Category: Issue Comments

Brookfield is now the official stalking horse for General Growth:

General Growth Properties Inc., the bankrupt U.S. mall owner, won court approval of a sale process that makes a group led by Brookfield Asset Management Inc. the lead bidder, beating an offer by Simon Property Group Inc.

U.S. Bankruptcy Judge Allan Gropper in Manhattan today approved General Growth’s plan to give Brookfield, Fairholme Capital Management LLC and Pershing Square Capital Management LP warrants to buy stock in the reorganized company in exchange for funding. Testimony at today’s hearing focused on whether the warrants might chill bidding.

General Growth, based in Chicago, said the Brookfield-led bid is intended to serve as a so-called stalking-horse for higher offers or the raising of money from capital markets. Simon said the warrants would dilute General Growth’s value and the Indianapolis-based company would stop bidding if Gropper approved their issue.

The deal has been previously discussed on PrefBlog.

Dominion Bond Rating Service has commented:

In a revision to the offer this week, Brookfield, Fairholme Capital Management, LLC and Pershing Square Capital Management LP (on a several basis) agreed to backstop an additional $2 billion in capital, which includes $1.5 billion of debt and a $500 million equity rights offering. The $1.5 billion is the same amount that had originally been proposed under a new credit facility. With this modification, Brookfield would backstop $600 million of the $1.5 billion in debt issuance and $350 million of the $500 million rights offering.
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DBRS has received comfort from Brookfield concerning its ability to fund its portion of the transaction should it proceed under the current terms, and believes that the Company can create the needed liquidity without materially increasing leverage at the corporate level. If Brookfield further revises its offer going forward, DBRS would review the terms to determine if there were any the rating implications.

DBRS has announced that it has:

upgraded the ratings of preferred shares issued by four split share companies and trusts (the Issuers): Energy Split Corporation, Energy Split Corp. II, SNP Split Corp. and Utility Split Trust.

Each of the Issuers has invested in a portfolio of securities (the Portfolio) funded by issuing two classes of shares – dividend-yielding preferred shares or securities (the Preferred Shares) and capital shares or units (the Capital Shares). The main form of credit enhancement available to these Preferred Shares is a buffer of downside protection. Downside protection corresponds to the percentage decline in market value of the Portfolio that must be experienced before the Preferred Shares would be in a loss position. The amount of downside protection available to Preferred Shares will fluctuate over time based on changes in the market value of the Portfolio.

Today’s rating actions reflect upward trends in the net asset value (NAV) of the respective Portfolios over the past eight months. In its surveillance of split share funds, DBRS reviews the historical trends in downside protection and assigns greater weighting to more recent Issuer NAVs.

DBRS will continue to closely monitor changes in the credit quality of these Preferred Shares. The timing of rating actions will generally follow the surveillance guidelines listed in DBRS’s split share methodology, “Rating Canadian Split Share Companies and Trusts.”

I am sorely tempted to add UST.PR.A to the HIMIPref™ database, but it is scheduled to wind-up 2011-12-31. Maybe if they extend term …

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.

Nice to see an end to the Floating Rate hegemony over the Best Performers!

US Financial 15 Split Corp. has announced:

the reinstatement of the regular monthly distribution of $0.04375 for each Preferred share ($0.525 annually) effective for the month of April as well as a dividend of $0.05 representing a portion of the accrued dividends in arrears. Both dividends will be payable on May 10, 2010 to Preferred shareholders on record as at April 30, 2010.

Management believes that the strong recovery in the US financial services companies held in the portfolio from the March 2009 lows combined with the current level of dividend income and option premiums from the covered call writing program presents the necessary conditions to reinstate the monthly dividend and to begin the process of making payments on the accrued dividends.

The 14 months of cumulative accrued dividends from February 2009 to March 2010 totaling $0.6125 per Preferred share are currently recorded as a liability of the Company and are accrued to the benefit of the Preferred shareholders. The accrued liability will decrease to $0.5625 per Preferred share after the payment of the $0.05 dividend. The timing and amount of any future payments of the cumulative dividends will be reviewed by the Board on an ongoing basis and will be based on market conditions, the level of the net asset value and income realized in the portfolio.

Regular monthly dividends of $0.04375 will continue each month and will be payable to Preferred shareholders on record on the last business day of each month.

The net asset value per unit as at April 15, 2010 was $7.17.

FTU.PR.A was last mentioned on PrefBlog when they published the 2009 Semi-Annual Financials. FTU.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Dividend Growth Split Corp. has announced:

that it has completed its treasury offering of 1,115,000 class A shares and 1,115,000 preferred shares for aggregate gross proceeds of $22,021,250. Shares will continue to trade on the Toronto Stock Exchange under the existing symbols DGS (class A shares) and DGS.PR.A (preferred 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.
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The preferred shares were offered at a price of $10.00 per share. 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 at the time of redemption on November 30, 2014.

The class A shares were offered at a price of $9.75 per share. 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 offering was placed through a group of agents co-led by RBC Capital Markets and CIBC World Markets Inc., and included National Bank Financial Inc., TD Securities Inc., BMO Nesbitt Burns Inc., Scotia Capital Inc., HSBC Securities (Canada) Inc., Mackie Research Capital Corporation, Raymond James Ltd., Canaccord Financial Ltd., Dundee Securities Corporation, Desjardins Securities Inc., Macquarie Capital Markets Canada Ltd. and Wellington West Capital Markets Inc.

DGS.PR.A was last mentioned on PrefBlog when the offering was announced. 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 the addition of 1.1-million-odd shares brings it closer!

BNS Split Corp. II has announced:

that its Board of Directors has approved a proposal to reorganize the Company. The reorganization will permit holders of Capital Shares to extend their investment in the Company beyond the scheduled redemption date of September 22, 2010 for an additional five years. The Preferred Shares will be redeemed on the same terms originally contemplated in their share provisions. Holders of Capital Shares who do not wish to extend their investment and all holders of Preferred Shares will have their shares redeemed on September 22, 2010.

The reorganization will involve (i) the extension of the originally scheduled redemption date, (ii) a special retraction right to enable holders of Capital Shares to retract their shares as originally contemplated should they not wish to extend their investment and (iii) the issuance of a new class of preferred shares in order to provide continuing leverage for the Capital Shares.

A special meeting of holders of the Capital Shares will be held on July 5, 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 of record on May 20, 2010 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.

BSC.PR.A was last mentioned on PrefBlog when the company announced it was considering extending term. BSC.PR.A is not tracked by HIMIPref™ …. but if they extend term and maybe up the size just a little, its successor might be.

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
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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.