Category: Issue Comments

I don’t normally talk about junk paper in this blog, but Prefblog’s Prettiest Assiduous Reader writes in and points out that there’s some really strange behaviour going on.

NTL.PR.F closed today at 11.40-59, 10×7

NTL.PR.G closed today at 10.00-48, 15×10

These two issues constitute a “weak pair”, as defined in my article about Preferred Pairs. They’re “ratchet rate” floaters, currently paying 100% of prime on their par value of $25.00 – which comes to $1.3125 at today’s prime of 5.25%. In other words, an interest rate of over 11% on investment … although, mind you, you can only call it 11% if you actually get paid the money. DBRS rates the Nortel Preferreds at Pfd-5(low), which is their lowest ranking short of default, and Nortel’s senior unsecured debt at B(low), which isn’t exactly investment grade either.

But regardless of where the level should be for these issues, why is there a difference?

NTL.PR.F had a conversion option to fixed rate in 2006. NTL.PR.G has been mentioned on PrefBlog in a post about distressed preferreds.

BCE has announced:

that the Québec Superior Court has approved BCE’s plan of arrangement for the company’s privatization transaction and dismissed all claims asserted by or on behalf of certain holders of Bell Canada debentures.

“We are very pleased with the Superior Court’s decisions. On every point of contention, the Court ruled in favour of BCE,” said Martine Turcotte, Chief Legal Officer of BCE and Bell Canada. “The Court’s decisions affirm our long-standing position that the claims of these debentureholders are without merit and that BCE acted in accordance with its rights and obligations with respect to the debentureholders. We now look forward to closing the privatization transaction with the investor group led by Teachers’ Private Capital, the private investment arm of the Ontario Teachers’ Pension Plan, Providence Equity Partners, Madison Dearborn Partners, and Merrill Lynch Global Private Equity,” added Martine Turcotte.

The remaining conditions to the closing of the privatization transaction include the required approvals of the Canadian Radio-television and Telecommunications Commission and Industry Canada. Subject to any appeal by the debentureholders and the timing and terms of such an appeal, BCE expects the transaction to close in the first part of the second quarter of 2008.

In the event the debentureholders decide to appeal the Québec Superior Court’s judgments, they have agreed the appeal must be filed with the Québec Court of Appeal by March 17, 2008.

The deal has been previously reviewed on PrefBlog.

I never considered the bondholders’ suit to be much of a threat to the deal. The two threats I consider paramount are:

• Teachers’ (and its partners) willingness to proceed with a deal – the risk/reward will definitely have changed since the agreement, and
• Availability of financing

We will see!

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

Middlefield (the sponsor of STW) has announced:

its intention to make a normal course issuer bid for its Capital Units and Preferred Securities through the facilities of the Toronto Stock Exchange (the “TSX”). This normal course issuer bid is intended to commence on March 10, 2008 and will terminate on March 9, 2009. In accordance with the Declaration of Trust by which STRATA is governed, market purchases pursuant to its normal course issuer bid may be effected by the Fund.
    The Fund had 8,499,344 Capital Units and 5,929,455 Preferred Securities issued and outstanding as at February 28, 2008. STRATA may, during the 12 month period commencing March 10, 2008 purchase on the TSX up to 849,034 Capital Units and 586,648 Preferred Securities, being 10% of the public floats of 8,490,344 Capital Units and 5,866,484 Preferred Securities, respectively, and may not, in any 30 day period, purchase more than 169,986 Capital Units and 118,589 Preferred Securities, being 2% of the respective securities issued and outstanding. As at February 28, 2008, STRATA has purchased 3,100 Capital Units at an average price of $7.91 per Capital Unit under its previously approved normal course issuer bid. STRATA believes that its Capital Units and Preferred Securities represent good value for the Fund and purchases under the normal course issuer bid may serve to enhance returns to securityholders.

It’s hard to take this bid very seriously, seeing as they spent less than $25,000 on the previous issuer bid, but you never know! The NAV of STW.UN is $8.08 as of February 28, so the market price of $7.30 is favourable for buy-backs.

STW.PR.A was last mentioned on PrefBlog in December, 2006, in connection with their stealth redemption.

Sixty-Split Corporation has announced:

it has called 181,733 Preferred Shares for cash redemption on March 14, 2008 (in accordance with the Company’s Articles) representing approximately 20.257% of the outstanding Preferred Shares as a result of the special annual retraction of 363,490 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 March 13, 2008 will have approximately 20.257% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $25.00 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 March 14, 2008.

Payment of the amount due to holders of Preferred Shares will be made by the Company on March 14, 2008. From and after March 14, 2008 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.

SXT.PR.A is tracked by HIMIPref™ but is not currently included in the HIMIPref™ Indices due to low averageTradingValue. It was last moved to “Scraps” on the March 30, 2007 Rebalancing. 

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.

DBRS has announced that it:

today discontinued its ratings on the following preferred shares at the request of Quadravest Capital Management Inc. (the Promoter).

… followed by a list of the three captioned issues. These are all split-share corporations of that horrible form that includes a forward contract and a managed portfolio, like High Income Preferred Shares Corporation. I’m not going to look at the financials to see what I think of them; I’ll just report the NAV of the Managed Portfolio as reported by Quadravest and assume (assume! I can’t even be bothered to check my files!) that this is supposed to cover redemption of the indicated shares.

CGQ.E was downgraded to Pfd-5 on 2006-10-25. Par Value $15.00, Managed Portfolio NAV $12.44.

STQ.E was downgraded to Pfd-5 on 2008-1-7. Par Value $15.00, Managed Portfolio NAV $13.38.

STR.E was downgraded to Pfd-5(low) on 2005-10-25. Par Value $25.00, Managed Portfolio NAV $18.98.
 

Quebecor World has announced:

the final conversion rate applicable to the 3,975,663 Series 5 Cumulative Redeemable First Preferred Shares (TSX: IQW.PR.C) (the “Series 5 Preferred Shares”) that will be converted into Subordinate Voting Shares effective as of March 1, 2008. Taking into account all accrued and unpaid dividends on the Series 5 Preferred Shares up to and including March 1, 2008, Quebecor World has determined that, in accordance with the provisions governing the Series 5 Preferred Shares, each Series 5 Preferred Share will be converted on March 1, 2008 into 12.93125 Subordinate Voting Shares. Registered holders of Series 5 Preferred Shares who submitted notices of conversion on or prior to December 27, 2007 will receive in the coming days from Quebecor World’s transfer agent and registrar, Computershare Investor Services Inc., certificates representing their Subordinate Voting Shares resulting from the conversion. Approximately 51.4 million new Subordinate Voting Shares will thus be issued by Quebecor World to holders of Series 5 Preferred Shares on March 1, 2008. Quebecor World will apply to list the 51.4 million Subordinate Voting Shares on The Toronto Stock Exchange (TSX), although there can be no assurance that the TSX will accept the listing of such shares.

Quebecor World is currently in creditor protection and is on review for possible delisting. The conversion of over half the IQW.PR.C has been discussed previously.

CA Bancorp has announced:

C.A. Bancorp Canadian Realty Finance Corporation (the “Corporation”) has closed its initial public offering (the “Offering”).

Gross Proceeds: At the closing, the Corporation issued 1,440,000 Preferred Shares, Series 1 (the “Preferred Shares”) for aggregate gross proceeds of $36,000,000. The agents have been granted an over-allotment option to purchase up to 216,000 Preferred Shares at any time during the next 30 days.

Trading Information: The Preferred Shares commenced trading on the Toronto Stock Exchange (“TSX”) today under the symbol RF.PR.A.

This issue will not be tracked by HIMIPref™ for reasons that have been previously discussed.

BCE Inc. has announced:

that 10,755,445 of its 20,000,000 Cumulative Redeemable First Preferred Shares, Series AC (“Series AC Preferred Shares”) have been tendered for conversion, on a one-for-one basis, into Cumulative Redeemable First Preferred Shares, Series AD (“Series AD Preferred Shares”). Consequently, BCE will issue 10,755,445 new Series AD Preferred Shares on March 1, 2008. The balance of the Series AC Preferred Shares that have not been converted will remain outstanding and will continue to be listed on The Toronto Stock Exchange under the symbol BCE.PR.C.
    The Series AC Preferred Shares will pay on a quarterly basis, for the five-year period beginning on March 1, 2008, as and when declared by the Board of Directors of BCE, a fixed dividend based on an annual dividend rate of 4.60%.
    The Series AD Preferred Shares will pay a monthly floating adjustable cash dividend for the five-year period beginning on March 1, 2008, as and when declared by the Board of Directors of BCE. The Series AD Preferred Shares will be listed on The Toronto Stock Exchange under the symbol BCE.PR.D and should start trading on a when-issued basis at the opening of the market on February 26, 2008.

The press release also reiterates the purchase price for the issues should the Teachers’ bid close: BCE.PR.C = $25.76 and BCE.PR.D = $25.50.

I previously recommended conversion to BCE.PR.D, on a balance of risks basis.