Category: Issue Comments

Quebecor World has announced:

that it has received a written request from the Toronto Stock Exchange (TSX) that trading in all of Quebecor World’s outstanding classes and series of securities currently listed on the TSX be suspended. In the request letter, the TSX stated its view that, following the Company’s announcement on April 8, 2009 regarding the agreement in principle between Quebecor World and its key creditor constituencies on the material terms and conditions of a consolidated restructuring plan that would form the basis of a comprehensive plan of reorganization, arrangement or compromise, it is inappropriate for Quebecor World’s securities to continue to trade on the TSX. As the Company has consistently stated, it is highly unlikely that its existing Multiple Voting Shares, Redeemable First Preferred Shares and Subordinate Voting Shares will have any value following the implementation of any such plan of reorganization, arrangement or compromise. Based on the foregoing, and in response to the TSX’s written request, the Company has indicated to the TSX that it does not object to the TSX’s position and will comply with its request that all trading in Quebecor World’s securities on the TSX be suspended.

Consequently, effective after the close of markets on Friday, April 17, 2009, Quebecor World’s Subordinate Voting Shares (“IQW”), Series 3 Preferred Shares (“IQW.PD”) and Series 5 Preferred Shares (“IQW.PC”) will be suspended from trading on the TSX, which suspension will remain in place until the effectiveness of any reorganization, arrangement or compromise relating to Quebecor World and its subsidiaries under the ongoing insolvency proceedings.

Shareholders may contact their financial institutions, brokers or financial advisors to obtain more details on trading alternatives including the over-the-counter market.

The bare fact of suspension has been rather tersely confirmed by the TSX.

Both issues were last mentioned on PrefBlog in response to inquiries about their possible value subsequent to reorganization.

HIMIPref™ no longer tracks IQW.PR.C or IQW.PR.D, as the low price was causing “sanity checks” in the programming to indicate errors.

CC&L Group announced on March 31:

ROC Pref II Corp., ROC Pref III Corp. and Connor, Clark & Lunn ROC Pref Corp. (collectively the “Companies”) announced that the decision by Idearc Inc. to voluntarily file petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code is expected to constitute a credit event under the credit linked note (“CLN”) issued by their respective counterparties.

Idearc was created through a spin-off from Verizon Communications Inc. in November 2006. The Reference Portfolios of the Companies have exposure to Idearc Inc. at a half-weight as opposed to a full weight as a result of the spin-off. Idearc operates yellow pages directories in the U.S. The economic recession has negatively affected spending on directories advertising with customer cancellations due to credit deterioration and lower customer renewal rates resulting in declining cash flows thereby reducing Idearc’s ability to support its current level of debt.

The impact of the Idearc credit event on ROC Pref II Corp. and Connor, Clark & Lunn ROC Pref Corp. will be known when the recovery rate is determined within the next several weeks. The recovery rate for ROC Pref III Corp. is fixed at 40%. As a result, the Idearc 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 approximately 0.5 to 2.6.

ROC Pref II Corp., ROC Pref III Corp. and Connor, Clark & Lunn ROC Pref Corp. are listed for trading on the Toronto Stock Exchange under the symbols RPA.PR.A, RPB.PR.B and RPQ.PR.A, respectively.

Additionally, RPQ.PR.A is restating its financials:

the Company has restated and refiled its interim financial statements and management report of fund performance for the six months ended December 31, 2008.

In November 2008, the Company announced the implementation of restructuring initiatives designed to increase the likelihood that the Company will be able to repay the $25.00 Preferred Share issue price on the redemption of the Preferred Shares on June 30, 2011. As part of these initiatives, the next three quarters’ coupons on the underlying credit linked note (“CLN”) were sold to The Bank of Nova Scotia (“BNS”) (the issuer of the CLN) in return for additional subordination so that the number of defaults the CLN can sustain before principal and interest payments are adversely affected was increased.

In March 2009, the Manager determined that the 2008 fourth quarter CLN coupon payment had mistakenly been made by BNS resulting in an overstatement of Credit Trust IV’s and the Company’s net asset value. At the same time, the Manager also revisited the assumptions used to calculate the deferred management fee. The net impact of the two adjustments was a decrease in net assets by $0.07 per Preferred Share as at December 31, 2008. The Company has been reimbursed for the excess amounts paid out on the redemption of Preferred Shares as a result of the higher Preferred Share value.

It never rains but it pours!

RPQ.PR.A was last mentioned on PrefBlog in connection with the downgrade of the credit linked note (or, at least, what I think is the credit linked note). All three issues were mentioned with respect to the Tribune Credit Event in December.

None of these issues are tracked by HIMIPref™.

Better late than never! Brompton Split Banc Corp. announced on 2008-12-17:

In accordance with its prospectus and the Class A Share Provisions, the regular, non-cumulative, monthly distribution for the month of December will not be paid on the class A shares of Brompton Split Banc Corp. Under the prospectus, no cash distribution may be paid on the class A shares, if after payment of the distribution by the Fund, the net asset value per unit (consisting of one class A share and one preferred share) would be less than $15.00. The net asset value per unit as at December 11, 2008 was $13.52. The Fund will re-evaluate the payment of class A share distributions in each subsequent month with the expectation that normal monthly distributions will resume and a press release will be issued if the net asset value per unit is in excess of $15.00 prior to declaration.

NAV was $15.16 on April 2 according to the company, so resumption may well be in the cards!

SBC.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-3 by DBRS. SBC.PR.A is tracked by HIMIPref™ but was relegated to the “Scraps” index at the February 2009 rebalancing on credit concerns.

Better late than never! Canadian Life Companies Split Corp announced on Dec. 18:

There will not be a distribution paid to the Class A shares for December 31, 2008 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 December 15, 2008 was $13.65.

The NAV on March 31 was $11.69 according to the company.

LFE.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-4 by DBRS. LFE.PR.A is tracked by HIMIPref™ but was relegated to the “Scraps” index in the March 2009 rebalancing due to credit concerns.

HSBC Bank of Canada has announced:

has completed the offering of 10 million Non-Cumulative 5-Year Rate Reset Class 1 Preferred Shares Series E (the “Preferred Shares Series E”), issued at a price of C$25.00 per share to raise gross proceeds of C$250 million. The offering was made through a syndicate of underwriters led by HSBC Securities (Canada) Inc. and Scotia Capital Inc. The underwriters exercised an option to purchase 3 million Preferred Shares Series E in addition to the 7 million shares that they had previously agreed to purchase. The Preferred Shares Series E commenced trading today on the Toronto Stock Exchange under the ticker symbol HSB.PR.E.

This was the Fixed Reset 6.60%+485 issuee that had originally been scheduled to close on March 31 but had to be pulled when S&P downgraded HSBC Holdings, its parent. It would appear that HSBC Canada is much happier about issuing press releases when events proceed as expected! They did not acknowledge the problem until a press release was issued after 8pm on April 1.

To a point, I feel sorry for these guys. The downgrade was beyond the control of the Canada unit and the timing was horrible. But only to a point. There should have been a press release as soon as it was known that there was a problem … but then, HSBC is a huge organization, and nobody ever got anywhere in a huge organization (and many small ones!) by highlighting events that the corporation would rather forget (or, even better, not know in the first place). What do you think caused the credit crisis, anyway?

Be that as it may, the vital statistics for HSB.PR.E are:

It traded 615,220 shares in a range of 24.98-23 before closing at 25.20-23, 40×6.

IGM Financial Inc. has announced:

that it has priced the issuance of $375 million principal amount of debentures. The debentures will be offered through a group of agents to be led by BMO Capital Markets and RBC Capital Markets.

The Debentures will be dated April 7, 2009 and will mature April 8, 2019. These debentures will bear interest at a rate of 7.35% per cent per annum payable semi-annually in arrears in equal installments on April 8 and October 8 of each year, commencing on October 8, 2009. The Debentures have been priced to provide a yield to maturity of 7.358% percent.

The senior unsecured credit rating for IGM assigned by S&P is A+ and by DBRS is A (High).

This looks like a reasonable deal compared to the IGM.PR.A retractible (retraction date 2013-6-30). The preferred closed yesterday at 25.85-99, which corresponds to a YTW market of 4.91%-72. When the retractible’s yield is multiplied by the standard equivalency factor of 1.4x, the YTW market becomes 6.87%-61.

Bearing in mind the junior nature of preferreds, shorter term of IGM.PR.A and convexity of the preferred, these issues seem in line with each other.

TD.PR.K, the 6.25%+433 FixedReset announced last week closed today – all $350-million of it – and traded 832,732 shares in a range of 24.98-20 before closing at 25.17-22, 12×2.

Its vital statistics are:

HSBC Bank of Canada has announced:

HSBC Bank Canada (the “Bank”) intends to file an amended and restated prospectus supplement for the previously announced offering of Non-Cumulative 5-Year Rate Reset Class 1 Preferred Shares Series E (the “Preferred Shares Series E”). The amendment is a result of ratings action announced on 31 March 2009 by Standard and Poor’s (“S&P”) on the hybrid capital securities of over 60 European financial institutions, including the Bank’s parent company, HSBC Holdings plc. The S&P ratings of the Preferred Shares Series E of ‘P-1(Low)’ and ‘A’ under S&P’s Canadian and Global Preferred Share Rating scales, respectively, are among the highest of the major Canadian banks.

The Bank and a syndicate of investment dealers led by HSBC Securities (Canada) Inc. and Scotia Capital Inc. (the “Underwriters”) intend to enter into an agreement that will amend in certain respects the underwriting agreement they signed on 24 March 2009 (the “Underwriting Agreement” and together with the amending agreement, the “Amended Underwriting Agreement”). The size of the offering will be unchanged at 7 million shares at a price of $25.00 per share, for gross proceeds of C$175 million. The expected closing date for the offering, previously scheduled for 31 March 2009, will be amended to 8 April 2009.

Pursuant to the Amended Underwriting Agreement, HSBC Bank Canada will grant the Underwriters the option (the “Underwriters’ Option”), exercisable in whole or in part at any time up to two business days prior to closing, to purchase up to an additional 3 million Preferred Shares Series E at the issue price. Should the Underwriters’ Option be fully exercised, the total gross proceeds of the financing will be C$250 million.

The Preferred Shares Series E will entitle the holders to receive non-cumulative preferential fixed quarterly cash dividends if, as and when declared by the board of directors of the Bank, of C$0.4125 per share, to yield 6.60 per cent annually for the initial period ending 30 June 2014. Thereafter, the dividend rate will reset every five years at a rate equal to 4.85 per cent over the then five-year Government of Canada Bond Yield. Subject to regulatory approval, on 30 June 2014 and on 30 June every five years thereafter, the Bank may redeem the Preferred Shares Series E in whole or in part at par.

Based on the anticipated closing date of 8 April 2009, the first dividend on the Preferred Shares Series E will be payable on 30 June 2009 in the amount of C$0.3762 per share.

This resolves the confusion previously noted on PrefBlog. The issue was announced on March 23, with size bumped from $125-million to $175-million same-day.

The release on Newswire is timestamped 8:14 pm, for those who are interested.

Update, 2009-4-6: S&P has released a commentary on HSBC Canada:

Standard & Poor’s Ratings Services today commented on the March 31, 2009, downgrade of the rating on the preferred shares of HSBC Bank Canada (HSBC Canada; AA/Negative/A-1+). On that date, the global scale rating on HSBC Canada’s preferred shares was lowered to ‘A’ from ‘A+’, and the Canada scale rating on these instruments was lowered to ‘P-1(Low)’ from ‘P-1’.

This rating action was a direct consequence of a review of the ratings on the hybrid capital securities of various European banks (see “Hybrid Securities Of Over 60 European Financial Institutions Downgraded Following S&P Review”, published March 31, 2009, on RatingsDirect). One of the groups included in this review was HSBC Canada’s ultimate parent, HSBC Holdings PLC (HSBC Group; AA-/Negative/A-1+), which is U.K.-incorporated.
…
The hybrid capital-related ratings downgrades on HSBC Canada were not related to the previously planned closing date for HSBC Canada’s preferred share issuance on March 31, 2009.

I have communicated my displeasure to HSBC Canada regarding its delay in issuing a press release on this matter. While I am very well aware that it was a nightmarish occurance for them, I think that a March 31 press release to the effect that “Due to S&P’s rating action this morning the issue did not close as planned. HSBC Canada is in discussions with the underwriters to resolve this situation” should have been issued.

RY.PR.X, the FixedReset issue announced last week had a very solid opening day, trading 725,748 shares in a range of 24.91-09 before closing at 25.02-05, 27×46.

Its vital statistics are:

This is an issue sure to be at the centre of many trade errors over the course of its existence. A few years back, Royal Bank started a new numbering system for its preferreds, presumably in cooperation with the TSX: Series ‘AA’ has ticker RY.PR.A, Series ‘AB’ has ticker RY.PR.B and so on. It was great, and a lot better than giving Series N the symbol RY.PR.K, for instance.

But now we have Series AV having ticker RY.PR.X. I suspect that the TSX reserves the “V” suffix for USD issues, or perhaps they consider it too soon after the redemption of the old RY.PR.V (USD 250-million, Series K, redeemed in 2003) to recycle the ticker.

One way or another, it would appear a little more communication is in order.

S&P has announced:

it lowered its issue ratings on the hybrid capital securities of over 60 European financial institutions.

The rating actions followed our review of ratings on the hybrid instruments of financial institutions in Europe. The downgrades reflect our assessment of the deteriorating financial prospects for the European banking industry in the worsening economic environment and our view that European governments and the European Commission (EC) over the medium term may be more willing than previously to encourage or force banks to suspend payments on hybrid securities to preserve cash and build capital. We did not change any of the issuer credit ratings (ICRs) on the banking groups that issue these hybrid securities.

Hybrids for HSBC Bank PLC has been downgraded from A+ to A; HSBC Holdings PLC has been downgraded from A to A-.

The rating of HSBC Bank Canada preferreds, have been reduced from A+ to A, which equates to a change from P-1 to P-1(low) on the national scale.

This has had repercussions for the new issue announced last week, which had been assigned the TSX ticker symbol HSB.PR.E.

The underwriting agreement dated March 24 (available on SEDAR) states:

The Bank shall cause to be delivered to the Underwriters’ Representative on behalf of all Underwriters at the Closing Time, and the Underwriters’ obligations pursuant to this Agreement will be conditional upon:
…
(j) receipt by the Underwriters of a confirmation in a form reasonably acceptable to them that the Offered Securities have received a final rating from DBRS of Pfd-1 with a negative trend and from S&P of P-1 and A+, using S&P’s Canadian scale for preferred shares and S&P’s global scale for preferred shares, respectively;

It is my understanding that a new term sheet has been issued, but I haven’t seen it.

There is no press release and HSBC has not responded to my inquiry. You can’t expect important people like bankers and underwriters to demean themselves by communicating with investor scum.

This could be fun! Get your popcorn!