Category: Issue Comments

Great-West Lifeco has announced:

the closing of its previously announced offering of 3.65% Non-cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) through a syndicate of underwriters led by BMO Nesbitt Burns Inc., RBC Dominion Securities Inc. and Scotia Capital Inc. and including CIBC World Markets Inc., TD Securities Inc., National Bank Financial Inc. and Desjardins Securities Inc. for gross proceeds of $250 million.

The Series N Shares were priced at $25.00 per share. The net proceeds will be used for general corporate purposes and to augment Lifeco’s current liquidity position. The Series N Shares will be posted for trading on the Toronto Stock Exchange under the symbol “GWO.PR.N”.

GWO.PR.N is the 3.65%+130 FixedReset announced November 15. The final size of $250-million means that the greenshoe of $50-million was not exercised.

GWO.PR.N traded 110,585 shares today in a range of 24.65-76 before closing at 24.65-70, 39×128. Vital statistics are:

GWO.PR.N is tracked by HIMIPref™ and has been assigned to the FixedReset index.

Dividend Growth Split Corp has announced:

it has filed a preliminary short form prospectus with respect to a treasury offering of preferred shares and class A shares.

Dividend Growth Split Corp. invests in a portfolio of common shares of high quality, large capitalization companies, which have among the highest dividend growth rates of those companies included in the S&P/TSX Composite Index.
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The offering price of the preferred shares is $10.00 per share. The closing price of the preferred shares on the TSX on November 19, 2010 was $10.45. The investment objectives for the preferred shares are to provide their holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.13125 per preferred share to yield 5.25% per annum on the original issue price, and to return the original issue price to holders of preferred shares at the time of redemption on November 30, 2014.

The final class A share offering price will be non-dilutive to existing class A shareholders as it will be set at a level that ensures that the net proceeds of the Offering per Unit are greater than the most recently calculated Net Asset Value per Unit prior to the date of the final prospectus. The closing price of the class A shares on the TSX on November 19, 2010 was $9.70. The investment objectives for the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per class A share, and to provide the opportunity for growth in net asset value per class A share.

DGS.PR.A was last mentioned on PrefBlog when the last treasury offering closed. DGS.PR.A is not tracked by HIMIPref™ as it is too small … but that excuse won’t hold up for much longer if they keep up the pace of treasury offerings!

Scotiabank has announced:

that Scotiabank has agreed to make an offer for all of the common shares of DundeeWealth that the Bank does not own. Scotiabank currently owns 18 per cent of DundeeWealth.
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The value of the offer to DundeeWealth shareholders is $21.00 per common share representing an enterprise value for DundeeWealth of approximately $3.2 billion. Scotiabank will offer 0.2497 of a Scotiabank common share and, at the election of each shareholder, either $5.00 in cash or 0.2 of a $25.00, 3.70% five year rate reset Scotiabank preferred share for each DundeeWealth common share (including common shares issuable on conversion of other shares).
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Dundee Corporation owns 48 per cent of DundeeWealth. As a result of Dundee Corporation’s commitment to tender, on completion of the offer Scotiabank will own at least 67 per cent of DundeeWealth. After the completion of the offer, Scotiabank also expects to proceed with the acquisition of the balance of the common shares of DundeeWealth.

This will improve the credit quality of DW.PR.A quite considerably, and the cash might have an effect on the credit ratings of DC as well. DW.PR.A closed on Friday at 24.95-30, for a yield-to-worst of 4.94-68%, but is now quoted at 26.01-25. The Modified Duration on Friday was 5.38,

It’s interesting that Scotia is offering partial payment in FixedReset preferreds with an initial coupon of 3.70% – that would make the Issue Reset Spread about 150bp, so this issue will be treated as “more perpetual than otherwise”.

Update: DBRS comments:

The transaction is consistent with BNS’s strategy of growing its wealth management businesses, which the Bank believes offers attractive opportunities. DBRS views BNS’s wealth management businesses as a key component of the Bank’s domestic growth strategy.

BNS will gain significant market share to 7.8% and become the fifth largest mutual fund provider in Canada and the third largest among the Canadian banks with over $55 billion in assets under management, up from tenth position. The Bank is currently under-represented in retail mutual funds.

The transaction provides BNS with added capabilities in the advisor channel, which is the primary distribution channel for DWI. Over the last three years, BNS has been investing to strengthen its distribution capabilities in wealth management, including both the direct and advisor channels. Both mutual fund brands, ScotiaFunds and Dynamic, will be maintained.

BCE Inc. has announced:

that none of its Cumulative Redeemable First Preferred Shares, Series R (Series R Preferred Shares) will be converted into Cumulative Redeemable First Preferred Shares, Series Q (Series Q Preferred Shares).

On October 12, 2010, BCE notified holders of Series R Preferred Shares that they could elect to convert their shares into Series Q Preferred Shares subject to the terms and conditions attached to those shares. Only 71,965 of BCE’s 8,000,000 Series R Preferred Shares were surrendered for conversion into Series Q Preferred Shares. As this would result in there being less than one million Series Q Preferred Shares outstanding, no Series R Preferred Shares will, as per the terms and conditions attached to those shares, be converted on December 1, 2010 into Series Q Preferred Shares. Shareholders who had elected to convert their Series R Preferred Shares will be receiving, by December 1, 2010, share certificates representing the number of shares surrendered for conversion.

The Series R Preferred Shares will continue to be listed on The Toronto Stock Exchange under the symbol BCE.PR.R. The Series R Preferred Shares will pay on a quarterly basis, for the five-year period beginning on December 1, 2010, as and when declared by the Board of Directors of BCE, a fixed dividend based on an annual dividend rate of 4.490%.

BCE.PR.R was last mentioned on PrefBlog when the dividend reset to 4.49% was announced. BCE.PR.R is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

The Bank of Canada has released the Autumn 2010 Review with articles

• Has Exchange Rate Pass-Through Really Declined? Some
  Recent Insights from the Literature

• Financial Stress, Monetary Policy, and Economic Activity
• Trends in Issuance: Underlying Factors and Implications

The last article, by Jonathan Witmer, attracted my eye, but was something of a disappointment … typical B-School Look-Mummy-I-Got-A-Spreadsheet broker research stuff.

Update: Not everyone agrees with my assessment of the Witmer paper.

DBRS has announced that it:

has today discontinued the ratings of the Preferred Shares/Securities issued by Mulvihill Premium Canadian Bank, Top 10 Split Trust, and World Financial Split Corp. The ratings are being withdrawn at the request of Mulvihill Capital Management Inc., the manager of the three funds.

PIC.PR.A was last mentioned on PrefBlog when the Capital Units were consolidated. It is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

WFS.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-4(low) by DBRS. It is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

TXT.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-4(high) by DBRS. It is not tracked by HIMIPref™.

BCE Inc. has announced that it:

will, on December 1, 2010, continue to have Cumulative Redeemable First Preferred Shares, Series R outstanding if, following the end of the conversion period on November 17, 2010, BCE Inc. determines that at least one million Series R Preferred Shares would remain outstanding. In such a case, as of December 1, 2010, the Series R Preferred Shares will 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 “Government of Canada Yield” is 2.169%. Accordingly, the annual dividend rate applicable to the Series R Preferred Shares for the five-year period beginning on December 1, 2010 will be 4.490%.

The announcement of the Selected Percentage Rate was reported on PrefBlog. Data for the Pairs Equivalency Calculator have been updated, but as yet the RatchetRate complement to this issue, Series Q, does not exist.

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

Mulvihill Premium Split Share Corp. has announced:

that its manager Mulvihill Capital Management Inc. has voluntarily agreed to decrease the management fee from 1.25% per annum of the net asset value to 0.50% per annum of net asset value for an indefinite period. The Fund implemented its Priority Equity Portfolio Protection Plan as required, to protect the original value of the Priority Equity Shares and is consequently invested in cash and cash equivalents. At this time, the manager has determined to consider strategic alternatives regarding the Fund and its operations.

The Priority Equity Portfolio Protection Plan was grafted on to the structure with the 2007 reorganization. In the Semi-annual Financials for July 31, 2010, the company disclosed:

Due to the above strategy to protect the Priority Equity shares the Fund is entirely in cash and cash equivalents. The Priority Equity shares have residual risk now, since they will be expected to cover expenses of the Fund in future years.

MUH.PR.A was last mentioned on PrefBlog when the company announced an issuer bid. MUH.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Yellow Media Inc. has announced:

that Yellow Pages Income Fund (the Fund) has completed today the previously announced plan of arrangement pursuant to which the Fund’s income trust structure has been converted into a dividend paying publicly traded corporation named Yellow Media Inc. On May 6, 2010, unitholders of the Fund approved the conversion to a corporate structure by a vote of 99.8 percent. Under the plan of arrangement, unitholders of the Fund received, for each unit of the Fund held, one common share of the resulting public corporation. Common shares of Yellow Media Inc. will commence trading on the Toronto Stock Exchange on November 1, 2010 under the symbol YLO.

This ticker change applies to the company’s four series of preferred shares outstanding: The Operating Retractibles, YPG.PR.A and YPG.PR.B are now YLO.PR.A and YLO.PR.B, respectively. The FixedResets YPG.PR.C and YPG.PR.D, are now YLO.PR.C and YLO.PR.D respectively.

It is of interest to note the following from the 3Q10 Management Discussion and Analysis:

On June 8, 2010, Yellow Media Inc. received approval from the Toronto Stock Exchange on its notice of intention to renew its normal course issuer bid for its preferred shares, Series 1 and preferred shares, Series 2 through the facilities of the Toronto Stock Exchange from June 11, 2010 to no later than June 10, 2011, in accordance with applicable rules and regulations of the Toronto Stock Exchange.

Under its normal course issuer bid, Yellow Media Inc. intends to purchase for cancellation up to but not more than 1,174,691 and 720,000 of its outstanding preferred shares, Series 1 and preferred shares, Series 2, respectively, representing 10% of the public float of each series of preferred shares outstanding on June 8, 2010.

For the first nine months of 2010, Yellow Media Inc. purchased for cancellation 604,748 preferred shares, Series 1 for a total cash consideration of $15 million including brokerage fees at an average price of $24.76 per share and 260,250 preferred shares, Series 2 for a total cash consideration of $5.2 million including brokerage fees at an average price of $20.17 per share. The carrying value of these preferred shares, Series 1 and Series 2 was $14.9 million and $6.4 million, respectively.

Since June 11, 2009, the total cost of repurchasing preferred shares amounted to $33.9 million, including brokerage fees.