Category: Issue Comments

M Split Corp has announced (on March 23, so I’m a little late with this):

the opening net asset value per unit for the newly reorganized Company was $9.01 per unit as of the close of business on March 22, 2010. There were 2,846,795 units outstanding for total net assets of $25.6 million as at March 22, 2010. The Company will begin to initiate its full investment plan and increase its investment in Manulife common shares and its supplemental covered call writing program. Trading will begin today on the TSX under the following new stock symbols listed below:

XMF.PR.B – the Class I Preferred Share
XMF.PR.C – the Class II Preferred Share
XMF.WT – the 2011 Warrant
XMF.WT.A – the 2012 Warrant
XMF.A – the Capital Share

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:

Class I Preferred Shares
Each Class I Preferred Share (Symbol: XMF.PR.B) pays fixed cumulative preferential monthly dividends to yield 7.50% per annum on the $5.00 notional issue price and having a repayment objective on December 1, 2014 or such other date as the Company may be terminated (the “Termination Date”) of $5.00.

Class II Preferred Shares
Each Class II Preferred Share (Symbol: XMF.PR.C) 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 having 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.

2011 Warrant
Each 2011 Warrant (Symbol: XMF.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: XMF.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: XMF.A) 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.

For additional information regarding the provisions attached to the Class I Preferred Shares, Class II Preferred Shares, 2011 Warrants, 2012 Warrants and Capital Shares, reference should be made to the Company’s Management Information Circular dated December 23,2009.

The effective date and a reminder of the terms of the reorg were announced March 19:

At the opening of trading on March 23, 2010, holders of Priority Equity Shares (Symbol: XMF.PR.A) will have received the following securities in exchange for each Priority Equity Share held:

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

As previously announced, since more Priority Equity Shares were tendered for retraction under the special retraction right than Class A Shares, the outstanding Class A Shares will effectively be consolidated (the “Consolidation”) through an adjustment to the number of Capital Shares to be issued to holders of Class A Shares in the Reorganization. The Consolidation will be implemented so that following the Reorganization, there will be an equal number of Capital Shares, Class I Preferred Shares and Class II Preferred Shares outstanding.

As a result of the Reorganization and the Consolidation, holders of Class A Shares (Symbol: XMF) will receive 0.944808 of a Capital Share (Symbol: XMF.A) in exchange for each Class A Share held.

XMF.PR.A was last mentioned on PrefBlog in the post XMF.PR.A Announces Reorg Details. XMF.PR.A was not tracked by HIMIPref™; there are no current plans to track XMF.PR.B or XMF.PR.C.

Dividend Growth Split Corp. has announced (via SEDAR; press release dated 2010-4-1; management’s too lazy to put it on their web site [Update: But see the comments!]):

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. Subsequent to the closing of this offering, the portfolio will consist of common shares of the following 20 companies:
…
The preferred shares will be offered at a price of $10.00 per share. The closing price of the preferred shares on the TSX on March 31, 2010 was $10.32. 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 class A shares will be offered at a price of $9.75 per share. The closing price of the class A shares on the TSX on March 31, 2010 was $9.95. The investment objectives for the class A shares are to provide their 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.

The red-herring prospectus filed on SEDAR does not specify a closing date.

DGS.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-3 by DBRS. It is not tracked by HIMIPref™ as it is too small an issue to trade efficiently (slightly over 2-million shares outstanding on 2009-12-31, according to the 2009 Annual Report … but that could change!

This is very old news indeed, but should be recorded for easy access to the information.

There’s no prospectus for the issue, since it came into being via the

OFFER TO PURCHASE
all of the outstanding Non-Cumulative Preferred Shares, Series L
of
THE GREAT-WEST LIFE ASSURANCE COMPANY
not already held directly or indirectly by Great-West Lifeco Inc.
in exchange, at the option of the holder, for
$23.00 cash
or
One Non-Cumulative Preferred Share, Series O (a “Series O Share”) of
The Great-West Life Assurance Company (“GWL”)
for each Non-Cumulative Preferred Share, Series L (a “Series L Share”) of GWL

This document is available on SEDAR, as “The Great-West Life Assurance Company Dec 14 2000 Issuer bid circular – English
PDF 314K”

Series O Dividends

Until October 31, 2010 (the “Fixed Dividend Rate Period”), the holders of the Series O Shares will be entitled to receive quarterly non-cumulative cash dividends, as and when declared by the board of directors of GWL, payable on the last day of January, April, July and October in each year at a rate equal to $0.346875 per share to initially yield 5.55%. The first such dividend, if declared, will be payable on January 31, 2001 in an amount equal to $0.346875 per share.

From October 31, 2010 (the “Floating Dividend Rate Period”), the holders of the Series O Shares will be entitled to receive non-cumulative cash dividends, as and when declared by the board of directors of GWL, payable on the last day of January, April, July and October in each year at a floating rate in respect of each quarterly dividend period equal to one quarter of the greater of (a) 4.75% and (b) 80% of Prime.

Series O Redemption

The Series O Shares will not be redeemable prior to October 31, 2010. Subject to the provisions described under “Restrictions on Dividends and Retirement of Series O Shares” and “Regulatory Approvals”, GWL may redeem on October 31, 2010 and on the last day of every successive period of five years plus one day thereafter, all or any part of the then outstanding Series O Shares. Such redemption may be made upon payment in cash of the amount of $25.00 per share together with an amount equal to all declared and unpaid dividends thereon to but excluding the date on which such shares are redeemed. GWL will provide not less than 30 nor more than 60 calendar days’ notice of such redemption to each holder of Series O Shares to be redeemed.

On October 31, 2010 and every five years thereafter, Series O is exchangeable at the holder’s option (subject to the usual restrictions on shares left outstanding) to and from Series P.

Series P Dividends

The holders of the Series P Shares will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of GWL, in an amount per share per annum determined by the Board of Directors of GWL payable quarterly on the last day of January, April, July and October in each year. The first such dividend, if declared, will be payable on January 31, 2011.

The annual dividend rate determined by the Board of Directors of GWL in respect of a Dividend Period will not be less than 85% of the Government of Canada Yield prevailing at the time the dividend rate is set.

Series P Redemption

The Series P Shares will not be redeemable prior to November 1, 2015. Subject to the provisions described under “Restrictions on Dividends and Retirement of Series P Shares” and “Regulatory Approvals”, GWL may redeem on November 1, 2015 and on the last day of every successive period of five years plus one day thereafter, all or any part of, the outstanding Series P Shares. Such redemption may be made upon payment in cash in the amount of $25.00 for each Series P Share together with an amount equal to all declared and unpaid dividends thereon to but excluding the date on which such shares are redeemed.

GWL.PR.O is not currently listed on PrefInfo. When I get around to updating the information, it will be summarized as:

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.

Momentum is still amazing, with the Floating Rate sector continuing to shine.

Brascan Soundvest Rising Distribution Split Trust has released via SEDAR the materials for the Extraordinary Meeting of Capital Unitholders previously reported on PrefBlog.

Sadly, it appears that no material change in the management of the fund can be expected – it is merely a name change and ownership shuffle. It appears that Kevin Charlebois, who has presided over the appallingly poor performance of the trust since inception, will continue his endeavors.

Two elements of the reorganization not previously reported are:

(b) removing the fixed termination date for the Fund, which is currently set at March 31, 2015;

(c) permitting the Manager, in its sole discretion, to wind-up the Fund should the net asset value (“NAV”) of the Fund 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 (the “Trust Indenture”);

The second of those items is of great interest since:

The Fund was launched in 2005 with a mandate to deliver a stable stream of monthly distributions and to maximize long-term total return. As of March 12, 2010, the Fund had 5,662,643 Units and 5,662,643 Preferred Securities outstanding, and its total NAV was $17,211,757 or $3.04 per Unit. The Fund’s Units closed at $2.36 on the TSX on March 12, 2010.

While the manager’s abuse of discretion in suspending the annual retraction does not provide a lot of hope that they will exercise their discretion to shut down the fund in the event of continued poor performance, the availability of that discretion must be considered a Good Thing.

I’m not entirely sure that this is the first time it’s happened, because I don’t keep track of such things … but at the very least, it’s one of the first times this has happened!

RY.PR.R is a 6.25%+450 FixedReset, announced 2009-1-21. It is callable 2014-2-24 at par and was most recently mentioned in the volume highlights for 2010-3-22.

It traded 5,593 shares today in a range of 28.24-43 before closing at 28.31-40, 20×35.

HIMIPref™ reports that the yield to a call 2014-3-26 at par is now 2.93% (pre-tax, bond-equivalent); recall that a slight inaccuracy in HIMIPref™ conventions means that the calculated call date is maturityNoticePeriod days after the actual call date.

That’s a pretty low yield! The reset to +450bp makes it almost certain to be called at the first opportunity, but one of the words that can hurt in the investment game is “almost”!

I have uploaded two charts for your edification and amusement:

• Bid YTW
• Bid Price

RY.PR.R was last mentioned on PrefBlog (other than in routine reports) when it was added to TXPR in July 2009. It is tracked by HIMIPref™ and is a member of the FixedReset index.

Hard on the heels of the DFN.PR.A enlargement, Financial 15 Split Corp. has announced:

it has filed a short form prospectus in each of the provinces of Canada with respect to an additional offering of Preferred Shares and Class A Shares. The offering will be available through a group of underwriters, co-led by RBC Capital Markets and CIBC World Markets. The Company will file an amended and restated prospectus shortly outlining the offering prices set forth below.

The Preferred Shares will be offered at a price of $10.00 per share to yield 5.25% based on current distribution policy. The closing price of the Preferred Shares on March 25, 2010 on the TMX was $10.41.

The Class A Shares will be offered at a price of $9.75 per share to yield 15.5% based on current distribution policy. The closing price of the Class A Shares on March 25, 2010 on the TMX was $10.40.

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

The Net Asset Value Per Unit was 17.84 on March 15.

FTN.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-3 by DBRS.

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

Lifeco Split Corporation has announced:

that it is considering the merits of a possible extension of the term of the Capital Shares and the Preferred Shares beyond their scheduled redemption date of July 31, 2010. Lifeco has retained Scotia Capital Inc. to assist in this regard. There is no guarantee that after such review an extension will be proposed or if proposed will be approved by shareholders.

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.

Capital Shares and Preferred Shares of Lifeco are listed for trading on The Toronto Stock Exchange
under the symbols LSC and LSC.PR.C respectively.

Asset coverage is 1.7+:1 according to the company; total asset value is about $32-million.

LSC.PR.C is not tracked by HIMIPref™. LSC.PR.C was last mentioned on PrefBlog when the capital unit dividend was suspended (it has since been reinstated).

Thomson Reuters has announced:

the offering of US$500 million of 5.85% notes due 2040. The offering is expected to close on March 30, 2010, subject to customary closing conditions. Thomson Reuters plans to use the net proceeds from this offering and available cash to repurchase all of its US$700 million principal amount of 6.20% notes due 2012, as previously announced earlier today.

J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated, RBS Securities Inc. and UBS Securities LLC are the joint book-running managers for the offering.

DBRS rates it A(low).

USD 30-Year Swaps are now at 4.45%, implying that the issue could be swapped into 3-month USD LIBOR +140bp. This in turn implies (to me!) that TRI.PR.B, paying 70% of Prime and quoted today at 23.75-95 (95% of par; hence paying about 74% of Prime as a dividend (so call it pre-tax interest equivalent = prime, close enough for government work).

Therefore TRI.PR.B pays the pre-tax equivalent of Prime, which is equal to about the overnight rate +200bp … so you’re getting a yield increment for the prefs of about +60bp, which is way, way less than you get for nominals … although, mind you, there is a LOT of basis risk in this calculation.

So I say TRI.PR.B is expensive.