Category: Issue Comments

Connor, Clark & Lunn ROC Pref Corp. has announced:

that its board of directors has approved a proposal to change the redemption date of the Preferred Shares from June 30, 2011 to December 22, 2009 (the “Proposal”). As a result of the Proposal, Shareholders will have their Preferred Shares redeemed by the Company on such date and will be paid the net asset value per Preferred Share as of December 18, 2009. The credit linked note portfolio to which the Company has exposure has suffered several defaults over the past year and if three or more occur in the time remaining to maturity Shareholders risk losing all or a substantial portion of their investment. The Company’s Investment Advisor believes there are a number of reference companies in the credit linked note portfolio that are at a significant risk of default prior to the maturity of the credit linked note. Accordingly, the Company’s board of directors, Manager and Investment Advisor believe it is in the best interests of the Shareholders to crystalize and preserve the remaining value of the Preferred Shares for Shareholders. In this regard, following recently completed negotiations the issuer of the credit linked note has agreed to repurchase the note on December 18, 2009 to facilitate this outcome. The Proposal will involve the amendment of the Company’s articles of incorporation and will be subject to receipt of all necessary shareholder and regulatory approvals.

A special meeting of holders of Preferred Shares has been called and will be held on December 17, 2009 to consider and vote upon the Proposal. Details of the Proposal will be outlined in an information circular to be sent to shareholders in connection with the special meeting. Copies of the information circular will be available on www.sedar.com and www.cclcapitalmarkets.com.

The estimated NAV of the fund is 9.20 as of November 16.

Let’s see … it’s backed by a structured note, downside risk is enormous, and there’s a motivated seller … I bet they’ll get a good price for the credit linked note!

RPQ.PR.A was last mentioned on PrefBlog when the continued suspension of dividends was announced. RPQ.PR.A is not tracked by HIMIPref™.no deposit required casino lists Play Igt Slots Free slots of fun
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DBRS has announced:

has today downgraded its rating on the LROC Preferred Units (the Units) issued by Kingsway Linked Return of Capital Trust (the Trust) to Pfd-4 (low) from Pfd-4. The Under Review with Negative Implications status, which was assigned to the Units on June 8, 2009, is being maintained.

The LROC Preferred Units are supported by an exposure to a note guaranteed by Kingsway Financial Services Inc. and Kingsway America Inc. (collectively, Kingsway) through a forward purchase agreement. The downgrade of the Units is a result of DBRS downgrading the long-term debt ratings of Kingsway earlier today to B (high) from BB (low).

Also, subsequent to today’s downgrade, DBRS immediately discontinued its ratings coverage of Kingsway. As a result, the rating of the Units has also been discontinued.

KSP.UN was last mentioned on PrefBlog when it was downgraded to Pfd-4 by DBRS. KSP.UN is not tracked by HIMIPref™.

Dividend 15 Split Corp. has announced:

that it has issued 1,181,421 Units for an aggregate of $23.3 million pursuant to the Rights offering that expired on November 16, 2009 at 4:00 p.m. (local time). The net proceeds from the subscription of Units will be used to acquire additional securities in accordance with the Company’s Investment objectives. By raising additional cash through this offering it allows the Company to capitalize on certain attractive investment opportunities that may arise over the next few months. In addition, the offering is expected to increase the trading liquidity of the Company and reduce the management expense ratio.

Both the Preferred Shares and Class A Shares trade on the Toronto Stock Exchange (the “TSX”) under the symbol “DFN.PR.A” and “DFN” respectively.

It was only yesterday that I predicted negligible take-up! So much for predictions! There were 10,037,713 units outstanding on May 31, so issue size has increased by a little over 11% (barring interim retractions).

DFN.PR.A was last mentioned on PrefBlog when the rights offering was announced. DFN.PR.A is tracked by HIMIPref™, but is relegated to the Scraps subindex on credit concerns.

Nothing on their website yet, but IIROC halted MFC at 4:31pm today while they announced a $2.5-billion common share deal:

Manulife Financial launched a $2.5-billion stock sale late Wednesday as the life insurer moves to build what it’s chief executive officer described as ‘fortress levels of capital.”

A syndicate of underwriters being led by Scotia Capital and RBC Dominion Securities agreed to buy $2.5-billion in Manulife (MFC-T20.180.180.90%)common shares at a price of $19 each.

They had 1,623-million shares outstanding at the end of the third quarter, so this issue of 130-million-odd shares represents a dilution of about 8%.

It is not clear just what will be done with the money – delevering the holdco would be nice – but presumably this will cause a reappraisal of credit: S&P put them on Watch-Negative on November 6.

MFC has the following preferred shares outstanding: MFC.PR.A (OpRet), MFC.PR.B & MFC.PR.C (PerpetualDiscount), MFC.PR.D & MFC.PR.E (FixedReset). All are tracked by HIMIPref™.

Update: Press Release:

The Company has granted the underwriters an over-allotment option, exercisable in whole or in part at any time up to 30 days after closing, to purchase up to an additional $375,060,000 in common shares at the same offering price. Should the over-allotment option be exercised in full, the total gross proceeds of the offering would be $2,875,460,000.

The estimated net proceeds from the offering will be approximately $2.413 billion, after deducting the underwriting fee and before the estimated offering expenses payable by the Company. The Company expects to use the net proceeds from this offering for general corporate purposes, which may include contributions of capital to its insurance and other subsidiaries, potential acquisitions or other growth initiatives. The Company has not yet made a determination as to how much of the proceeds will be invested in MLI and how much will be used for other corporate purposes. Following the offering, the Company also intends to retire the approximately $1 billion outstanding indebtedness under its Credit Facility with Canadian chartered banks using other cash resources of the Company.

Update, 2009-11-19:DBRS comments:

DBRS notes that on November 18, 2009, Manulife Financial Corporation (Manulife or the Company) announced a $2.5 billion equity issue which will significantly increase the amount of available capital to its primary operating life insurance subsidiary. Manulife also intends to retire the approximately $1 billion outstanding indebtedness under its Credit Facility with banks. At the end of September 2009, there was over $1 billion in cash held at the holding company. There are no rating implications stemming from these actions.

The equity issuance is consistent with the Company’s desire to have “Fortress Capital” to support its longer term financial strength and market franchise. This capital is a cushion against potential earnings volatility associated with heightened equity and credit market exposures, which can also be deployed for growth opportunities. Adjusting for the equity issue and the retirement of the bank debt, the net new capital improves the Company’s consolidated debt ratio (including preferred shares) to 25% from a relatively high 29% at the end of September 2009, and the adjusted debt ratio is 17.2% (down from 20.7%). DBRS anticipates that growth in retained earnings at normalized levels will reduce the total debt ratio to below 25%, which is the Company’s target

The YPG Holdings treasury department has been working overtime; there were two announcements of interest today.

First, they are redeeming the 4.65% of 2011:

Yellow Pages Group announced today that YPG Holdings Inc. (the “Company”) intends to exercise its right to redeem all of its outstanding $150 million 4.65% Medium Term Notes, Series 6, due February 28, 2011 (CUSIP No. 98424ZAF14) (the “Series 6 Notes”) on the following terms:

Redemption Date: January 15, 2010;
Redemption Price: $1,041.681 per $1,000 principal amount;
Accrued and Unpaid Interest: $17.836 per $1,000 principal amount; and
Total Redemption Price and Accrued and Unpaid Interest: $1,059.517 per $1,000 principal amount.

The redemption price has been determined in accordance with the terms of the Series 6 Notes and the provisions of the trust indenture dated April 21, 2004 governing the Series 6 Notes. Interest accrued on the Series 6 Notes up to, but excluding, the redemption date will be paid on the redemption date. The Company plans to finance the redemption through its existing commercial paper program.

That’s a very fat price for a one-year, The Pricing Supplement for the Series 6 is on SEDAR dated 2006-2-22:

YPG Holdings shall be entitled, at its option, to redeem the Series 5 Notes and/or Series 6 Notes in whole at any time or in part from time to time, by giving prior notice of not less than 30 days and not more than 60 days to the holders thereof, at the greater of the “Canada Yield Price” (as defined herein) and par, together in each case with accrued and unpaid interest to but excluding the date fixed for redemption. “Canada Yield Price” shall mean a price equal to the price of the Series 5 Notes or Series 6 Notes, as the case may be, calculated on the banking day preceding the day on which the redemption is authorized by YPG Holdings to provide a yield from the date fixed for redemption to the maturity date of the Series 5 Notes or Series 6 Notes to be redeemed, as the case may be, equal to the “Government of Canada Yield” plus 0.50% in the case of the Series 5 Notes or the “Government of Canada Yield” plus 0.16% in the case of the Series 6 Notes.

Of particular interest to YPG.PR.B holders is news of their issue of 10-year bonds at 7.75%:

YPG Holdings sold C$300 million ($286 million) of 10-year medium term notes, according to a term sheet seen by Reuters on Wednesday.

The 7.75 percent notes, due March 2, 2010, were priced at C$100.00 to yield 7.753 percent, or 432.5 basis points over the Canadian government benchmark, the term sheet said.

The bookrunners of the sale were investment dealer arms of Royal Bank of Canada, Bank of Nova Scotia and Bank of Montreal.

The reported due date of 2010-3-2 is a typographical error. I am advised it’s really 2020-3-2.

I noted in July that a ten-year issue would increase confidence and now they’ve done it!

YPG.PR.B closed last night at 17.56-60 to yield 11.09-05%; it is retractible 2017-6-30 at 25.00, so it has a term of about 7.5 years. There may be some who argue that the seniority difference justifies a 335bp spread to bonds, but I’m not one of them!

YPG is tracked by HIMIPref™ but is relegated to the “Scraps” index on credit concerns. The MAPF Performance Report for October 2009 disclosed a position in YPG.PR.B.

Update, 2009-11-21: I should have linked to the post about the YPG.PR.A & YPG.PR.B Issuer Bid and its reality.

DBRS has announced that it:

has today discontinued its rating of the Preferred Shares issued by AIC Global Financial Split Corp. at the request of AIC Limited (the Promoter).

The NAV was 11.16 as of November 6 according to Manulife Financial.

ASC.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-5 by DBRS. ASC.PR.A is tracked by HIMIPref™ but is relegated to the Scraps subindex on credit concerns.

S Split Corp. has announced:

that it has filed a final short form prospectus relating to an offering of Warrants to holders of Class A Shares of the Fund. Each Class A shareholder of record on November 19, 2009 will receive one Warrant for each Class A Share held. One Warrant will entitle its holder to acquire one Class A Share and one Preferred Share (together, a “Unit”) upon payment of the subscription price of $18.75. The Toronto Stock Exchange has conditionally approved the listing of the Warrants under the symbol SBN.WT and the Class A Shares and the Preferred Shares issuable upon the exercise thereof. It is expected that the Warrants will commence trading on November 17, 2009 and will remain trading until noon (Toronto time) on the expiry date of March 31, 2010.

The exercise of Warrants by holders will provide the Fund with additional capital that can be used to take advantage of attractive investment opportunities and is also expected to increase the trading liquidity of the Class A Shares and the Preferred Shares and to reduce the management expense ratio of the Fund.

The Units had a NAV of 20.14 on November 5. SBN closed today at 8.01-29, 3×11 and SBN.PR.A closed at 10.00-34, 22×1.

SBN.PR.A was last mentioned on PrefBlog when the intent to issue warrants was announced. SBN.PR.A is tracked by HIMIPref™, but is relegated to the Scraps subindex on credit concerns.

World Financial Split Corp. has announced:

that it has filed a final short form prospectus relating to an offering of Warrants to holders of Class A Shares of the Fund. Each Class A shareholder of record on November 19, 2009 will receive one Warrant for each Class A Share held. One Warrant will entitle its holder to acquire one Class A Share and one Preferred Share (together, a “Unit”) upon payment of the subscription price of $13.14. The Toronto Stock Exchange has conditionally approved the listing of the Warrants under the symbol WFS.WT and the Class A Shares and the Preferred Shares issuable upon the exercise thereof. It is expected that the Warrants will commence trading on November 17, 2009 and will remain trading until noon (Toronto time) on the expiry date of March 31, 2010.

The exercise of Warrants by holders will provide the Fund with additional capital that can be used to take advantage of attractive investment opportunities and is also expected to increase the trading liquidity of the Class A Shares and the Preferred Shares and to reduce the management expense ratio of the Fund.

The NAV of the units was 13.23 on November 5. WFS closed today at 3.25-34, 11×10, and WFS.PR.A closed at 9.40-45, 25×7.

WFS.PR.A was last mentioned on PrefBlog when the intent to issue warrants was announced. WFS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps subindex on credit concerns.

Update, 2009-12-4: The company has renewed its issuer bid. This news is not worthy of its own post (despite the commentary in Split-Share Buy-Backs? WFS.PR.A & FIG.PR.A Examined) because, as the 2008 Annual Report states:

Under the terms of the normal course issuer bid that was renewed in November 2008, the Fund proposes to purchase, if considered advisable, up to a maximum of 1,275,271 Class A shares (2007 – 1,414,293) and up to a maximum of 1,275,271 Preferred shares (2007 – 1,414,293), 10 percent of its public float as determined in accordance with the rules of the Toronto Stock Exchange. The purchases would be made in the open market through facilities of the Toronto Stock Exchange. The normal course issuer bid will remain in effect until the earlier of November 12, 2009 or until the Fund has purchased the maximum number of units permitted under the bid. As at December 31, 2008, nil shares (2007 – nil) have been purchased by the Fund.

Standard & Poor’s has announced:

• Manulife Financial Corp.’s (TSX/NYSE: MFC) operating performance is below expectations.
• MFC’s risk tolerance remains high and the majority of its
  equity-linked liabilities remain unhedged. Also, earnings and capitalization are highly sensitive to volatile equity markets and changes in interest rates.

• MFC’s planned reorganization will reduce its cash flow diversification.
• We are placing our ‘AA-‘ counterparty credit rating on MFC on CreditWatch with negative implications because we expect to restore standard notching following the reorganization.
• We are revising the outlook on our ‘AA+’ financial strength ratings on MFC’s subsidiaries to negative from stable.

Under its current organizational structure, MFC has two major cash flow streams consisting of MLI and its U.S. subsidiaries held under John Hancock Financial Services Inc. (John Hancock Financial). Its U.S. subsidiaries are currently organized in two columns with each providing approximately one quarter of the group’s operating performance. This organizational diversification is important to support the nonstandard two-notch differential between the counterparty credit ratings on MFC and the higher financial strength ratings on its core subsidiaries. Following the planned reorganization, MLI will be the only major direct source of earnings and cash flow for MFC. But, more importantly, the U.S. half of total earnings will be channeled through a single U.S. insurance company and, therefore, be subject to the dividend restrictions of a single U.S. insurance regulator instead of two. Although the eorganization results in many benefits to Manulife, including increased capital and operational efficiency, it is our opinion that the reduced diversification increases the potential for lower cash flows to MFC during severe or extreme stress events and is more in line with standard notching.

The target date for completion of the reorganization is year-end 2009. When completed, we expect to lower the ratings on MFC by one notch. This would restore a standard three-notch differential between the ratings on MFC and the higher financial strength ratings of its core ubsidiaries.

Meanwhile, Manulife CEO Daniel “Cowboy” Guloien thinks his luck will change:

But on a conference call with analysts Thursday, Mr. Guloien made it clear that he thinks he’s developed a strategy that will strengthen the company’s capital levels and still allow shareholders to benefit if stock markets go up. And he’s sticking to it – no matter what S&P says. “I could look like a hero [by taking] a huge one-time charge and say, ‘We’ve put it behind us.’ And I think that would mollify rating agencies and other people who are concerned about downside risk,” he said.

“I happen to believe that the shareholders who have suffered a great deal by seeing unhedged positions cost [the company] in terms of the market downdraft have a right to earn that back in the market updraft.

“And I’m not prepared to put their interest behind me because a rating agency has a view on an unhedged position.”

MFC has the following preferred shares outstanding: MFC.PR.A (OpRet), MFC.PR.B & MFC.PR.C (PerpetualDiscount), MFC.PR.D & MFC.PR.E (FixedReset). All are tracked by HIMIPref™.

EPCOR Power L.P. (TSX: EP.UN) (the Partnership) and EPCOR Power Equity Ltd. (TSX: EPP.PR.A, EPP.PR.B) have announced:

changes to their respective company names. The change in names follows Capital Power Corporation’s (TSX: CPX) (Capital Power) acquisition of EPCOR Utilities Inc.’s power generation assets and operations effective July 1, 2009 when it assumed the role of manager and operator of the Partnership’s assets. The following table summarizes the previous and new names and associated Toronto Stock Exchange (TSX) ticker symbols:

Previous Names	New Names
EPCOR Power L.P. (EP.UN)	Capital Power Income L.P. (CPA.UN)
EPCOR Power Equity Ltd. •Series 1 (EPP.PR.A) •Series 2 (EPP.PR.B)	CPI Preferred Equity Ltd. •Series 1 (CZP.PR.A) •Series 2 (CZP.PR.B)

EPCOR Power L.P.’s units and the preferred shares (Series 1 and 2) issued by EPCOR Power Equity Ltd. will continue to trade on the TSX with the new ticker symbols expected to take effect on or about November 9, 2009.