Category: Issue Comments

Split Yield Corp has announced:

Split Yield Corporation (“Split Yield”) reports financial results for the six months ending July 31, 2009.

The six month period ending July 31, 2009 was one of the most tumultuous periods in financial market history. Against this backdrop, the market prices of the stocks in the portfolio mirrored this activity reaching lows in early March but recovering significantly by the end of July. The net asset value per unit (a unit consists of one Class I Preferred share, one Class II Preferred share and one Capital share) increased by $3.43 to $18.66 per unit as at July 31, 2009.

In a word, yech. As the audited financials state:

The Company has 1,213,202 Class I Preferred shares and 1,213,202 Class II Preferred shares outstanding as at July 31, 2009 with a principal repayment of $24,264,040 and $18,198,030 respective due on termination date, February 1, 2012. As at July 31, 2009 the Company had net assets equivalent to $18.66 per Class I Preferred share and nil per Class II Preferred share. This represents a deficiency as at July 31, 2009 of $1.34 per Class I Preferred share and $15.00 per Class II Preferred share for a total deficiency of $19,823,720. If this condition prevails, the Company will have insufficient assets to meet its full liability of the Preferred shares at the termination date.

How did things come to such a pass? Well … I don’t know. The chart of NAV:

… shows some numbers for cumulative performance that, when a product is taken, come to a cumulative return since inception of -4.77%, and NAV has declined a lot more than that. I can only assume that this figure reports total return on the portfolio gross of distributions, in which case the decline in NAV is due to the cumulative distributions since inception of $7.25, $10.54 and $12.52 on the capital units, YLD.PR.B and YLD.PR.A, respectively. The MER (1.95% annualized in 1H09) will also have played a role.

The company notes:

The Company’s investment manager, Quadravest Capital Management Inc., actively manages the Company’s portfolio consisting primarily of common equities in the S&P/TSX 60 and the S&P 100 Indices. In order to generate additional income above the dividend and interest income earned in the Portfolio, the Company writes covered call options. This conservative strategy is designed to enhance the income in the portfolio by enabling the Company to earn strong income in times of volatile markets while reducing the effects of market corrections. In addition, this source of income is treated as capital gains and as such receives a more favorable tax treatment relative to other sources of income.

Quick! Does anybody have total return figures handy for those indices, from April 16, 1998 to July 31, 2009?

BPO.PR.L, the new FixedReset 6.75%+417 announced August 21 has closed smoothly.

The issue traded 898,182 shares in range of 25.02-30 before closing at 25.03-05, 20×75.

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

DBRS has announced that it:

has today discontinued its rating on the Preferred Shares issued by GlobalBanc Advantaged 8 Split Corp. (the Company) at the request of the Company.

The company stated that:

The board of directors concluded that there was no benefit to continuing the rating, and incurring the costs associated with the rating.

The company announced yesterday that:

announces a distribution of $0.005 per Preferred Share for the quarter ending September 30, 2009. The distribution will be paid on October 13, 2009 to holders of record on September 30, 2009. A distribution will not be paid on the Class A Shares for the quarter ending September 30, 2009.

The Board of Directors has again decided to maintain the distribution at the same level as the last two quarters even though the Bloomberg Dividend Forecast now anticipates that dividends to be paid by certain of the banks included in the Bank Portfolio may increase slightly in 2010. The Board of Directors will continue to monitor the Bloomberg Dividend Forecast, the Company’s current cash flow and changes in its expenses and may revise the amount of dividends paid on the Preferred Shares in the future.

Unitholders are reminded that the Preferred Shares, as a class, are entitled to receive, as and when paid in the discretion of the Board of Directors of the Company, cumulative dividends not exceeding $0.1125 per share per annum. The shortfall below the prescribed amount of the Preferred Share dividend (currently, $0.2575 in aggregate) will accumulate and, in accordance with the terms of the Preferred Shares and the Class A Shares, will be paid in priority to any payments on the Class A Shares.

GBA.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-5(low) by DBRS in February. GBA.PR.A is not tracked by HIMIPref™.

I’m a little late with this news, but that’s life …

Global Forty-Five Split Corp. announced on August 20:

that it has re-instated a distribution of $0.05 per Class A Share for the month ending August 31, 2009. The distribution will be paid on or before September 15, 2009 to unitholders of record on August 31, 2009.

The Manager will assess the ability to pay distributions, and the amount thereof, on a monthly basis. Among other considerations, the Company is not permitted to pay a distribution on the Class A Shares if, after the payment of the distribution by the Company, the Net Asset Value per Unit would be less than $15.00.

The Capital Unit dividend had been suspended in November 2008.

The last mention of GFV.PR.A on PrefBlog occurred when it was upgraded to Pfd-3(high) by DBRS. GFV.PR.A is not tracked by HIMIPref™.

Economic Investment Trust Limited has announced:

that on November 30, 2009 it will redeem for cash all of its outstanding 5% Cumulative Preferred Shares Series A at a redemption price of $53.125, comprised of $50.00 per share, a premium of $2.50, and accrued dividends in the amount of $0.625 per share.

Even the most Assiduous Readers may be forgiven for asking ‘What?’. The June 09 Financials state:

At June 30, 2009, there are 5,615,535 Common Shares issued and outstanding and each share is entitled to one vote. There are 7,200 (2008 – 7,700) 5% Cumulative Preferred Shares Series A issued and outstanding. During the fi rst quarter, the Company purchased 500 Preferred Shares Series A for cancellation.

So the total market capitalization of the preferreds comes to less than half a million dollars. EVT.PR.A closed today at 51.23 bid for 800, no offer. This is the first mention of EVT.PR.A on PrefBlog. EVT.PR.A is not tracked by HIMIPref™.

Commerce Split Inc. has announced:

it plans on holding a special meeting of shareholders in December 2009 to vote on a reorganization plan for the Company.

The reorganization proposal will provide both Priority Equity and Class A shareholders with an opportunity to participate in an alternative structure going forward. This proposal is designed to address the impact that the significant decline in price of the Company’s underlying holding of CIBC common stock and the resultant activation of the Priority Equity Protection Plan has had on the ability of the Company to meet some of its original investment objectives.

Many of the characteristics of the proposal will be similar to the previous shareholder proposal that was contained in the December 23, 2008 Management Information Circular. This previous proposal, although not passed, did receive overwhelming support, outside of certain larger shareholders. If this proposal had been implemented at that time, both classes of shareholders would have experienced significant improvement in the value of their investments. As a consequence of the results of this vote and continued interest in seeking a solution that balances the interests of both classes of shareholders, the Company is bringing forward this proposal which will provide shareholders with a choice of remaining in the current Fund with all the existing attributes or the option to transfer into a new Fund that will have a different set of attributes, subject to maintaining an equal number of shares of each Class outstanding in each option.

The Company, subject to all necessary Board and regulatory approvals, expects to send out the full details of this proposal to all shareholders through a Management Information Circular in November, 2009 with a shareholder vote to follow in December, 2009.

The proposal will allow shareholders the option to participate in a new Fund with different attributes. The new Fund would allow the fixed income instruments purchased under the Priority Equity Protection Plan to be liquidated and the proceeds to be re-invested in common shares of CIBC. This would allow the new Fund to begin receiving dividends on a more fully invested position (on up to 100% of Fund assets versus a currently invested position in CIBC common stock of 20%) in CIBC common stock, increase income producing potential under the covered call writing program and increase participation in any capital appreciation of CIBC common stock held. The requirement that an equal number of Priority Equity shareholders and Class A shareholders be outstanding would also be maintained in the New Fund.

Priority Equity shareholders transferring their Priority Equity shares to the new Fund would receive i) one new $5 preferred share to yield 7.5% per annum and ii) one $5 par value equity share that will receive dividends of 7.5% per annum if and when the Company’s net asset value exceeds $12.50.

In addition, each Priority Equity share exchanged would receive i) one half Series I warrant, with one full Series I warrant allowing holders to purchase a full Unit (a Unit consisting of one new preferred share, one new equity share and a Class A share) of the Company at a price of $10 for 1 year and ii) a full Series II warrant to acquire a full Unit of the Company at a price of $12.50 for 2 years. These warrants will effectively provide upside potential on the performance of CIBC shares held in the Fund. The Company believes that the proposed package of securities will provide Priority Equity shareholders with substantial value added compared to their existing investment.

Class A shares will receive dividends when the net asset value reaches $15 per unit in the new Fund with all other attributes to remain the same. The value of the Class A share opportunity in the new Fund is that it will provide more exposure to any increases in CIBC common stock held through the Fund and the Company believes this provides substantial shareholder value relative to Class A shareholders’ existing investment.

Shareholders that do not wish to transfer into the new Fund may maintain their investment in the existing Fund under the existing set of attributes for each class of share.

The Company believes this reorganization plan is in the best interest of all shareholders. The full details of the Plan will be sent to all shareholders in November, 2009.

The immediate thing that strikes me about this press release is the plethora of detail relative to the terse release from XMF.PR.A, its sister in misery. This may be related to its September 15 valuation of $9.24 net of accrued preferred share dividends.

XCM closed today at 1.18-1.24, 50×63, while XCM.PR.A closed at 7.75-86, 100×2 … in contrast to XMF.PR.A, the October retraction is in the money (although not clear whether retractors will get the accrued dividend). Of course, the higher NAV has led to a lower committment to the fixed income portfolio: XCM has 21% exposure to CM as of August 31, which makes arbitrage somewhat riskier.

The fascinating part about this reorganization is the optional nature of the proposed conversions. It remains to be seen whether the proposed exchange will be coercive or not … the final proposal may well have unpleasant language about fees and expenses and so on that would, in practical terms, force conversion if the plan is passed.

XCM.PR.A was last mentioned on PrefBlog when management refused to consider winding up the company. XCM.PR.A is not tracked by HIMIPref™.

M-Split Corp. has announced:

that it plans on holding a special meeting of shareholders in December 2009 to vote on a reorganization proposal for the Company.

The reorganization proposal will allow shareholders to vote on an alternative structure going forward. This proposal is designed to address the impact that the significant decline in price of the Company’s underlying holding of Manulife common stock and the resultant activation of the Priority Equity Protection Plan has had on the ability of the Company to meet some of its original investment objectives.

Many of the characteristics of this new proposal will be similar to the previous shareholder proposal that was contained in the December 23, 2008 Management Information Circular. This previous proposal, although not passed, did receive overwhelming support, outside of certain larger shareholders. If this proposal had been implemented at that time, both classes of shareholders would have experienced significant improvement in the value of their investments.

The Company, subject to all necessary Board and regulatory approvals, expects to send out the full details of this proposal to all shareholders through a Management Information Circular in November, 2009 with a shareholder vote to follow in December, 2009.

The Company believes this reorganization proposal will be in the best interest of all shareholders.

Presumably the company has managed to get support of some of the larger shareholders who scuttled the last attempt; in the last press release reported on PrefBlog, the company claimed to be maintaining a dialogue.

The NAV as of Sept. 15 was $8.51, with less than 1% exposure to MFC as of June 18, 2009.

Of note is the upcoming special retraction:

Shareholders who concurrently retract a Priority Equity share and a Class A share (together, a “unit”) in the month of October in each year will be entitled to receive an amount equal to the transactional net asset value per unit on the last day of October.

Note that the company does not appear to be putting any money into its issuer bid:

On March 2, 2009, the Company announced the acceptance of a Normal Course Issuer bid that could allow the Company to purchase, from time to time, up to 10% of the public float of the shares. The Company plans on utilizing this only in situations where the combined trading prices of the Priority Equity shares and Class A shares are at an excessive discount to net asset value of the Company.

XMF.PR.A closed today at 7.79-90, 198(!)x27, while XMF closed at 0.52-56, 3×12; my guess is that arbitrageurs have moved in, given that the NAV is dependent almost entirely on five-year strips. Note that:

Any accrued or declared and unpaid dividends payable on or before a Retraction Date in respect of Priority Equity Shares tendered for retraction on such Retraction Date will also be paid on the Retraction Payment Date.

The prospectus is not explicit on the disposition of accrued dividends on the exercise of an October retraction.

XMF.PR.A is not tracked by HIMIPref™.

The DC FixedReset 6.75%+410 announced August 25 has closed and is now trading as DC.PR.B.

Dundee Corporation was pleased to announce:

that it has completed its offering of 4,600,000 Cumulative 5-Year Rate Reset First Preference Shares, Series 2 (“Rate Reset Series 2 Preference Shares”) of the Company at a purchase price of $25.00 per Rate Reset Series 2 Preference Share, for aggregate gross proceeds of $115,000,000. The Rate Reset Series 2 Preference Shares are listed on the Toronto Stock Exchange under the symbol DC.PR.B.

The offering was underwritten on a bought deal basis by a syndicate co-led by GMP Securities L.P. and Scotia Capital Inc. that included BMO Nesbitt Burns Inc., CIBC World Markets Inc., Dundee Securities Corporation, National Bank Financial Inc., TD Securities Inc., Canaccord Capital Corporation and Raymond James Ltd.

The gross proceeds of $115-million implies that the greenshoe was not taken up.

The issue traded 722,705 shares before closing at 25.07-08, 40×63. Vital statistics are:

By way of comparison, DC.PR.A is retractible and closed at 21.25-40 today to yield 7.91% to a SoftMaturity 2016-6-29. If the relative pricing of these issues makes any sense to anybody, please drop me a line explaining it!

DC.PR.B is tracked by HIMIPref™ but is relegated to the “Scraps” index due to credit concerns.

Update, 2009-9-16 Here’s a relative pricing clue!

The race is on to see how long it will take DC.PR.B to reach 26-26.50 like the other fixed resets.

The issue had closed about 2 hours after it was posted and just started trading yesterday.

I didn’t get any at the IPO but sold all of my MFC.PR.E to buy this one and will also sell at 26 or 27, probably in a month or two if history repeats itself.

FixedReset structure + new issue = free money? Well, it’s one way to invest.

Missed this when it came out … on August 19, Financial 15 Split II announced:

its regular monthly distribution of $0.10 for each Class A share ($1.20 annually) and $0.04375 for each Preferred share ($0.525 annually). Distributions are payable September 10, 2009 to shareholders on record as at August 31, 2009.

as opposed to its July announcement:

regular monthly distribution of $0.04375 for each Preferred share ($0.525 annually). Distributions are payable August 10, 2009 to shareholders on record as at July 31, 2009. There will not be a distribution paid to Financial 15 II Class A Shares for July 31, 2009 as per the Prospectus which states no regular monthly dividends or other distributions will be paid on the Class A Shares in any month as long as the net asset value per unit is equal to or less than $15.00. The net asset value as of July 15, 2009 was $14.71.

FFN.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-4(high) by DBRS. In the first half of 2009, its income coverage was 1.0+:1. The Capital Unit divided was suspended in November 2008.

FFN.PR.A is tracked by HIMIPref™, but has been relegated to the “Scraps” index on credit concerns.