Category: Issue Comments

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™.

R Split III Corp. has announced:

that it has called 559,447 Preferred Shares for cash redemption on May 31, 2010 (in accordance with the Company’s Articles) representing approximately 25.690% of the outstanding Preferred Shares as a result of the annual retraction of 1,118,894 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 May 28, 2010 will have approximately 25.690% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $29.22 per share.

In addition, holders of a further 1,996 Capital Shares and 998 Preferred Shares have deposited such shares concurrently for retraction on May 31, 2010. As a result, a total of 1,120,890 Capital Shares and 560,445 Preferred Shares, or approximately 25.7239% of both classes of shares currently outstanding, will be redeemed.

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 May 31, 2010.

Payment of the amount due to holders of Preferred Shares will be made by the Company on May 31, 2010. From and after May 31, 2010 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any rights in respect of such shares except to receive the amount due on redemption.

R Split III Corp. is a mutual fund corporation created to hold a portfolio of common shares of Royal Bank of Canada.

RBS.PR.A is scheduled to mature 2012-5-31. RBS.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-3 by DBRS. RBS.PR.A is not tracked by HIMIPref™.

Brompton Split Banc Corp. has announced:

that it has filed a preliminary prospectus relating to an offering of warrants to Class A shareholders of the Company. Each Class A shareholder will receive one half warrant for each Class A share held on a record date which will be set upon filing of the final prospectus.

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, which will be determined as the lesser of: (i) $22.36 (which is the sum of (a) the most recently calculated NAV per Unit prior to the date hereof and (b) the estimated per Unit fees and expenses of the offering), and (ii) the most recently calculated NAV per Unit prior to the date of filing the final prospectus plus the estimated per Unit fees and expenses of the offering. The Company has applied to list the warrants and the Class A shares and Preferred shares issuable on the exercise thereof on the TSX.

Successful completion of the warrants offering will provide the Company with additional capital that can be used to take advantage of attractive investment opportunities and 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.

A 50% increase in size – if the offering is fully subscribed – will be a welcome addition to the $53-million-odd outstanding at year end according to the fund’s 2009 Annual Report.

SBC.PR.A was last mentioned on PrefBlog when I reported the April 2009 reinstatement of the Capital Units dividend. 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 preliminary prospectus relating to an offering of warrants to Class A shareholders of the Company. Each Class A shareholder will receive one half warrant for each Class A share held on a record date which will be set upon filing of the final prospectus.

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, which will be determined as the lesser of: (i) $19.31 (which is the sum of (a) the most recently calculated NAV per Unit prior to the date hereof and (b) the estimated per Unit fees and expenses of the offering), and (ii) the most recently calculated NAV per Unit prior to the date of filing the final prospectus plus the estimated per Unit fees and expenses of the offering. The Company has applied to list the warrants and the Class A shares and Preferred shares issuable on the exercise thereof on the TSX.

Successful completion of the warrants offering will provide the Company with additional capital that can be used to take advantage of attractive investment opportunities and 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.

If fully subscribed, the 50% increase in issue size will be a very welcome addition to the $100-million-odd reported in the 2009 Annual Report.

LBS.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-3 by DBRS. LBS.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

B Split II Corp. has announced:

The Capital Shares and Preferred Shares will be redeemed by the Company on June 1, 2010 (the “Redemption Date”) in accordance with the redemption provisions as detailed in the prospectus dated May 25, 2005. Pursuant to these provisions, the Preferred Shares will be redeemed at a price per share equal to the lesser of $9.75 and the net asset value per Unit. The Capital Shares will be redeemed at a price per share equal to the amount by which the net asset value per Unit exceeds $9.75. The net asset value per Unit was $21.30 as at May 12, 2010.

Holders of Capital Shares who requested to receive their redemption payment in BCE Inc. common shares (“BCE Shares”) and gave notice to this effect and tendered $9.75 for every Capital Share by May 3, 2010 will receive their pro rata share of the BCE Shares. The redemption of Capital Shares and Preferred Shares will constitute a taxable disposition of the Company’s shares at the time of the redemption whether the payment is received in the form of cash or BCE Shares.

A further press release will be issued by the Company in connection with the redemption prices on May 27, 2010. Payment of the amounts due to holders of Capital Shares and Preferred Shares will be made by the Company on June 1, 2010.

BXN.PR.B was last mentioned on PrefBlog when it was downgraded to Pfd-3 by DBRS. BXN.PR.B is not tracked by HIMIPref™.

Update, 2010-5-28: Redemption price announcement.