Category: Issue Comments

This should have been posted yesterday, July 28. Sorry!

Northland Power Income Fund has announced:

the closing of the previously announced offering of Cumulative Rate Reset Preferred Shares, Series 1 (the “Series 1 Preferred Shares”) by Northland Power Preferred Equity Inc. (the “Corporation”), an indirect wholly-owned subsidiary of the Fund. The Series 1 Preferred Shares are guaranteed by the Fund. The Corporation issued a total of 6 million Series 1 Preferred Shares at $25.00 per share for gross proceeds of $150 million. The offering was made on a bought deal basis through a syndicate of underwriters led by CIBC.

The Series 1 Preferred Shares commence trading on the TSX today under the symbol NPP.PR.A.

The Corporation intends to loan the net proceeds of the offering to NPIF Holdings L.P., a subsidiary of the Fund, which will use the funds to: (i) finance the remaining $51 million equity infusion in North Battleford Power L.P.; (ii) finance the $26 million equity infusion in Mount-Louis Wind L.P.; and (iii) repay certain non-recourse project debt in the amount of $40 million. The remainder of the loan will be used by NPIF Holdings L.P. for general corporate purposes.

NPP.PR.A is a FixedReset, 5.25%+280, announced July 6.

Vital statistics are:

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

About four months ago, on March 26, I noted that RY.PR.R was bid at under 3.00%. It turns out that that was a significant date: March 26 marked a peak in the FixedReset market, which then entered a slump period that I analyzed extensively in the May edition of PrefLetter.

So now BMO.PR.N is bid through 3.00%. This is an interesting issue: it was announced 2008-11-25, very close to the all time low in the PerpetualDiscount market (BMO PerpetualDiscounts were at 8.50%!), and settled in December 2008; it’s a FixedReset, 6.50%+383bp. It closed today bid at 28.30 and is callable at 25.00 on February 25, 2014.

We plug the following data into the Yield-to-Call calculator:
Current Price 28.30
Call Price 25.00
Settlement Date 2010-7-23 (easily disputable – so sue me)
Quarterly Dividend 0.40625
Cycle 2 (FMAN)
Pay Date 25
Include First Dividend 1 = yes (goes ex 7/28; the proximity of the ex-Date might be influencing the price)

And we get IRR = 2.95%, Quarterly compounded yield 2.91%. HIMIPref™ reports 2.98% yield – the difference is due to the month’s grace period that is a bug feature idiosyncracy in the system; of very little import since it’s small AND consistent across issues, but it’s embarrassing because it has to be disclosed every time I discuss yields. One day I’ll change it, never fear.

Another notable fact regarding BMO.PR.N is that it has just been added to TXPR which may be exerting a little upwards pressure on the price.

Two charts have been uploaded for your edification and amusement:

• Yield-to-Worst
• Bid Price

which plot both BMO.PR.N and RY.PR.R from the latter’s issuance in January 2009. Enjoy!

Faircourt Asset Management Inc. has announced:

that in accordance with the terms of the Trust Indenture governing the Preferred Securities and the maintenance of a minimum 1.4 times asset coverage to be maintained by the Trust, dated November 17, 2004, the monthly distribution on the Trust Unit (TSX: FIG.UN) will be suspended until further notice. The Trust’s ability to continue variable distributions, as announced on April 19, 2010, is dependent on market conditions, the results of the annual redemption, and the Trust’s asset coverage levels and would be evaluated by the Manager on a monthly basis.

This announcement does not affect the quarterly distributions related to the Preferred Securities of either Trust (TSX: FIG.PR.A).

Faircourt Income & Growth Split Trust is designed to provide levered exposure to a portfolio comprised of Income Trusts, North American Dividend Paying Equities, as well as other income generating securities.

Acuity Investment Management Inc. is the Investment Advisor for Faircourt Income & Growth Split Trust.

Acuity is best known for holding income trusts in “Acuity Fixed Income Fund”, but the performance of FIG.UN (-15.24% p.a. annualized since inception, vs. a benchmark of +6.96%) is also worthy of note.

FIG.PR.A was last mentioned on PrefBlog when it was announced that warrant exercise in June was minimal. FIG.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Lifeco Split Corporation Inc. has announced:

that in relation to its previously announced reorganization, the Company has called 15,194 Preferred Shares for cash redemption on July 30, 2010, representing approximately 6.6035% of the outstanding Preferred Shares. The Company is redeeming the 15,194 Preferred Shares in order to increase the downside protection on the remaining Preferred Shares to approximately 38.8%, as at July 15, 2010. The Preferred Shares shall be redeemed on a pro rata basis so that each holder of Preferred Shares of record on July 29, 2010 will have approximately 6.6035% of their Preferred Shares redeemed. Holders of the Preferred Shares being redeemed will still be entitled to the dividend payable on July 30, 2010. The redemption price of the Preferred Shares will be equal to the lesser of (i) Unit Value on July 26, 2010 (the “Valuation Date”) and (ii) $51.19. As at the close of business yesterday, Unit Value was $76.20. The Preferred Shares will commence trading on a post redemption basis commencing July 27, 2010.

Immediately following the redemption of the Preferred Shares, the Company will subdivide the remaining Preferred Shares on a 1.39-for-1 basis in order to maintain the ratio of two Capital Shares for each Preferred Share. Accordingly, the redemption price of the Preferred Shares will be adjusted so that after the subdivision, the Preferred Shares will be redeemable for a cash amount equal to the lesser of (i) Unit Value and (ii) $36.84. The quarterly fixed distribution of the Preferred Shares will be also be adjusted, effective July 30, 2010, so that after the subdivision, holders of Preferred Shares will be entitled to quarterly fixed distributions equal to $0.3684. On an annualized basis, the fixed distribution will continue to represent a yield of 4.00% on the redemption price of $36.84. The subdivision will be effected as at the close of business on August 5, 2010 and the Preferred Shares will commence trading on a post subdivision basis commencing August 3, 2010.

It is not clear to me whether these 15,194 shares are including or in addition to the redemption of 10,107 shares due to unmatched capital unit retractions announced in June.

The downside protection on the remaining Preferred Shares to approximately 38.8% equates to Asset Coverage of 1.6+:1.

LSC.PR.C is not tracked by HIMIPref™.

World Financial Split Corp. has announced:

that it has filed a preliminary short form prospectus relating to an offering of Warrants to holders of its Class A Shares. Each Class A shareholder of record on the record date will receive one Warrant for each Class A Share held.

Each Warrant will entitle its holder to acquire one Class A Share and one Preferred Share upon payment of the subscription price. The record date and the subscription price will be determined at the time the Fund files its final prospectus for the offering. The Fund has applied to list the Warrants and the Class A Shares and the Preferred Shares issuable upon the exercise thereof on the Toronto Stock Exchange.

The exercise of Warrants by holders will provide the Fund with additional capital that can be used to take advantage of attractive investment opportunities and is also expected to increase the trading liquidity of the Class A Shares and the Preferred Shares and to reduce the management expense ratio of the Fund.

The Fund invests in a portfolio that includes common equity securities selected from the ten largest financial services companies by market capitalization in each of Canada, the United States and the rest of the world (the “Portfolio Universe”). In addition, up to 20% of the NAV of the Fund may be invested in common equity securities of financial services companies that are not in the Portfolio Universe but meet certain market capitalization and credit rating thresholds. To generate additional returns above the distributions earned on its securities, the Fund may, from time to time, write covered call options in respect of some or all of the securities in its portfolio. The Fund may also, from time to time, write cash-covered put options in respect of securities in which the Fund is permitted to invest. The Fund’s investment portfolio is managed by its investment manager, Mulvihill Capital Management Inc.

WFS.PR.A was last mentioned on PrefBlog when it’s last warrant offering was 10% subscribed. WFS.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

If at first you don’t succeed, try, try again! S Split Corp. has announced:

that it has filed a preliminary short form prospectus relating to an offering of Warrants to holders of its Class A Shares. Each Class A shareholder of record on the record date will receive one Warrant for each Class A Share held.

Each Warrant will entitle its holder to acquire one Class A Share and one Preferred Share upon payment of the subscription price. The record date and the subscription price will be determined at the time the Fund files its final prospectus for the offering. The Fund has applied to list the Warrants and the Class A Shares and the Preferred Shares issuable upon the exercise thereof on the Toronto Stock Exchange.

The exercise of Warrants by holders will provide the Fund with additional capital that can be used to take advantage of attractive investment opportunities and is also expected to increase the trading liquidity of the Class A Shares and the Preferred Shares and to reduce the management expense ratio of the Fund.

The Fund invests in a portfolio of common shares of The Bank of Nova Scotia. To generate additional returns above the distributions earned on its securities, the Fund may, from time to time, write covered call options in respect of some or all of the securities in its portfolio. The Fund may also, from time to time, write cash-covered put options in respect of securities in which the Fund is permitted to invest. The Fund’s investment portfolio is managed by its investment manager, Mulvihill Capital Management Inc.

A preliminary short form prospectus containing important information relating to the securities has been filed with the securities commissions or similar authorities in certain jurisdictions of Canada. The preliminary short form prospectus is still subject to completion or amendment. Copies of the preliminary short form prospectus may be obtained from Mulvihill Fund Services Inc. at the address, telephone numbers, website and e-mail address set forth above. There will not be any sale or any acceptance of an offer to buy the securities until a receipt for the final short form prospectus has been issued.

SBN.PR.A was last mentioned on PrefBlog when they announced a 34% subscription rate on April’s warrant offering. SBN.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Dominion Bond Rating Service has announced it has:

upgraded its rating on the Non-Cumulative Preference Shares of the Co-operators General Insurance Company (Co-op General or the Company) to Pfd-3 (high) from Pfd-3. The trend on the rating remains Stable. The upgrade reflects an updated review of the Company’s strategic market position relative to its peer group in the Canadian property and casualty (P&C) insurance industry.

CCS has two issues of preferreds outstanding: CCS.PR.C (PerpetualDiscount) and CCS.PR.D (FixedReset). Both are tracked by HIMIPref™; both are relegated to the Scraps index on credit concerns. The latter issue has just been dropped from TXPR after being added in July 2009. Love that churning!

S&P maintains its rating at P-2(low).

Brompton Split Banc 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 July 19, 2010 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. The subscription price is $20.58, which is the sum of:
a) the most recently calculated NAV per Unit prior to the date of filing the final prospectus; and
b) the estimated per Unit fees and expenses of the offering.

Warrants may be exercised on or before October 22, 2010, the expiry date. The Company has applied to list the warrants (under the ticker symbol SBC.WT) and the Class A shares and Preferred shares issuable on the exercise thereof, on the TSX. Warrants will be distributed to client accounts on a best-efforts basis after the July 19, 2010 record date.

Successful completion of the warrants offering will provide the Company with additional capital that can be used to take advantage of attractive investment opportunities. It is also expected to increase the trading liquidity of the Class A shares and Preferred shares, and reduce the ongoing management expense ratio of the Company.

The intention to undertake this warrant offering was discussed in the post SBC.PR.A to Get Bigger. SBC.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

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 July 19, 2010 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. The subscription price is $17.66, which is the sum of:
a) the most recently calculated NAV per Unit prior to the date of filing the final prospectus; and
b) the estimated per Unit fees and expenses of the offering.

Warrants may be exercised on or before August 23, 2010, the expiry date. The Company has applied to list the warrants (under the ticker symbol LBS.WT) and the Class A shares and Preferred shares issuable on the exercise thereof, on the TSX. Warrants will be distributed to client accounts on a best-efforts basis after the July 19, 2010 record date.

Successful completion of the warrants offering will provide the Company with additional capital that can be used to take advantage of attractive investment opportunities. It is also expected to increase the trading liquidity of the Class A shares and Preferred shares, and reduce the ongoing management expense ratio of the Company.

The intention to issue warrants was discussed in the post LBS.PR.A to Get Bigger. LBS.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Update, 2010-12-16: In their 2010 Semiannual report, Brompton discloses: