Category: Issue Comments

5Banc Split Inc. has announced:

that it has declared a quarterly dividend on its Preferred Shares of $0.11875 per Preferred Share and on its Capital Shares of $0.05 per Capital Share. The Capital Share dividend has been reinstated due to improved market conditions for the underlying portfolio securities. The dividends on both the Preferred Shares and Capital Shares are payable on September 15, 2009 to holders of record on August 31, 2009.

Capital Unitholders have missed two dividends, the dividend suspension was announced in January. The NAV of the company was reported to be $15.74 as of July 23.

FBS.PR.B was last mentioned on PrefBlog when it was downgraded to Pfd-4 by DBRS as part of the February mass-downgrade. It is tracked by HIMIPref™, but has been relegated to the Scraps index on credit concerns.

Faircourt Asset Management has announced:

the final terms of the distribution to its unitholders of rights (the “Rights”) exercisable for units (“Units”) of the Trust (the “Rights Offering”). Each Unit consists of one trust unit of the Trust (a “Trust Unit”) and one transferable warrant to acquire a Trust Unit (a “Warrant”). Each Warrant entitles the holder thereof to purchase one Trust Unit on, and only on, June 25, 2010 at a subscription price of $4.00. The distribution is being made pursuant to a short form prospectus dated July 14, 2009. TD Securities Inc. is the dealer manager for the Rights Offering.

Under the Rights Offering, holders of the Trust Units as of the close of business on July 22, 2009 received one Right for each Trust Unit held as of the record date. Each Right will entitle the holder thereof to purchase one Unit at a subscription price of $2.30. The Rights will expire at 4:00 pm (Toronto time) on August 27, 2009.

The Rights Offering included an additional subscription privilege under which holders of Rights who fully exercise their Rights will be entitled to subscribe for additional Units, if available, that were not otherwise subscribed for in the Rights Offering.

The Trust will use the net proceeds of this issue to increase capital for investment.

As of July 24, the NAV of each Capital Unit was $3.96 and as of Dec. 31, 2008:

the Trust had 5,344,946 Trust Units Fund Performance outstanding and trading at $0.80 per Trust Unit, a discount to the underlying NAV of 59%. Closed end trusts may trade above, at or below their NAV per unit.

As at December 31, 2008, the Trust had 9,964,308 Preferred Securities outstanding representing a total liability of $99.64 million.

Income coverage of the FIG.PR.A distribution in 2008 was 1.4-:1; asset coverage at year-end was originally reported as 1.1-:1, and adjusted later. Assuming there have been no changes in outstanding shares, asset coverage (from the NAV provided) is currently 1.2+:1 before giving effect to any rights subscriptions.

FIG.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-5 as part of the February Massacre; a planned rights offering was cancelled last November.

FIG.PR.A is tracked by HIMIPref™ but was relegated to the ‘Scraps’ index as part of the February 2009 rebalancing on credit concerns.

Canadian Life Companies Split Corp. has 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 August 10, 2009 to shareholders on record as of July 31, 2009.

A surprising lack of fanfare in this announcement – dividends to the Capital Units were suspended in December but the NAV has recovered to $15.26 as of July 15.

BMONT Split Corp. has announced:

The Capital Shares and Preferred Shares will be redeemed by the Company on August 5, 2009 (the “Redemption Date”) in accordance with the redemption provisions as detailed in the prospectus dated July 29, 2004. Pursuant to these provisions, the Preferred Shares will be redeemed at a price per share equal to the lesser of $27.45 and the net asset value per unit. The Capital Shares will be redeemed at a price for every two shares equal to the amount by which the net asset value per unit exceeds $27.45.
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A further press release will be issued by the Company in connection with the redemption prices on July 31, 2009. Payment of the amounts due to holders of Capital Shares and Preferred Shares will be made by the Company on August 5, 2009.

Given that the NAV is currently $47.30, redemption at par seems like a pretty good bet.

BMT.PR.A was last mentioned on PrefBlog in February, when it was downgraded to Pfd-4 by DBRS. At the time, the NAV was $30.77 … what a difference!

BMT.PR.A is tracked by HIMIPref™, but is relegated to the “Scraps” sub-index on both volume and credit concerns.

Global Credit Pref Corp has announced:

that it received a credit event notice today from The Toronto-Dominion Bank with respect to Lear Corp. as a result of that entity failing to make the $38 million required interest payments within the 30 day grace period on its 8.5% and 8.75% senior notes.

Global Credit Pref Corp. is a mutual fund corporation that issued 10-year redeemable, retractable cumulative preferred shares. The Company has exposure, by way of an equity forward sale agreement, to a structured credit linked note issued by The Toronto-Dominion Bank and held by Global Credit Trust, the return on which is currently linked to the credit performance of 122 reference entities, subsequent to the removal of Lear Corp. (the “CLN Portfolio”).

The return on the credit linked note is linked to the number of defaults experienced over its term among the reference entities in the CLN Portfolio. The credit linked note has been structured so that it is unaffected by the first net losses on the CLN Portfolio up to 5.12% of the initial value of the CLN Portfolio (initially representing defaults by 11 reference entities in a CLN Portfolio comprised of 129 reference entities). The net loss on a reference entity that defaults is calculated as the percentage exposure in the CLN Portfolio to such reference entity reduced by a 40% fixed recovery rate. Following the credit event, the credit linked note will be able to withstand approximately 5 further credit events in the CLN Portfolio. Global Credit Pref Corp.’s capacity to return $25.00 per preferred share on the scheduled redemption date of September 30, 2015 and the payment of quarterly fixed cumulative preferential distributions of $0.3281 per preferred share (a 5.25% yield on the original subscription price of $25.00 per preferred share) will not be affected by this credit event.

These prefs are currently rated P-5(low)/Watch Negative by S&P. RPB.PR.A was not the only synthetic affected by the Lear event!

GPA.PR.A is not tracked by HIMIPref™. The last mention on PrefBlog was with respect to its downgrade to P-5.

BAM Split Corp – which today settled its new BNA.PR.D issue – has announced:

the Company has delivered a notice of early redemption to CDS Clearing and Depository Services Inc. (“CDS”) to inform them that the Company will redeem all of the outstanding Class A Preferred Shares, other than the Class A Preferred Shares owned by BAM Investments Corp. (“BAM Investments”), on July 27, 2009, at an early redemption price of $25.25 per share plus accrued and unpaid dividends.

BNA.PR.A is tracked by HIMIPref™. It is currently a member of the SplitShare subindex.

BNA.PR.D, the 5-year split share refunding BNA.PR.A announced June 18 settled today, trading 261,515 shares in a range of 24.89-03 before closing at 24.99-25.

BAM Split also announced:

Concurrently with the completion of the offering, BAM Investments has agreed to transfer 7,000,000 BAM Shares to the Company in exchange for additional Capital Shares of the Company. On or about July 27, 2009, BAM Investments will convert its existing holdings of Class A Preferred Shares, Class AA Preferred Shares, Series 1 and Class AAA Preferred Shares, Series 1 of the Company (collectively, the “Preferred Shares”) into Capital Shares and the Company will consolidate the existing Capital Shares held by BAM Investments so that an equal number of Preferred Shares and Capital Shares will be outstanding.

BNA.PR.D will be tracked by HIMIPref™. It has been added to the HIMIPref™ SplitShares Index.

Update: Prospectus (via SEDAR) to the rescue! The transactions with BAM Investments are fully disclosed in the prospectus, which provides a pro-forma statement of the capitalization changes:

The capitalization of the Company at March 31, 2009, and at such date as adjusted to give effect to the issue and sale of the Series 4 Preferred Shares offered hereby, the redemption of the Class A Preferred Shares, the conversion of BAM Investments’ Preferred Shares to Capital Shares, and the acquisition of an additional 7,000,000 BAM Shares is set forth in the table below.

This is very good news for holders of BNA.PR.B & BNA.PR.C, who are seeng their credit quality increase dramatically for free.

Update, 2009-7-10: DBRS has announced:

To increase the level of protection to the Class AA Preferred Shares, BAM Investments will convert its existing Non-Rated Preferred Shares, Class A Preferred Shares and Class AA Preferred Shares to Capital Shares following the issuance of the Series 4 Preferred Shares. In addition, BAM will transfer seven million additional BAM Shares into the Portfolio in exchange for Capital Shares, which will increase the amount of Company assets and further increase the downside protection available for the Class AA Preferred Shares.

After giving effect to the foregoing changes, the downside protection available to the Class AA Preferred Shares will be approximately 62%, based on the market value of the BAM Shares as of July 8, 2009. The dividend coverage ratio will be approximately 1.6 times.

The rating assigned to the Series 4 Preferred Shares is an indication of the probability that the Company will make timely payments of dividends and ultimately repay principal by the Final Maturity. The Pfd-2 (low) ratings are primarily based on the downside protection and dividend coverage available to the Class AA Preferred Shares.

The main constraints to the rating are the following:
(1) The downside protection available to holders of the Class AA Preferred Shares depends solely on the market value of the BAM Shares held in the Portfolio, which will fluctuate over time.
(2) There is a lack of diversification as the Portfolio is entirely made up of BAM Shares.
(3) Changes in the dividend policy of BAM may result in reductions in Class AA Preferred Shares dividend coverage.
(4) The BAM Shares pay dividends in U.S. dollars, so the Company is exposed to foreign currency risk relating to the Canadian-U.S. exchange rate.

Note that a “downside protection” of 62% is equivalent to asset coverage of 2.6+:1.

Last week, YPG announced:

an offering by YPG Holdings Inc. (the “Company”) of Medium Term Notes for gross proceeds of $90 million. The net proceeds from the issuance of the Notes will be used for general corporate purposes, to repay indebtedness outstanding under the Company’s commercial paper program and to repay an amount of $50 million under its term credit facility. This offering is scheduled to close on or about July 3, 2009.

Pursuant to this offering, the Company will issue $90 million of 6.85% Series 8 Notes (compounded semi-annually), which will be dated July 3, 2009, will mature on December 3, 2013 and will be issued at a price of $100.00.

The Series 8 Notes will be guaranteed by Yellow Pages Income Fund (TSX: YLO.UN), YPG Trust, YPG LP, Yellow Pages Group Co., Trader Corporation, YPG (USA) Holdings, Inc., Yellow Pages Group, LLC and YPG Directories, LLC. The Notes have been assigned a rating of BBB (high) with a stable trend by DBRS Limited and a rating of BBB- with a stable outlook from Standard & Poor’s Rating Service.

… and now they have announced:

an offering by YPG Holdings Inc. (the “Company”) of Medium Term Notes Series 9 and an additional offering of Medium Term Notes Series 8 for combined gross proceeds of $165 million. All of the net proceeds from the issuance of the Series 9 Notes and Series 8 Notes will be used to repay indebtedness outstanding under the Company’s term credit facility. Both offerings are scheduled to close on or about July 10, 2009.

Pursuant to these offerings, the Company will issue $130 million of 6.50% Series 9 Notes (compounded semi-annually), which will be dated July 10, 2009, will mature on July 10, 2013 and will be issued at a price of $100.00. The Company will also increase the size of its $90 million offering of 6.85% Series 8 Notes, which were issued on July 3, 2009, by issuing a further $35 million of 6.85% Series 8 Notes (compounded semi-annually). The Series 8 Notes mature on December 3, 2013.

The Series 9 Notes and the Series 8 Notes will be guaranteed by Yellow Pages Income Fund (TSX: YLO.UN), YPG Trust, YPG LP, Yellow Pages Group Co., Trader Corporation, YPG (USA) Holdings, Inc., Yellow Pages Group, LLC and YPG Directories, LLC. The Series 9 Notes and Series 8 Notes have been assigned a rating of BBB (high) with a stable trend by DBRS Limited and a rating of BBB- with a stable outlook from Standard & Poor’s Rating Service.

YPG is certainly showing that it can access the bond market and is chipping away steadily at its bank debt (as noted in mid-June); it’s certainly encouraging, but a 10-year issue would increase confidence in YPG.PR.B given the term structure of their debt.

Standard & Poors has announced:

it revised its outlook on Brookfield Asset Management Inc. to negative from stable. At the same time, we affirmed the ratings, including the ‘A-‘ long-term corporate credit rating on the company.

“The outlook revision reflects what we view as pressure on the credit risk profile of Brookfield’s core subsidiaries, Brookfield Properties Corp. and Brookfield Renewable Power Inc., as well as our expectation of weaker operating cash flows, in particular, a lower level of investment gains,” said Standard & Poor’s credit analyst Greg Pau.

In the past two months, we have revised the outlook on the ‘BBB’ ratings on both Brookfield Properties (BBB/Negative/–) and Brookfield Renewable Power (BBB/Negative/A-3) to negative from stable to reflect the pressure on their respective credit standings. In the case of Brookfield Properties, we expect that valuation declines on its commercial properties and stricter lender underwriting could heighten refinancing risks of maturing debt, particularly that in the pro rata US$1.6 billion debt maturing in its U.S. fund in 2011. With the generally weak state of commercial property market in major U.S. cities and financial centers, we believe that any recovery in valuation could be slow and modest.
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The negative outlook reflects our expectation that pressures on Brookfield’s core subsidiaries’ credit risk profile, cash flow volatility from potentially lower investment gains, and the challenging market conditions could weaken the company’s own financial risk profile. Standard & Poor’s could consider lowering the rating if the credit risk profiles of Brookfield Properties and Brookfield Renewable Power deteriorate further. We could also lower the rating if remitted cash flows further weaken to result in remitted OCF interest coverage falling below 4x or OCF to total debt falling below 20%. Conversely, we could revise the outlook to stable when the company’s cash flows strengthen again when market conditions improve or the company materially reduces its corporate level debts, resulting in OCF coverage measures returning to levels similar to those attained in 2008.

On a perhaps not entirely unrelated note, DBRS has confirmed Brookfield Renewable Power following a shuffling of assets down the line:

DBRS has today confirmed the Senior Unsecured Debentures and Notes rating of Brookfield Renewable Power Inc. (BRP or the Company) at BBB (high), with a Stable trend. This action follows today’s announcement that BRP intends to sell substantially all of its renewable generating facilities in Canada with a total capacity of 387 MW to its 50.01% owned Great Lakes Hydro Income Fund (the Fund, rated STA-2 (high)). BRP will also amend two existing power purchase arrangements (PPAs) under which it acquires power from two of the Fund’s generating assets, and will provide a price guarantee in connection with the bulk of the transferred assets.

Total consideration payable by the Fund to BRP is $945 million, to be funded with the net proceeds from the sale of $760 million of Fund units, and a $200 million senior unsecured note to BRP. BRP will subscribe for 50.01% of the $760 million equity offering in order to maintain its current ownership percentage. Initial cash proceeds to BRP will be approximately $365 million, with an additional $200 million when the note matures.
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BRP’s consolidated financial profile is not expected to be materially changed as a result of the Transaction as the Company will continue to consolidate the Fund’s results. On a non-consolidated basis, while BRP would lose a modest amount of operating cash flow from the sale of the physical generating assets, and will take on additional price exposure through the additional/amended power purchase agreements with certain of the Fund’s assets, these challenges are viewed as largely offset by the considerable Transaction consideration to be received, the expectation of BRP continuing with a prudent hedging strategy, and the Company maintaining its ownership position in the Fund.

The following BAM issues are tracked by HIMIPref™: BAM.PR.B, BAM.PR.E, BAM.PR.G, BAM.PR.H, BAM.PR.I, BAM.PR.J, BAM.PR.K, BAM.PR.M, BAM.PR.N, BAM.PR.O & BAM.PR.P.

Additionally, the ratings of BAM Split Corp are capped by BAM’s rating: BNA.PR.A, BNA.PR.B, BNA.PR.C and the new issue that closes 2009-7-9.