Category: Issue Comments

Bombardier Inc. has announced (on 2022-7-12):

that as of August 1, 2022, its Series 3 Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of Bombardier Inc., cash dividends for the following five years that will be based on a fixed rate equal to the product of (a) the average of the yields to maturity that would be carried by a Government of Canada bond with a five-year maturity, designated on July 11, 2022 by each of National Bank Financial Inc. and TD Securities Inc., namely 3.164%, multiplied by (b) 145%, which multiplier was previously announced on June 17, 2022.

Accordingly, the annual dividend rate applicable to the Series 3 Preferred Shares for the period of five years beginning on August 1, 2022 will be 4.588%.

As a reminder, any registered shareholder who wishes to convert his or her Series 2 and/or Series 3 Preferred Shares must complete and sign the conversion panel contained on the back of the Series 2 or Series 3 Preferred Share certificate, as the case may be, and deliver it to Computershare Investor Services Inc., and any registered shareholder who wishes to revoke or amend his or her previously delivered conversion instructions must notify Computershare Investor Services Inc., in each case at the latest by 5:00 p.m. (Montréal time) on July 18, 2022. Likewise, shareholders who are beneficial owners and who wish to exercise their right of conversion or, alternatively, revoke or amend their instructions should communicate as soon as possible with their broker or other nominee and follow their instructions. In that case, it is important that they follow such instructions and act in the timeframe advised so as to provide enough time to their broker or other nominee to meet the July 18, 2022 deadline.

This reporting is late and appears as a matter of record only!

Brookfield Asset Management Inc. has announced (in October, 2021):

that it has determined the fixed dividend rate on its Class A Preference Shares, Series 9 (the “Series 9 Preferred Shares”) (TSX: BAM.PR.G) for the five years commencing November 1, 2021 and ending October 31, 2026.

If declared, the fixed quarterly dividends on the Series 9 Preferred Shares during the five years commencing November 1, 2021 will be paid at an annual rate of 2.75% ($0.171875 per share per quarter). This dividend rate represents 218% of the interpolated yield, calculated as of October 12, 2021 at 10:00 a.m. (Toronto time), on the 1.00% Government of Canada bond due September 1, 2026 and the 1.00% Government of Canada bond due June 1, 2027. This dividend will be payable quarterly on the first day of February, May, August and November, commencing with the dividend payable on February 1, 2022.

The annual rate currently paid on the Series 9 Preferred Shares is 2.75%. A quarterly dividend payable at this rate will be paid on November 1, 2021 to shareholders of record on October 15, 2021.

Conversion Rights
Holders of Series 9 Preferred Shares have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on October 18, 2021, to convert all or part of their Series 9 Preferred Shares, on a one-for-one basis, into Brookfield’s Class A Preference Shares, Series 8 (the “Series 8 Preferred Shares”) (TSX: BAM.PR.E), effective November 1, 2021. Holders of Series 9 Preferred Shares who elect to convert their shares by the conversion deadline will receive Series 8 Preferred Shares, effective November 1, 2021 and will be entitled to receive, if declared, a monthly floating-rate dividend based on the prime rate.

Holders of Series 8 Preferred Shares also have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on October 18, 2021, to convert all or part of their Series 8 Preferred Shares, on a one-for-one basis, into Series 9 Preferred Shares, effective November 1, 2021. Holders of Series 8 Preferred Shares who elect to convert their shares by the conversion deadline will receive Series 9 Preferred Shares, effective November 1, 2021 and will be entitled to receive, if declared, the fixed-rate dividend as described above.

Holders of Series 9 Preferred Shares are not required to elect to convert all or any part of their Series 9 Preferred Shares into Series 8 Preferred Shares and holders of Series 8 Preferred Shares are not required to elect to convert all or any part of their Series 8 Preferred Shares into Series 9 Preferred Shares.

As provided in the share conditions of the Series 9 Preferred Shares, (i) if Brookfield determines that there would be fewer than 500,000 Series 9 Preferred Shares outstanding after November 1, 2021, all remaining Series 9 Preferred Shares will be automatically converted into Series 8 Preferred Shares on a one-for-one basis effective November 1, 2021; and (ii) if Brookfield determines that there would be fewer than 500,000 Series 8 Preferred Shares outstanding after November 1, 2021, no Series 9 Preferred Shares will be permitted to be converted into Series 8 Preferred Shares. There are currently 5,515,981 Series 9 Preferred Shares outstanding.

Similarly, as provided in the share conditions of the Series 8 Preferred Shares, (i) if Brookfield determines that there would be fewer than 500,000 Series 8 Preferred Shares outstanding after November 1, 2021, all remaining Series 8 Preferred Shares will be automatically converted into Series 9 Preferred Shares on a one-for-one basis effective November 1, 2021; and (ii) if Brookfield determines that there would be fewer than 500,000 Series 9 Preferred Shares outstanding after November 1, 2021, no Series 8 Preferred Shares will be permitted to be converted into Series 9 Preferred Shares. There are currently 2,476,185 Series 8 Preferred Shares outstanding.

Holders of Series 8 Preferred Shares and Series 9 Preferred Shares will again have the opportunity to convert their shares into the other series on November 1, 2026 and every five years thereafter.

They later announced (on 2021-10-22):

that holders of 8,202 of its Class A Preference Shares, Series 8 (the “Series 8 Preferred Shares”) (TSX: BAM.PR.E) and holders of 853,503 of its Class A Preference Shares, Series 9 (the “Series 9 Preferred Shares”) (TSX: BAM.PR.G) have elected, effective November 1, 2021, to convert their shares into an equivalent number of shares of the other series. Following these conversions, there will be 3,321,486 Series 8 Preferred Shares and 4,670,680 Series 9 Preferred Shares issued and outstanding.

I didn’t post this at the proper time! This post exists as a matter of record only!

Birchcliff Energy Ltd. has announced:

its intention to redeem all of its 2,000,000 issued and outstanding cumulative redeemable preferred shares, Series A (the “Series A Preferred Shares”) and all of its 1,528,219 issued and outstanding cumulative redeemable preferred shares, Series C (the “Series C Preferred Shares”) on September 30, 2022 (the “Redemption Date”) for a redemption price equal to $25.00 per share (the “Redemption Price”), less any tax required to be deducted or withheld by the Corporation. The aggregate Redemption Price payable by the Corporation to redeem the Series A and Series C Preferred Shares will be approximately $88.2 million. As September 30, 2022 is a federal statutory holiday in Canada, the aggregate Redemption Price will be paid by the Corporation to the sole registered holder of the Series A and Series C Preferred Shares on the next business day, being October 3, 2022.

In addition, the Corporation’s board of directors has declared a quarterly cash dividend of $0.527677 per Series A Preferred Share and $0.441096 per Series C Preferred Share, which dividends will be paid on October 3, 2022 to the holders of record at the close of business on September 15, 2022. The dividends have been designated as eligible dividends for the purposes of the Income Tax Act (Canada). These will be the final quarterly dividends on the Series A and Series C Preferred Shares and will be paid separately from the Redemption Price. Upon the payment of these dividends, there will be no accrued and unpaid dividends on the Series A or Series C Preferred Shares.

The Corporation has provided notice today of the Redemption Price and the Redemption Date to the sole registered holder of the Series A Preferred Shares and the Series C Preferred Shares in accordance with the terms of the shares as set out in the Corporation’s articles. Non-registered holders of Series A and Series C Preferred Shares should contact their broker or other intermediary for information regarding the redemption process for the Series A and Series C Preferred Shares in which they hold a beneficial interest. The Corporation’s transfer agent for the Series A and Series C Preferred Shares is Computershare Investor Services Inc. Questions regarding the redemption process may also be directed to Computershare Investor Services Inc. at 1-800-564-6253 or by email to corporateactions@computershare.com.

BIR.PR.A was issued as a FixedReset, 8.00%+683 that commenced trading 2012-8-8. It reset to 8.374% in 2017.

BIR.PR.C was issued as a seven-year retractible, 7.00%, that commenced trading in 2013.

Neither issue has been tracked by HIMIPref™. This company notice confirms their earlier, less official announcement.

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

BCE Inc. has announced (on July 14):

Holders of fixed-rate BCE Inc. Series AA Preferred Shares have the right to convert all or part of their shares, effective on September 1, 2022, on a one-for-one basis into floating-rate Cumulative Redeemable First Preferred Shares, Series AB of BCE Inc. (the “Series AB Preferred Shares”). In order to convert their shares, holders must exercise their right of conversion during the conversion period which runs from July 18, 2022 until 5:00 p.m. (Eastern time) on August 22, 2022.
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As of September 1, 2022, the Series AA Preferred Shares, should they remain outstanding, will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be determined by BCE Inc. on August 8, 2022 but which shall not be less than 80% of the five-year Government of Canada Yield (as defined in BCE Inc.’s articles) compounded semiannually and computed on August 8, 2022 by two investment dealers appointed by BCE Inc. The annual dividend rate applicable to the Series AA Preferred Shares will be published on August 10, 2022 in the national edition of The Globe and Mail, the Montreal Gazette and Le Devoir and will be posted on BCE Inc.’s website at www.bce.ca.

BCE.PR.A is a FixedFloater that was issued with a 5.45% coupon in 2002 and reset to 4.80% in 2007; about half were converted to the RatchetRate BCE.PR.B.. It then reset to 3.45% in 2012 and there was a small net conversion back to the FixedFloater. It reset to 3.61% in 2017 and there was a 6% net conversion in the FixedFloater.

BCE.PR.B is a RatchetRate preferred that is interconvertible with BCE.PR.A every five years.

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

Manulife Financial Corporation has announced:

that it does not intend to exercise its right to redeem all or any of its currently outstanding 10,000,000 Non-cumulative Rate Reset Class 1 Shares Series 9 (the “Series 9 Preferred Shares”) (TSX: MFC.PR.I) on September 19, 2022. As a result, subject to certain conditions described in the prospectus supplement dated May 16, 2012 relating to the issuance of the Series 9 Preferred Shares (the “Prospectus”), the holders of the Series 9 Preferred Shares have the right, at their option, to convert all or part of their Series 9 Preferred Shares on a one-for-one basis into Non-cumulative Floating Rate Class 1 Shares Series 10 of Manulife (the “Series 10 Preferred Shares”) on September 19, 2022. A formal notice of the right to convert Series 9 Preferred Shares into Series 10 Preferred Shares will be sent to the registered holders of the Series 9 Preferred Shares in accordance with the share conditions of the Series 9 Preferred Shares. Holders of Series 9 Preferred Shares are not required to elect to convert all or any part of their Series 9 Preferred Shares into Series 10 Preferred Shares. Holders who do not exercise their right to convert their Series 9 Preferred Shares into Series 10 Preferred Shares on such date will retain their Series 9 Preferred Shares, unless automatically converted in accordance with the conditions below.

The foregoing conversion right is subject to the conditions that: (i) if, after September 2, 2022, Manulife determines that there would be less than 1,000,000 Series 9 Preferred Shares outstanding on September 19, 2022, then all remaining Series 9 Preferred Shares will automatically be converted into an equal number of Series 10 Preferred Shares on September 19, 2022, and (ii) alternatively, if, after September 2, 2022, Manulife determines that there would be less than 1,000,000 Series 10 Preferred Shares outstanding on September 19, 2022, then no Series 9 Preferred Shares will be converted into Series 10 Preferred Shares. In either case, Manulife will give written notice to that effect to any registered holders of Series 9 Preferred Shares affected by the preceding minimums on or before September 12, 2022.

The dividend rate applicable to the Series 9 Preferred Shares for the 5-year period commencing on September 20, 2022, and ending on September 19, 2027, and the dividend rate applicable to the Series 10 Preferred Shares for the 3-month period commencing on September 20, 2022, and ending on December 19, 2022, will be determined and announced by way of a news release on August 22, 2022. Manulife will also give written notice of these dividend rates to the registered holders of Series 9 Preferred Shares.

Beneficial owners of Series 9 Preferred Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (Toronto time) on September 2, 2022. Conversion inquiries should be directed to Manulife’s Registrar and Transfer Agent, TSX Trust Company, at 1‑800-783-9495.

Subject to certain conditions described in the Prospectus, Manulife may redeem the Series 9 Preferred Shares, in whole or in part, on September 19, 2027, and on September 19 every five years thereafter and may redeem the Series 10 Preferred Shares, in whole or in part, after September 19, 2022.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 10 Preferred Shares effective upon conversion. Listing of the Series 10 Preferred Shares is subject to Manulife fulfilling all the listing requirements of the TSX and, upon approval, the Series 10 Preferred Shares will be listed on the TSX under the trading symbol “MFC.PR.S”.

MFC.PR.I was issued as a FixedReset, 4.40%+286, that commenced trading 2012-5-24 after being announced 2012-5-16. After the 2017 announcement the issue would be extended, the rate was reset to 4.35100% and I recommended against conversion; there was no conversion. It is tracked by HIMIPref™ and is included in the FixedReset (Discount) subindex.

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

DBRS has announced that it:

withdrew its rating on Canaccord Genuity Group Inc.’s (CG) Cumulative Preferred Shares. The decision to withdraw the rating was made at the issuer’s request. The last rating action on CG was on October 22, 2021, when DBRS Morningstar confirmed the Company’s Cumulative Preferred Shares rating at Pfd-4 (high) with a Stable trend.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

Affected issues are CF.PR.A and CF.PR.C

Bank of Montreal has announced:

its intention to redeem all of its 16,000,000 outstanding Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 42 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 42”) for an aggregate total of $400 million on August 25, 2022. The redemption has been approved by the Office of the Superintendent of Financial Institutions.

The Preferred Shares Series 42 are redeemable at the Bank’s option on August 25, 2022 (the “Redemption Date”) at a redemption price of $25.00 per share. Payment of the redemption price will be made by the Bank on the Redemption Date.

Separately from the payment of the redemption price, the final quarterly dividend of $0.275 per share for the Preferred Shares Series 42 announced by the Bank on May 25, 2022 will be paid in the usual manner on August 25, 2022, to shareholders of record on August 2, 2022.

Notice will be delivered to holders of the Preferred Shares Series 42 in accordance with the terms thereof.

BMO.PR.D is a FixedReset, 4.40%+317, NVCC, that commenced trading 2017-6-29 after being announced 2017-6-20. It has been tracked by HIMIPref™ and is currently assigned to the FixedResets (Discount) subindex.

What makes this redemption fascinating is that yesterday BMO announced:

a domestic public offering of $500 million of Non-Cumulative 5-Year Fixed Rate Reset Class B Preferred Shares, Series 50 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 50”).

The Preferred Shares Series 50 will be issued to certain institutional investors at a price of $1,000 per share. Holders will be entitled to receive non-cumulative preferential fixed semi-annual dividends, as and when declared by the Board of Directors of the Bank, payable in the amount of $24.64400000 per share, to yield 7.376 per cent annually, for the initial period to, but excluding, November 26, 2027. Thereafter, the dividend rate will reset every five years at a rate equal to the then 5-Year Government of Canada bond yield plus 4.250 per cent.

Subject to regulatory approval, during the period from October 26, 2027 to and including November 26, 2027 and during the period from October 26 to and including November 26 every fifth year thereafter, on not less than 15 days nor more than 60 days’ notice, the Bank may redeem the Preferred Shares Series 50 in whole or in part at par, plus any declared and unpaid dividends.

Upon the occurrence of certain regulatory events and subject to regulatory approval, the Bank may, at its option and without the consent of the holder, at any time following such occurrence, on not less than 30 days nor more than 60 days’ notice, redeem the Preferred Shares Series 50 in whole but not in part at par, plus any declared and unpaid dividends.

BMO Capital Markets is acting as lead agent on the issue. The anticipated closing date is July 27, 2022. The net proceeds to the Bank from the sale of Preferred Shares Series 50 will be added to the general funds of the Bank and will be utilized for general banking purposes.

The Preferred Shares Series 50 will be offered by way of a prospectus supplement to the Bank’s short form base shelf prospectus dated March 11, 2022, to be filed on or about July 22, 2022 with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada.

So the upshot is that BMO is issuing a FixedReset at +425 in order to fund a redemption of BMO.PR.D, a FixedReset +317. The redemption will cost $400-million; the new issue is worth $500-million. And yes, I know that the bank claims that “The net proceeds to the Bank from the sale of Preferred Shares Series 50 will be added to the general funds of the Bank and will be utilized for general banking purposes” but I find that statement somewhat suspicious in view of the timing of these two events.

To say this is unusual is to understate the issue. The only rationale I can think of was suggested by Addenda Capital’s Mark Kaminski In collaboration with François Desjardins, in a piece published in November, 2021:

To understand the rationale behind OTC preferred shares, we first need to look at an instrument that entered the financial market last year: the limited recourse capital note (LRCN).
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There is a ceiling, as OSFI pointed out in its July 2020 ruling: LRCNs issued by a federally regulated bank can only fill up 50% of its AT1 bucket. By issuing OTC preferred shares, banks gain the ability to issue more LRCNs. Our understanding of the market’s thinking is that once OSFI is comfortable that there is an established OTC preferred share market, it will raise the LRCN limits.

In essence, the banks are moving regulatory capital from retail investors (i.e. exchange-traded preferred shares) to institutional investors. In our view, OSFI is interested in seeing an established OTC preferred share market in the event that those LRCNs would be converted to preferred shares.

Well, if the coupon and reset rate on the new issue is any indication, it’s going to cost the banks a hell of a lot of money to establish an OTC market for preferreds. And, if the market has any sense at all (not always a good bet), then the yields on LRCNs will be equivalent to these OTC issues, since the LRCN is only an OTC preferred that has been dressed up like a bond to bamboozle the clients of portfolio managers who like to bamboozle their clients.

Surely it would make more sense to insist that an Exchange listing be sought for the preferred shares underlying the LRCNs? One could even insist that issuance of an LRCN should involve the issuance of X shares to the vehicle through which this charade is being funnelled, with another X shares being issued to the public with an Exchange listing. Or would that make the bamboozlement too transparent?

One way or another, something very odd is happening, with no disclosure made to the investing public.

Thanks to Assiduous Reader CanSiamCyp for bringing the redemption to my attention, and for previously bringing the OTC issue to my attention.

Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Class A Preferred Shares Series 45 (TSX: CM.PR.R) for cash. The redemption will occur on July 29, 2022. The redemption price is $25.00 per Series 45 share.

The $0.275000 quarterly dividend announced on May 26, 2022 will be the final dividend on the Series 45 shares and will be paid on July 28, 2022, covering the period to July 31, 2022, to shareholders of record on June 28, 2022.

Holders of the Series 45 shares should contact the financial institution, broker or other intermediary through which they hold the shares to confirm how they will receive their redemption proceeds.

CM.PR.R is a FixedReset, 4.40%+338, NVCC Compliant issue that commenced trading 2017-6-2 after being announced 2017-05-25. It has been tracked by HIMIPref™ and is currently part of the FixedResets (Discount) subindex.

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