Category: Issue Comments

STRATA Income Fund has announced:

Based upon a review of various factors, we have reduced the distribution for STRATA Income Fund (the “Fund”) to $0.05 per capital unit payable on February 13, 2009 to unitholders of record on January 31, 2009. Among the more important considerations were distribution cuts by a number of oil and gas royalty trusts in response to the recent correction in oil and gas prices, the global economic slowdown including its impact on corporate revenues and earnings, and corporate conversions accompanied by distribution cuts by a number of income trusts. These factors have caused COMPASS Income Fund (“COMPASS”), the sole underlying investment of the Fund, to reduce its distributions and STRATA to follow suit.

Notwithstanding the current challenging economic environment, we believe there are some very positive developments occurring which we shall consider in determining future distribution levels of COMPASS and of the Fund. More specifically, Middlefield’s oil and gas consultant, Groppe Long and Littell, is currently forecasting a significant recovery in energy prices with crude oil expected to average US$85 per barrel in 2009. In addition, we expect that the various economic stimulus packages and interest rate cuts will begin to take effect in the second half of 2009, thereby improving business prospects.

It should be noted that the Fund will be maturing on November 30, 2009, at which time the preferred securities, which are currently yielding 6.0% per annum, will be repaid in full at the original subscription price of $10.00 plus accrued interest. In addition, those holding STRATA capital units will have the option to receive the net asset value at maturity or exchange their capital units for units of COMPASS.

The capital units and the preferred securities trade on the Toronto Stock Exchange under the symbols STW.UN and STW.PR.A, respectively.

STW.PR.A was last mentioned on PrefBlog when its Stealth Redemption was confirmed. STW.PR.A is tracked by HIMIPref™ and is included in the HIMIPref™ InterestBearing subindex

SNP Health Split Corp. has announced:

The Capital Shares and Preferred Shares will be redeemed by the Company on February 11, 2009 in accordance with the redemption provisions of the shares. Pursuant to these provisions, the Preferred Shares will be redeemed at a price per share equal to the lesser of $25.00 and the Net Asset Value per Unit. The Capital Shares will be redeemed at a price equal to the amount (for every two capital shares) by which the Net Asset Value per Unit exceeds $25.00.

The NAVPU is $28.70 as of January 15 according to Scotia Managed Companies. Not a very successful split corporation as far as the capital unitholders are concerned … capital units were issued at $11.15. On the bright side, though, I might use the handy graph of performance as an illustration of the difference between preferreds and capital!

SNH.PR.U was last mentioned on PrefBlog when it was downgraded to Pfd-5(high) by DBRS. SNH.PR.U is not tracked by HIMIPref™.

The previously announced Scotia Fixed Resets 6.25%+414 settled today with such success that both Royal and Scotia were convinced to add to the growing pile in the late afternoon. Both issues came with the same 6.25% initial fixed rate, with resets to +450 and +446 respectively … which gives you some idea of what has happend to Canada Five Year yields in the last two weeks!

BNS.PR.T traded 769,327 shares in a range of 24.90-35, to close at 25.00-05, 104×30.

Today’s skill-testing question is: What time were the new issues announced? Hint:

A very successful issue! After announcing an initial size of 8-million shares, Scotia announced on January 8:

that, as a result of strong investor demand for its domestic public offering of non-cumulative 6.25% 5-year rate reset preferred shares Series 26 (the “Preferred Shares Series 26”), the size of the offering has been increased to 10 million shares. The gross proceeds of the offering will now be $250 million and is expected to close on or after January 21, 2009.

The offering was made through a syndicate of investment dealers led by Scotia Capital Inc. on a bought deal basis. The Bank has granted to the underwriters an option to purchase up to an additional 3 million Preferred Shares Series 26 at closing, which option is exercisable by the underwriters any time up to 48 hours before closing.

and has now announced:

that it has completed the domestic offering of 13 million, non-cumulative 5-year rate reset preferred shares Series 26 (the “Preferred Shares Series 26”) at a price of $25.00 per share. The gross proceeds of the offering were $325 million.

And today, of course, Scotia came up with another 8-million share issue with a 2-million share greenshoe, immediately bumped up to 10-million shares with the potential for another 2-million.

BNS.PR.T has been added to the HIMIPref™ Fixed-Reset SubIndex.

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.