Category: Issue Comments

US Financial 15 Split Corp. has announced:

that it has suspended its regular monthly dividends effectively immediately for Priority Equity (“Preferred”) shareholders in order to preserve cash and to assist in rebuilding the net asset value in an attempt to meet longer term objectives. Since the Preferred shares are cumulative, this suspended dividend (and all subsequent dividends not paid) will be accrued to the benefit of the Preferred shareholders and recorded as a liability in the Company’s net asset value. Also, there will not be a distribution paid to Class A Shares for February 27, 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 February 13, 2009 was $4.17 and has been adversely impacted by the significant declines in the US financial services companies held in the portfolio.

FTU.PR.A was last mentioned on PrefBlog in October when DBRS ceased coverage at the request of Quadra. Quadra has also suspended dividends on XMF.PR.A and XCM.PR.A, with considerably less provocation.

FTU.PR.A is tracked by HIMIPref™. It was moved from the SplitShares subIndex to “Scraps” in April 2008 on credit concerns.

A. M. Best has announced:

has downgraded the financial strength rating (FSR) to A+ (Superior) from A++ (Superior) and issuer credit ratings (ICR) to “aa” from “aa+” for the core life insurance subsidiaries of Sun Life Financial Inc. (SLF) (Toronto Canada), which consist of Sun Life Assurance Company of Canada (Sun Life) (Toronto, Canada), Sun Life Assurance Company of Canada (U.S.) (Wilmington, DE) and Sun Life Insurance and Annuity Company of New York (New York, NY). Concurrently, A.M. Best has downgraded the ICR to “a” from “aa-” of SLF as well as the existing debt ratings of the enterprise. The downgrading of the debt ratings reflects a revision to standard notching for the group in accordance with A.M. Best’s published debt rating methodology. The outlook for all ratings is stable. (See link below for a detailed listing of the companies and ratings.)

The downgrades reflect the challenges SLF faces due to stresses in the global macroeconomic environment, especially in its U.S. operations. The prolonged weakness in the equity markets has negatively impacted both SLF’s insurance operations—through higher reserve and capital charges and lower fee income—and its asset management operation, MFS, which has recorded lower assets under management. SLF’s U.S. insurance operations recorded a loss in 2008 due to the impact of equity market declines, credit related losses, as well as, the unfavorable impact of changes in currency exchange rates as well as credit impairment losses. While risk-adjusted capital levels at the group remain strong, the U.S. operations have required capital contributions, reducing financial flexibility for the group. Despite this additional funding, A.M. Best believes its targeted U.S. risk-based capital levels will remain modest relative to its peers.

While its U.S. segment reported the weakest results in 2008, SLF also recorded declines in earnings in its Canadian and Asian operations. A.M. Best believes that earnings will remain under pressure for the group, resulting in lower fixed coverage, due to continued equity market weakness and higher asset impairments. SLF retains exposure to real estate-linked assets through its investments in commercial mortgage loans, direct real estate and residential and commercial mortgage-backed securities. A.M. Best notes that a large portion of SLF’s real estate portfolio is underwritten in Canada, which is expected to continue to perform better than similar investments in the United States.

The stable outlook is based on SLF’s diversified revenue stream from multiple regions, profitable operations in Canada, favorable risk-adjusted capitalization and well developed and fully integrated risk management framework. The year-end regulatory capital ratio in Canada is considered strong. SLF is a Canadian-based holding company with a top three market position in the Canadian insurance market. SLF also maintains an expanding wealth management and life insurance operation in Asia.

There is a complete list of ratings available.

This announcement follows a Credit Watch Negative by S&P and a downgrade to Baa2 by Moody’s.

Recently, A.M. Best has

• affirmed MFC at “a” on preferred stock
• affirmed GWO at “a-” on preferred stock
• affirmed IAG at bbb+

Sun Life Financial has the following issues outstanding: SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D & SLF.PR.E. All are tracked by HIMIPref™ and are incorporated in the PerpetualDiscounts subIndex.

Energy Split Corp. has announced:

that it has revised its Capital Yield Share distribution policy and starting with the next distribution date on June 16, 2009, has determined that it will not pay a distribution on the Capital Yield Shares if the Net Asset Value at the time of declaration, after giving effect to the distribution, would be less than or equal to the original issue price of the Class B Preferred Shares. In such circumstances, any excess distributions received on the royalty trust portfolio minus the distributions payable on the Class B Preferred Shares and all administrative and operating expenses will be reinvested in short-term debt securities or used to purchase Class B Preferred Shares in the market for cancellation under a normal course issuer bid. However, as long as Net Asset Value at the date of declaration exceeds the original issue price of the Class B Preferred Shares, the Company intends to pay a distribution on the Capital Yield Shares equal to the excess of the distributions received on the royalty trust portfolio minus the Class B Preferred Share distributions and all administrative and operating expenses.

The previous policy was:

to declare and pay quarterly distributions in an amount equal to the distributions paid by the royalty trusts comprising the Royalty Trust Portfolio minus the distributions payable on the ROC Preferred Shares and all administrative and operating expenses of the Company and Royalty Fund.

ES.PR.B is currently underwater, with the preferred share redemption price of $21.00 “covered” by NAV of $18.27 as of February 26.

The last mention of ES.PR.B was when it was downgraded to Pfd-4(low) by DBRS. ES.PR.B is not tracked by HIMIPref™.

Nova Scotia Power has announced:

that effective April 1, 2009 (the “redemption date”) the Company will redeem all of its outstanding Cumulative Redeemable First Preferred Shares, Series C (the “Series C shares”) for a redemption price of $25.00 per share.

The Notice of Redemption and associated documents are being sent to Registered holders of these shares today. Beneficial holders of the Series C shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds.

After the redemption date, holders of the Series C shares will cease to be entitled to dividends or to exercise any rights of shareholders.

NSI.PR.C was last mentioned on PrefBlog when it was added to the TXPR index at the January rebalancing.

NSI.PR.C is tracked by HIMIPref™; it is included in the “Scraps” sub-index due to volume concerns.

Energy Split Corp II has announced:

it has revised its Capital Yield Share distribution policy and starting with the next distribution date on June 16, 2009, has determined that it will not pay a distribution on the Capital Yield Shares if the Net Asset Value at the time of declaration, after giving effect to the distribution, would be less than or equal to the original issue price of the ROC Preferred Shares. In such circumstances, any excess distributions received on the royalty trust portfolio minus the distributions payable on the ROC Preferred Shares and all administrative and operating expenses will be reinvested in short-term debt securities or used to purchase ROC Preferred Shares in the market for cancellation under a normal course issuer bid.

However, as long as Net Asset Value at the date of declaration exceeds the original issue price of the ROC Preferred Shares, the Company intends to pay a distribution on the Capital Yield Shares equal to the excess of the distributions received on the royalty trust portfolio minus the ROC Preferred Share distributions and all administrative and operating expenses.

The Company’s ongoing dividend policy entitles holders of ROC Preferred Shares to receive quarterly fixed cumulative distributions equal to $0.1718 per ROC Preferred Share. The Capital Yield Shareholders are provided with a leveraged play on the yield and price performance from a fixed portfolio consisting of 16 oil and gas royalty trusts listed on the Toronto Stock Exchange.

Capital Yield Shares and ROC Preferred Shares of Energy Split Corp. II Inc. are listed for trading on The Toronto Stock Exchange under the symbols EN and EN.PR.A respectively.

The previous policy was:

Holders of Capital Yield Shares will be entitled to receive distributions that the board of directors of the Company may declare from time to time subject to the prior rights of the Holders of the ROC Preferred Shares. Under the distribution policy adopted by the board of directors, it is expected that Holders of Capital Yield Shares will receive quarterly tax efficient distributions to be paid by the Company on or before the 16th day of March, June, September and December of each year in an amount equal to the distributions paid on the units of Royalty Fund II after payment of the fixed distribution payable on the ROC Preferred Shares and operating expenses of the Company.

EN.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-3 by DBRS. It is tracked by HIMIPref™ and is a member of the “Scraps” sub-index.

Allbanc Split Corp. has announced:

it has called 1,600 Preferred Shares for cash redemption on March 10, 2009 (in accordance with the Company’s Articles) representing approximately 0.125% of the outstanding Preferred Shares as a result of the special annual retraction of 46,300 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on March 9, 2009 will have approximately 0.125% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $26.75 per share.

Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including March 10, 2009.

ABK.PR.B was last mentioned on PrefBlog when it revised the policy on Capital Unit dividends. ABK.PR.B is not tracked by HIMIPref™.

Standard & Poors has announced:

it lowered its ratings on Toronto-based Manulife Financial Corp. (TSX: MFC; Manulife Financial) and all of its rated operating companies by one notch.
…
All of these operating insurance companies now have long-term counterparty credit and financial strength ratings of ‘AA+’. The counterparty credit rating on Manulife Financial is ‘AA-‘. The outlook is stable.

“In our opinion, the downgrade reflects the decline and ongoing volatility of the global equity markets, the resultant impact on earnings, reserves, capital and financial leverage, and the company’s reduced level of financial flexibility,” said Standard & Poor’s credit analyst Donald Chu. Currently, equity markets are down almost halfway from their peak in the major markets where Manulife competes. While we believe that Manulife Financial has done relatively well managing itself through an equity market tail event, we believe the increased earnings and capital volatility are not consistent with the previous ‘AAA’ rating.

The previous mention of these issues on PrefBlog was on Dec. 2, 2008, when S&P affirmed the ratings with a negative outlook. MFC’s 4Q08 Results were briefly reported on PrefBlog.

All three issues are tracked by HIMIPref™. MFC.PR.A is a member of the OperatingRetractible sub-index; MFC.PR.B & MFC.PR.C are members of the PerpetualDiscount index.

Allbanc Split Corp. has announced:

The Company has revised its Capital Share dividend policy and has determined that it will not pay a dividend on the Capital Shares if the Net Asset Value at the time of declaration, after giving effect to the dividend, would be less than or equal to the original issue price of the Preferred Shares. In such circumstances, any excess dividends received on the underlying portfolio securities minus the dividends payable on the Preferred Shares and all administrative, operating and income tax expenses will be reinvested in short-term debt securities or underlying portfolio securities. However, as long as Net Asset Value at the date of declaration exceeds such amount, the Company intends to pay a dividend on the Capital Shares equal to the excess of the dividends received on the portfolio securities minus the Preferred Share dividends and all administrative, operating and income tax expenses. Based on yesterday’s closing sale prices of the underlying portfolio securities and after giving effect to the Capital Share dividend, the Net Asset Value per Unit would be $30.51 or $3.76 in excess of the original issue price of the Preferred Shares.

On February 12, the NAVPU was $34.71. The last week … has not been kind.

ABK.PR.B was last mentioned on PrefBlog when it was downgraded to Pfd-3 as part of the DBRS Mass Downgrade of Split-Shares. ABK.PR.B is not tracked by HIMIPref™.