Category: Issue Comments

DBRS has announced that it:

upgraded the ratings of National Bank of Canada (National or the Bank) and its related entities, including the Bank’s Long-Term Issuer Rating to AA from AA (low) and Short-Term Issuer Rating to R-1 (high) from R-1 (middle). Additionally, DBRS Morningstar changed the trends on all ratings to Stable from Positive. National’s Long-Term Issuer Rating is composed of an Intrinsic Assessment of AA (low) and a Support Assessment of SA2, which reflects the expectation of timely systemic support from the Government of Canada (rated AAA with a Stable trend by DBRS Morningstar). As a result of the SA2 designation, the Bank’s Long-Term Issuer Rating benefits from a one-notch uplift.

KEY RATING CONSIDERATIONS
The upgrades and Stable trends recognize National’s successful expansion of its footprint in targeted markets and niches across Canada, especially in Wealth Management (WM) and Financial Markets (FM). In addition, the Bank’s strong performance over the last few years, with Personal and Commercial (P&C) and WM now contributing a larger portion of earnings, has placed National at the top of its peer range in terms of profitability metrics.

The ratings also reflect National’s dominance in its home province, the Province of Québec (Québec; rated AA (low) with a Stable trend by DBRS Morningstar), which had experienced strong economic growth prior to the Coronavirus Disease (COVID-19) pandemic and is now showing a healthy rebound. Furthermore, the Bank benefits from strong preprovision earnings, while the transformation efforts in its P&C business and growth of its WM business have driven growth in client deposits. The ratings also consider the small yet growing contribution of the U.S. Specialty Finance and International (USSF&I) segment, which DBRS Morningstar views as having a higher risk profile, as well as potentially more volatile earnings. Lastly, DBRS Morningstar notes that National’s FM business segment is an important contributor to the Bank’s franchise and has benefitted from the market volatility experienced in the last couple of years. Although the majority of transactions are client driven, the segment’s activities could expose the Bank to increased capital markets risk from significant market downturns.

The ratings also consider that government support measures have largely mitigated the negative economic impacts of the pandemic. Positively, economic performance has rebounded, and the labour market is essentially at full capacity; however, headwinds persist from a potentially aggressive interest rate tightening cycle to combat inflation, geopolitical tensions related to the Russia-Ukraine conflict, supply-chain disruptions, and the pandemic. Furthermore, DBRS Morningstar remains concerned about the combination of high Canadian household debt levels that have reached an all-time high and elevated home prices that have been driven by housing market imbalances and robust demand during the pandemic (particularly in the greater Toronto and Vancouver areas). Housing prices remain vulnerable and, as a result, National and its Canadian peers remain susceptible to adverse changes in the Canadian real estate market. Positively, DBRS Morningstar views National’s residential mortgage loan portfolio as conservatively underwritten, reflecting the Bank’s strong risk culture.

Affected issues are NA.PR.C, NA.PR.E, NA.PR.G, NA.PR.S and NA.PR.W.

Bank of Montreal has announced:

its intention to redeem all of its 20,000,000 outstanding Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 40 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 40”) for an aggregate total of $500 million on May 25, 2022. The redemption has been approved by the Office of the Superintendent of Financial Institutions.

The Preferred Shares Series 40 are redeemable at the Bank’s option on May 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 $0.28125 per share for the Preferred Shares Series 40 announced by the Bank on March 1, 2022 will be paid in the usual manner on May 25, 2022, to shareholders of record on May 2, 2022.

Notice will be delivered to holders of the Preferred Shares Series 40 in accordance with the terms thereof.

BMO.PR.C is a FixedReset, 4.50%+333, that commenced trading 2017-5-25 after being announced 2017-2-28. It has been tracked by HIMIPref™ and has been assigned to the FixedResets (Premium) subindex.

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

BEP.PR.R closed today with no announcement from the company.

BEP.PR.R is a Straight Perpetual, 5.50%, announced April 5.

The issue traded 311,625 shares today in a range of 23.51-24.80 before closing at 23.60-80. As the HIMI PerpetualDiscount index has fallen about 5% since the April 5 announcement date, we may conclude that the issue fell more-or-less in-line with the market.

Vital statistics are:

In connection with its announcement of a new issue of 5.50% Straight Perpetuals, Brookfield Renewable Partners L.P. has announced (emphasis added):

Brookfield Renewable intends to use the net proceeds from this offering to finance and/or refinance investments made in renewable power generation assets or businesses and to support the development of clean energy technologies that constitute Eligible Investments, including the potential redemption of all or a portion of the Partnership’s Class A Preferred Limited Partnership Units, Series 11 on April 30, 2022.

BEP.PR.K is a FixedReset, 5.00%+382M500, that commenced trading 2017-2-14 after being announced 2017-2-7. Note that distributions on this security have been a mix of ordinary income and return of capital. It has been tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

Note that this is a ‘Potential Redemption’ only. Redemptions only become offical when a formal notice of redemption is issued.

Update, 2022-4-5-11:50pm: The company has announced (at 8:14pm, according to SEDAR):

that it intends to redeem all of its outstanding Class A Preferred Limited Partnership Units, Series 11 (the “Series 11 Preferred Units”) (TSX: BEP.PR.K) for cash on April 30, 2022. The redemption price for each Series 11 Preferred Unit will be C$25.00. Holders of Series 11 Preferred Units of record as of April 14, 2022 will receive the previously declared final quarterly distribution of C$0.3125 per Series 11 Preferred Unit.

I will leave it to the lawyers to argue about the meaning of “intends” as opposed to “potential”.

TC Energy Corporation has announced that it:

will redeem its issued and outstanding Cumulative Redeemable Minimum Rate Reset First Preferred Shares, Series 15 (Series 15 Shares) (TSX:TRP.PR.K) on May 31, 2022 (Redemption Date) at a price equal to $25.00 per share (Redemption Price) and provided notice today to the sole registered holder of the Series 15 Shares in accordance with their terms.

Subject to approval by our Board of Directors, the Company expects to declare a final quarterly dividend of $0.30625 per Series 15 Share, for the period up to but excluding May 31, 2022, payable on May 31, 2022 to shareholders of record on May 17, 2022. This would be the final dividend on the Series 15 Shares and, as the Redemption Date is also a dividend payment date, the Redemption Price will not include any accrued and unpaid dividends. Subsequent to the Redemption Date, the Series 15 Shares will cease to be entitled to dividends and will be delisted from the Toronto Stock Exchange.

Non-registered holders of Series 15 Shares should contact their broker or other intermediary for information regarding the redemption process for the Series 15 Shares in which they hold a beneficial interest.

TRP.PR.K is a FixedReset, 4.90%+385M490, that commenced trading 2016-11-21 after being announced 2016-11-14. TC Energy announced in early March, 2022, that it was considering the redemption, which caused a certain amount of confusion. It has been tracked by HIMIPref™ and assigned to the FixedReset (Premium) subindex.

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

Partners Value Split Corp. has announced:

the completion of its previously announced issue of 6,000,000 Class AA Preferred Shares, Series 13 (the “Series 13 Preferred Shares”) at an offering price of $25.00 per Series 13 Preferred Share, raising gross proceeds of $150,000,000. The Series 13 Preferred Shares carry quarterly fixed cumulative preferential dividends representing a 4.45% annualized yield on the offering price and have a final maturity of May 31, 2029. The Series 13 Preferred Shares have been listed and posted for trading on the Toronto Stock Exchange under the symbol PVS.PR.K. The net proceeds of the offering will be used by the Company to pay a special dividend on the Company’s capital shares.

Prior to the closing of the offering, the Company subdivided the existing capital shares held by Partners Value Investments Inc. so that there are an equal number of preferred shares and capital shares outstanding.

PVS.PR.K is a SplitShare, 4.45%, 7-year issue announced 2022-3-17. It will be tracked by HIMIPref™ and has been added to the SplitShare subindex. Neither the press release nor anything on SEDAR mentions their screw-up with the definition of the ‘Series 13 Redemption Date’, let alone clarifying the issue. Naturally, given the uselessness of the company administration, my ‘phone call asking for clarification has not been returned.

The issue traded 329,875 shares in a range of 24.80-91 before closing at 24.80-85. Vital Statistics are:

Brookfield Office Properties Inc. (“Brookfield”), a subsidiary of Brookfield Property Partners L.P., has announced:

that after having taken into account all election notices received by the March 15, 2022 deadline for the conversion of the Class AAA Preference Shares, Series EE (the “Series EE Shares”) (TSX: BPO.PR.E) into Class AAA Preference Shares, Series FF (the “Series FF Shares”), the holders of Series EE Shares are not entitled to convert their Series EE Shares into Series FF Shares. There were 122,460 Series EE Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series FF Shares.

The Series EE Shares will pay on a quarterly basis, for the five-year period beginning on April 1, 2022, as and when declared by the board of directors of Brookfield, a fixed dividend based on an annual dividend rate of 5.496% ($0.3435 per share per quarter).

BPO.PR.E was issued as a FixedReset, 5.10%+396M510, that commenced trading 2017-2-17 after being announced 2017-2-9. It is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns. The issue reset to 5.496% in 2022.

Brookfield Office Properties Inc. (“Brookfield”), a subsidiary of Brookfield Property Partners L.P. has announced:

that after having taken into account all election notices received by the March 15, 2022 deadline for the conversion of the Class AAA Preference Shares, Series P (the “Series P Shares”) (TSX: BPO.PR.P) into Class AAA Preference Shares, Series Q (the “Series Q Shares”), the holders of Series P Shares are not entitled to convert their Series P Shares into Series Q Shares. There were 118,948 Series P Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series Q Shares.

The Series P Shares will pay on a quarterly basis, for the five-year period beginning on April 1, 2022, as and when declared by the board of directors of Brookfield, a fixed dividend based on an annual dividend rate of 4.536% ($0.2835 per share per quarter).

BPO.PR.P was issued as a FixedReset, 5.15%+300, that commenced trading 2010-10-21 after being announced 2010-10-13. The issue reset to 4.161% in 2016; I recommended against conversion; and there was no conversion. The issue reset to 4.536% in 2022.

Brompton Funds has announced:

As a result of strong performance, Brompton Split Banc Corp. (the “Company”) is pleased to announce that the board of directors has approved an extension of the maturity date of the Class A and Preferred shares of the Company for an additional 5-year term to November 29, 2027. The reset preferred share dividend rate for the extended term will be announced at least 60 days prior to the original November 29, 2022 maturity date and will be based on market yields for preferred shares with similar terms at that time.

The term extension allows Class A shareholders to continue to invest in the Canadian bank sector with an attractive distribution rate of 8.4% based on the March 22, 2022 closing price and the opportunity for capital appreciation. Canadian banks continue to offer attractive dividend yields and return on equity. As well, the extension of the term of the Company is not a taxable event and enables shareholders to defer potential capital gains tax liability that would have otherwise been realized on the redemption of the Class A shares or Preferred Shares at the end of the term, until such time as such shares are disposed of by shareholders.

Since inception in November 2005 to February 28, 2022, the Class A shares have delivered a 13.2% per annum total return, outperforming the S&P/TSX Capped Financials Index by 3.8% per annum and the S&P/TSX Composite Index by 5.8% per annum.(1) Since inception to February 28, 2022, Class A shareholders have received cash distributions of $19.15 per share. Class A shareholders also have the option to reinvest their cash distributions in a dividend reinvestment plan which is commission free to participants.

The term extension offers Preferred shareholders the opportunity to enjoy preferential cash dividends until November 29, 2027. Since inception, the Preferred shares have delivered a 5.1% per annum total return, outperforming the S&P/TSX Preferred Share Index by 2.2% per annum with lower volatility.(1)

Brompton Split Banc Corp. invests, on an approximately equal weighted basis in a portfolio consisting of common shares of the six largest Canadian banks (currently, Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, The Bank of Nova Scotia and The TorontoDominion Bank). In addition, the Company may hold up to 10% of the total assets of the Portfolio in investments in global financial companies for the purposes of enhanced diversification and return potential.

Brookfield Asset Management Inc. has announced:

that 147,537 of its Cumulative Class A Preference Shares, Series 26 (the “Series 26 Shares”) (TSX: BAM.PR.T) and 27,550 of its Cumulative Class A Preference Shares, Series 46 (the “Series 46 Shares”) (TSX: BAM.PF.I), were tendered for conversion into Cumulative Class A Preference Shares, Series 27 (the “Series 27 Shares”) and Cumulative Class A Preference Shares, Series 47 (the “Series 47 Shares”), respectively.

After taking into account all shares tendered for conversion, there would be less than one million shares outstanding for each of the Series 27 Shares and the Series 47 Shares, as of March 31, 2022, the conversion date. Accordingly, as provided in the share conditions of each of the series, there will be no conversion of Series 26 Shares into Series 27 Shares, nor of Series 46 Shares into Series 47 Shares and holders of Series 26 Shares and of Series 46 Shares will retain their Series 26 Shares and Series 46 Shares, respectively.

BAM.PF.I was issued as a FixedReset, 4.80%+385M480 that commenced trading 2016-11-18 after being announced 2016-11-10. BAM.PF.I will reset at 5.386% effective April 1, 2022. I recommended against conversion.