Class A distributions paid by the Fund will vary and will be calculated as approximately 8.0% per annum of the NAV of a Class A Share.

Holders of Preferred Shares are expected to continue to benefit from fixed cumulative preferential quarterly cash dividends in the amount of $0.215625 per Preferred Share ($0.8625 per year) representing a yield of 5.75% per annum on the original issue price of $15.00.

As part of the Reorganization, the Fund will also make other changes including changing its authorized share capital by adding new classes of shares issuable in series, changing the monthly retraction prices for the Class A Shares and the Preferred Shares so that they are calculated by reference to market price in addition to NAV and changing the dates by which notice of monthly retractions needs to be provided and by which the retraction amount will be paid. The Fund will also allow for the calculation of a diluted NAV in the event the Fund should ever issue warrants or rights to acquire additional Class A Shares or Preferred Shares.

The Fund believes that the Reorganization will allow shareholders to maintain their investment in the Fund on a basis that will better enable it to meet its investment objectives for both classes of shares. Shareholders will be given a special retraction right to retract their Class A Shares or Preferred Shares at NAV on November 1, 2010. The redemption date of the shares will automatically be extended for successive seven-year terms after November 1, 2017, the Board of Directors will be authorized to set the dividend rate on the Preferred Shares for any such extension of term and shareholders will be able to retract their Class A Shares or Preferred Shares at NAV prior to any such extension.

When I reported the proposal in PIC.PR.A Proposes Term Extension I decried the poor credit quality of the shares and suggested that holders might wish to redeem if the proposal went through.

PIC.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Allbanc Split Corp II has announced:

that its Board of Directors has approved a proposal to reorganize the Company. The reorganization will permit holders of Capital Shares to extend their investment in the Company beyond the scheduled redemption date of February 28, 2011 for an additional five years. The Preferred Shares will be redeemed on the same terms originally contemplated in their share provisions. Holders of Capital Shares who do not wish to extend their investment and all holders of Preferred Shares will have their shares redeemed on February 28, 2011.

The reorganization will involve (i) the extension of the originally scheduled redemption date, (ii) a special retraction right to enable holders of Capital Shares to retract their shares as originally contemplated should they not wish to extend their investment and (iii) the issuance of a new class of preferred shares in order to provide continuing leverage for the Capital Shares.

A special meeting of holders of the Capital Shares will be held on December 7, 2010 to consider and vote upon the proposed reorganization. Details of the proposed reorganization will be outlined in an information circular to be prepared and delivered to holders of Capital Shares of record on October 28, 2010 in connection with the special meeting and will be available on www.sedar.com. Implementation of the proposed reorganization will also be subject to applicable regulatory approval including the Toronto Stock Exchange.

Allbanc Split Corp. II is a mutual fund corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks.

ALB.PR.A was last mentioned on PrefBlog when the company announced it was considering reorganizing. ALB.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.