Category: Issue Comments

SNP Health Split Corp. has announced:

that the redemption prices for all outstanding Capital Shares and Preferred Shares to be paid on February 11, 2009 are as follows:

Redemption Price per Preferred Share = US$25.00

Redemption Price per Capital Share = US$2.6507

Holders of 250,730 Capital Shares requested delivery of and will receive their pro rata share of the portfolio securities in payment for their Capital Shares.

The intent to proceed with the maturity has been discussed on PrefBlog.

SNH.PR.U is not tracked by HIMIPref™.

DBRS has announced that it:

placed its rating of the Preferred Units issued by Kingsway Linked Return of Capital Trust, rated at Pfd-3, Under Review with Negative Implications. This action is a result of DBRS placing the ratings of Kingsway Financial Services Inc. and affiliates (the Company) Under Review with Negative Implications on February 9, 2009. This rating action followed the Company’s pre-release of Q4 2008 results.

KSP.UN was issued back in the good old days, when you could issue anything. The prospectus states:

LROC Preferred Unit distributions will consist primarily of returns of capital (which are generally tax-deferred and reduce a Holder’s cost base in the LROC Preferred Units for tax purposes), and may, in certain circumstances, include capital gains distributions.

In order to achieve its investment objectives, the Trust will use the net proceeds of this Offering to subscribe for and purchase all of the limited partnership units (the ‘‘LP Units’’) of KL Limited Partnership (‘‘KL LP’’), a newly created limited partnership organized under the laws of the Province of Ontario, which will, in turn, use the proceeds of such subscription to pre-pay its purchase obligations under a forward securities purchase agreement (the ‘‘Purchase Agreement’’) with The Bank of Nova Scotia, a Canadian chartered bank, the long-term debt of which is currently rated AA- by S&P and AA (low) by DBRS (‘‘BNS’’ or the ‘‘Counterparty’’). The Purchase Agreement will provide exposure to a note (the ‘‘Kingsway Note’’) issued by Kingsway ROC GP, a newly created general partnership organized under the laws of the State of Delaware (‘‘Kingsway ROCGP’’) and unconditionally guaranteed as to payments of principal, interest and other amounts by Kingsway Financial Services Inc. (‘‘Kingsway’’), a corporation incorporated under the laws of the Province of Ontario, and by Kingsway America Inc., a corporation incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of Kingsway (‘‘Kingsway America’’). The longterm debt of Kingsway and Kingsway America is currently rated BBB-by S&P and BBB by DBRS. The Kingsway Note will be owned by Kingsway Note Trust, a newly created investment trust established under the laws of the Province of Ontario (‘‘KN Trust’’). The initial holder of all of the outstanding units of KN Trust will be the Counterparty or an affiliate of the Counterparty.

I will hazard a guess that the Toronto Stock Exchange refused to issue it a “.PR.” symbol due to confusion regarding what it was preferred to; but it got a “Preferred Scale” rating from both DBRS and S&P.

S&P has announced that today it:

lowered its ratings on the linked return of capital (LROC) preferred units issued by Kingsway Linked Return of Capital Trust (see list).

The lowering of these ratings mirrors today’s downgrade of Kingsway ROCGP’s senior unsecured 10-year note, which is linked to the LROC preferred
units.

It’s now rated P-4 by S&P.

KSP.UN was last mentioned on PrefBlog when it was downgraded to Pfd-3 by DBRS.

KSP.UN is not tracked by HIMIPref™.

Brookfield Investment Funds Management has announced:

as manager of Brascan SoundVest Rising Distribution Split Trust (TSX: BSD.UN and BSD.PR.A) (the “Trust”), announced today that the Toronto Stock Exchange has accepted its Notice of Intention to make a normal course issuer bid. The Trust will have the right under the bid to purchase for cancellation up to 284,127 of its Capital Units and 284,127 of its Preferred Securities (collectively, the “Shares”), representing 5% of the 5,682,543 Capital Units and 5,682,543 Preferred Securities issued and outstanding as at January 29, 2009.
…
The Manager is of the opinion that Capital Units and Preferred Securities of the Trust may become available during the proposed purchase period at prices that would make such purchases in the best interests of the Trust and its securityholders. The Trust has not previously purchased its Capital Units or Preferred Securities under a normal course issuer bid.

An announcement of a bid of this nature is not normally considered newsworthy unless the company has a history of actually putting some money on the table. In this case, however, the company suspended retraction rights prior to being downgraded to Pfd-5 by DBRS in December. The suspension of retractions was permitted by the prospectus, but was not mandatory, and remains in effect.

The Preferred Securities remain underwater: the February 6 combined NAV of $8.61 may be expressed as an asset coverage of 0.9-:1.

BSD.PR.A closed today at 5.90-00, 3×5, after trading 6,636 shares in a range of 5.70-93. The capital units, BSD.UN, traded 1,000 shares at $0.50 before closing at 0.50-73, 9×4. At these levels, an issuer bid will indeed be incremental to NAV; but I consider it an absolute disgrace that capital unitholders will be getting so much as a nickel from the company through management fiat while the preferreds are underwater.

NewGrowth Corp has announced:

that its Board of Directors has retained Scotia Capital to advise the Company on a possible extension and reorganization of the Company. There is no guarantee that after such review an extension will be proposed or if proposed, will be approved by shareholders.

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 preferreds currently have asset coverage of 1.9+:1 as of February 5, according to Scotia and are scheduled for full redemption June 26, 2009. There was a tiny call for redemption in June 2008, at which date there was a face value of $42.5-million in preferreds outstanding

NEW.PR.B is not tracked by HIMIPref™.

Bravo!

Commerce Split Corp. has announced:

Commerce Split Corp. (the “Company”) held a meeting today, Thursday February 5, 2009 to vote on the special resolution of the proposed reorganization of the Company. The vote has not been carried, and therefore the proposed capital reorganization will not be implemented. Management thanks all shareholders for considering the proposed reorganization.

PrefBlog had recommended defeat of the proposal, on the grounds Preferred Shareholders were giving a gift to the wiped-out capital unitholders. NAVPU was 9.05 as of January 30, according to the company.

XCM.PR.A is not tracked by HIMIPref™.

Bravo!

M-Split Corp. has announced:

M Split Corp. (the “Company”) held a meeting today, Thursday February 5, 2009 to vote on the special resolution of the proposed reorganization of the Company. The vote has not been carried, and therefore the proposed capital reorganization will not be implemented. Management thanks all shareholders for considering the proposed reorganization.

PrefBlog had recommended defeat of the proposal, on the grounds Preferred Shareholders were giving a gift to the wiped-out capital unitholders. NAVPU was 9.25 as of January 30, according to the company.

XMF.PR.A is not tracked by HIMIPref™.

Allbanc Split Corp. II has announced:

The Company has determined to revise its Capital Share dividend policy to not pay a dividend on the Capital Shares if the Net Asset Value at the time of declaration, after giving effect to the dividend, is less than or equal to the par value of the Preferred Shares. Any excess dividends received on the underlying portfolio securities minus the dividends payable on the Preferred Shares and all administrative and operating expenses will be reinvested in short-term debt securities or underlying portfolio securities

That’s nice, eh? They’ll paying dividends on the capital units until the preferred shareholders are actually under water. Still, it’s better than the distribution policy outlined in the prospectus which had no asset coverage test:

It will be the policy of the Board of Directors to declare and pay quarterly distributions on the Capital Shares in an amount equal to the dividends received by the Company on the Portfolio Shares minus the distributions payable on the Preferred Shares and all administrative and operating expenses.

Asset coverage is 1.1+:1 as of January 29, according to Scotia. ALB.PR.A is currently under Review-Negative by DBRS – the mass review announced October 24 has not yet come to resolution … on October 23 the NAVPU was $38.10; it is now $27.76 covering a $25 pref.

ALB.PR.A is currently included in the HIMIPref™ SplitShare index, somewhat to my chagrin.

CIBC has announced:

that it completed the offering of 13 million non-cumulative Rate Reset Class A Preferred Shares Series 35 (the “Series 35 Shares”) priced at $25.00 per share to raise gross proceeds of $325 million.

The offering was made through a syndicate of underwriters led by CIBC World Markets Inc. Following the successful sale of the previously announced 10 million Series 35 Shares, the underwriters exercised an option to purchase an additional 3 million shares. The Series 35 Shares commence trading on the Toronto Stock Exchange today under the ticker symbol CM.PR.L.

The Fixed-Reset 6.50%+447 was announced last week with an original size of 8-million shares plus a 3-million greenshoe, quickly bumped up to 10+3.

Today it traded 432,749 shares in a range of 24.60-94 before settling at 24.90-93, 20×21. The issue has been added to the HIMIPref™ Fixed-Reset subindex.

Commerce Split Corp has announced:

the deadline for voting on the proposed reorganization is February 3, 2009 at 10:00 a.m.

The purpose of the meeting, as previously disclosed, is to provide both Priority Equity and Class A shareholders with two choices. Effectively, there would be two investment options within the Company, each of which will be considered a separate investment fund.

The first Fund (Original Commerce Split) would function in much the same way as the Company now functions. There would continue to be two classes of shares related to this Fund: Priority Equity shares and Class A shares. The portfolio assets of the Fund would consist largely of cash and permitted repayment securities, and there would be limited exposure to the common shares of CIBC. There would continue to be a Priority Equity Portfolio Protection Plan in respect of this Fund.

The second Fund (New Commerce Split) would not have a Priority Equity Protection Plan associated with it, but rather would hold only shares of CIBC, to provide full exposure to a potential recovery in the value of CIBC common shares. The increased exposure to such common shares would create higher dividend income (assuming no changes to current dividends paid on the CIBC common shares) and the potential for much higher levels of income through the covered call writing program. In summary, under this option, Priority Equity Shares would receive the following securities for each Priority Equity share held: (i) one new $5 Class I Preferred share to yield 7.5% per annum; (ii) one Class II Preferred share with a notional value of $5 with distributions to yield 7.5% per annum on the $5 notional issue price to commence if and when the net asset value per unit of the New Commerce Split exceeds $12.50; and (iii) one half warrant. One full warrant can be exercised to purchase one Unit (consisting of one Class I Preferred share, one Class II Preferred share and one Capital share) for $10.00 at specified times for a period of two years after the closing date of the reorganization, if approved. Class A shares would receive one Capital share which would continue to participate in any net asset value growth over $10.00 per unit and dividends would only be reinstated if and when the net asset value per Unit exceeds $15.00.

Therefore, the special resolution, if passed, will effectively offer all shareholders a choice of the status quo through the Original Commerce Split or participating in a new fund through New Commerce Split that potentially could offer increased distribution and capital growth potential. The Company believes providing this choice is in the best interests of all shareholders in light of the unprecedented and severe decline in CIBC shares and the fact that there is still 6 years remaining until the maturity date of the Company.

We encourage all shareholders who have not yet voted, to vote by the February 3, 2009 deadline.

As discussed at the time of announcement, I recommend … VOTE NO!:

The preferred shareholders – currently holding a perfectly good fixed-income portfolio – are being asked to provide all the funding for the new company, taking all the downside risk of the portfolio holdings and giving away, free, gratis and for nothing an option on a big chunk of the upside. VOTE NO!

M-Split Corporation has announced:

Last Day to Vote on Proposed Reorganization
TORONTO, ONTARIO – February 2, 2009 / Marketwire: M Split Corp (the “Company”) announces the deadline for voting on the proposed reorganization is February 3, 2009 at 10:00 a.m.

The purpose of the meeting, as previously disclosed, is to provide both Priority Equity and Class A shareholders with two choices. Effectively, there would be two investment options within the Company, each of which will be considered a separate investment fund.

The first Fund (Original M Split) would function in much the same way as the Company now functions. There would continue to be two classes of shares related to this Fund: Priority Equity shares and Class A shares. The portfolio assets of the Fund would consist largely of cash and permitted repayment securities, and there would be limited exposure to the common shares of Manulife. There would continue to be a Priority Equity Portfolio Protection Plan in respect of this Fund.

The second Fund (New M Split) would not have a Priority Equity Protection Plan associated with it, but rather would hold only shares of Manulife, to provide full exposure to a potential recovery in the value of Manulife common shares. The increased exposure to such common shares would create higher dividend income (assuming no changes to current dividends paid on the Manulife common shares) and the potential for much higher levels of income through the covered call writing program. In summary, under this option, Priority Equity Shares would receive the following securities for each Priority Equity share held: (i) one new $5 Class I Preferred share to yield 7.5% per annum; (ii) one Class II Preferred share with a notional value of $5 with distributions to yield 7.5% per annum on the $5 notional issue price to commence if and when the net asset value per unit of the New M Split exceeds $12.50; and (iii) one half warrant. One full warrant can be exercised to purchase one Unit (consisting of one Class I Preferred share, one Class II Preferred share and one Capital share) for $10.00 at specified times for a period of two years after the closing date of the reorganization, if approved. Class A shares would receive one Capital share which would continue to participate in any net asset value growth over $10.00 per unit and dividends would only be reinstated if and when the net asset value per Unit exceeds $15.00.

Therefore, the special resolution, if passed, will effectively offer all shareholders a choice of the status quo through the Original M Split or participating in a new fund through New M Split that potentially could offer increased distribution and capital growth potential. The Company believes providing this choice is in the best interests of all shareholders in light of the unprecedented and severe decline in Manulife shares and the fact that there is still 6 years remaining until the maturity date of the Company.

We encourage all shareholders who have not yet voted, to vote by the February 3, 2009 deadline.

For further information please contact Investor Relations at 416-304-4443, toll free at 1-877-4-Quadra (1-877-478-2372), or visit www.M-Split.com.

As previously discussed, I have recommended … VOTE NO!:

The preferred shareholders – currently holding a perfectly good fixed-income portfolio – are being asked to provide all the funding for the new company, taking all the downside risk of the portfolio holdings and giving away, free, gratis and for nothing an option on a big chunk of the upside. VOTE NO!