Category: Issue Comments

TransAlta Corporation has announced (on March 18):

that (i) 1,417,338 of its 10,175,380 currently outstanding Cumulative Redeemable Rate Reset First Preferred Shares, Series A (“Series A Shares”) will be converted on March 31, 2021, on a one-for-one basis, into Cumulative Redeemable Floating Rate First Preferred Shares, Series B (“Series B Shares”), and (ii) 871,871 of its 1,824,620 currently outstanding Series B Shares will be converted on March 31, 2021, on a one-for-one basis, into Series A Shares. As a result, on March 31, 2021, the Company will have 9,629,913 Series A Shares issued and outstanding and 2,370,087 Series B Shares issued and outstanding.

The Series A Shares and Series B Shares are currently listed on the Toronto Stock Exchange under the symbols TA.PR.D and TA.PR.E, respectively.

TA.PR.D was issued as a FixedReset, 4.60%+203, that commenced trading 2010-12-10 after being announced 2010-12-2. In 2016, it reset to 2.709%. I recommended against conversion, but there was a 15% conversion to the FloatingReset, TA.PR.E, anyway. The issue reset to 2.877% in 2021.

TA.PR.E is a FloatingReset, Bills+203, that arose via a partial conversion from the FixedReset, TA.PR.D.

Partners Value Split Corp. has announced (on March 15):

its intention to redeem all 7,990,000 of its Class AA Preferred Shares, Series 6 (“Preferred Shares, Series 6”) for cash on March 31, 2021 (the “Redemption Date”) in accordance with the terms of the Preferred Shares, Series 6.

The redemption price per Preferred Shares, Series 6 will be equal to C$25.25 plus accrued and unpaid dividends of C$0.09272 per share to March 30, 2021 representing a total redemption price of C$25.34272 per share (the “Redemption Price”).

Notice will be delivered to holders of the Preferred Shares, Series 6 in accordance with the terms of the Preferred Shares, Series 6.

From and after the Redemption Date, the Preferred Shares, Series 6 will cease to be entitled to dividends or any other participation in any distribution of the assets of the Company and the holders thereof shall not be entitled to exercise any of their other rights as shareholders in respect thereof except to receive the Redemption Price (less any tax required to be deducted and withheld by the Company). After the redemption of the Preferred Shares, Series 6, the Company will consolidate the existing capital shares held by Partners Value Investments Inc. so that there are an equal number of preferred shares and capital shares outstanding.

Given that the directors and officers of PVS:

• Frank N.C. Lochan
• James L.R. Kelly
• Ralph J. Zarboni
• Brian D. Lawson
• Leslie Yuen
• Bryan Sinclair
• Loretta M. Corso

continue to be a useless pack of bozos, this information is not yet available on the company website.

The intent to redeem this issue was announced in September, 2020; the issue commenced trading in July 2014 as BNA.PR.F, a SplitShare, 4.50%, with 7-year term announced 2014-6-16 but the ticker symbol was changed in July 2014.

Note that the $0.25 redemption premium is taxable as a dividend. Some investors may wish to sell on the market prior to the redemption so that the market premium (probably a few pennies less than $0.25) is taxed as a capital gain, which may be offset be capital losses on other trades.
Update, 2021-3-22 The press release finally made its appearance on the company website.

First National Financial Corporation has announced:

that 399,700 of its outstanding cumulative 5-year rate reset Class A Preference Shares, Series 1 (“Series 1 Preference Shares”) were tendered for conversion, on a one-for-one basis, into cumulative floating rate Class A Preference Shares, Series 2 (“Series 2 Preference Shares”). The Company also announced that 497,388 of its outstanding Series 2 Preference Shares were tendered for conversion, on a one-for-one basis, into Series 1 Preference Shares.

After both conversions, effective April 1, 2021, the Company will have 2,984,835 Series 1 Preference Shares and 1,015,165 Series 2 Preference Shares outstanding and issued. The Series 1 Preference Shares will continue to be listed on the Toronto Stock Exchange (“TSX”) under the symbol FN.PR.A and the Series 2 Preference Shares will continue to be listed on the TSX under the symbol FN.PR.B.

FN.PR.A is a FixedReset, 4.65%+207, that commenced trading 2011-1-25 after being announced 2011-1-17. Notice of extension was given in February, 2016 and the issue reset to 2.79%. I recommended against conversion, but there was 28% conversion to the FloatingReset, FN.PR.B. Notice of the second extension was given in February, 2021. The issue reset at 2.895% in 2021.

FN.PR.B is a FloatingReset, Bills+207, that arose via a partial conversion from the FixedReset, FN.PR.A, in 2016.

National Bank of Canada has announced:

its intention, subject to approval from the Office of the Superintendent of Financial Institutions, to redeem all of its 16,000,000 issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series 34 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 34”) on May 15, 2021, for cash at a redemption price of $25.00 per share, together with all declared and unpaid dividends.

The quarterly dividend of $0.35 per Preferred Share Series 34 declared on February 24, 2021 is the final dividend on the Preferred Shares Series 34, and is payable in the usual manner on May 15, 2021 to shareholders of record on April 5, 2021, as previously announced.

Since May 15, 2021 is not a business day, amounts due to holders of Preferred Shares 34 on that date will be paid on the first business day following that date, namely, Monday, May 17, 2021.

Formal notice will be given to holders of Preferred Shares Series 34 in accordance with the terms of the shares.

The redemption of the Preferred Shares Series 34 is part of National Bank’s ongoing management of its regulatory capital.

NA.PR.X is a FixedReset, 5.60%+490, that commenced trading 2016-1-22 after being announced 2016-1-13.

Thanks to Assiduous Reader CanSiamCyp for ensuring I did not miss this.

The Empire Life Insurance Company has announced (on March 3, but inexplicably not yet on their website):

that it will exercise its right to redeem all of its 5,980,000 outstanding Non-Cumulative Rate Reset Preferred Shares, Series 1 (the “Preferred Shares Series 1”) on Saturday, April 17, 2021 at the price of $25.00 per Preferred Share Series 1 for an aggregate total of $149,500,000, plus declared and unpaid dividends.

On February 24, 2021, Empire Life announced that a dividend of $0.359375 per Preferred Shares Series 1 had been declared. This will be the final dividend on the Preferred Shares Series 1, and will be paid in the usual manner to shareholders of record on March 18, 2021, as previously announced. After April 17, 2021, the Preferred Shares Series 1 will cease to be entitled to dividends and the only remaining rights of holders of such shares will be to receive payment of the redemption amount.

Given April 17, 2021 is a Saturday, payment of the final dividend and the redemption amount will be made as noted above on Monday, April 19, 2021.

The Preferred Shares Series 1 are currently listed for trading on the Toronto Stock Exchange under the symbol EML.PR.A and will be de-listed from the TSX, as at the close of trading on Friday, April 16, 2021.

Beneficial holders of Preferred Shares Series 1 should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds.

The company had previously announced their intention to redeem this issue, given successful OSFI approval of, and market sale of, an issue of LRCNs.

EML.PR.A is a FixedReset, 5.75%+499, that commenced trading 2016-2-16 after being announced 2016-1-25.

Thanks to Assiduous Reader CanSiamCyp for ensuring I did not miss this.

Rogers Communications Inc. and Shaw Communications Inc. have announced:

• Rogers to acquire all issued and outstanding Class A Shares and Class B Shares of Shaw for a price of $40.50 per share in cash, amounting to approximately $20 billion, which reflects a premium of approximately 70% to Shaw’s recent Class B Share price
• Transaction valued at approximately $26 billion inclusive of approximately $6 billion of Shaw debt, equivalent to 10.7x 2021 Calendar Year EBITDA based on latest consensus estimates, or 7.6x post synergies

• Transaction to be funded by cash consideration of $40.50 to all shareholders, with the exception of approximately 60% of the Shaw family shares which will be exchanged for 23.6 million Class B Shares of Rogers at an exchange ratio of 0.70 reflecting the volume weighted average trading price of Rogers shares over the last 10 days
• The transaction is not conditional upon financing, as Rogers has secured committed financing to cover the cash consideration
• Pro forma leverage on closing is expected to be just over 5x and Rogers expects to maintain its investment grade rating

Alexandra Posadzki comments in the Globe:

Rogers Communications Inc. (RCI-B-T +5.65% increase) may have to sell off some wireless assets to get its $20.4-billion bid for Shaw Communications Inc. (SJR-B-T +2.51%increase) past a government that has been pushing to increase wireless competition and reduce cellphone bills, analysts say.

The deal announced on Monday is likely to face significant regulatory hurdles, analysts said, because it would eliminate Canada’s fourth-largest wireless carrier, Shaw-owned Freedom Mobile. The regional carrier – which operates in Ontario, Alberta and British Columbia – has been credited with driving price competition in recent years.

She commented later:

The announcement comes three weeks ahead of the April 6 deadline for telecoms to pay their deposits if they wish to participate in the June auction for airwaves critical for 5G. Experts say the deal raises questions about Shaw’s ability to bid on licenses for the 3,500-megahertz spectrum – airwaves used to transmit wireless signals.

“Based on a reading of the auction rules, there is a non-negligible possibility that the announced merger may jeopardize Shaw’s participation as a stand-alone entity in the upcoming spectrum auction,” Johanne Lemay, co-president of telecom consultancy Lemay-Yates Associates Inc., said in an e-mail.

The 3,500-MHz band is a key one for the delivery of fifth-generation wireless services because it can carry large volumes of data over long distances.

“Sitting out this auction could make or break a company,” said Gregory Taylor, a spectrum expert and associate professor at the University of Calgary. “If Shaw were out of this auction and then somehow the deal does not go through, Shaw is in big trouble.”

DBRS has placed Shaw under Review-Developing:

DBRS Limited (DBRS Morningstar) placed all ratings of Shaw Communications Inc. (Shaw or the Company) Under Review with Developing Implications following the announcement of an agreement to combine Shaw with Rogers Communications Inc. (Rogers; rated BBB (high) and Under Review with Negative Implications by DBRS Morningstar) in a $26 billion transaction (including the assumption of approximately $6 billion of Shaw’s debt; the Transaction). The closing of the Transaction is subject to a series of approvals including regulatory considerations and is expected to close by the first half of 2022.
…
The status of Under Review with Developing Implications reflects Rogers’ potential assumption of approximately $6 billion of Shaw’s debt should the Transaction close according to terms substantially similar to those proposed. DBRS Morningstar expects Shaw’s debt will effectively rank pari passu with Rogers’ existing senior unsecured indebtedness.

DBRS Morningstar will proceed with its review as more information becomes available and aims to resolve the Under Review status by the closing of the Transaction.

… and placed Rogers under Review-Negative:

DBRS Limited (DBRS Morningstar) placed all ratings of Rogers Communications Inc. (Rogers or the Company) Under Review with Negative Implications following the Company’s announcement of an agreement to combine Rogers with Shaw Communications Inc. (Shaw; rated BBB and Under Review with Developing Implications by DBRS Morningstar) in a $26 billion transaction (including the assumption of approximately $6 billion of Shaw’s debt; the Transaction). The closing of the Transaction is subject to a series of approvals including regulatory considerations and is expected to close by the first half of 2022.
…
DBRS Morningstar notes that under the Arrangement Agreement, Rogers has the right to cause Shaw to redeem the Company’s outstanding preferred shares on June 30, 2021 (valued at $293 million as of Q4 F2020) in accordance with its terms by providing written notice to Shaw. As of the date of this press release, Rogers has not exercised this right.
…
The Under Review with Negative Implications status reflects DBRS Morningstar’s view that while Rogers’ business profile should benefit from increased scale, an enlarged geographic footprint, and enhanced spectrum license portfolio and potential cost synergies, the benefits do not completely offset the risks associated with the initial increase in financial leverage as lease-adjusted debt-to-EBITDA may increase above 5.0 times on an unadjusted basis and assuming leveraged acquisition.

In its review, DBRS Morningstar will focus on (1) assessing the business risk profile of the combined entity as well as the risks associated with integration and realization of synergy potential; (2) Rogers’ financial risk profile on a pro forma basis, including free cash flow-generating capacity of the combined entity; and (3) the Company’s longer-term business strategy and financial management intentions going forward.

Affected issues are SJR.PR.A and SJR.PR.B

Standard & Poor’s comments:

• On March 15, 2021, Canadian cable and national wireless operator Rogers Communications Inc. (RCI) announced that it had agreed to acquire Canadian cable operator Shaw Communications Inc. for about C$26 billion. We expect initial leverage to be above 5x–almost two categories higher than RCI’s current leverage.
• We predict long-term benefits for RCI, in terms of its pro forma scale and market share, reflecting the combined national network(s) and spectrum position for 5G wireless.
• However, integration and transition risks, potential restructuring costs, and spectrum investments could result in subdued discretionary free operating cash flow and materially higher leverage in the first couple of years after closing.
• Therefore, S&P Global Ratings placed its ‘BBB+’ long-term and ‘A-2’ short-term ratings on RCI on CreditWatch with negative implications.
• The CreditWatch placement indicates the risk of an up to two-notch downgrade of RCI.

Canaccord Genuity Group Inc. has announced (on March 15):

that on March 9, 2021 it submitted a letter to the board of directors of RFCapital Group Inc. (TSX:RCG) (“RF Capital”) in which Canaccord Genuity proposed to purchase 100%
of the outstanding shares of RF Capital for $2.30 per share (the “Proposal”) for cash or Canaccord Genuity common shares. The Proposal represented a 31% premium to the closing price of RF Capital common shares on March 12, 2021 and a 30% premium to the volume-weighted average price for the 20 trading days ended on that date. The proposed price of $2.30 per common share is supported by the formal valuation commissioned by the special committee of RF Capital’s board of directors in connection with the recently completed transaction (the “RGMP Transaction”) between RF Capital and Richardson GMP Limited (“Richardson Wealth”). The rationale behind the Proposal is simple – on a combined basis, RF Capital and Canaccord Genuity would become the preeminent independent wealth business in Canada.

Unfortunately, RF Capital’s board of directors dismissed the Proposal on March 10, 2021 without reason. As a result, RF Capital shareholders, including its Investment Advisors (“IA”s) who, as a group, represent a significant shareholding, were not provided an opportunity to consider an offer at an attractive valuation. Representatives of Richardson Financial Group Limited (the “Richardson family”), which owns approximately 44% of the outstanding common shares of RF Capital, rejected an invitation to discuss the Proposal.

Andrew Willis comments in the Globe:

Investment dealer Canaccord Genuity Group Inc. CF-T (+1.04% increase) is taking a $367-million takeover offer for RF Capital Group Inc. RCG-T (+4.10% increase)
to the company’s public shareholders and employees, after being rebuffed by its rival’s board and largest shareholder, Winnipeg’s Richardson family.

In a bid to unite two of the country’s largest independent wealth management platforms, Toronto-based Canaccord sent RF Capital’s board a letter last Tuesday offering $2.30 a share for the company, a price 31 per cent above where its shares were trading. The following day, RF Capital’s board turned down the bid, without offering reasons, according to a news release from Canaccord on Monday detailing the previously confidential negotiations.
…
By making its offer public, Canaccord is trying to get these shareholders to push for a deal. Canaccord has $88-billion of client assets under management, an increase of $32-billion over the past five years.

Affected issues are CF.PR.A, CF.PR.C, RCG.PR.B and RCG.PR.C.

Innergex Renewable Energy Inc. has announced (on January 8, 2021):

the applicable dividend rates for its Cumulative Rate Reset Preferred Shares, Series A (“Series A shares”) and Cumulative Floating Rate Preferred Shares, Series B (“Series B shares”).

With respect to any Series A shares that remain outstanding after January 15, 2021, commencing as of such date, the holders thereof will be entitled to receive fixed cumulative preferential cash dividends, as and when declared by the Board of Directors, payable quarterly on the 15th day (or, if such day is not a Business Day, the immediately following Business Day) of January, April, July and October in each year from and including January 15, 2021 to, but excluding, January 15, 2026. The dividend rate for the five-year period commencing on January 15, 2021 to but excluding January 15, 2026 will be 3.244% per annum, or $0.2027 per share per quarter, being equal to the sum of the Government of Canada Yield (as the term is defined in the Prospectus referred to below) on December 16, 2020 plus 2.79%.

With respect to any Series B shares that may be issued on January 15, 2021, the holders thereof will be entitled to receive floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors, payable quarterly on the 15th day (or, if such day is not a Business Day, the immediately following Business Day) of January, April, July and October in each year (the “Quarterly Commencement Date”), in the annual amount per Series B Share determined by multiplying the applicable Floating Quarterly Dividend Rate (as defined herein) by $25.00. The Floating Quarterly Dividend Rate from and including January 15, 2021 to, but excluding, April 15, 2021, and thereafter the period from and including the day immediately following the end of the immediately preceding Quarterly Floating Rate Period to, but excluding, the next succeeding Quarterly Commencement Date (the “Quarterly Floating Rate Period”) will be equal to the sum of the T-Bill Rate (as the term is defined in the Prospectus referred to below) plus 2.79% per annum (calculated on the basis of the actual number of days in the applicable Quarterly Floating Rate Period divided by 365) determined on the 30th day prior to the first day of the applicable Quarterly Floating Rate Period. The dividend rate for the Quarterly Floating Rate Period commencing on January 15, 2021 to but excluding April 15, 2021 will be equal to 2.91% per annum, or $0.181875 per share per quarter, as determined in accordance with the terms of the Series B shares.

INE was issued as a FixedReset 5.00%+279 that commenced trading 2010-9-14 after being announced 2010-8-23. Notice of exension was provided in December, 2015 and the issue reset to 3.608%. I recommended against conversion and none occurred.

DBRS has announced that it:

confirmed the Cumulative Preferred Shares rating of Canaccord Genuity Group Inc.’s (CG or the Company) at Pfd-4 (high) and changed the trend to Stable from Negative. The Company has a Support Assessment of SA3, which implies no expected systemic support.

KEY RATING CONSIDERATIONS
The trend change to Stable reflects DBRS Morningstar’s view that the considerable uncertainties facing financial institutions, particularly those with more limited business models, caused by the Coronavirus Disease (COVID-19) pandemic have begun to abate. CG is a Canadian-based financial institution with $6.1 billion in assets as of Q3 2021, operating in the U.S., the United Kingdom (UK), and Australia, with a focus on capital markets activities and wealth management. The Company reported 9M 2021 revenue of $1.3 billion, up 44% from 9M 2020 earnings of $119 million, double the earnings of the previous year. CG benefited from the businesses it had acquired in 2019, the year prior to the pandemic, namely its U.S. capital markets business as well as its Australian wealth management operations.

In confirming the rating, DBRS Morningstar recognizes CG’s solid niche franchise, with a growing wealth management presence across various geographies, while remaining cognizant of the Company’s increased leverage following its recent wealth management and other acquisitions. The Company has made acquisitions in Canada, the U.S., the UK, and Australia, and although it has now integrated these businesses it will need to continue to leverage the larger platform to further enhance efficiencies. The Company expects the combined businesses’ success and efficiencies should drive profits and enable it to reduce leverage over time. However, DBRS Morningstar remains cognizant that the continued impact of the coronavirus-related downturns could, over the short term, create earnings volatility and impede the Company’s ability to comfortably meet contractual payments.

RATING DRIVERS
Although DBRS Morningstar considers CG as being well placed in its current rating category, over the longer term, further franchise diversification that contributes to sustained and improving earnings across segments while lowering leverage would result in an upgrade. Conversely, weakened credit fundamentals or inconsistent earnings would result in a rating downgrade. Furthermore, given CG’s high reliance on market confidence to support its franchise, any significant operational or reputational issues would likely negatively affect the rating, as would material negative stresses to the Company’s liquidity or funding profiles.

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

The Bank of Nova Scotia has announced:

its intention to redeem all outstanding Non-cumulative 5-Year Rate Reset Preferred Shares Series 34 (Non-Viability Contingent Capital (NVCC)) (“Series 34 Shares”) of Scotiabank on April 26, 2021 at a price equal to $25.00 per share together with declared and unpaid dividends to the Redemption Date (the “Redemption Price”). Formal notice will be issued to the shareholders in accordance with the share conditions.

The redemption has been approved by the Office of the Superintendent of Financial Institutions and will be financed out of the general funds of Scotiabank. This redemption is part of the Bank’s ongoing management of its Tier 1 capital.

On February 23, 2021, the Board of Directors of Scotiabank declared quarterly dividends of $0.343750 per Series 34 Share. This will be the final dividend on the Series 34 Shares and will be paid on April 26, 2021, to shareholders of record at the close of business on April 6, 2021, as previously announced. Subsequent to this final dividend payment, the Series 34 Shares will cease to be entitled to dividends.

BNS.PR.E is a FixedReset 5.50%+451, NVCC-compliant issue that commenced trading 2015-12-17 after being announced 2015-12-8.

Thanks to Assiduous Reader CanSiamCyp for ensuring I didn’t miss this.