Category: Issue Comments

I was looking at this today and, not wishing to have done any work without publishing it, decided to pass this along.

• BMO.PR.H / BMO.PR.J pre-tax bid-YTW
• Differences thereof

And … a comparison with common!

(inspired by a post on FWF)

I speculated in May that the XTM eXchange Split Corp. Offering might be in trouble … I now see that their website states that it is “Postponed due to Market Conditions”. No further information appears to be available on either this site or on that of Quadravest (the sponsor).

Commerce Split Corp. has announced:

Since the June 13, 2008, the share price of CIBC has declined by approximately 18% and has required Commerce Split to sell additional shares of CIBC in order to raise cash levels to add to the Priority Equity Protection Plan. The proceeds from these sales are being used to purchase additional permitted repayment securities in order to maintain coverage levels as noted above. After giving effect to these additional purchases of repayment securities, it is estimated that the portfolio will have the equivalent of approximately $5.62 in cash and notional value (value at maturity) of permitted repayment securities per unit. As at July 11, 2008, the Company’s investment portfolio has approximately $5.49 in CIBC exposure per Unit.

Things have just gotten worse since they entered protection!

XCM.PR.A is not rated by any rating agency and is not tracked by HIMIPref™.

Update, 2008-7-17: CM common has gained substantially since the fund’s valuation at $9.83 on July 15, so the company issued another press release.

Mulvihill has announced on behalf of Global Telecom Split Share Corp.:

that the redemption prices to be paid for all Preferred Shares and Class A Shares outstanding on the July 2, 2008 final redemption date are as follows:

• Redemption Price per Preferred Share = $12.4838
• Redemption Price per Class A Share = nil

In addition, the Company will pay holders of Preferred Shares all accrued and unpaid dividends to date amounting to $0.20625 per Preferred Share. The Company expects that the redemption price and unpaid dividend will be paid to holders of Preferred Shares on or about July 10, 2008.

GT.PR.A’s ratings woes were highlighted in an article I wrote about Split Shares; the fund’s preferreds serve as an object lesson that you can’t simply ignore the underlying security when purchasing a split-share pref with a high coverage ratio. The fund’s prospectus was dated June 18, 1998 … it did quite well … for a while.

Issue price of both the capital shares and preferred shares was $15.00, issued in equal amounts.

Trading like this deserves its own post. These are the last ten trades in BMO.PR.L, as reported by the TSX:

All the trades from 15:34 and 15:50, except for the odd lot, were with RBC as the seller; a total of 15,400 shares that took the price from 24.40 to 22.15. The closing quote was 23.00-24.68, 25×3.

Which leaves us guessing: forced seller? or fool?

BMO.PR.L started trading on April 3.

BAM preferreds have suffered since the credit crunch got rolling last August so … I consider the otherwise routine affirmation of their credit rating by DBRS to be newsworthy:

DBRS has today confirmed the ratings of Brookfield Asset Management Inc. (Brookfield or the Company), including its A (low) Senior Notes and Debentures rating.

Brookfield’s credit profile continues to be supported by solid credit metrics and liquidity at the corporate level as it benefits from strong free cash flow generation from its diverse investments. Despite an increase in overall consolidated leverage in recent years, Brookfield has maintained solid interest coverage ratios at the corporate level and cash flows are now generated from a more stable asset base than in past years. As well, DBRS remains comfortable that the subsidiary debt is non-recourse to Brookfield and so far is supported by Brookfield’s solid balance sheet and good liquidity at the corporate level.

In 2007, the major acquisition of Multiplex Group (Multiplex) in Australia for $6.2 billion enhanced Brookfield’s commercial real estate portfolio by adding 8.5 million square feet of commercial office and retail space in major centres in Australia, as well as developments in Europe and the Middle East. Brookfield also established Brookfield Infrastructure Partners (BIP), which includes its Chilean transmission assets and certain North American timber assets, to represent a public vehicle for future growth of global infrastructure holdings. DBRS expects Brookfield to continue to establish further private and public vehicles to increase fees from third-party asset management activities; this should mitigate some of the risks with major acquisitions and raise capital to pursue other investments. The growth in asset management fees represents a stable source of cash flows at the corporate level.

DBRS notes that one of the major risks for Brookfield’s current ratings is the Company potentially undertaking significant acquisitions that materially increase financial risk at the corporate and/or subsidiary level. To date, Brookfield has maintained acceptable balance sheet ratios with just under 30% debt-to-total capital (book value) and cash flow-to-debt of 0.33 on a remitted basis (0.40 on an underlying basis). Brookfield’s coverage ratios also remained strong in 2007, with interest coverage on a remitted basis of 5.3 times and fixed charge coverage of 3.9 times. In 2007, Brookfield generated free cash flow (before one-time gains and after common dividends) of $558 million on a remitted basis or $1.4 billion including several large gains. Brookfield’s liquidity remains strong, with cash and financial assets at the end of Q1 2008 of $1.8 billion and $240 million available on its $800 million commercial paper limit.

Looking forward, DBRS expects Brookfield’s credit metrics to remain relatively stable or to improve slightly in 2008. Somewhat higher leverage (to finance major acquisitions) and weakness in the Company’s U.S. residential development business are expected to be more than offset by 1) higher cash flows from improved hydrology and pricing conditions in its power business, and 2) the contribution from dividends paid from its investment in Canary Wharf Group, plc.

The note that one of the major risks for Brookfield’s current ratings is the Company potentially undertaking significant acquisitions that materially increase financial risk at the corporate and/or subsidiary level is a little peculiar. It makes it seem as if DBRS has decided that BAM management is comprised of wild-eyed plungers, who are straining at the leash, eager to blow their (our!) money on a white elephant of some kind.

I’m pleased to see that they’ve highlighted the fact that an enormous chunk of their formal debt is secured by property and is non-recourse: I consider that quite important.

As I never fail to remind you, BAM has quite a few preferred issues outstanding: BAM.PR.B, BAM.PR.E, BAM.PR.G, BAM.PR.H, BAM.PR.I, BAM.PR.J, BAM.PR.K, BAM.PR.M, BAM.PR.N, BAM.PR.O.

The marvellously named “Big Bank Big Oil Split Corp” has announced:

that it has received all necessary approvals for its previously announced rights offering (the “Rights Offering”).

Under the Rights Offering holders of class A capital shares (“Capital Shares”) at the close of business on July 17, 2008 will receive rights (“Rights”) to purchase Combined Units on the basis of one Right for each Capital Share held. Two Rights will entitle the holder to purchase a Combined Unit, consisting of one Capital Share, one class A preferred share (“Preferred Share”) and one Warrant for a subscription price of $26.38 per Combined Unit. Each Warrant may be used to purchase one Capital Share and one Preferred Share. Rights may be exercised at any time up to the expiry of the Rights at 4:00 p.m. (Toronto time) on August 13, 2008.

Holders of Rights who exercise all of their Rights may also subscribe for additional Combined Units that may be available as a result of unexercised Rights. Rightsholders may exercise their Rights through the broker or dealer which holds their Rights.

The Rights will be listed and posted for trading on the TSX under the symbol BBO.RT. Holders of Rights should contact the broker or dealer who holds their Rights on their behalf to exercise their Rights. A prospectus describing the Rights Offering is expected to be mailed to Capital Shareholders on or around July 23, 2008.

So, the issue might get bigger – a good thing, since there are less than 1.9-million shares outstanding with a $10.00 par value. Asset coverage is just under 2.6:1 as of July 3, according to Claymore Investments.

BBO.PR.A is not tracked by HIMIPref™.

DBRS has announced:

today changed the trend on its ratings of the Debt and Preferred Shares of Manulife Financial Corporation (Manulife or the Company) and its related entities to Positive from Stable. The trends on the Claims Paying Ability of The Manufacturers Life Insurance Company and the Short-Term Limited Recourse Notes of Maritime Life Canadian Funding remain stable.

The positive trend reflects the Company’s strong earnings performance since the acquisition of John Hancock Financial Services (JHFS) in 2004, advantageous strategic positions in selected diverse products and geographic market segments, consistency in being among the first to introduce new and innovative products tempered by effective risk and expense management controls and the most conservative capitalization of its peer group. Diversification and strong earnings in the absence of any meaningful financial leverage allow Manulife to stand out among its peers from the perspective of creditworthiness. The resolution of the current turmoil in the capital markets, provided that Manulife continues to cope favourably, is expected to precipitate an upgrade in the Company’s credit ratings.

Following its successful integration of JHFS, Manulife has become one of the five largest life insurance and wealth management organizations in North America and one of the top 10 in the world, enjoying excellent geographic and product diversification, notably in such attractive markets as U.S. long-term care, U.S. variable annuities, and Asian wealth accumulation products, which leverage off the Company’s North American successes. Distribution networks are similarly well-diversified, the broadening and deepening of which is the key to the Company’s continuing success. Like most life insurance concerns, the Company is increasingly focused on growing its wealth management and payout businesses, which are well-aligned with demographic trends, but it retains leading positions in the sale of new life insurance protection products in both Canada and the United States, where profit margins tend to be more generous and cash flows more stable, despite the expected new business strain.

Excellent risk-management practices and strong independent governance has helped the Company to maintain stable profitability. The Company’s large block of in-force policies provides a stable core to earnings as conservative reserving practices pay off over time through the release of excess provisions for adverse deviation and consistently favourable experience gains. Unlike several of its U.S. peers, a high-quality asset portfolio has limited the Company’s exposure to the recent softness in credit markets related to asset-backed securities and the U.S. housing markets.

The issues continue to be rated P-1 by S&P on their national scale.

All three issues are tracked by HIMIPref™. MFC.PR.A is part of the Operating Retractible index; the others are part of the PerpetualDiscount index.

Perhaps this is not, strictly, sufficiently newsworthy to be worth a post … but gracious heavens, we could all use a little bit of good news around now!

The TSX has announced that it:

has determined to delist the Common Shares of Algo Group Inc. (Symbol: AO), as well as the Convertible Redeemable Retractable Third Preferred Shares Series I (Symbol: AO.PR.A) and 6% Cumulative Redeemable Convertible Second Preferred Shares Series I (Symbol: AO.PR.B) at the close of market on August 6, 2008 for failure to meet the continued listing requirements of TSX. The Securities of the Company are currently halted due to the imposition of a Cease Trade Order. In addition, the Securities have been suspended from trading by TSX effective immediately. The Company will now be subject to the requirements of Section 501 of The TSX Company Manual.

The review was previously reported on PrefBlog. Neither issue is tracked by HIMIPref™.

BCE has announced:

BCE today announced the company has entered into a final agreement with a company formed by an investor group led by Teachers’ Private Capital, the private investment arm of the Ontario Teachers’ Pension Plan, Providence Equity Partners Inc., Madison Dearborn Partners, LLC, and Merrill Lynch Global Private Equity.

As a result of the execution of the final agreement, amending the definitive agreement dated June 29, 2007:

• The purchase price will remain $42.75 per common share;
• The Purchaser and the Lenders have delivered fully negotiated and executed credit documents for the purpose of funding the transaction, including an executed credit agreement and other key financing documents;
• The reverse break fee payable by the Purchaser in the circumstances contemplated by the definitive agreement has been increased to $1.2 billion;
• Closing will occur on or before December 11, 2008; and
• Prior to closing, the company will not pay dividends on its common shares but will continue to pay dividends on its preferred shares.

Well, the deal hasn’t closed until the money’s in the bank … but at this point I have to say that a successful closing looks pretty likely. It’s interesting that the break fee increased; presumably, that’s the concession won by BCE in exchange for cancelling the common dividend.

BCE has the following preferred shares outstanding: BCE.PR.A, BCE.PR.C, BCE.PR.D, BCE.PR.E, BCE.PR.F, BCE.PR.G, BCE.PR.H, BCE.PR.I, BCE.PR.R, BCE.PR.S, BCE.PR.T, BCE.PR.Y & BCE.PR.Z

The last dedicated PrefBlog entry in this saga was BCE / Teachers’ Deal : Chattering Classes Humiliated