Category: Issue Comments

DBRS has announced that it:

today downgraded the long- and short-term ratings of George Weston Limited (Weston or the Company). The Notes & Debentures have been downgraded to BBB from BBB (high), the Exchangeable Debentures to BBB (low) from BBB and the Preferred Shares to Pfd-3 from Pfd-3 (high), all with a Stable trend. At the same time, DBRS has downgraded Weston’s Commercial Paper rating to R-2 (high) from R-1 (low), also with a Stable trend.

This action removes Weston’s ratings from Under Review with Negative Implications, where they were placed on November 16, 2007 along with Loblaw Companies Ltd.’s (Loblaw).

Although management of Loblaw and Weston are separate, and there is no cross-default or cross-collateralization covenants on the respective debt, Weston’s ratings reflect the investment in Loblaw, as it is a significant portion of the group’s consolidated operations. DBRS’s approach in considering Weston’s debt ratings includes: 1) the implied rating for Weston’s wholly-owned operating businesses; and 2) the support of the Loblaw rating.

Last week, Loblaw’s long-term rating was downgraded to BBB (high) from A (low), while the short-term rating was downgraded to R-2 (high) from R-1 (low). The trend is Negative for the long-term ratings and Stable for the short-term rating. (See separate Loblaw Press Release dated February 7, 2008 for details.)

DBRS has completed its review of Weston and confirmed that the stand-alone businesses are well placed in the BBB rating category. The view reflects Weston’s above average operating efficiency, strong brands, and reasonable financial profile for companies within the bakery sector. The Stable trend reflects the fact that Weston has been successful at passing on price increases and maintaining its market position in a rising cost environment. With regards to the short-term rating, Weston’s liquidity profile is commensurate with the R-2 (high) category based on its long-term rating, the dividend income received from Loblaw, reasonably stable cash flow, a high level of cash and marketable investments and manageable debt levels.

With the downgrade of Loblaw’s ratings to BBB (high) and R-2 (high), the ratings for Weston at BBB and R-2 (high) reflect more its operating businesses and less the support from the Loblaw rating. As such, if there is any further deterioration in Loblaw’s long-term rating, it will not necessarily affect the long-term rating of Weston.

The November 16 Credit Watch has been previously reported. S&P has not yet made any changes from their P-3(high)/Watch Negative level.

The TSX has announced:

Ten new symbols will be added to TSX Quantum on Friday March 7th 2008.

    <<     The symbols are from the following issuers:

    Cinram International Income Fund           CRW.UN
    Cooperators General Insurance Co.          CCS.PR.C
    Cygnal Technologies Corp.                  CYN
    Fairfax Financial Holdings Ltd.            FFH
    HEARx Canada Inc.                          HUX
    Kinross Gold Corp.                         K, K.U, K.WT.B
    Nventa Biopharmaceuticals Corp.            NVN
    Technicoil Corp                            TEC
    >>

    These symbols join Telus Corporation (T and T.A) and TSX Group Inc. (X) that are already trading on TSX Quantum.
    Rik Parkhill, Interim CO-CEO, TSX Group Inc., said, “We are pleased with the robust performance and efficiency of TSX Quantum. As we continue to migrate symbols to the new trading platform, we are one step closer to realizing the goal of significant enhancement in performance and capacity across the entire market, which also offers a large benefit to our customers.”

The Quantum platform is the TSX’s new trading platform. I do not anticipate any market impact from this change.

CCS.PR.C was discussed recently on PrefBlog.

As previously discussed, BCE.PR.C is a fixed floater with a reset scheduled to take effect March 1, 2008. It is convertable (for a very limited time, so call your broker!) into BCE.PR.D, a “Ratchet Rate” Preferred.

The fixed rate payable on BCE.PR.C for the five years commencing March 1, 2008, will be 4.60% of par, or $1.15 p.a.

As implied by the previous discussion, I recommend conversion to BCE.PR.D, based on a balance of risks.

The announcement has been posted by BCE:

BCE Inc. will, on March 1, 2008, continue to have Cumulative Redeemable First Preferred Shares, Series AC (“Series AC Preferred Shares”) outstanding if holders of at least 2.5 million of its Series AC Preferred Shares elect not to convert such shares into Cumulative Redeemable First Preferred Shares, Series AD (“Series AD Preferred Shares”) by February 20, 2008. In such a case, as of March 1, 2008, the Series AC Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend of $0.2875 based on an annual dividend rate of 4.60% for the five-year period beginning on March 1, 2008.

Under and subject to the terms and conditions of the Definitive Agreement entered into by BCE Inc. in connection with its acquisition 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 Partners, Inc., the purchaser has agreed to purchase all outstanding Series AC Preferred Shares for a price of $25.76 per share, together with accrued but unpaid dividends to the Effective Date (as such term is defined in the Definitive Agreement). The purchaser has also agreed, on and subject to the terms and conditions of the Definitive Agreement, to purchase any Series AD Preferred Shares that might be issued by BCE Inc. on the conversion of the Series AC Preferred Shares for a price of $25.50 per share, together with accrued but unpaid dividends to the Effective Date. The Board of BCE Inc. has received opinions as to the fairness, from a financial point of view, of the consideration to be paid for the preferred shares from BCE Inc.’s financial advisors.

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.

It’s worth noting that HSB.PR.D was actually only the 27th-worst issue in the HIMIPref™ Universe, but only those issues included in the HIMIPref™ indices are examined for possible inclusion in this table. A lot of lower-volume and worse-credit issues were passed over.

Woo-hoo! You know what I like? I like redemptions at prices that exceed the market, that’s what I like! Redemptions are not always unfavourable!

FIG.PR.A closed today at 9.81-85, 4×9, after trading 20,437 shares in a range of 9.80-90. The sponsor, Faircourt Asset Management, has just announced:

that $30,000,000 of aggregate principal amount of preferred securities will be redeemed.
    Given the challenges facing global equity markets and resulting volatility, the Manager believes that to maintain appropriate balance in the fund between the Trust Units and Preferred Securities, redemptions are necessary. Therefore, the Manager announces that $30,000,000 in aggregate principal amount of the Trust’s 6.25% outstanding Preferred Securities (the “Preferred Securities”) will be redeemed on March 2, 2008 (the “Redemption
Date”). The scheduled Redemption Date of March 2, 2008 falls on a Sunday and payment will therefore be made in full on the next business day, March 3, 2008.
    Proceeds from the Preferred Securities redemption will amount to $10.1062 for each $10.00 principal amount of Securities, being equal to the aggregate of (i) $10.00 (the “Redemption Price”), and (ii) all accrued and unpaid interest hereon to but excluding the Redemption Date (collectively, the “Total Redemption Price”). The notice date of the Preferred Securities redemption is February 1, 2008. The Total Redemption Price for all Preferred Securities being redeemed is $30,318,600
    The Preferred Securities are being redeemed pursuant to the terms of the Trust Indenture governing the Preferred Securities, which permit a partial redemption at such time as the principal amount of the Preferred Securities exceeds 40% of the Total Assets of the Trust.

Assiduous Readers with extremely good memories will recall that there was also a redemption last August. The TSX states that 17,464,308 shares are outstanding, therefore the redemption proportion is a bit more than one-sixth.

Asset coverage on January 31 was 2.0+:1 according to the company. This redemption should bring coverage up to 2.4+:1.

FIG.PR.A is tracked by HIMIPref™ and is part of the Interest Bearing subindex. The issue has recently been removed from the S&P/TSX Preferred Share Index.

TD.PR.Q, which was announced shortly after BNS.PR.O was announced, commenced trading today and fears of a debacle were not realized. It traded 433,512 shares to close at 25.11-14, 6×19.

The greenshoe was fully exercised:

The Toronto-Dominion Bank (“TD”) today announced that a group of underwriters led by TD Securities Inc. has exercised the option to purchase an additional 2 million Non-cumulative Class A First
Preferred Shares, Series Q (the “Series Q Shares”) carrying a face value of $25.00 per share. This brings the total issue announced on January 22, 2008, and expected to close January 31, 2008, to 8 million shares and gross proceeds raised under the offering to $200 million.
    The Series Q Shares will yield 5.60% per cent annually and are redeemable by TD for cash, subject to regulatory consent, at a declining premium after approximately five years. TD has filed in Canada a prospectus supplement to its January 11, 2007 base shelf prospectus in respect of this issue.

More Later.

Later, More: Curve price at the close 2008-1-31 was 25.23.

BNS.PR.O, which caused a sharp downdraft when it was announced got off to a solid start today, trading 550,670 shares to close at 25.02-08, 48×20.

Not only that, but the greenshoe was fully exercised:

Scotiabank today announced that it completed the domestic offering of 9.2 million, 5.60% Non-cumulative Preferred Shares Series 17 (the “Preferred Shares Series 17”), including the full exercise of the over-allotment option, at a price of $25.00 per share. The gross proceeds of the offering were $230 million.
    The offering was made through a syndicate of investment dealers led by Scotia Capital Inc. Following the successful sale of the initially announced 8 million Preferred Shares Series 17, the syndicate fully exercised the over-allotment option to purchase an additional 1.2 million shares. The Preferred Shares Series 17 commence trading on the Toronto Stock Exchange today under the symbol BNS.PR.O.

More Later.

Later, More: Curve Price at the close 2008-1-31 was 25.26

SNP Health Split Corp. has announced:

that it has called 220,849 Preferred Shares for cash redemption on February 11, 2008 (in accordance with the Company’s Articles) representing approximately 19.162% of the outstanding Preferred Shares as a result of the special annual retraction of 571,698 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 February 8, 2008 will have approximately 19.162% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be US$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 February 11, 2008.

Payment of the amount due to holders of Preferred Shares will be made by the Company on February 11, 2008. From and after February 11, 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.

SNH.PR.U is not tracked by HIMIPref™.