Category: Issue Comments

Brascan SoundVest Rising Distribution Split Trust has announced (April 20, Material Change Report, via SEDAR):

On April 20, 2010, at an extraordinary meeting of unitholders of the Fund (the “Meeting”), the unitholders of the Fund approved resolutions with respect to a proposal (the “Proposal”) to amend the existing investment strategy and to change the fund manager for the Fund. The amendments and change of Manager included in the Proposal are expected to be completed on or about April 30, 2010.

At the Meeting on April 20, 2010, unitholders of Brascan SoundVest Rising Distribution Split Trust approved the Proposal by approximately 95%. Pursuant to the Proposal, the manager of the Fund will change to Brookfield Soundvest Capital Management Ltd. on or about April 30, 2010 (the “Effective Date”). Also on the Effective Date, the investment mandate of the Fund will be expanded to allow investment in a broader set of primarily high yielding equity securities. The investment objectives will remain the same: with respect to the preferred securities, (i) to provide securityholders with fixed quarterly interest payments in the amount of $0.15 per preferred security ($0.60 per annum to yield 6% per annum on the original subscription price of $10.00); and (ii) to repay the original subscription price at maturity on March 31, 2015; and with respect to the capital units, (i) to provide unitholders with regular distributions and (ii) to maximize long term total return with the Fund’s portfolio. Further amendments to be made to the declaration of trust of the Fund on the Effective Date include eliminating the fixed termination date of the Fund, and permitting the manager, in its sole discretion to wind-up the Fund should its net asset value fall below $15 million, subject to compliance with the trust indenture between the Fund and CIBC Mellon Trust Company dated March 16, 2005 governing the 6% Preferred Securities.

According to the press release, Kevin Charlebois (who has overseen the vapourization of client money in the fund) is the new president of the new manager.

BSD.PR.A was last mentioned on PrefBlog when the extraordinary resolution paperwork was mailed. BSD.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Faircourt Asset Management has announced:

that monthly distributions on the Trust Units (TSX: FIG.UN) will be reinstated. The initial annualized monthly distribution rate will be 4.1%, based on the April 16th closing price of the Trust Units, or $0.015 per month per Trust Unit ($0.18 per annum per Trust Unit). The Trust’s ability to continue variable distributions will depend on market conditions, the results of the annual redemption, and the Trust’s asset coverage levels and will be evaluated by the Manager on a monthly basis
…
Distributions were suspended in October 2008 in accordance with the terms of Trust Indenture governing the Preferred Securities dated November 17, 2004, which require the maintenance of a minimum 1.4 times asset coverage by the Trust. This announcement does not affect the quarterly distributions related to the Preferred Securities of the 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, Convertible Debentures, as well as other income generating securities.

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

Faircourt’s attitude towards Investor Relations is quite amusing. There’s nothing about this on their website; the FIG.UN press release page stops after “2007 Press Releases” and that section includes a release from 2008. The fund manager, Acuity, has some degree of notoriety for its inclusion of Income Trusts in its Acuity Fixed Income Fund.

FIG.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-4(high) by DBRS. FIG.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Lifeco Split Corp. has announced:

that its Board of Directors has approved a proposal to reorganize the Company. The reorganization will permit current holders of both Capital Shares and Preferred Shares to extend their investment in the Company beyond the scheduled redemption date of July 31, 2010 for an additional two years. Holders of both classes of Shares will maintain the right to retract their Shares on or about July 31, 2010 on the same terms that would have applied had the Company redeemed all Capital Shares and Preferred Shares as originally contemplated.

Under the proposed reorganization, the Preferred Shares are expected to be extended at the current coupon rate of 4.00%. In approving the proposal to reorganize the Company, the Board received and relied on the financial advice and recommendations of Scotia Capital Inc.

A special meeting of holders of the Capital Shares and holders of the Preferred Shares will be held on June 15, 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 and Preferred Shares 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.

Lifeco is a mutual fund corporation created to hold a portfolio of common shares of selected publicly listed Canadian life insurance companies. Lifeco will generate a fixed quarterly dividend for the Preferred shareholders and provide the Capital shareholders with a leveraged investment, the value of which is linked to changes in the market price of the portfolio shares.

LSC.PR.C was last mentioned on PrefBlog when the company announced it was considering extending term. LSC.PR.C is not tracked by HIMIPref™.

Financial 15 Split Corp has announced it has:

today completed its secondary offering of 1,980,000 Preferred Shares and 1,980,000 Class A Shares of the Company for aggregate gross proceeds of $39,105,000, bringing the Company’s net assets to approximately $169 million. The shares will continue to trade on the Toronto Stock Exchange under the existing symbols FTN (Class A shares) and FTN.PR.A (Preferred shares).

The Preferred Shares were offered at a price of $10.00 per share to yield 5.25% based on current distribution policy. The Class A shares were offered at a price of $9.75 per share to yield 15.47% based on current distribution policy. RBC Capital Markets and CIBC World Markets were co-lead agents for the offering.

The proceeds from the re-opening of the Company, net of expenses and Agents’ fee, will be used by the Company to invest in an actively managed portfolio of 15 financial services companies made up of 10 Canadian and 5 U.S. issuers

There were about 7.3-million units outstanding as at November 30, 2009, so this offering improves liquidity by about 25%.

FTN.PR.A was last mentioned when the treasury offering was announced. FTN.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Standard and Poor’s has announced:

• We believe Sun Life Financial Inc.’s 2010 after-tax operating earnings will come in below our expectation and that the U.S. investment portfolio will show further asset impairments, which will add pressure to the group’s capital.
• Based on weaker-than-expected operating earnings and expected future pressure on capital, we have lowered the ratings on SLF and its North American subsidiaries by one notch.
• The outlook on SLF’s North American subsidiaries is stable, and the outlook on SLF is negative.

Standard & Poor’s Ratings Services said today that it lowered its long-term counterparty credit and financial strength ratings on Sun Life Financial Inc.’s (SLF) core insurance subsidiaries–Sun Life Assurance Co. of Canada (SLA), Sun Life Assurance Co. of Canada (U.S.) (SLUS), and Sun Life Insurance & Annuity Co. of New York–to ‘AA-‘ from ‘AA’.

Standard & Poor’s also said that it lowered its financial strength ratings on Independence Life & Annuity Co., which benefits from an explicit claims guarantee for policyholder obligations provided by SLUS–to ‘AA-‘ from ‘AA’. The outlook on these companies is stable.

In addition, Standard & Poor’s lowered its long-term counterparty credit rating on SLF to ‘A’ from ‘A+’. The outlook on SLF in negative.

The ratings and outlook on SLF’s Hong Kong subsidiary, Sun Life Hong Kong Ltd. (A+/Stable/—), remain unchanged…
…
Sun Life’s 2009 operating earnings were well below the C$1.75 billion normal run rate required for the higher ratings, as outlined within the report we published on March 6, 2009. We believe SLF’s 2010 after-tax operating earnings will also come in below our expectation of at least C$1.75 billion. The company’s current earnings guidance is for adjusted earnings from operations for 2010 to be C$1.4 billion-C$1.7 billion, which is notionally below the above target.

Supporting the ratings are Sun Life’s very strong business profile and competitive advantages in Canada as well as its very strong earnings, capitalization, and investments. We view Sun Life’s enterprise risk management (ERM) as strong and a neutral to the ratings given the group’s complexity and risks. We view Sun Life’s financial flexibility as a weakness to the ratings.

Sun Life has six issues of PerpetualDiscounts outstanding: SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D and SLF.PR.E, as well as one FixedReset, SLF.PR.F. All are tracked by HIMIPref™ and assigned to their expected subindices.

This issue is a 3.85%+100 FixedReset announced March 25.

BNS has announced:

that as a result of investor demand for its domestic public offering of non-cumulative 5-year rate reset preferred shares Series 30 (the “Preferred Shares Series 30”), the size of the offering has been increased to 10.6 million Preferred Shares Series 30. The gross proceeds of the offering will now be $265 million.

The offering was made through a syndicate of investment dealers led by Scotia Capital Inc. The Preferred Shares Series 30 commence trading on the Toronto Stock Exchange today under the symbol BNS.PR.Y.

Holders of Preferred Shares Series 30 will be entitled to receive a non-cumulative quarterly fixed dividend for the initial period ending April 25, 2015 yielding 3.85% per annum, as and when declared by the Board of Directors of Scotiabank. Thereafter, the dividend rate will reset every five years at a rate equal to 1.00% over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series 30 will, subject to certain conditions, have the right to convert all or any part of their shares to non-cumulative floating rate preferred shares Series 31 (the “Preferred Shares Series 31”) of Scotiabank on April 26, 2015 and on April 26 every five years thereafter. Holders of the Preferred Shares Series 31 will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 1.00%, as and when declared by the Board of Directors of Scotiabank.

BNS.PR.Y traded 461,960 shares in a range of 24.30-64 (!) today, before settling at 24.42-49.

Vital statistics are:

BNS.PR.Y is tracked by HIMIPref™. It is assigned to the “FixedReset” index; when there is enough differentiation of prices to justify a new index, the FixedReset index will be split into discount and premium indices; just by price, I think: doing it by reset level and call expectation might be too complex for what is meant to be a simple index.

Mulvihill has announced 898,716 warrants for full units of World Financial Split Corp. were exercised. Issuance was 8,557,010, hence: 10%.

The 900,000-odd new shares added to the 8.6-million old ones should increase the liquidity of WFS.PR.A; it’s a shame about the credit quality.

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

Mulvihill has announced that the SBN.PR.A warrant offering has succeeded in selling slightly under 1.3-million units, for gross proceeds of $24.24-million.

The prospectus stated 3.8-million units were up for sale; hence, 34%.

The 1.3-million new shares, added to the 3.8-million old ones, means this fund is starting to get to a respectable size. Now, if only the credit quality was better…

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

I can’t find any definitive information on this issue but DBRS reports:

DBRS has today assigned a rating of A (high) with a Stable trend to Enbridge Pipelines Inc.’s $350 million 4.45% unsecured medium-term notes (Notes) issue maturing on April 6, 2020, and $300 million 5.33% Notes maturing on April 6, 2040.
The Notes will rank equally with all of Enbridge Pipelines Inc.’s existing senior unsecured indebtedness. Net proceeds from the issue will be used to repay short-term indebtedness and for other general corporate purposes.

Thirty year Enbridge Pipelines paper at 5.33%, eh? Given continuing carnage in the preferred share market, it’s nice to see how the other half lives!

Enbridge Pipelines is 100% owned by Enbridge. It issued $200-million in 30-year notes at 5.35 in a prospectus supplement dated 2009-11-23. That issue had a Canada Call at +33bp, but no unusual features.

ENB.PR.A closed today at 24.05-10 to yield 5.78% dividend at the bid, equivalent to 8.09% interest at the standard equivalency factor of 1.4x; a spread (assuming credit equivalency) of +276bp. ENB.PR.A was last mentioned on PrefBlog in the post TXPR Rebalancing Effect on Market (it was removed from TXPR in January). ENB.PR.A is tracked by HIMIPref™ and is a member of the PerpetualDiscounts subindex.

This one is complex. Assiduous Readers will recall that the former XCM has been reorganized into two parts: Original Commerce Split Corp. and New Commerce Split Fund, which are what one might call “virtual” funds sharing the same set of books (rather like different classes of mutual fund units).

As the website states:

Original Commerce Split Corp. offers two types of shares, a Class A (YCM.X) and a Priority Equity (YCM.PR.X).

New Commerce Split Corp. offers three types of shares, a Capital share (YCM), a Class I Preferred (YCM.PR.A) and a Class II Preferred (YCM.PR.B).

The Reorg Summary is (emphasis added):

At the opening of trading on March 26, 2010:

Holders of Priority Equity Shares (Symbol: XCM.PR.A) that did not elect to remain in the Original Commerce Split Fund will have each of the Priority Equity Shares that they hold converted into the following new securities in the New Commerce Split Fund:

• 1. One $5.00 Class I Preferred Share (Symbol: YCM.PR.A) (the “Class I Preferred Share”);
• 2. One $5.00 Class II Preferred Share (Symbol: YCM.PR.B) (the “Class II Preferred Share”);
• 3. One half 2011 Warrant (Symbol: YCM.WT); and
• 4. One 2012 Warrant (Symbol: YCM.WT.A).

Holders of Priority Equity Shares (Symbol: XCM.PR.A) that did elect to remain in the Original Commerce Split Fund will have each of the Priority Equity Shares that they hold converted into the following new security in the Original Commerce Split Fund:

• 1. One Priority Equity Share 2010 (Symbol: YCM.PR.X).

Holders of Class A Shares (Symbol: XCM) that did not elect to remain in the Original Commerce Split Fund will have each of the Class A Shares that they hold converted into the following securities (in order to achieve the required balancing objectives as previously discussed in the March 10, 2010 press release):

• 1. 0.7167721 of a Capital Share in the New Commerce Split Fund (Symbol: YCM); and
• 2. 0.283228 of a Class A Share 2010 in the Original Commerce Split Fund (Symbol: YCM.X)

Holders of existing Class A Shares (Symbol: XCM) who elected to remain in the Original Commerce Split Fund will have each of the Class A Shares that they hold converted into the following security in the Original Commerce Split Fund:

• 1. One Class A Share 2010 (Symbol: YCM.X)

Original Commerce Split Corp states:

that the opening net asset value per unit for the newly reorganized Original Commerce Split Fund was $9.36 as of the close of business on March 25, 2010. There were 1,707,491 units outstanding for total net assets of $16.0 million as at March 25, 2010. The net assets of the Original Commerce Split Fund are currently allocated approximately 82.7% to the Priority Equity Portfolio Protection Plan and approximately 17.3% to CIBC common shares. The Original Commerce Split Fund will continually rebalance the portfolio between the requirements of the Priority Equity Protection Plan and maintaining direct exposure to CIBC common stock.

The following is a summary of some of the principal provisions of the Priority Equity Shares 2010 and Class A Shares 2010 of the Original Commerce Split Fund. In general, these two classes of shares will retain the same characteristics as the existing Priority Equity and Class A Shares.

Priority Equity Shares 2010
Priority Equity Shares 2010 (Symbol YCM.PR.X) will continue to have the repayment target of $10 per share on December 1, 2014 as the primary investment objective. The Fund will continue to implement the Priority Equity Portfolio Protection Plan described in the original prospectus. Dividends are anticipated to remain suspended for the foreseeable future in order to preserve cash and to assist in rebuilding the net asset value of the Original Commerce Split Fund. Since the dividends on the Priority Equity Shares are cumulative, the suspended dividends (and all subsequent dividends not paid) will be accrued and are recorded as a liability in determining the net asset value of the Original Commerce Split Fund. The current amount of accrued dividends is $0.5688 per share representing 13 months of suspended dividends.

Class A Shares 2010
Class A Shares 2010 (Symbol: YCM.X) will continue to participate in any net asset value growth over $10.00 per Unit and dividends would be reinstated only if and when the net asset value per Unit exceeds $12.50. Each “Unit” consists of one Priority Equity Share 2010 and one Class A Share 2010.

New Commerce Split Fund has announced:

that the opening net asset value per unit for the newly reorganized New Commerce Split Fund was approximately $9.94 as of the close of business on March 25, 2010. There were 3,824,009 units outstanding for total net assets of approximately $38.0 million as at March 25, 2010. The New Commerce Split Fund will now begin to initiate its full investment plan and increase its investment in CIBC common shares and its supplemental covered call writing program.

The following is a summary of some of the principal provisions of the Class I Preferred Shares, Class II Preferred Shares, 2011 Warrants, 2012 Warrants and Capital Shares of the New Commerce Split Fund:

Class I Preferred Shares
Each Class I Preferred Share (Symbol: YCM.PR.A) pays fixed cumulative preferential monthly dividends to yield 7.50% per annum on the $5.00 notional issue price and has a repayment objective on December 1, 2014 or such other date as the Company may be terminated (the “Termination Date”) of $5.00. The dividend payable in respect of the month of March 2010 will be accrued and is expected to be paid with the April 2010 dividend, payable May 10, 2010 to shareholders of record on April 30, 2010.

Class II Preferred Shares
Each Class II Preferred Share (Symbol: YCM.PR.B) pays distributions to yield 7.50% per annum on the $5.00 notional issue price if and when the net asset value per Unit exceeds $12.50 and has a repayment objective on the Termination Date of $5.00. Each “Unit” consists of one Class I Preferred Share, one Class II Preferred Share and one Capital Share. As the net asset value per Unit is currently less than $12.50, no dividends will initially be paid on the Class II Preferred Shares.

2011 Warrant
Each whole 2011 Warrant (Symbol: YCM.WT) can be exercised to purchase one Unit for an exercise price of $10.00 per Unit at specified times until February 28, 2011.

2012 Warrant
Each 2012 Warrant (Symbol: YCM.WT.A) can be exercised to purchase one Unit for an exercise price of $12.50 per Unit at specified times until February 28, 2012.

Capital Shares
Capital Shares (Symbol: YCM) will continue to participate in any net asset value growth over $10.00 per Unit and dividends would be reinstated only if and when the net asset value per Unit exceeds $15.00. The dividend rate on the Capital Shares will be set by the Board of Directors of the Company at its discretion, based on market conditions. No dividend payments will be made on the Capital Shares unless all dividends on the Class I Preferred Shares and, if applicable, Class II Preferred Shares have been declared and paid.

XCM.PR.A was last mentioned on PrefBlog when reorg details were announced. XCM.PR.A was not tracked by HIMIPref™; there are no plans to commence tracking YCM.PR.X, YCM.PR.A or YCM.PR.B.