Category: Issue Comments

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.

What can I say? The Floaters Index currently has three members. The top three spots in May were occupied by Floaters; the bottom three spots in June were occupied by Floaters.

Connor Clark has announced:

that Lear Corporation has reached agreement on a consensual debt restructuring under court supervision pursuant to a voluntary bankruptcy filing under Chapter 11 of the United States Bankruptcy Code. This plan is expected to constitute a credit event under the credit linked note (“CLN”) issued by TD Bank to which the Company has exposure.

Given the unprecedented economic downturn and corresponding decline in global automobile production volumes, as well as continued difficult conditions in credit markets generally, Lear’s Board of Directors concluded that this action was the fastest and most effective way to de-lever its capital structure.

The recovery rate for ROC Pref III Corp. is fixed at 40%. As a result, the Lear credit event is expected to reduce the number of additional defaults that ROC Pref III Corp. can sustain before the payment of $25.00 per Preferred Share at maturity is adversely affected by 1.0 to 1.6.

They provide a table:

There are 127 names in the reference portfolio, with 6.0 defaults as of 2009-3-31; on that date there were 17 non-defaulted junk names. The death watch continues.

RPB.PR.A was last mentioned on PrefBlog in connection with December’s credit event for Tribune Corp..

RPB.PR.A is not tracked by HIMIPref™.

On May 27, Sentry Select announced:

that the units of Select 50 S-1 Income Trust, Sentry Select Focused Growth & Income Trust, Pro-Vest Growth & Income Fund and the capital units and preferred securities of the Multi Select Income Trust (collectively, the “Units”) will be voluntarily delisted from the Toronto Stock Exchange at the close of business on Tuesday, June 2, 2009. The delisting of the Units is being done in preparation for the merger of each of the Funds into Sentry Select Canadian Income Fund (collectively, the “Mergers”), which are expected to occur on or about June 12, 2009.

… and on June 16 announced:

that the mergers of Sentry Select 40 Split Income Trust (“40 Split”), Pro-Vest Growth & Income Trust (“Pro-Vest”), Multi-Select Income Trust (“Multi-Select”), Sentry Select Focused Growth & Income Trust (“Focused Growth”) and Select 50 S-1 Income Trust (“Select 50”) (collectively the “Terminating Funds”) with Sentry Select Canadian Income Fund (the “Continuing Fund”) (the “Mergers”), became effective on June 12, 2009. The Mergers were approved at special meetings of unitholders of the Terminating Funds held concurrently on May 20, 2009.

The Terminating Funds transferred all of their assets to the Continuing Fund in exchange for Series A units of the Continuing Fund and the assumption by the Continuing Fund of all the liabilities of the Terminating Funds. Each unitholder of the Terminating Funds, except unitholders of 40 Split, received Series A units of the Continuing Fund having the same aggregate net asset value as their units of the Terminating Funds as of the close of business on June 11, 2009.
…
Each unitholder of Multi-Select received 0.3819 Series A units of the Continuing Fund in exchange for each unit of Multi-Select.

DBRS has announced that it:

has today discontinued the rating on the Preferred Securities issued by Multi Select Income Trust (the Trust). On June 12, 2009, the Capital Units issued by the Trust were merged along with units from other funds into the Sentry Select Canadian Income Fund. The Preferred Securities had been scheduled for final redemption on September 30, 2009, but were redeemed at the initial issue price of $10 per security on the date of the merger.

MST.PR.A was tracked by HIMIPref™ and was last mentioned on PrefBlog when it was downgraded to Pfd-3(high) by DBRS. At the time of redemption it was in the “Scraps” index due to credit concerns.

DBRS has announced that it:

has today downgraded the preferred shares and innovative Tier 1 instrument ratings of the Canadian banks it rates, following the application of changes in DBRS’s global banking methodology. The ratings have been removed from Under Review with Negative Implications, where they were placed on April 20, 2009. All other ratings for the Canadian banks are unaffected; related rating trends remain unchanged. The downgrades reflect the revision of DBRS’s views on external support as it relates to preferred shares and the elevated risk of non-payment of preferred dividends relative to the risk of default indicated by senior debt ratings. The downgrades do not reflect any specific credit event at any of the listed institutions or related entities.

The change in methodology affects preferred shares ratings in three ways:

(1) The change in the global banking methodology dictates that the starting point for notching preferred shares will be based on the intrinsic assessment rating, rather than the senior debt rating (which may incorporate the benefit of external support). The primary factor that has led to this change in the methodology is recent actions taken in other jurisdictions that demonstrate no systemic external support for preferred shares. As such, the preferred shares and Tier 1 innovative instruments ratings of the listed institutions and their related entities that benefited from a one-notch uplift in October 2006 (due to the support assessment designation of SA2) will now be removed.

The preferred shares and Tier 1 innovative instruments of the affected institutions are: Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank.

(2) The other change in the global banking methodology incorporates the elevated risk of non-payment of preferred dividends relative to the risk of default for more senior debt instruments. As such, the changes in the methodology have increased the base notching, even within the strongest rating categories, and the base notching now expands as the credit quality of the bank migrates downward. Within this approach, there exists some flexibility to adjust the notching for factors that reflect the position of individual banks. Historically, DBRS’s methodology resulted in a fixed relationship across all rating categories.

The preferred shares and Tier 1 innovative instruments of the affected institutions are: National Bank of Canada and Laurentian Bank of Canada.

(3) The final change in the global banking methodology affects SA1 category banks. The preferred shares rating for the subsidiary will be notched relative to the preferred share of the parent in the same way that all debt ratings are notched between the two entities.

The preferred shares and Tier 1 innovative instruments of the affected institution is: HSBC Bank Canada.
…
DBRS will host a teleconference tomorrow morning, Tuesday June 30, at 11:00 am ET, to discuss today’s rating action.

Interested callers should dial the appropriate number listed below at least five minutes before the 11:00 am ET call time.

Local Callers: 416-695-5800, quoting passcode: 5742370

Toll Free Callers: 800-408-3053, quoting passcode: 5742370

This follows the original announcement that they were on Review-Negative.

Affected issues are:

The main effect of this, I feel, is the decreased notching between the top banks and the top insurers. Previously, MFC, SLF, PWF & GWO had been ranked a notch below the Big 5 … and I thought that was a little on the skimpy side. Now there’s no notching. Interesting…

Update: It is interesting to note that this is largely a reversal of the the October 2006 Mass Upgrade of Banks.

Newgrowth Corp. has announced:

that it has completed its public offering of Series 2 Class B Preferred Shares, (the “Preferred Shares”), raising approximately $ 30.7 million through the issuance of 2,238,510 Preferred Shares at a price of $ 13.70 per Preferred Share. The Preferred Shares were offered to the public by a syndicate of agents led by Scotia Capital Inc. The Preferred Shares were offered in order to maintain the leveraged “split share” structure of the Company following the successful reorganization of the Company approved by shareholders on May 11, 2009 which, among other things, extended the redemption date of the Capital Shares for an additional five year term. With the closing of the offering, there will be 2,238,510 Capital Shares and 2,238,510 Preferred Shares issued and outstanding on the close of business on June 26, 2009.

NewGrowth Corp. is a mutual fund corporation whose investment portfolio consists of publicly-listed securities of selected Canadian chartered banks and utility issuers. The Capital Shares and Preferred Shares of NewGrowth Corp. are both listed for trading on The Toronto Stock Exchange under the symbols NEW.A and NEW.PR.B respectively.

The issue pays $0.822 p.a., payable quarterly, for an issue yield on the issue price of 6.00%.

There is a monthly retraction feature:

A holder retracting Series 2 Preferred Shares will receive a cash price per Series 2 Preferred Share retracted equal to the amount, if any, by which 95% of the Unit Value exceeds the aggregate of (i) the average cost to the Company, including commissions, of purchasing a Class A Capital Share in the market; and (ii) $1.00. See “Retraction and Redemption of Series 2 Preferred Shares”.

… and annual calls at par until maturity:

Any outstanding Series 2 Preferred Shares will be redeemed by the Company on June 26, 2014 (the “Redemption Date”) at a price per share (the “Series 2 Preferred Share Redemption Price”) equal to the lesser of $13.70 and Unit Value.

Asset coverage is somewhere around 2.9:1 and DBRS has assigned a provisional rating of Pfd-2 on the issue; this seems a little conservative given the nature of the portfolio and the degree of asset coverage.

As previously discussed on PrefBlog, this issue refunds the NEW.PR.B. Sadly, the issue will not be tracked by HIMIPref™; it’s just too small.

Assiduous Readers with extremely good memories will remember that Empire Life was rated by DBRS in May, at which time I speculated that a new issue might be coming out.

Well, it did, but it was a private placement and I missed it. Their press release states:

The Empire Life Insurance Company (Empire Life) and E-L Financial Corporation Limited (E-L) (TSX:ELF)(TSX:ELF.PR.F)(TSX:ELF.PR.G) announced today that Empire Life offered in Canada, by way of private placement to accredited investors, $200 million principal amount of subordinated unsecured 6.73% fixed/floating debentures (Debentures) due May 20, 2019. The offering is expected to close May 20, 2009.

The Debentures will mature on May 20, 2019 and will bear interest at a fixed annual rate of 6.73% for the first five years, payable in equal semi-annual payments, and a variable annual rate equal to the three-month CDOR plus 5.75% for the last five years, payable quarterly. The Debentures have been provisionally rated “A (low)” with a stable trend by DBRS Limited.

The proceeds will be used for regulatory capital and general corporate purposes, and to repay a $125 million subordinated debenture issued to E-L (subject to approval by the Superintendent of Financial Institutions). The proceeds from the Debentures are expected to qualify as Tier 2B capital for regulatory purposes.

The issue has been offered on an agency basis by a syndicate of dealers co-led by RBC Dominion Securities Inc. and Scotia Capital Inc. Other syndicate members include: National Bank Financial Inc., TD Securities Inc., BMO Nesbitt Burns Inc., CIBC World Markets Inc. and HSBC Securities (Canada) Inc.

Impact of the debentures issue on financial strength

On a pro forma basis, the Company estimates that its Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio would increase from 201% to 219% (as at March 31, 2009) following the issue of these Debentures and repayment of the E-L debenture.

Remember that as preferred shareholders in the holding company (ELF.PR.G, ELF.PR.F) we don’t care all that much about the MCCSR of the operating subsidiaries.

Quebecor World has announced:

the voting results for Quebecor World’s Third Amended Joint Plan of Reorganization (the “U.S. Plan”). Voting by classes of creditors entitled to vote on the Plan reflected broad-based support for the U.S. Plan, with all classes entitled to vote receiving the applicable affirmative vote as required under the U.S. Bankruptcy Code. Of the more than 2,800 ballots cast, 2,485, or 86.4%, of all voting creditors aggregated across classes voted to accept the U.S. Plan. Based on total dollar amount of claims voted, 88.9% of the total claims, or US$1.82 billion, aggregated across classes voted to accept the U.S. Plan. Although no assurances can be made, Quebecor World believes that the U.S. Plan satisfies the requirements of the Bankruptcy Code and is confirmable.

In addition, Quebecor World also announced that its Second Amended and Restated Canadian Plan of Reorganization and Compromise (the “Canadian Plan”) was approved by affected creditors at the creditors’ meeting held earlier today. At the Canadian meeting of affected creditors of Quebecor World, the Canadian Plan was approved by approximately 96% of those affected creditors who voted in person or by proxy, representing approximately 89% of the total value of affected claims that were voted at the meeting.

A joint confirmation hearing on the U.S. Plan and the Canadian Plan is scheduled to occur on June 30, 2009 in the U.S. Bankruptcy Court for the Southern District of New York and the Quebec Superior Court, and Quebecor World anticipates the consummation of the U.S. Plan and the Canadian Plan in mid-July 2009.
Details of the voting results including votes on a class-by-class basis will be available at the following websites:
http://www.donlinrecano.com/cases/caseinfo.aspx?cl=qw
http://documentcentre.eycan.com/pages/main.aspx?SID=54
And hyperlinked from: http://www.quebecorworld.com/restructuring.aspx

The restructuring plan states:

(iii) to change each issued and outstanding Subordinate Voting Share, Multiple Voting Share, Series 3 Cumulative Redeemable First Preferred Share and Series 5 Cumulative Redeemable First Preferred Share into 0.000001 of a Redeemable Share;

(iv) immediately following the redemption of all of the Redeemable Shares in accordance with Section 1.4 of Schedule I hereto, to cancel, remove and delete the authorized share capital of the Corporation, consisting of the Multiple Voting Shares, Subordinate Voting Shares, the First Preferred Shares issuable in series and the Redeemable Shares (collectively, the “Cancelled Classes of Shares”), along with the rights, privileges, restrictions and conditions attached to the Cancelled Classes of Shares and all rights to accrued dividends in respect of all of such classes and series of shares;
…
All of the outstanding Redeemable Shares and fractional interests therein shall be automatically redeemed by the Corporation immediately following their issuance, which issuance is provided for in item [(iii)] of the Corporation’s Articles of Reorganization on Form 14 to which this Schedule I is attached, without notice to the holders of such Redeemable Shares, on payment of CDN$0.01 for each whole Redeemable Share (the “Redemption Price”).

So each IQW.PR.C & IQW.PR.D share will be turned into one one-millionth of a Redeemable Share and each Redeemable Share will be instantly redeemed for a penny.

IQW.PR.C & IQW.PR.D were last mentioned on PrefBlog when they were suspended from trading on the TSX.

Update, 2009-7-26: It’s done.

The Toronto Stock Exchange has announced:

SUSPENDED – Nortel Networks Limited (the “Company”) – The Cumulative Redeemable Class A Preferred Shares, Series 5 (Symbol: NTL.PR.F) and the Non-Cumulative Redeemable Class A Preferred Shares, Series 7 (Symbol: NTL.PR.G) will be suspended from trading effective immediately as a result of the Company’s June 19, 2009 news release. Further information will be forthcoming regarding the Company’s expected delisting application.

The last mention of these issues on PrefBlog occurred when the company requested restrictions on trading.

Both issues have been tracked by HIMIPref™, but are relegated to the “Scraps” index on credit concerns. Tracking will cease immediately.

Update, 2009-6-23: The TSX has announced:

CHANGES IN STOCK LIST Nortel Networks Limited (the “Company”) – Further to TSX Bulletin #2009-0795, at the request of the Company, the Cumulative Redeemable Class A Preferred Shares, Series 5 (Symbol: NTL.PR.F) and the Non-Cumulative Redeemable Class A Preferred Shares, Series 7 (Symbol: NTL.PR.G) (collectively the “Shares”) will be delisted at the close of market on June 26, 2009. Trading in the Company’s Shares will remain suspended.

Commerce Split Corp. has announced:

The Company’s total net asset value is approximately $8.85 per unit as at June 18, 2009, consisting of less than 16% common shares of CIBC. The reduced exposure to CIBC will materially limit the future impact of price movements of CIBC shares on the net asset value of the Company and lower the ability of the Company to generate income from
dividends and its covered call option writing program.

The significant price decline of CIBC and the resultant implementation of the Priority Equity Protection Plan have made it extremely difficult to achieve the original stated objectives for both classes of shares. The Company established a normal course issuer’s bid which allows the Company to re-purchase units in the market when trading prices are at a discount to the net asset value.

Subsequent to the unsuccessful shareholder vote on February 5, 2009 of the reorganization proposal, the Company has continued to dialogue with certain larger shareholders to try and establish potential solutions for reorganizing the Company that would be suitable for all shareholders and result in a successful shareholder vote. Outside of certain larger shareholders, the remaining shareholders had voted overwhelmingly in support of management’s latest proposal.

The Company has received several shareholder requests to wind up the Company. In response to this request, the Company would like to remind all shareholders that all such reorganization proposals must receive a 66 2/3 favorable vote by both the Class A shareholders and the Preferred shareholders voting separately by class. This requirement is outlined in the Company’s prospectus and is part of the articles of incorporation of the Company. Under any kind of termination proposal at the current time, Class A shareholders would receive no value for their Class A shares since the net asset value per unit is below $10. The Class A shares have traded in a range between $0.36 and $1.84 since February 5, 2009 and closed at $1.02 on June 18, 2009. As such, the Company does not believe that this proposal is in the best interests of the Class A shareholders and any proposal that would provide no value to the Class A shareholders would ultimately never be approved by Class A shareholders.

The Company will continue to seek solutions that will balance and meet the interests of both Classes of shareholders and also result in a successful vote. The costs of holding a meeting are significant to the Company and, as such, the Company will only bring forward a proposal that has a high probability of being passed by the requisite majorities of each Class of shareholders.

Huh. Providing no value – indeed, taking away value – for the preferred shareholders didn’t seem to stop their last proposal from coming to vote.

XCM.PR.A is currently quoted at 7.20-31, while XCM is at 1.05-18. The company should buy the maximum permitted under its issuer bid when this can be done at or below NAV, remind shareholders of their retraction rights, and propose a wind-up that will pay the common shareholders a nominal sum. Waiving management fees, or a good chunk thereof, would be a good thing too, but I’m not holding my breath!

XCM.PR.A is not tracked by HIMIPref™.