Category: Issue Comments

DBRS has announced that it:

has today assigned a rating of A (low) with a Stable trend to the prospective issue by Nova Scotia Power Inc. (NSPI) of $300 million, 5.61% medium-term notes, maturing June 15, 2040 (the Notes). The offering is expected to settle on June 15, 2010.

The Notes rank equally with all other unsecured obligations of NSPI and are being issued pursuant to the Short Form Base Shelf Prospectus dated May 21, 2010, as supplemented by the Prospectus Supplement dated June 9, 2010. Proceeds from this issue are expected to be used to repay short-term debt and for general corporate purposes.

NSPI is a wholly owned subsidiary of EMA.

It will be recalled that EMA recently issued EMA.PR.A, a FixedReset paying 4.40%+184.

Direct comparisons between the credits these issues are difficult; NSPI is a subsidiary of EMA, together with the difference in seniority.

Standard & Poor’s rates EMA’s preferreds at BBB- on the global scale and NSPI’s notes at BBB+; as a rough explanation, we can say that there is one notch for the holdco/sub relationship and one for the preferred/senior note relationship (which is much less than would be applied to a bank of the same credit quality).

It will be noticed that TCA recently issued long notes at 6.10% and TRP’s two FixedReset issues, TRP.PR.A and TRP.PR.B, closed last night yielding 4.12% (to call) and 3.95% (to perpetuity) respectively, while TCA’s two PerpetualDiscounts (TCA.PR.X and TCA.PR.Y) yield about 5.90%, down about 17bp from issue time. Make of it what you will!

DBRS has announced that it:

confirmed the Unsecured Debentures and Preferred Shares ratings of Fortis Inc. (Fortis or the Company) at BBB (high) and Pfd-3 (high), respectively, and changed the trends to Positive from Stable. The trend change is largely driven by the Company’s low business risk profile (benefiting from its ownership of a diversified basket of utility businesses which provide over 90% of consolidated EBITDA), its strong credit metrics (which have improved modestly over the years), the significant reduction in external debt at subsidiary Terasen Inc. (Terasen) and the Company’s demonstrated ability to acquire and integrate stable utility businesses financed on a conservative basis.
…
Capital expenditures at the regulated utilities are subject to regulatory approval. It is anticipated that the majority of capital expenditures will be funded at the subsidiary level, with a combination of internally generated cash, operating company-level debt and equity from Fortis (expected to average $100 million annually for the next five years) to fund capital build-out programs, while maintaining their respective regulated capital structures. DBRS views the level of Fortis’s equity injections as reasonable, and does not anticipate that the Company will use debt to fund the injections, thereby avoiding double leverage.

DBRS will consider an upgrade to the Unsecured Debentures and Preferred Shares ratings if Fortis continues to exhibit strong financial and operating performance and maintain its conservative financial practices; barring any materially negative regulatory actions at the operating subsidiaries, or mergers and acquisitions activity financed on an aggressive basis.

Fortis’ preferreds are rated Pfd-3(high) by DBRS. S&P rates Series D, E and H as P-2; Series C is also rated P-2, but S&P seems to think that these are denominated in USD.

Fortis has five series of preferred shares outstanding: FTS.PR.C (OpRet); FTS.PR.E (OpRet); FTS.PR.F (PerpetualDiscount); FTS.PR.G (FixedReset) and FTS.PR.H (FixedReset). All are tracked by HIMIPref™ and all have been relegated to the Scraps index on credit concerns.

Faircourt Asset Management, on behalf of Faircourt Income & Growth Split Trust, has announced:

that it has received requests for redemptions totaling approximately 6.4 million Units of the Trust. Payment will be made on July 22nd, 2010 based on the Net Asset Value per Trust Unit calculated using a three day volume weighted average price for exchange-traded securities held by the Trust, determined as of June 30, 2010 less costs of funding the redemption, including commissions.

The Trust currently has approximately 4.9 million Warrants outstanding, at an exercise price of $4.00 per unit while the current Net Asset Value of the Trust as at the close of business June 2nd is $4.57 or $4.34 on fully diluted basis. The Warrants will expire on June 25th, 2010. Holders of Warrants desiring to exercise Warrants and purchase Units should ensure that subscriptions and payment in full of the Subscription Price are received by the Warrant Agent prior to 4:01 p.m. (Toronto time) on June 25, 2010. Warrants submitted to the Warrant Agent for exercise on June 25, 2010 will be exercised in accordance with the practices and procedures of the Warrant Agent and the applicable CDS Participants

The fund, advised by Acuity Investment Management Inc., is most notable for having the Capital Units underperform the benchmark by over 20% annually in the five years to 2009-12-31. There were 9,806,610 units outstanding as of year-end, so this announcement reflects a mass churning by unitholders – assuming they exercise their warrants, which are in-the-money. Otherwise, of course, it’s just a plain mass-retraction.

FIG.PR.A was last mentioned on PrefBlog when the Capital Units’ dividend was reinstated. FIG.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Emera has announced:

that it has completed its public offering of six million Cumulative 5-Year Rate Reset First Preferred Shares, Series A for aggregate gross proceeds of $150 million. The offering was first announced on May 25, 2010 when Emera entered into an agreement with a syndicate of underwriters in Canada led by Scotia Capital Inc., RBC Capital Markets and CIBC World Markets Inc.

The net proceeds of the offering will be used for general corporate purposes.

The aggregate gross proceeds of $150-million implies that the $50-million greenshoe was not exercised, while the low volume implies the underwriters had trouble flogging the issue.

EMA.PR.A is a FixedReset, 4.40%+184, announced May 25.

It traded 26,700 shares today in a range of 24.70-00 before closing at 24.75-89, 27×10.

Vital statistics are:

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

These are total returns, with dividends presumed to have been reinvested at the bid price on the ex-date. The list has been restricted to issues in the HIMIPref™ indices.

There’s a crashing to earth of the Floating Rate sector!

BAM Split Corp. has released its Semi-Annual Financial Statements for the six months ended March 31, 2010.

A somewhat non-standard feature of these financial statement is explained in note 4 of the 2009 Annual Financials:

As at September 30, 2009 the following Preferred Shares were issued and outstanding and have been included in liabilities, net of $6.2 million (September 30, 2008 – $3.8 million) of associated transaction costs which are amortized using the effective interest method of amortization.

On September 30, 2009, the company had $367.825-million par value of preferreds outstanding which was stated on the books as a liability of $361.592-million. When calculating Asset Coverage, use the par value, not the book value! Ideally, the analyst will reduce the net assets of the firm by the unamortized costs, but in the great scheme of things (total assets of $1.371-billion) it’s only a rounding error.

The amortization of this expense makes the income statement look less good than it is, but if we add back the six-months’ amortization of ($923,000) to the net income as stated ($13,702,000) we get $14,625,000 to cover preferred dividends of $9,968,000, for income coverage of 1.5-:1, a slight improvement from the 1H09 figure of 1.4+:1.

BAM Split Corp. has three series of prefereds outstanding, BNA.PR.B, BNA.PR.C and BNA.PR.D. All are tracked by HIMIPref™. The first is relegated to the Scraps index on volume concerns, but the latter two are the sole constituents of the SplitShare index. These issues were last mentioned on PrefBlog during the Summer 2009 reorganization.

According to DBRS:

DBRS has today assigned a rating of “A” with a Stable trend to TransCanada PipeLines Limited’s (the Company) $500 million of 3.40% and $750 million of 6.10% senior unsecured notes (the Notes), maturing June 1, 2015 and June 1, 2040, respectively. The Notes are being issued under the Company’s pricing supplement dated May 26, 2010, and are expected to settle on June 1, 2010.

These Notes will rank equally with the Company’s existing and future senior unsecured debt, and the net proceeds from the offering will be used to partially fund capital projects, retire maturing debt obligations and for general corporate purposes.

TCA.PR.X closed today at 46.50-69 to yield 6.06-03%, while TCA.PR.Y closed at 46.01-30 to yield 6.13-08%. Taking 6.07% as a happy medium and converting to interest-equivalent with a 1.4x factor makes the preferreds yield 8.50% interest-equivalent, for a seniority spread for this issuer of 240bp – much less than the seniority spread on the PerpetualDiscount as a whole because – and this part is interpretation! – the preferreds have scarcity value as non-financial issues.

Sun Life Financial has announced:

the successful completion of a Canadian public offering of $280 million of Class A Non-Cumulative Rate Reset Preferred Shares Series 8R (the “Series 8R Shares”) at a price of $25.00 per share and yielding 4.35 per cent annually. The offering, initially for $250 million of Series 8R Shares, was increased to $280 million following exercise by the underwriting syndicate, co-led by Scotia Capital Inc., RBC Dominion Securities Inc. and TD Securities Inc., of an option to purchase an additional $30 million of Series 8R Shares.

The Series 8R Shares were issued under a prospectus supplement dated May 13, 2010, which was issued pursuant to a short form base shelf prospectus dated April 1, 2009. Copies of those documents are available on the SEDAR website for Sun Life Financial Inc. at www.sedar.com. The Series 8R Shares are listed on the Toronto Stock Exchange under the ticker symbol SLF.PR.G.

The issue was announced on May 14. The greenshoe was for $50-million worth, so it wasn’t completely taken up, but to exercise at all indicates a very creditable effort by the underwriters (less creditable for the brokers who actually advised clients to buy them) given the expensiveness of the issue.

The issue traded 448,345 shares in a range of 24.35-75 before closing at 24.22-35, 30×12.

Vital statistics are:

Given the very low Issue Reset Spread and the discount to par, this may be thought of as a perpetual, with perpetual credit risk: as things stand, one must assign a relatively low weight to the potential for a call in five years.

The Sun Life Straights (SLF.PR.A / B / C / D / E) are all trading to yield about 6.50% at present, so it appears that the market is prepared to pay a 250bp premium for the reset feature. Incredible.

This issue is tracked by HIMIPref™ and has been assigned to the FixedResets index. When I get enough investment grade issues trading at a discount, I’ll split the index into Premium and Discount components, probably on a backdated basis.

SNP Split Corp. has announced:

that it has called 334,614 Preferred Shares for cash redemption on June 4, 2010 (in accordance with the Company’s Articles) representing approximately 22.669% of the outstanding Preferred Shares as a result of the special annual retraction of 669,228 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on June 3, 2010 will have approximately 22.669% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be US$10.25 per share.

Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including June 4, 2010.

Payment of the amount due to holders of Preferred Shares will be made by the Company on June 4, 2010. From and after June 4, 2010 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.

SNP.PR.V was last mentioned on PrefBlog when it was upgraded to Pfd-3(high) by DBRS. SNP.PR.V is not tracked by HIMIPref™.

Pacific & Western Bank has announced:

that it plans to raise up to $15 million in Canada through the issuance of additional Class B preferred shares, common shares, or a combination of both, by way of short form prospectus (the “Offering”).

Byron Securities Limited (“Byron”) will be the lead manager for the Offering and will be responsible for creating a selling group for this issue. A decision as to what securities to offer under the prospectus will be decided by PWC prior to filing the preliminary prospectus based on market demand and through discussions with Byron.

The Offering will be conducted in each province and territory of Canada (other than Quebec) and is subject to all necessary regulatory approval.

PWC’s Class B Preferred shares trade on the TSX under the symbol PWC.PR.B and its common shares trade on the TSX under the symbol PWC.

PWC.PR.B was last mentioned on PrefBlog when a tranche was issued in January. PWC.PR.B is not tracked by HIMIPref™.