Category: Issue Comments

JovFunds Management Inc. has announced:

that the securities of Charterhouse Preferred Share Index Corporation (the “Corporation”) will be delisted from the Toronto Stock Exchange at the close of business on January 23, 2009 so that the merger of the Corporation into a newly created open-end mutual fund trust (the “Merger”), named the Jov Leon Frazer Preferred Equity Fund (the “Fund”), may proceed as previously announced on November 12, 2008.

Subject to regulatory approval, the Merger will occur at the close of business on or about January 30, 2009 (the “Effective Date”), at a ratio based on the net asset value of the preferred shares of the Corporation on the Effective Date, and, $10.00, the starting net asset value of the Series A units of the Fund. Units of the Fund will be valued daily and may be
transacted via the FundSERV Network on or about February 2, 2009.

Their intention to merge has been discussed on PrefBlog. JovFunds and Leon Frazer are both owned by Jovian Capital.

SL Split Corp. has announced:

that it has called 450 Preferred Shares for cash redemption on January 30, 2009 (in accordance with the Company’s Articles) representing approximately 0.046% of the outstanding Preferred Shares as a result of the special annual retraction of 157,500 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 January 29, 2009 will have approximately 0.046% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $25.78 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 January 30, 2009.

Payment of the amount due to holders of Preferred Shares will be made by the Company on January 30, 2009. From and after January 30, 2009 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any rights in respect of such shares except to receive the amount due on redemption.

SL Split Corp. is a mutual fund corporation created to hold a portfolio of common shares of Sun Life Financial Inc. Capital Shares and Preferred Shares of SL Split Corp. are listed for trading on The Toronto Stock Exchange under the symbols SLS and SLS.PR.A respectively.

Nice news for the holders of the 450 shares – unless the redemption breaks up their board lots and winds up costing them money! SLS.PR.A has asset coverage of 1.1+:1 and closed today at 19.50-20.99, 2×1. The prospectus states:

Preferred Shares may be surrendered for retraction at any time. Provided the Preferred Shares have been surrendered for retraction on or before the 1st day of a month, such shares will be retracted on the 15th day of such month (the Valuation Date) and retraction payments will be made on the last day of such month or where such day is not a business day, the preceding business day.

A holder retracting Preferred Shares will receive a cash price per 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 two Capital Shares in the market; and (ii) $1.00.

So …
R = 95%NAV – 2C – 1
= 95%(29.02) – 2*3.00 – 1
= 27.57 – 6 – 1
= 20.57

SLS.PR.A was downgraded to Pfd-4(low) in December by DBRS. It is not tracked by HIMIPref™.

RY.PR.P, a Fixed-Reset 6.25%+419 issue announced January 6, has settled successfully, closing at 25.30-33, 30×20, after trading 576,398 shares in a range of 25.15-35.

There was no press release issued by Royal Bank indicating any take-up of the greenshoe, which was for up to 3-million shares over the stated size of 8-million.

RY.PR.P is tracked by HIMIPref™. It has been added to the Fixed-Reset Index.

NA.PR.O, a Fixed-Reset 6.60%+463 issue announced January 5, has settled successfully. It closed today at 24.86-95, 20×100, after trading 177,885 shares in a range of 24.70-94.

National Bank has announced:

Prior to the closing of the offering, the underwriters agreed to purchase 1,800,000 additional Series 24 Preferred Shares through the underwriters’ option, bringing the total issue to 6,800,000 shares and gross proceeds of the offering to $170 million.

The maximum greenshoe was for 3-million shares; not fully taken up but a very creditable effort.

NA.PR.O is tracked by HIMIPref™. It has been added to the Fixed-Reset Index.

TD.PR.E, a Fixed-Reset 6.25%+437 issue announced January 5, closed with a quote of 25.30-33 today after trading 972,217 shares in a range of 25.06-39.

TD Bank announced on January 6 that:

a group of underwriters led by TD Securities Inc. has exercised the option to purchase an additional 3 million non-cumulative 5-Year Rate Reset Class A Preferred Shares, Series AE (the Series AE Shares) carrying a face value of $25.00 per share. This brings the total issue announced on January 5, 2009, and expected to close January 14, 2009, to 12 million shares and gross proceeds raised under the offering to $300 million.

Well! There’s lots of money around, at the right price!

TD.PR.E is tracked by HIMIPref™. It has been added to the Fixed-Reset Index.

Nortel has announced:

that it, Nortel Networks Limited (“NNL”) and certain of its other Canadian subsidiaries will seek creditor protection under the Companies’ Creditors Arrangement Act (“CCAA”) in Canada. As well, certain of the Company’s U.S. subsidiaries, including Nortel Networks Inc. and Nortel Networks Capital Corporation, have filed voluntary petitions in the United States under Chapter 11 of the U.S. Bankruptcy Code, and certain of the Company’s EMEA** subsidiaries are expected to make consequential filings in Europe.
…
In addition, the Company will request the courts to impose certain restrictions on trading in the Company’s common shares and Nortel Networks Limited’s preferred shares in order to preserve valuable tax assets in the United States. Trading restrictions, if imposed, would apply immediately to investors beneficially owning at least 4.75% of (i) the outstanding common shares of Nortel Networks Corporation or (ii) any series of preferred shares of Nortel Networks Limited. For these purposes, beneficial ownership of stock will be measured in accordance with special U.S. tax rules that, among other things, apply constructive ownership concepts and take into account indirect holdings. There will be no immediate trading restrictions imposed on debt securities of the Company or its affiliates, but the Company by this press release is advising debtholders that the courts may, at the Company’s request, impose certain trading restrictions at a later date.

I confess I am not familiar with the “special U.S. tax rules” that have made trading curbs advisable.

NTL.PR.F & NTL.PR.G were slapped with a default rating by DBRS after suspending dividends in December.

NTL.PR.F & NTL.PR.G are tracked by HIMIPref™ but have been relegated to the “Scraps” index rather than “Ratchet” on credit concerns.

Assiduous Reader medinvic has asked if the preferreds are automatically worthless. Well … not necessarily, but that’s the base case scenario. At this point, I think that the best preferred shareholders can hope for is a Thornberg-style cram-down offer they can’t refuse, as discussed on July 22, 2008.

Update: The Toronto Stock Exchange has announced:

DELISTING REVIEW – Nortel Networks Limited (the “Company”) – TSX is reviewing 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) of the Company with respect to meeting the requirements for continued listing. The Company is being reviewed on an expedited basis.

Update, 2009-1-16: The TSX has announced:

Further to TSX Bulletin 2009-0057 dated January 14, 2009, TSX’s review of 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) of the Company with respect to meeting the requirements for continued listing has been stayed pursuant to the Initial Order issued on January 14, 2009 by the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, As Amended.

Xstrata Canada has announced:

that it will mail on January 14, 2009 a notice of redemption for all of its outstanding Cumulative Preferred Shares, Series 3 (TSX:FAL.PR.B) (the “Preferred Shares”). Xstrata Canada will redeem all of the outstanding Preferred Shares on March 1, 2009 for C$25.00 in cash, plus accrued and unpaid dividends in respect of each Preferred Share up to, but excluding, March 1, 2009. Xstrata Canada intends to use its internal cash resources to fund the aggregate redemption price of approximately C$79 million. Following the redemption of the Preferred Shares, Xstrata Canada will no longer have any publicly traded shares.

This follows the redemption of FAL.PR.A and FAL.PR.H last year.

FAL.PR.B is tracked by HIMIPref™. It was moved from the FixedFloater subindex to Scraps in August 2008 on volume concerns.

Financial 15 Corp has announced:

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 $13.58.

This announcement was actually made the day prior to the DBRS announcement of a mass split share review including FTN.PR.A. I regret not having publicized this release earlier.

FTN.PR.A is tracked by HIMIPref™. It is included in the SplitShare sub-index.

According to the original 2004 prospectus:

It will be the policy of the Board of Directors to declare and pay quarterly dividends on the Capital Shares in an amount equal to the dividends received by the Company on the BMO Shares minus the distributions payable on the Preferred Shares and all administrative and operating expenses. Based on the current BMO Share dividends and estimated expenses of the Company, the Company expects to pay quarterly dividends of $0.0180 per Capital Share ($0.0720 per year or 0.47% of the Capital Share offering price).

The company has announced today:

that the Board has changed the dividend policy on the Capital Shares. As a result of the declining downside asset coverage on the Preferred Shares during the quarter, the Company has determined that any excess of the dividends received by the Company on the Bank of Montreal common shares minus the distributions payable on the Preferred Shares and all administrative and operating expenses will be invested in short-term debt securities or Bank of Montreal common shares until the scheduled redemption of the Company’s Capital Shares and Preferred Shares on August 5, 2009.

The preferred shares have asset coverage of 1.2-:1 as of January 2. They were caught up in the DBRS Mass Review of Splits and are currently under Review-Negative. I suspect the change in policy was prompted by discussions of this review.

BMT.PR.A is tracked by HIMIPref™. It would normally be included in the SplitShare index but has been relegated to “Scraps” on volume concerns.

According to the original prospectus of July 2000:

It is not currently expected that holders of the Capital Shares will receive any dividends. If dividends on the Portfolio Shares exceed the amount of the fixed Preferred Share distributions and all expenses of the Company, the excess may be paid as dividends on the Capital Shares. In addition, if the Company realizes capital gains and would be liable to pay tax thereon, the Company may declare a capital gains dividend on the Capital Shares. Such dividend will minimize any tax payable by the Company and, as such, should benefit the Company and its shareholders. The Company expects to pay such dividend in Capital Shares rather than in cash. See ‘‘The Company – Distribution Policy’’.

In July 2006, following a refinancing of the preferred shares, the company announced:

In addition, the Board of Directors of the Company has declared a special dividend of $0.1290 per Capital Share payable on July 31, 2006 to holders of record at the close of business on July 28, 2006. The dividend on the Capital Shares represents the portfolio share dividends received in excess of the fixed Preferred Share dividends and forecasted expenses of the Company for its 2006 fiscal year.

… which was followed by regular quarterly dividends.

Today, the company announced:

Lifeco has determined to revise its Capital Share dividend policy so that to the extent the downside asset coverage on the Preferred Shares drops below 1.3 times at any time during the quarter, any excess of the dividends received on the underlying portfolio securities minus the distributions payable on the Preferred Shares and all administrative and operating expenses will be reinvested in short-term debt securities or underlying portfolio securities.

… which is good news for the preferred shareholders! According to the company, asset coverage on January 2 was 1.5-:1.

LSC.PR.C has been caught up in the latest DBRS Mass Review of Split Shares … I suspect that such a policy change was a requirement of keeping their rating … if, in fact, they keep it.

LSC.PR.C is not tracked by HIMIPref™.