Category: Issue Comments

So BPO preferreds got hammered again today, with losses of about 10% of market value and will doubtless dominate the list of new 52-week lows reported in the Globe tomorrow, as they have done for the past two weeks.

So, what’s going on?

It seems to have started with a SEC filing by Brookfield DTLA Fund Office Trust Investor Inc.:

Subsidiaries of Brookfield DTLA Fund Office Trust Investor Inc. (the “Company”) have secured loans of $465.0 million on Gas Company Tower, comprised of a $350.0 million mortgage loan, a $65.0 million mezzanine loan and a $50.0 million junior mezzanine loan (collectively, the “Gas Company Tower Loans”). There is $465.0 million currently outstanding under the Gas Company Tower Loans. The initial maturity date of the Gas Company Tower Loans was February 9, 2023, with three one-year extension options. The Company did not exercise the option to extend the maturity of the loans and therefore, on February 9, 2023, the Gas Company Tower Loans matured, and an Event of Default (as defined in the underlying loan agreements) has occurred and is continuing. The lenders may exercise their remedies under the loans, including foreclosing on Gas Company Tower. As of the date of this filing, the lenders have not exercised any of their remedies under the Gas Company Tower Loans

Other Subsidiaries of the Company have secured loans of $318.6 million on 777 Tower, comprised of a $268.6 million mortgage loan and a $50.0 million mezzanine loan (collectively, the “777 Tower Loans”). There is $288.9 million currently outstanding under the 777 Tower Loans. The Company did not obtain an Interest Rate Protection Agreement (as defined in the underlying loan agreements) which constitutes an Event of Default (as defined in the underlying loan agreements). Wells Fargo Bank, National Association, as Administrative Agent for the lenders under the mortgage loan, has notified the relevant subsidiary of the Company that defaults and potential defaults have occurred under the loan and that the lenders have the right to exercise their remedies under the 777 Tower Loans, including, without limitation, declaring the debt to be immediately due and payable and foreclosing on 777 Tower. As a result of the default under the mortgage loan, an Event of Default (as defined in the underlying loan agreements) has occurred and is continuing under the mezzanine loan. As of the date of this filing, the lenders have not exercised any of their remedies under the 777 Tower Loans.

This was picked up by Business Insider in a 2023-3-30 story later syndicated to Yahoo:

Gas Company Tower was once a gleaming model of downtown America’s ascendancy. Located squarely in Los Angeles’ central business district, the 52-story skyscraper has a strong pedigree. It’s home to a collection of major corporate tenants, including the Southern California Gas Company, the white-shoe law firm Sidley Austin, and Deloitte, one of the Big Four accounting firms. Its owner, Brookfield, is an $800 billion investment firm known for its blue-chip portfolio of real-estate assets. The tower’s lobby even had a Hollywood cameo when it was featured in the opening shot of the 1994 film “Speed.”

More recently, though, the glassy office property has become an example of the alarming financial turmoil that is engulfing once-bedrock real-estate assets. Brookfield disclosed in a February filing that a subsidiary it controls had defaulted on $753.9 million worth of debt tied to the tower and another nearby office building — one of the largest since the great financial crisis. But as Brookfield grapples with its lenders, it’s also facing a potential exodus of the building’s most visible occupants.

The Southern California Gas Company, the Gas Company Tower’s namesake tenant, is in the market to relocate its 360,000 square feet at the property. Sidley Austin, which has about 136,000 square feet in the 1991-vintage building, is also prowling the market for new space, according to two people with knowledge of both tenants’ real-estate decision-making. Spokespeople for Sidley and Brookfield declined to comment. A spokesperson for the Southern California Gas Company did not reply to a request for comment.

This report was further fleshed out by RealDeal:

Brookfield has admitted one of its trophy office towers in Downtown L.A. has lost a quarter of its value, thanks to L.A.’s new transfer taxes.

The investment firm wrote down the value of its 45-story office tower at 355 South Grand Avenue — the South Tower of the Wells Fargo Center — by $111 million, according to an annual report released by Brookfield’s entity that owns six office buildings and one retail center in Downtown L.A.

The publicly traded fund, called Brookfield DTLA Fund Office Trust Investor, blamed the writedown on Measure ULA — the City of L.A.’s new transfer tax that will take 5.5 percent from all commercial and residential sales that trade for more than $10 million, according to its report.

The writedown marks the first time Brookfield has drastically cut the value of one of its Downtown L.A. holdings, which have been affected by the dual triggers of high vacancy rates and high interest rates.

The connection is explained by another helpful SEC filing:

This information statement (“Information Statement”) is being furnished by Brookfield DTLA Fund Office Trust Investor Inc., a Maryland corporation (the “Company”, “we”, “our” or “us”), in connection with the Annual Meeting
…
As of the Record Date, Brookfield DTLA Holdings LLC, a Delaware limited liability company (“DTLA Holdings”, and together with its affiliates excluding the Company and its subsidiaries, the “Manager”), was the holder of all of the issued and outstanding shares of Common Stock.

DTLA Holdings is an indirect partially- owned subsidiary of Brookfield Property Partners L.P. (“BPY”), one of the world’s premier real estate companies and a subsidiary of Brookfield Asset Management Inc. (“Brookfield Asset Management” or “BAM”), a leading global alternative asset manager with approximately $750 billion in assets under management. DTLA Holdings is entitled to vote on the election of five directors, the ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm and on each other matter properly presented at the Annual Meeting. As of the Record Date, there were 1,000 shares of Common Stock outstanding.

DTLA has a balance sheet that is … interesting. Negative equity for the common shareholder, just barely outweighed by the ‘mezzanine equity’ of the preferred shares issued by the company, and 2.3-billion in debt secured by assets with a stated value of 2.5-billion. Succinctly:

Brookfield DTLA’s business requires continued access to adequate cash to fund its liquidity needs. The amount of cash Brookfield DTLA currently generates from its operations is not sufficient to cover its investing and financing activities, including upcoming debt obligations, leasing costs and capital expenditures, without issuing additional debt or equity, resulting in “negative cash burn,” and there can be no assurance that the amount of Brookfield DTLA’s negative cash burn will decrease. If Brookfield DTLA’s operating cash flows and capital are not sufficient to cover its operating costs or to repay its indebtedness as it comes due, we may issue additional debt and/or equity, including to affiliates of Brookfield DTLA, which issuances could further adversely impact the amount of funds available to Brookfield DTLA for any purpose, including for dividends or other distributions to holders of its capital stock, including the Series A preferred stock. Given the uncertainty in the economy, current office leasing volume and volatile financial markets created by the continued rise in interest rates and the Company’s upcoming debt maturities, management believes that access to liquidity will be challenging and is planning accordingly. We are also working to proactively address challenges to our long-term liquidity position. However, if uncertainty in the economy and financial and leasing markets do not improve, or the Company is not able to find additional sources of liquidity, the property-owning subsidiary debt obligors may not be able to successfully refinance the debt obligations when they fall due, which could result in foreclosure on the encumbered properties.

A mess, and now the company has announced:

Brookfield DTLA Fund Office Trust Investor Inc. (the “Company”) announced today that its board of directors (the “Board”) has approved the voluntary delisting of the Company’s 7.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (the “Preferred Shares”) from the New York Stock Exchange (the “NYSE”). The Board believes that its decision to delist and deregister the Preferred Shares will better enable the Company to maximize value for all stakeholders, including the holders of the Preferred Shares. The Company also gave notice to the NYSE of its intent to voluntarily delist the Preferred Shares and to withdraw the registration of the Preferred Shares with the Securities and Exchange Commission (the “SEC”). The Preferred Shares are currently listed on the NYSE under the symbol “DTLA-P.”
…
The delisting and deregistration of the Preferred Shares will not have any impact on the terms or conditions of the Preferred Shares, including the dividends payable on the Preferred Shares and the rights granted to holders of the Preferred Shares to appoint two directors to the Board under certain circumstances. After the delisting and deregistration of the Preferred Shares, the Company intends to continue to make unaudited annual and quarterly financial statements available to investors. The Company also will seek to have the Preferred Shares quoted on the Pink Sheets Electronic Quotation Service (the “Pink Sheets”) in the OTC Pink Limited Information marketplace, although it cannot provide any assurance that any broker-dealer will make a market in the Preferred Shares, which is a requirement for Pink Sheet quotation.

So it’s a mess, but misery loves company and there’s a lot of love in the air:

The humdrum business of renting out offices and stores is suddenly in the spotlight as property experts and economists warn that growing problems in U.S. commercial real estate could trigger a new financial crisis.

Among the people raising alarms is Scott Rechler, chief executive officer of RXR Realty, a large property manager in New York, and a director of the Federal Reserve Bank of New York.

In a Twitter thread last week, Mr. Rechler warned that US$1.5-trillion in commercial real estate debt will mature over the next three years. Most of it was taken out when interest rates were near zero.
…
Somewhat similarly Neil Shearing, group chief economist at Capital Economics, warned that a “doom loop” could emerge in which falling commercial real estate values feed back into the U.S. banking system, choking off lending and creating further declines in commercial property prices.
…
Still, it’s far from certain that the worst case will materialize.

For one thing, the commercial real estate sector is made up of several distinct subsectors. While office and retail landlords are struggling, some other areas, such as industrial properties, have held up just fine, while still others, such as hotel properties, are actually seeing conditions improve as the economy reopens and travel resumes.

Taken as a whole, the commercial real estate sector doesn’t look so bad. Delinquent mortgages – that is, those on which payments have been overdue for at least 30 days – are rising in number, but the statistics are still a long way from panic levels.

In February, 3.12 per cent of U.S. commercial mortgages were delinquent, according to data tracker Trepp Inc. That is slightly higher than the 2.98 per cent recorded six months earlier but far below the record 10.34 per cent recorded in July, 2012.

OK, so the owners are keeping their mortgages current – for now – but some of them will be struggling to do so. And meanwhile:

Slate Office REIT is slashing its monthly distribution by 70 per cent, making it Canada’s second publicly traded office building owner to cut its payout in the span of three weeks as vacancies rise and higher interest rates bite.

Slate, which owns office properties in Canada and the United States but derives half of its operating income from the Greater Toronto Area and Atlantic Canada, slashed its distribution to 1 cent per unit monthly from 3.3 cents after a strategic review. Slate’s units, which trade on the Toronto Stock Exchange, dropped 25 per cent Wednesday and are down 43 per cent this year.

True North Commercial, which owns office properties across Canada but focuses on Ontario, slashed its own distribution by 50 per cent in mid-March. The REIT is run by Daniel Drimmer, one of Canada’s largest property owners through a mix of private and publicly traded businesses. Like Slate, True North’s unit price also tanked after the decision and its units are now down 45 per cent this year.

Higher interest rates have weighed on most real estate investment trusts because they carry mortgages often amounting to between 50 per cent and 60 per cent of their property values. Like homeowners, REITs usually only face higher rates when their mortgages come up for renewal. But some, such as Slate, had sizable exposure to variable-rate mortgages.

Me, I blame millennials:

Canada’s downtown office vacancy rate reached 19 per cent in March, with Toronto and Vancouver driving the trend as the shift to hybrid work pushes more businesses to give up office space.

The level of vacancies was nearly double the 10.8 per cent in downtown markets before the start of the pandemic, according to new data from commercial real estate firm Altus Group. The 19-per-cent vacancy rate was a record high since 2003 when Altus started collecting data. It surpasses other tumultuous periods in the office market, including the oil price crash in 2014 when energy companies cut jobs and slashed their corporate offices.
…
Three years after governments required workers to stay at home to stop COVID-19 from spreading, employees have embraced remote work and are shunning workweeks of five days in the office. That is particularly the case for tech workers who generally have had more freedom to work from home.

“Less people are coming in and less space is needed,” said Colin Scarlett, executive vice-president with commercial real estate firm Colliers in Vancouver. “Employees don’t believe they need to be in the office. As a result, the employer has been delicate on the return to the office.”

So am I pushing the panic button here? First of all, take a look at the most recent affirmation of BPO’s & BPY’s rating by DBRS:

The ratings continue to be supported by (1) the Partnership’s robust access to liquidity of $4.7 billion, consisting of $2.0 billion in cash and cash equivalents and $2.7 billion available on credit facilities at December 31, 2021; (2) financial flexibility afforded by nonrecourse mortgage debt and no unsecured maturities until July 2023 when the CAD 500 million Series 1 Senior Unsecured Notes come due; (3) DBRS Morningstar’s view of implicit support from BAM; (4) BPY’s market position as a preeminent global real estate company; and (5) high-quality assets, particularly its Core Office segment, with long-term leases in place and large, recognizable investment-grade-rated tenants. The ratings continue to be constrained by BPY’s weak financial risk assessment as reflected by both its highly leveraged balance sheet and low EBITDA interest coverage (1.28x at the last 12 months ended December 31, 2021); a riskier retail leasing profile in terms of lease maturities and counterparty risk relative to BPY’s Core Office segment; a higher-risk opportunistic Limited Partnership Investments segment composed primarily of hotel, office, retail, and alternative assets; and DBRS Morningstar’s assessment of the unmitigated structural subordination of the Senior Unsecured Debt at the BPP level relative to a material amount of debt at its operating subsidiaries.

DBRS Morningstar would consider a negative rating action should BPY’s operating environment fail to improve as expected such that total debt-to-EBITDA remains above 16.0x, on a sustained basis, all else equal, or if DBRS Morningstar changes its views on the level and strength of implicit support provided by BAM. On the other hand, DBRS Morningstar would consider a positive rating action should DBRS Morningstar’s outlook for BPY’s total debt-to-EBITDA improve to 13.0x or better.

Trouble is, that affirmation is just over a year old now, and much has changed in the interest rate world since then. On a better note, S&P performed an Annual Review For Brookfield Property Partners L.P. dated 2023-2-1 and took no action.

Meanwhile BPY’s balance sheet still looks reasonable, with limited partners supplying about 8.1-billion in equity; total equity, including preferred shares and non-controlling interests, is 41.7-billion supporting 112-billion in assets. The limited partners actually recorded a small loss in 2022, as the available net income was scooped up by the non-controlling interests, but in 2022 there were substantial net sales of assets, net payments of debt and an increase in cash.

So, I’m concerned but I’m not panicking. One of Brookfield’s great strengths is actually being shown off by the DTLA problem: a lot of the debt is secured by the properties with no recourse to the company and – as may be shown by the DTLA situation – they are not averse to cutting their losses on a given investment and sending jingle-mail to the mortgage holders.

Affected issues are BPO.PR.A, BPO.PR.C, BPO.PR.E, BPO.PR.G, BPO.PR.I, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T, BPO.PR.W, BPO.PR.X and BPO.PR.Y.

Updatd, 2023-4-6: Those fortunate enough to have a copy of the August, 2022, PrefLetter on hand will have noted that as of 2022-7-29, CPD had a weight of about 3.8% in BPO preferreds. It’s actually more than that, since my analysis ignored the “Brookfield Property Preferred Pref”, BPYP.PR.A, with a portfolio weight of 1.50% (massive!), since it is a US-Pay issue and shouldn’t be in the TXPR index at all, according to me. As of 2023-4-5, this issue had a portfolio weight of 1.44%, so the total BPO weight in CPD is over 5% (before recent markdowns, anyway!). I consider this level of holding to be imprudent for an issuer of this credit quality, but then I consider the total level of Pfd-3 holdings in CPD to be imprudent. It’s not their fault, they’re reflecting the market, just like they’re supposed to do … but the market remains distorted by the issuance boom of ten-odd years ago, when a lot of companies that should not have been able to come to market … did.

The September, 2020, edition of PrefLetter reveals that ZPR held a weight of about 2.8% in BPO – also imprudently high, according to me, but better. ZPR does not hold BPYP.PR.A.

An Assiduous Reader writes in and says, in part:

but sometimes have to do a deeper dive into financials

– to have discovered that BPO had so much variable AND lumpy maturities within this dreaded “window” of high short rates (curve likely rightly assuming rates will settle back into 3s a year out) was a total shock
– how could they have been so stupid with all the warning signs of an imminent big move up in rates?
– especially when parent, BN, maintains a debt/cap of only 17% and its ALL termed out to 13 year average?
– why would BN have been so well prepared but left BPO in such a vulnerable spot

20 years of brainwashing participants into believing the “sub 2” environment would persist in perpetuity really got the better of a lot of people!

Fair enough, but as I am very fond of pointing out, it takes two to make a market. I’m not sure if a substantially longer term would be possible for commercial mortgages, or just how a hedging programme might work, or how such hedging might be viewed by investors in BPY/BPO. It’s not my field.

Some digging has indicated that American commercial mortgages generally have a much shorter term than the 30-year standard for residential mortgages, with terms greater than ten years being relatively hard to find, but I have been unable to locate any solid data. If anybody can find such data, let me know!

Update #2, 2023-4-5: Oddly, the BPYP.PR.A US-Pay issue mentioned above has done considerably better than BPO.PR.N – to take an example – in the year-to-date:

Artis Real Estate Investment Trust has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Preferred Units, Series I (“Series I Units”) (AX.PR.I) on April 30, 2023.

As a result, and subject to certain conditions set forth in the certificate of preferred units terms relating to the Series I Units effective January 31, 2018 (the “Certificate of Series I Unit Terms”), the holders of Series I Units have the right to elect to reclassify all or any of their Series I Units into Preferred Units, Series J (“Series J Units”) of Artis on the basis of one Series J Unit for each Series I Unit on May 1, 2023 (being the first business day after April 30, 2023).

With respect to any Series I Units that remain outstanding after May 1, 2023, holders thereof will be entitled to receive distributions, if, as and when declared by the Board of Trustees of Artis, in an annual amount per Series I Unit determined by multiplying the annual fixed distribution rate for such subsequent fixed rate period by $25.00, and shall be payable quarterly on the last business day of each of January, April, July and October in each year during such subsequent fixed rate period. For the initial subsequent fixed rate period commencing on May 1, 2023, the annual fixed distribution rate is 6.993% per annum.

With respect to any Series J Units that may be issued on May 1, 2023, holders thereof will be entitled to receive distributions, if, as and when declared by the Board of Trustees of Artis, in an amount per Series J Unit determined by multiplying the floating quarterly distribution rate (calculated on the basis of the actual number of days elapsed in such quarterly floating rate period, divided by 365) by $25.00, which shall be payable quarterly on the last business day of such quarterly floating rate period. For the initial quarterly floating rate period commencing May 1, 2023, the floating quarterly distribution rate is 8.337% per annum.

Holders of Series I Units are not required to elect to reclassify all or any part of their Series I Units into Series J Units.

As provided in the Certificate of Series I Unit Terms: (i) if Artis determines that there would remain outstanding on May 1, 2023 less than 500,000 Series I Units, all remaining Series I Units shall be reclassified automatically into Series J Units on a one-for-one basis, effective May 1, 2023; or (ii) if Artis determines that less than 500,000 Series J Units would be issued based upon the elections of holders, then holders of Series I Units shall not be entitled to reclassify their Series I Units into Series J Units. As at the date hereof, there are an aggregate of 4,871,140 Series I Units issued and outstanding.

The Series I Units are issued in “book entry only” form and must be purchased or transferred through a participant in the CDS depository service (each, a “CDS Participant”). All rights of holders of Series I Units must be exercised through CDS or the CDS Participant through which the Series I Units are held. The deadline for the registered holder of Series I Units to provide notice of exercise of the right to reclassify Series I Units into Series J Units is 5:00 p.m. (Toronto time) on April 17, 2023. Any notices received after this deadline will not be valid. As such, holders of Series I Units who wish to exercise their right to reclassify their Series I Units into Series J Units should contact their broker or intermediary for more information and it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

If Artis does not receive an election notice in due form from a holder of Series I Units during the time fixed therefor, then the Series I Units shall be deemed not to have been reclassified (other than pursuant to an automatic reclassification). Holders of Series I Units and Series J Units will have the opportunity to reclassify their units again on May 1, 2028 (being the first business day after April 30, 2028), and every five years after April 30, 2028 as long as such units remain outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series J Units effective upon reclassification. Listing of the Series J Units is subject to Artis fulfilling all the listing requirements of the TSX.

AX.PR.I is a FixedReset, 6.00%+393M600, ROC issue that commenced trading 2018-1-31 after being announced 2018-01-22. It is tracked by HIMIPref™ but will be relegated to the Scraps subindex on credit qualit concerns.

The Toronto-Dominion Bank has announced:

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 18 (Non-Viability Contingent Capital (NVCC)) (the “Series 18 Shares”) and Non-Cumulative Floating Rate Preferred Shares, Series 19 (Non-Viability Contingent Capital (NVCC)) (the “Series 19 Shares”).

With respect to any Series 18 Shares that remain outstanding after May 1, 2023 (being the first business day following the conversion date of April 30, 2023, which falls on a Sunday), holders of the Series 18 Shares will be entitled to receive quarterly fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the 5-year period from and including April 30, 2023 to but excluding April 30, 2028 will be 5.747%, being equal to the 5-Year Government of Canada bond yield determined as at March 31, 2023 plus 2.70%, as determined in accordance with the terms of the Series 18 Shares.

With respect to any Series 19 Shares that may be issued on May 1, 2023, holders of the Series 19 Shares will be entitled to receive quarterly floating rate non-cumulative preferential cash dividends, calculated on the basis of the actual number of days elapsed in such quarterly period divided by 365, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the floating rate period from and including April 30, 2023 to but excluding July 31, 2023, will be 7.107%, being equal to the 90-day Government of Canada Treasury Bill yield determined as of March 31, 2023 plus 2.70%, as determined in accordance with the terms of the Series 19 Shares.

Beneficial owners of Series 18 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right on or prior to the deadline for exercise, which is 5:00 p.m. (Toronto time) on April 17, 2023.

Inquiries should be directed to TD’s Registrar and Transfer Agent, TSX Trust Company, at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.J was issued as a FixedReset, 4.70%+270, that commenced trading 2018-3-14 after being announced 2018-3-5. An extension was announced in March, 2023. The issue has been tracked by HIMIPref™ and is assigned to the FixedReset (Discount) sub-index.

Brookfield Infrastructure has announced:

that after having taken into account all election notices received by the March 16, 2023 deadline for the reclassification of its Cumulative Class A Preferred Limited Partnership Units, Series 9 (the “Series 9 Units”) (TSX: BIP.PR.E) into Cumulative Class A Preferred Limited Partnership Units, Series 10 (the “Series 10 Units”), it has determined that there will be no reclassification of Series 9 Units into Series 10 Units, and holders of Series 9 Units will retain their Series 9 Units.

There were 18,000 Series 9 Units tendered for reclassification, which is less than the 1,000,000 units required to give effect to reclassifications of Series 9 Units into Series 10 Units.

BIP.PR.E was issued as a FixedReset, 5.00%+300M500, ROC, that commenced trading 2018-1-23 after being announced 2018-1-15. The issue will reset to 6.642% effective 2023-4-1. It is tracked by HIMIPref™ and has been assigned to the FixedResets (Discount) subindex on the basis of its P-2(low) rating from S&P (it is not rated by DBRS).

Manulife Financial Corporation has announced (on 2023-3-7):

that after having taken into account all election notices received by the March 6, 2023 deadline for conversion of its currently outstanding 8,000,000 Non-cumulative Rate Reset Class 1 Shares Series 11 (the “Series 11 Preferred Shares”) (TSX: MFC.PR.J) into Non-cumulative Floating Rate Class 1 Shares Series 12 of Manulife (the “Series 12 Preferred Shares”), the holders of Series 11 Preferred Shares are not entitled to convert their Series 11 Preferred Shares into Series 12 Preferred Shares. There were 117,415 Series 11 Preferred Shares elected for conversion, which is less than the minimum one million shares required to give effect to conversions into Series 12 Preferred Shares.

As announced by Manulife on February 21, 2023, after March 19, 2023, holders of Series 11 Preferred Shares will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Manulife and subject to the provisions of the Insurance Companies Act (Canada). The dividend rate for the five-year period commencing on March 20, 2023, and ending on March 19, 2028, will be 6.15900% per annum or $0.384938 per share per quarter, being equal to the sum of the five-year Government of Canada bond yield as of February 21, 2023, plus 2.61%, as determined in accordance with the terms of the Series 11 Preferred Shares.

Subject to certain conditions described in the prospectus supplement dated November 27, 2012 relating to the issuance of the Series 11 Preferred Shares, Manulife may redeem the Series 11 Preferred Shares, in whole or in part, on March 19, 2028 and on September 19 every five years thereafter.

MFC.PR.J was issued as a FixedReset, 4.00%+261 that commenced trading 2012-12-4 after being announced 2012-11-27. After the 2018 notice of extension it reset to 4.731%; I recommended against conversion; and there was no conversion. Notice of extension was provided in 2023 and the issue reset to 6.159%. The issue is tracked by HIMIPref™ and is assigned to the Insurance FixedReset (Discount) sub-index.

The Toronto-Dominion Bank has announced (on 2023-3-29):

that it does not intend to exercise its right to redeem all or any part of the currently outstanding 14 million Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 18 (Non-Viability Contingent Capital (NVCC)) (the “Series 18 Shares”) of TD on April 30, 2023. As a result and subject to certain conditions set out in the prospectus supplement dated March 7, 2018 relating to the issuance of the Series 18 Shares, the holders of the Series 18 Shares have the right to convert all or part of their Series 18 Shares, on a one-for-one basis, into Non-Cumulative Floating Rate Preferred Shares, Series 19 (Non-Viability Contingent Capital (NVCC)) (the “Series 19 Shares”) of TD on May 1, 2023 (being the first business day following the conversion date of April 30, 2023, which falls on a Sunday). Holders who do not exercise their right to convert their Series 18 Shares into Series 19 Shares on such date will continue to hold their Series 18 Shares, subject to the conditions described below.

The foregoing conversion right is subject to the conditions that: (i) if TD determines that there would be less than 1,000,000 Series 19 Shares outstanding after taking into account all shares tendered for conversion on May 1, 2023, then holders of Series 18 Shares will not be entitled to convert their shares into Series 19 Shares, and (ii) alternatively, if TD determines that there would remain outstanding less than 1,000,000 Series 18 Shares after taking into account all shares tendered for conversion on May 1, 2023, then all remaining Series 18 Shares will automatically be converted into Series 19 Shares on a one-for-one basis on May 1, 2023. In either case, TD will give written notice to that effect to holders of Series 18 Shares no later than April 24, 2023 (being the first business day following the notice date of April 23, 2023, which falls on a Sunday).

The dividend rate applicable to the Series 18 Shares for the 5-year period from and including April 30, 2023 to but excluding April 30, 2028, and the dividend rate applicable to the Series 19 Shares for the 3-month period from and including April 30, 2023 to but excluding July 31, 2023, will be determined and announced by way of a press release on March 31, 2023.

Beneficial owners of Series 18 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from March 31, 2023 until 5:00 p.m. (Toronto time) on April 17, 2023.

Inquiries should be directed to TD’s Registrar and Transfer Agent, TSX Trust Company, at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.J was issued as a FixedReset, 4.70%+270, that commenced trading 2018-3-14 after being announced 2018-3-5. It has been tracked by HIMIPref™ and is assigned to the FixedReset (Discount) sub-index.

Brompton Group has announced (on 2023-3-27):

Brompton Oil Split Corp. (the “Fund”) announces its intention to effect a consolidation of its Class A shares. As a result of the special non-concurrent retraction (the “Special Retraction”) granted in connection with the extension of the maturity date of the Fund to March 28, 2024 there will be 950,914 Class A shares and 822,414 Preferred shares outstanding. In order to restore an equal number of outstanding shares of each class following the Special Retraction, the Fund intends to consolidate its Class A shares such that each holder of a Class A share will receive approximately 0.864866854 Class A shares for each Class A share held (the “Share Consolidation”). It is expected that the Class A shares will trade on a post-consolidation basis at the opening of trading on April 11, 2023. The Share Consolidation is subject to approval by the Toronto Stock Exchange (the “TSX”). The value of the Class A shareholders’ holdings will remain the same and as a result, the net asset value (“NAV”) per Class A share, following the Share Consolidation, will increase on a proportionate basis. As at March 24, 2023, the pro forma NAV per Class A share after giving effect to the Share Consolidation would be $2.38 ($2.06 pre consolidation) and the asset coverage ratio for the Preferred shares would increase from 14% to 19%.

The Share Consolidation will allow Class A shareholders to maintain their current investment in the Fund and continue to have enhanced exposure to the Fund’s portfolio. The Fund invests in a portfolio of equity securities of large capitalization North American oil and gas issuers, primarily focused on those with significant exposure to oil. Brompton Funds Limited, the manager of the Fund, believes that the Fund’s investment strategy is well positioned to participate in opportunities that are expected to continue in the energy sector.

No fractional Class A shares will be issued and the number of Class A shares each holder shall receive will be rounded down to the nearest whole number. The Share Consolidation is a non-taxable event.

OSP.PR.A recently recently reset to 8.00% for a one year term and I suppose the fat coupon persuaded many holders to hang on despite the poor credit quality of the issue and the short term until the next reset.

Brookfield Infrastructure Partners L.P. has announced:

that it has determined the fixed distribution rate on its Cumulative Class A Preferred Limited Partnership Units, Series 9 (“Series 9 Units”) (TSX: BIP.PR.E) for the five years commencing April 1, 2023 and ending March 31, 2028.

Series 9 Units and Series 10 Units

If declared, the fixed quarterly distributions on the Series 9 Units during the five years commencing April 1, 2023 will be paid at an annual rate of 6.642% ($0.415125 per unit per quarter).

Holders of Series 9 Units have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on March 16, 2023, to reclassify all or part of their Series 9 Units, on a one-for-one basis, into Cumulative Class A Preferred Limited Partnership Units, Series 10 (“Series 10 Units”), effective March 31, 2023.

The quarterly floating rate distributions on the Series 10 Units will be paid at an annual rate, calculated for each quarter, of 3.00% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly distribution rate in respect of the April 1, 2023 to June 30, 2023 distribution period for the Series 10 Units will be 1.88582% (7.564% on an annualized basis) and the distribution, if declared, for such distribution period will be $0.471455 per unit, payable on June 30, 2023.

Holders of Series 9 Units are not required to elect to reclassify all or any part of their Series 9 Units into Series 10 Units.

As provided in the unit conditions of the Series 9 Units, (i) if Brookfield Infrastructure determines that there would be fewer than 1,000,000 Series 9 Units outstanding after March 31, 2023, all remaining Series 9 Units will be automatically reclassified into Series 10 Units on a one-for-one basis effective March 31, 2023; or (ii) if Brookfield Infrastructure determines that there would be fewer than 1,000,000 Series 10 Units outstanding after March 31, 2023, no Series 9 Units will be reclassified into Series 10 Units. There are currently 7,986,595 Series 9 Units outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 10 Units effective upon reclassification. Listing of the Series 10 Units is subject to Brookfield Infrastructure fulfilling all the listing requirements of the TSX.

BIP.PR.E was issued as a FixedReset, 5.00%+300M500, ROC, that commenced trading 2018-1-23 after being announced 2018-1-15. It is tracked by HIMIPref™ and has been assigned to the FixedResets subindex on the basis of its P-2(low) rating from S&P (it is not rated by DBRS).

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!

Industrial Alliance Insurance and Financial Services Inc. has announced:

that it has sent today to all shareholders of its Non-Cumulative 5-Year Rate Reset Class A Preferred Shares Series I (the “Series I Preferred Shares”) a formal notice and instructions for the redemption of the Series I Preferred Shares outstanding as of today. Upon the Series I Redemption scheduled for March 31, 2023, iA Insurance will pay to the holders of the Series I Preferred Shares the redemption price of $25 less any taxes required to be withheld or deducted. There are 6,000,000 Series I Preferred Shares outstanding as of today.

Separately from the redemption price, the final quarterly dividend of $0.3000 per Series I Preferred Share will be paid in the usual manner on March 31, 2023 to shareholders of record on March 24, 2023. After the Series I Preferred Shares are redeemed, holders of Series I Preferred Shares will cease to be entitled to distributions of dividends and will not be entitled to exercise any rights as holders other than to receive the redemption price and the final quarterly dividend described above.

UPDATE, 2023-3-1: The company has issued a correction; the record date for the dividend is February 24, 2023. Thanks to Assiduous Reader xalier for his comment.

IAF.PR.I was issued as IAG.PR.I, a FixedReset, 4.80%+275, that commenced trading 2018-3-7 after being announced 2018-2-26. The ticker changed in 2019. It has been tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

Thanks to Assiduous Readers DrSpinz, niagara and CanSiamCyp for bringing this to my attention!