Category: Issue Comments

Trading in CXC.PR.A was halted at 9:40am today on pending news; trading resumed at 10:30am.

The cause for the halt was “pending news” – CI Financial has announced:

At the request of the Investment Industry Regulatory Organization of Canada, on behalf of the Toronto Stock Exchange, CI Financial Income Fund (“CI”) today confirmed that over the past several months, CI has had discussions with a number of parties concerning possible strategic combinations involving CI and its subsidiaries. At the present time, there is no certainty that any transaction will be completed. As per company policy, CI will not comment further on rumours and speculation.

Amazing timing! There’s a story on Bloomberg today about what a lousy time it is to sell asset managers:

Their timing couldn’t be worse as prices for fund companies have fallen to the lowest in six years.
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The market’s weakness can be measured by the ratio of stock prices to earnings of publicly traded asset managers such as BlackRock Inc. and Legg Mason Inc. A basket of 50 companies worldwide traded at an average of 11 times earnings in the second quarter, meaning investors were willing to pay $11 for each $1 of operating profit. That’s down from 17.7 times in the second quarter of 2003, according to data compiled by the Putnam Lovell unit of New York-based Jefferies Group Inc.

It’s the lowest valuation for the group since 2002, driven by a 17 percent decline in world stock prices since Jan. 1, as tracked by the MSCI World Index. Also dragging prices lower has been a selloff of publicly traded hedge funds, buyout firms and managers based outside of the U.S.

CIX recently announced:

Net income (adjusted for equity-based compensation) for the quarter ended June 30, 2008 was $135.8 million, down 11% from the three-month period ended June 30, 2007. On a per unit basis, adjusted earnings for the quarter were $0.49, down from $0.54 per unit for the three months ended June 30, 2007.

CIX.UN closed today at 22.11, up $1.14. The 52-week high/low is 28.49 / 19.20.

CXC.PR.A had asset coverage of 1.7+:1 as of August 21, according to CI Investments.

CXC.PR.A is not tracked by HIMIPref™

C.A.Bancorp has announced:

a change to the exercise price of the warrants being offered under a preliminary prospectus dated July 21, 2008.
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Each Warrant will entitle the holder to purchase one Preferred Share at a subscription price of $23.75 at any time on or before 4:00 p.m. (Toronto time) on September 30, 2011. Previously, as filed in the preliminary prospectus, the subscription price was set at $24.50. The revised subscription price will be changed to $23.75 upon filing of the final prospectus.

The offering has been previously noted on PrefBlog. It would appear that they’re having a little difficulty selling it!

DBRS has announced that it:

has today discontinued its ratings coverage of Quebecor World Inc. (Quebecor World).

Quebecor World’s North American subsidiaries have been operating under the Companies’ Creditors Arrangement Act in Canada and under Chapter 11 of the United States Bankruptcy Code in the United States since January 21, 2008.

Short and sweet, eh? S&P withdrew their ratings on June 10. Moody’s withdrew theirs on February 6.

Quebecor World was last mentioned on PrefBlog in connection with the continuing conversion of IQW.PR.C to common.

JovFunds Management Inc. has announced:

at the special meeting of the preferred shareholders of Charterhouse held today, preferred shareholders voted:

a. Against a proposed resolution to approve an amendment of the articles of incorporation of Charterhouse to permit Charterhouse to redeem all outstanding preferred shares on a merger of Charterhouse into the Fairway Diversified Income and Growth Trust; and

b. For a proposed resolution to approve an amendment to the articles of incorporation of Charterhouse to permit the Corporation to redeem all outstanding preferred shares prior the scheduled redemption date. [sic]

The meeting was previously discussed on PrefBlog.

Morgan Meighan has announced that:

Canadian General Investments, Limited (the “Company”) today announced that it has provided notice to holders of its $60,000,000 5.40% Cumulative Redeemable Class A Preference Shares, Series 1 that the Company will redeem all of such Shares on October6, 2008 for the redemption price of $25.00 per share plus accrued and unpaid dividends (from and including the last scheduled dividend payment date, September15, 2008, to but excluding the date of redemption, and being in the amount of $0.07767 per share), less any required withholding tax.

This is the first date that the issue becomes retractible, according to the prospectus:

On and after October 5, 2008, Canadian General Investments, Limited (“CGI” or the “Corporation”) may, on not less than 30 nor more than 60 days’ notice, redeem for cash the Series 1 Shares in whole or in part, at the Corporation’s option, at $25.00 per share together with all accrued and unpaid dividends to the date of redemption. On and after October 5, 2003 the Corporation may, on not less than 30 nor more than 60 days’ notice redeem for cash all but not less than all of the Series 1 Shares upon payment of a redemption price equal to the higher of the Yield Price (as defined) and $25.00 per share together with accrued and unpaid dividends to the date of redemption. On and after October 5, 2008, the Series 1 Shares will be redeemable for cash, at the option of the holder, for $25.00 per share, plus accrued and unpaid dividends to the date of retraction.

CGI.PR.A is tracked by HIMIPref™. I consider it to be a SplitShare but it is in the “Scraps” index due to volume concerns.

Update: Morgan Meighan has issued a press release:

Canadian General Investments, Limited (the “Company”) today completed the previously announced redemption of its $60,000,000 5.40% Cumulative Redeemable Class A Preference Shares, Series 1. This redemption is in accordance with the terms of the governing short form prospectus. The aggregate amount of $60,186,480 (including accrued and unpaid dividends from September 15, 2008) was funded through the sale of portfolio securities.

… but the TMX website continues to report trading. I don’t know what the story on this one’s all about!

These are total returns, with dividends presumed to have been reinvested at the bid price on the ex-date. The list has been restricted to issues in the HIMIPref™ indices.

… however, the previously scheduled end of the world was cancelled on July 17, and …

… so, after all the smoke has cleared …

Lawrence Asset Management has announced:

On July 31, 2008, holders of Preferred Shares are expected to be repaid $25.00 per Preferred Share from the proceeds of a forward agreement with Canadian Imperial Bank of Commerce. The Preferred Shares offer an attractive alternative to conventional preferred shares, bonds, money market and other income vehicles.

Equity Shares (TSX:PAY) On July 31, 2008, Equity Shareholders will receive the proceeds of the Managed Portfolio. Distributions to PAY holders were paid from the Fund’s inception to October 31, 2005. PAY does not currently have a distribution.

So the preferred shares will be paid in full; the equity shares will receive about $11.40, after having subscribed $20 in March 2002 … and, as noted by Lawrence Asset Management, not having received distributions for the past 2.75 years.

PAY.PR.A was last mentioned in February 2008.

C.A.Bancorp has announced:

that a preliminary prospectus had been filed with, and a receipt therefor issued by, the securities regulatory authorities in each of the provinces and territories of Canada.

The Corporation is offering (the “Offering”) units (the “Units”) at a price of $10.00 per Unit. Each Unit consists of one Class A Share and one warrant (a “Warrant”) to purchase one Series 1, Preferred Share (the “Preferred Shares”). Prospective purchasers may purchase Units by (i) cash payment, or (ii) an exchange (the “Exchange Option”) of eligible securities of certain issuers (“Issuers”) at the applicable exchange ratio. The Offering is for a minimum of 2,000,000 Units ($20,000,000) and a maximum of 10,000,000 Units ($100,000,000).
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C.A. Bancorp Ltd. (the “Manager”) views the Preferred Shares as a form of financial leverage to the Class A Shares as the Preferred Shares have a fixed term, fixed cash distributions and fixed maturity value.

The Manager uses the maturity value of the Preferred Shares issued and outstanding and compares that to the tangible net book value of the Class A Shares issued and outstanding as a measure of debt (the Preferred Shares) to equity (the Class A Shares) ratio of the Corporation (the “Leverage Ratio”). As at June 30, 2008, the Leverage Ratio was 8.8 to 1.
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Each Warrant will entitle the holder to purchase one Preferred Share at a subscription price of $24.50 at any time on or before 4:00 p.m. (Toronto time) on September 30, 2011.

Assiduous Readers will recall I hated this issue on announcement. At issue, the Leverage Ratio was about 8:1, so it would appear that so far in their short history, they’ve lost money … but this is just a guess, since their investment update, while lauding many attractive features of the fund, does not go so far as to provide even an estimated mark-to-market of the fund’s value. Fortunately, however, there is a prospectus for this capital raise on SEDAR (search the last six months for “Bancorp”):

EARNINGS COVERAGE RATIOS

The Preferred Shares’ distribution (interest) requirements, after giving effect of the issuance of Preferred Shares through the exercise of the maximum number of Warrants offered under this Offering would have been $19,473,273 per annum. The Corporation had a loss before interest of $1,870,240 (annualized from $666,113 for the 130 days ended June 30, 2008). An increase of $24,573,439 per annum in earnings would be necessary to produce an earnings coverage ratio of one to one for the annualized period ended June 30, 2008 which would have required a yield of 7.32% on any net proceeds received on a maximum Offering of Class A Shares and full exercise of all Warrants distributed under the Offering.

Well, it’s all very interesting, but I won’t be looking at this further. It’s a wonderful idea for a company, but I have great difficulty envisaging the preferred shares as investment grade. Mind you, RF.PR.A is currently quoted at 20.51-50, 4×1, so those with an appetite for junk might be interested.

Following the shareholder approval of the term extension, DBRS:

has today placed the rating of the Preferred Shares issued by Financial 15 Split Corp. (the Company) Under Review with Developing Implications.

An initial rating of Pfd-2 was assigned to the Preferred Shares in November 2003. The Preferred Shares had a scheduled final maturity date of December 1, 2008. On June 3, 2008, Quadravest Capital Management (the Manager) announced a proposal would be made to the Company’s shareholders to extend the mandatory termination date for the Company from December 1, 2008 to December 1, 2015.

On July 23, the Manager announced that the resolution to extend the final maturity was approved by the required percentage of Preferred Shareholders and Class A Shareholders. As a result of such developments, DBRS has placed the rating of the Preferred Shares Under Review with Developing Implications.

FTN.PR.A had an asset coverage of just under 1.7:1 as of July 15, according to the company, with the note:

As at the close on July 17, 2008, there have been material upward movements in the net asset values ranging from 10% to 25%.

Shall we guess? Based on the downgrade of WFS.PR.A and the downgrade of FFN.PR.A, I’d call it 50-50 between a rating of Pfd-2(low) and Pfd-3(high) once the review has been completed.

The Toronto Stock Exchange has announced:

Pursuant to an Order issued on July 21, 2008 by the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act, the Company and its monitor in those proceedings, Ernst & Young Inc., have been authorized to consent to the delisting of Hollinger Inc’s Retractable Common Shares (Symbol: HLG.C) and Exchangeable Non-Voting Preference Shares Series II (Symbol: HLG.PR.B) (collectively the “Securities”). Accordingly, TSX will delist the Securities at the close of market on August 22, 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 by the Ontario Securities Commission. In addition, the Securities have been suspended from trading by TSX effective immediately.

The same press release had further details regarding the Argus delisting previously discussed.

HLG.PR.B has not been tracked by HIMIPref™.

Update, 2008-8-22: The delisting has become effective:

Hollinger Inc. (the “Company”)(TSX:HLG.C)(TSX:HLG.PR.B) announced today that the Company’s common shares and Series II preference shares (collectively, the “Shares”) were delisted from the Toronto Stock Exchange (the “TSX”) effective as of the close of business today.

The Shares have been suspended from trading since the issuance of a cease trade order by the Ontario Securities Commission on July 23, 2008. The cease trade order was issued as a result of the Company’s determination, in the interests of reducing its costs for the benefit of its stakeholders, not to prepare and file annual audited financial statements and other annual disclosure documents in respect of the Company’s financial year ended March 31, 2008. Consequently, following June 30, 2008, the Company has been in default of its continuous disclosure filing requirements under Canadian securities laws.

On July 21, 2008, the Ontario Superior Court of Justice (the “Court”) issued an order authorizing the Company and Ernst & Young Inc., the Company’s court-appointed Monitor (the “Monitor”), to consent to the issuance of the cease trade order and the delisting of the Shares. The Company and the Monitor have provided such consent.

Pursuant to proceedings under the Companies’ Creditors Arrangement Act (Canada), the Company is conducting a claims process for the Company and its subsidiaries, Sugra Ltd. and 4322525 Canada Inc. (the “Applicants”), and will also do so for its non-Applicant subsidiaries as part of their winding-up. Retired justice John D. Ground has been appointed as Litigation Trustee to administer the Company’s litigation assets, assisted by an Advisory Committee and under the supervision of the Monitor and the Court.

Preliminary estimates prepared by the Company, in conjunction with the Monitor, indicate that there is a significant risk that there will not be adequate recoveries from the Company’s assets for there to be any residual value for the Series II preference or common shareholders of the Company.