Category: Issue Comments

TransCanada Corp. has announced:

that it has completed its public offering of cumulative redeemable first preferred shares, series 3 (the “Series 3 Preferred Shares”). As the underwriters fully exercised their option to acquire an additional two million Series 3 Preferred Shares, the size of the offering increased to a total of 14 million shares resulting in gross proceeds of $350 million.

The offering was first announced on March 4, 2010 when TransCanada entered into an agreement with a syndicate of underwriters in Canada led by Scotia Capital Inc. and RBC Capital Markets.

The net proceeds of the offering will be used to partially fund capital projects, for general corporate purposes and to reduce short term indebtedness of TransCanada and its affiliates, which short term indebtedness was used to fund TransCanada’s capital program and for general corporate purposes.

TRP.PR.B is the new FixedReset 4.00%+128 announced March 4. TRP.PR.B traded 437,233 shares in a range of 24.83-95 before closing at 24.88-90, 48×2.

Vital statistics are:

The issue will be tracked by HIMIPref™. It has been added to the FixedReset sub-index; at some point this index will be split into Premium and Discount moieties, similarly to the Straight Perpetuals, as the behaviour of Premium and Discount issues in response to yield shocks will be different.

Brookfield Renewable Power Fund has announced:

the closing of the previously announced public offering of 10 million Class A Preference Shares, Series 1 (the “Series 1 Preferred Shares”) of Brookfield Renewable Power Preferred Equity Inc., at $25.00 per share for gross proceeds of $250 million. The offering was made on a bought deal basis through a syndicate of underwriters led by Scotia Capital Inc., CIBC, RBC Capital Markets and TD Securities Inc.

The Series 1 Preferred Shares commence trading on the Toronto Stock Exchange today under the symbol BRF.PR.A.

This is a FixedReset, 5.25%+262, announced February 18 and upsized to $250-million after announcement. The issue traded 388,252 shares in a range of 24.79-07 (the low price was the opening) before closing at 25.05-07, 3×20.

Vital statistics are:

Great-West Lifeco has announced:

the closing of its previously announced offering of 6,000,000 Non-Cumulative First Preferred Shares, Series M through a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets and Scotia Capital to raise gross proceeds of $150 million. The shares will be posted for trading on the Toronto Stock Exchange under the symbol “GWO.PR.M”.

The Series M Shares were priced at $25.00 per share and carry a 5.80% annual dividend. The net proceeds will be used by the Company to fund the redemption of the Non-Cumulative First Preferred Shares, Series D on March 31, 2010.

The issue traded 160,180 shares in a range of 24.50-70 before closing at 24.62-65, 50×11. It is 5.80% Straight announced February 23.

Vital statistics are:

Comparables are:

Lynx-eyed Assiduous Readers will note that prices of comparators has dropped since the announcement, but yields have barely changed. These issues all went ex-Dividend on March 1; the Power Group likes to announce new straight issues shortly prior to the ex-Date so that comparators will be full of dividend and hence have a lower Current Yield.

It is worth noting that not only is GWO.PR.M still expensive when priced as a perpetual annuity, but also that there is basically no allowance for Implied Volatility in the group prices – which makes it more expensive still.

Sixty Split Corp. has announced:

that it has called 64,750 Preferred Shares for cash redemption on March 15, 2010 (in accordance with the Company’s Articles) representing approximately 10.402% of the outstanding Preferred Shares as a result of the special annual retraction of 129,500 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 March 12, 2010 will have approximately 10.402% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $25.00 per share.

In addition, holders of a further 100,234 Capital Shares and 50,117 Preferred Shares have deposited such shares concurrently for retraction on March 15, 2010. As a result, a total of 229,734 Capital Shares and 114,867 Preferred Shares, or approximately 17.0784% 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 March 15, 2010. Payment of the amount due to holders of Preferred Shares will be made by the Company on March 15, 2010. From and after March 15, 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.

SXT.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-2 by DBRS. SXT.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on volume concerns.

BNS Split Corp. II has announced:

that its Board of Directors has retained Scotia Capital to advise the Company on a possible extension and reorganization of the Company. There is no guarantee that after such review an extension will be proposed or if proposed, will be approved by shareholders.

BNS Split Corp. II is a mutual fund corporation created to hold a portfolio of common shares of The Bank of Nova Scotia.

BSC.PR.A is scheduled to wind up in September:

The Capital Shares and the Preferred Shares may be surrendered for retraction at any time and will be redeemed by the Company on September 22, 2010 (the ‘‘Redemption Date’’).

BSC has an NAVPU of $48.31 providing Asset Coverage of 2.3+:1.

BSC.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-2(low) by DBRS. 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.

Brookfield Asset Management has announced:

an offering of C$300 million of medium term notes (unsecured) (“notes”) with a September 2016 maturity and a yield of 5.2%.

The notes have been assigned a credit rating of Baa2 (stable outlook) by Moody’s; A- (negative outlook) by Standard & Poor’s; BBB (stable outlook) by Fitch; and A low (stable outlook) by DBRS.

The notes are being offered through a syndicate of agents led by CIBC World Markets Inc. and RBC Capital Markets.

The net proceeds of the issue will be used to refinance US$200 million of notes that matured March 1, 2010 and for general corporate purposes.

This is useful data to have when evaluating BAM.PR.J, which is retractible on 2018-3-31 (presumed to trigger a call at $25 immediatly prior to exercise) which closed last night at 26.03-05 to yield 4.94-3%, equivalent to 6.90-1% interest at the standard equivalency factor of 1.4x. The interest-equivalent spread of about 170bp will be thought by many to more than adequately compensate for the seniority risk and slightly longer term. Note, however, that I have not yet reviewed the prospectus for the new bond issue – there may be terms and conditions peculiar to these notes which affect valuation.

Update: The Globe and Mail reports there is a credit-rating-linked put:

To give investors comfort, single-A-rated Brookfield agreed to buy back this paper at 101 cents on the dollar if its credit rating drops below investment grade, or if there is a change in control at the conglomerate.

That’s valuable – but in aggregate, that type of clause can leave credit quality on a knife-edge … as AIG found out.

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.

Industrial Alliance Insurance and Financial Services Inc. has announced:

the closing of its previously announced offerings of 2,950,000 Common Shares (the “Common Shares”) at a price of $34.00 per Common Share representing aggregate gross proceeds of $100 million, and 4,000,000 5.90% Non-Cumulative Class A Preferred Shares Series F (the “Series F Preferred Shares”) at a price of $25.00 per Series F Preferred Share, representing aggregate gross proceeds of $100 million.

The offerings were underwritten, on a bought deal basis, by a syndicate of underwriters co-led by BMO Nesbitt Burns Inc. and RBC Dominion Securities Inc. and which includes National Bank Financial Inc., Scotia Capital Inc., CIBC World Markets Inc., TD Securities Inc., Desjardins Securities Inc., Casgrain & Company Limited, Dundee Securities Corporation, HSBC Securities (Canada) Inc., Industrial Alliance Securities Inc. and Laurentian Bank Securities Inc.

These offerings were made under the terms of prospectus supplements dated February 19, 2010 to the short form base shelf prospectus dated April 30, 2009. The prospectus supplements are available on the SEDAR website at www.sedar.com and on the Company’s website at www.inalco.com.

The issue was announced on February 17.

Today it traded 72,800 shares in a range of 24.41-88 before closing at 24.55-60, 15×126.

Vital statistics are:

IAG.PR.F has been added to the PerpetualDiscount index.

BPO Properties has announced:

a proposal to create Canada’s pre-eminent office real estate investment trust (REIT). Upon conversion, the new REIT, to be named Brookfield Office Properties Canada, will acquire BPP’s directly owned office assets in Toronto, Calgary and Vancouver and will also acquire Brookfield Properties’ interest in Brookfield Place, widely regarded as the top commercial complex in Canada. If approved by BPP shareholders, upon closing of the transaction, it is expected that Brookfield Office Properties Canada will pay a special distribution of $1.02 per unit to unitholders and will also begin to pay monthly distributions of $0.0667 per unit (being $0.80 per unit on an annualized basis), double BPP’s current quarterly dividend of $0.10 per common share.
…
If approved by the Toronto Stock Exchange (TSX), the new REIT, Brookfield Office Properties Canada, will commence listing on the TSX immediately following closing of the transaction. Holders of BPP common shares will receive one unit of Brookfield Office Properties Canada for each common share held of BPP. Upon closing of the transaction, BPP’s common shares will be delisted from the TSX and all of its common equity will be owned by Brookfield Properties. Select assets of BPP, including the Canadian Office Fund and certain development properties, as well as certain assets which are not permitted to be owned by Brookfield Office Properties Canada, will be retained by Brookfield Properties. No changes will be made to the terms of BPP’s preferred shares.
…
The transaction will be effected by way of a plan of arrangement under the Canada Business Corporations Act. It requires the approval of at least two-thirds of the votes cast by all shareholders as well as the approval of a simple majority of the votes cast by common shareholders other than Brookfield Properties and its affiliates. The transaction must also be approved by the Ontario Superior Court of Justice. The transaction is also conditional upon receipt of all necessary regulatory, TSX and third party consents and approvals.
Brookfield Properties has advised BPP that Brookfield Properties and its affiliates intend to vote all of their shares of BPP in favour of the transaction.

If approved, on closing of the transaction, Brookfield Properties and its affiliates, which currently hold approximately 89.7% of BPP’s common equity, will hold in aggregate an equity interest in Brookfield Office Properties Canada of approximately 91%, including the consideration Brookfield Properties is receiving for the sale of Brookfield Place, net of the impact of retaining certain assets and preferred shares which are not being transferred to Brookfield Office Properties Canada.
…
Analysts, investors and other interested parties are invited to participate in a live conference call and webcast on March 1, 2010 at 4:30 p.m. (E.T.) to discuss the proposed transaction with members of senior management. To participate in the conference call, please dial 866.238.1640, pass code 1434853 five minutes prior to the scheduled start of the call. Live audio of the call will also be available via webcast at www.bpoproperties.com. A replay of this call can be accessed through April 14, 2010 by dialing 888.266.2081, pass code 1434853. A replay of the webcast will be available at www.bpoproperties.com for one year.

An information circular describing the transaction is anticipated to be mailed to shareholders in mid March and will be available on BPP’s website and at www.sedar.com. In addition, a meeting of shareholders to consider the transaction is expected to take place on April 9, 2010. If shareholders approve the transaction at the meeting, and the requisite court approval is obtained, it is anticipated that the transaction will be completed on or about April 14, 2010.

The Supplementary Information specifically states:

Existing preferred shares of BPP will not be assumed by the REIT

At present it is difficult to see what preferred shareholders will be getting in exchange for an affirmative vote on the transaction (I am assuming they get to vote, because it’s a CBCA Plan of Arrangement, similar to the BCE deal). I have eMailed BPP’s investor relations department, asking them to clarify whether BPP preferred shareholders will be voting as a class and whether there are any sweeteners in the deal for them.

Until they answer – or until the proxy documents come out! – I cannot take view on the best way for the Pref holders to vote. However, at first glance it appears that the preferreds will suddenly have all the disadvantages of a holding company investment (being farther from the actual money) with none of the advantages (diversification). This is normally worth a one-notch downgrade in credit.

BPP has three issues of shares outstanding: BPP.PR.G (1.8-million shares); BPP.PR.J (3.8-million) and BPP.PR.M (2.8-million). These are the Amazing Shares That Would Not Die, having been issued by Royal Trustco in 1985, 1986 and 1986, respectively, and changing their name from Gentra to BPO Properties effective 2001-5-7, following a name change from Royal Trustco 1993-6-18.

All three issues are tracked by HIMIPref™, all are relegated to the Scraps index on both credit and volume concerns. BPP.PR.G was last mentioned on PrefBlog in the post What is the yield of BPP.PR.G?. BPP.PR.J and BPP.PR.M were last mentioned in BPO & BPP: S&P Revises Outlook to Negative.

Update Dominion Bond Rating Service has announced:

Under DBRS methodology, the Transaction would typically result in a rating differential between BOPC LP and BPO, with BOPC LP attaining the higher of the two ratings. This is due to the fact that a majority of the assets reside at BOPC LP. However, DBRS believes that the structural issue is mitigated by the following:

(1) BPO currently has no senior unsecured debt.

(2) The articles of BPO will prohibit it from incurring any unsecured indebtedness for borrowed money, or guaranteeing any such indebtedness of any other person, other than indebtedness that is guaranteed by BOPC LP.

(3) In accordance with the Canadian Business Corporations Act, any revision to or removal of the corporate article containing the debt restriction will require approval by special resolution of the common shareholders. Note that BPC will hold all the common shares.

(4) This restriction will not affect the “grandfathered” status of the preferred shares.

DBRS also takes comfort in the fact that:

(1) BPO will receive a cash flow amount from its ownership in BOPC LP that is comparatively equal to the amount under the pre-REIT structure.

(2) BPO will have an investment in liquid REIT units and ownership in a high-quality office portfolio and will maintain certain income-producing assets (the Canadian Office Fund assets).

(3) Going forward, DBRS expects BOPC LP to maintain conservative debt levels and coverage ratios similar to previous levels achieved by BPO and that are consistent with the BBB rating category.

I believe that the reference to “grandfathered” is, to put it in technical language, some tax thing. If I’m right in this, the shares were issued prior to changes in the Income Tax Act which make the financing very attractive on an after-tax basis.

High Income Preferred Shares Corporation has announced:

that shareholders of the Corporation have approved a special resolution authorizing the amendment of the articles of the Corporation to provide for the early redemption by the Corporation of the Series 1 Shares (TSX:HPF.pr.a), Series 2 Shares (TSX:HPF.pr.b) and Equity Shares of the Corporation and to revise the redemption amount for each Series 1 Share and Series 2 Share that will be paid by the Corporation to the holders thereof upon such early redemption (collectively, the “Approved Amendments”). The Approved Amendments were described in detail in the notice of special meeting and management information circular dated January 26, 2010 that was provided to shareholders of the Corporation in connection with the special meeting.

It is expected that the Corporation will file articles of amendment to give effect to the Approved Amendments and that, subject to the approval of the applicable securities regulatory authorities and the Toronto Stock Exchange (“TSX”), the Series 1 Shares, Series 2 Shares and Equity Shares will be redeemed by the Corporation effective as of March 12, 2010.

Redemption of the Series 1 Shares

Each holder of Series 1 Shares will receive an aggregate payment equal to $27.80 for each Series 1 Share held by them, such amount representing (a) the original investment amount of $25.00 paid in respect of each Series 1 Share, plus (b) the amount of all declared but unpaid dividends payable to holders of the Series 1 Shares and any dividends accrued up to the planned redemption date of March 12, 2010.

The Series 1 Shares will be de-listed from the TSX upon the redemption thereof by the Corporation, or otherwise at such time and in such manner as required by the TSX.

Redemption of the Series 2 Shares

Each holder of Series 2 Shares will receive an aggregate payment equal to $16.46 per Series 2 Share, such amount representing (a) the original investment amount of $14.70 paid in respect of each Series 2 Share less $0.28 per share (such amount representing one-half of the expected costs, on a per share basis, of effecting the Approved Amendments and to wind up and terminate the Corporation), plus (b) the amount of all declared but unpaid dividends payable to holders of the Series 2 Shares and any dividends accrued up to the planned redemption date of March 12, 2010.

The Series 2 Shares will be de-listed from the TSX upon the redemption thereof by the Corporation, or otherwise at such time and in such manner as required by the TSX.

Redemption of the Equity Shares

All of the Equity Shares, which do not trade on any stock exchange, are held by the manger of the Corporation, Navina Asset Management Inc. (formerly, Lawrence Asset Management Inc.) (the “Manager”). If the Equity Shares are redeemed on March 12, 2010 as planned, the Manager will receive an aggregate payment of approximately $138,575, such amount representing $0. 43 per Equity Share. This amount reflects the residual proceeds of the Corporation’s portfolio after payment of all remaining accruals (including the accrued management fees of approximately $827,176) and after payment of the remaining portion of the expected costs of effecting the Approved Amendments and to wind up and terminate the Corporation. There are no distributions accrued on the Equity Shares.

About the Corporation:

The Corporation invests in a diversified portfolio consisting principally of common shares issued by corporations whose shares are included in the S&P 500 Index and the S&P/TSX 60 Index, income funds and investment grade debt securities. Navina Asset Management Inc. (formerly, Lawrence Asset Management Inc.) is both manager and investment manager of the Corporation.

We’ll be well rid of these ridiculous vehicles, with the egregiously poor performance of the underlying portfolio against its benchmark!

HPF.PR.A and HPF.PR.B were last mentioned on PrefBlog when the early wind-up proposal was announced. HPF.PR.A and HPF.PR.B are tracked by HIMIPref™, but are relegated to the Scraps index on credit concerns.