Category: Issue Comments

The Toronto-Dominion Bank has announced (on October 1):

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 9 (Non-Viability Contingent Capital (NVCC)) (the “Series 9 Shares”) and Non-Cumulative Floating Rate Preferred Shares, Series 10 (NVCC) (the “Series 10 Shares”).

With respect to any Series 9 Shares that remain outstanding after November 2, 2020 (being the first business day following the conversion date of October 31, 2020, which falls on a Saturday), holders of the Series 9 Shares will be entitled to receive quarterly fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the 5-year period from and including October 31, 2020 to but excluding October 31, 2025 will be 3.242%, being equal to the 5-Year Government of Canada bond yield determined as at October 1, 2020 plus 2.87%, as determined in accordance with the terms of the Series 9 Shares.

With respect to any Series 10 Shares that may be issued on November 2, 2020, holders of the Series 10 Shares will be entitled to receive quarterly floating rate non-cumulative preferential cash dividends, calculated on the basis of the actual number of days elapsed in such quarterly period divided by 365, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the floating rate period from and including October 31, 2020 to but excluding January 31, 2021, will be 3.006%, being equal to the 90-day Government of Canada Treasury Bill yield determined as of October 1, 2020 plus 2.87%, as determined in accordance with the terms of the Series 10 Shares.

Beneficial owners of Series 9 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right on or prior to the deadline for exercise, which is 5:00 p.m. (Toronto time) on October 16, 2020.

Inquiries should be directed to TD’s Registrar and Transfer Agent, AST Trust Company (Canada), at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.E is a FixedReset, 3.70%+287, that commenced trading 2015-4-24 after being announced 2015-4-15. Notice of extension was provided on 2020-9-17. The issue is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

AltaGas Ltd. has announced (strikethroughs added; see following press release):

that 35,180 of its 8,000,000 Cumulative Redeemable Five-Year Fixed Rate Reset Preferred Shares, Series A (the “Series A Preferred Shares”) (TSX: ALA.PR.A) were tendered for conversion into Cumulative Floating Rate Preferred Shares, Series B (the “Series B Preferred Shares”) (TSX: ALA.PR.B) and that 1,270,639 of its Series B Preferred Shares were tendered for conversion into Series A Preferred Shares. As a result of the conversions AltaGas has 5,511,220 Series A Preferred Shares and 2,488,780 Series B Preferred Shares issued and outstanding.

The Series A Preferred Shares will continue to pay on a quarterly basis, for the five-year period beginning on September 30, 2020, as and when declared by the Board of Directors of AltaGas, a fixed dividend based on an annual fixed dividend rate of 3.060 percent. The Series A Preferred Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbol ALA.PR.A.

The Series B Preferred Shares will pay a floating quarterly dividend for the five-year period beginning on September 30, 2020, as and when declared by the Board of Directors of AltaGas. The floating quarterly dividend rate for the Series B Preferred Shares for the quarterly floating rate period (being the period from September 30, 2020 to but excluding, December 31, 2020) is 2.809 percent and will be reset every quarter. The Series B Preferred Shares will continue to be listed the TSX under the symbol ALA.PR.B.

For more information on the terms of, and risks associated with an investment in, the Series A Preferred Shares and the Series B Preferred Shares, please see the prospectus supplement dated August 11, 2010 which is available on SEDAR at www.sedar.com.

AltaGas is a leading North American energy infrastructure company that connects NGLs and natural gas to domestic and global markets. AltaGas creates value by growing and optimizing its energy infrastructure, including a focus on clean energy sources. For more information visit: www.altagas.ca

They later announced their wish:

to correct an error in its press release entitled “AltaGas Ltd. Announces Results of Series A and Series B Preferred Share Conversions” issued on September 30, 2020. As a result of the conversions AltaGas has 6,746,679 Series A Preferred Shares and 1,253,321 Series B Preferred Shares issued and outstanding rather than the 5,511,220 Series A Preferred Shares and 2,488,780 Series B Preferred Shares referred to in AltaGas’ previous press release. This correction does not change any other amounts or information reported in the prior press release.

Thus there has been a net conversion of 1,235,459 shares from ALA.PR.B to ALA.PR.A, or 15% of the total issue size.

ALA.PR.A is a FixedReset issued at 5.00%+266bp, which commenced trading August 19, 2010 after being announced August 10, 2010. In 2015 the issue reset to 3.38% and I recommended holders retain the issue. Despite this, there was a 31% conversion to FloatingResets. The issue has now reset to 3.06%.

ALA.PR.B is a FloatingReset, Bills+266bp, which arose via a partial conversion from ALA.PR.A in 2015.

The Toronto-Dominion Bank has announced (on September 17):

that it does not intend to exercise its right to redeem all or any part of the currently outstanding 8 million Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 9 (Non-Viability Contingent Capital (NVCC)) (the “Series 9 Shares”) of TD on October 31, 2020. As a result and subject to certain conditions set out in the prospectus supplement dated April 17, 2015 relating to the issuance of the Series 9 Shares, the holders of the Series 9 Shares have the right to convert all or part of their Series 9 Shares, on a one-for-one basis, into Non-Cumulative Floating Rate Preferred Shares, Series 10 (NVCC) (the “Series 10 Shares”) of TD on November 2, 2020 (being the first business day following the conversion date of October 31, 2020, which falls on a Saturday). Holders who do not exercise their right to convert their Series 9 Shares into Series 10 Shares on such date will continue to hold their Series 9 Shares.

The foregoing conversion right is subject to the conditions that: (i) if TD determines that there would be less than 1,000,000 Series 10 Shares outstanding after taking into account all shares tendered for conversion on November 2, 2020, then holders of Series 9 Shares will not be entitled to convert their shares into Series 10 Shares, and (ii) alternatively, if TD determines that there would remain outstanding less than 1,000,000 Series 9 Shares after taking into account all shares tendered for conversion on November 2, 2020, then all remaining Series 9 Shares will automatically be converted into Series 10 Shares on a one-for-one basis on November 2, 2020. In either case, TD will give written notice to that effect to holders of Series 9 Shares no later than October 26, 2020 (being the first business day following the notice date of October 24, 2020, which falls on a Saturday).

The dividend rate applicable to the Series 9 Shares for the 5-year period from and including October 31, 2020 to but excluding October 31, 2025, and the dividend rate applicable to the Series 10 Shares for the 3-month period from and including October 31, 2020 to but excluding January 31, 2021, will be determined and announced by way of a press release on October 1, 2020.

Beneficial owners of Series 9 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from October 1, 2020 until 5:00 p.m. (Toronto time) on October 16, 2020.

Inquiries should be directed to TD’s Registrar and Transfer Agent, AST Trust Company (Canada), at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.E is a FixedReset, 3.70%+287, that commenced trading 2015-4-24 after being announced 2015-4-15. It is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

The Toronto-Dominion Bank has announced:

that it will exercise its right to redeem all of its 6,000,000 outstanding Non-cumulative Class A First Preferred Shares, Series 11 (Non-Viability Contingent Capital) (the “Series 11 Shares”) on October 31, 2020 at the price of $26.00 per Series 11 Share for an aggregate total of approximately $156 million.

On August 27, 2020, TD announced that dividends of $ 0.30625 per Series 11 Share had been declared. These will be the final dividends on the Series 11 Shares, and will be paid in the usual manner on October 31, 2020 to shareholders of record on October 9, 2020, as previously announced. After October 31, 2020, the Series 11 Shares 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.

Beneficial holders who are not directly the registered holder of Series 11 Shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds. Inquiries should be directed to our Registrar and Transfer Agent, AST Trust Company (Canada), at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.F is a 4.90% NVCC-compliant Straight Perpetual that commenced trading 2015-7-21 after being announced 2015-7-9. It is currently assigned to the PerpetualPremium sub-index.

This is a noteworthy event for two reasons: firstly, this is the first time an NVCC-compliant issue has been redeemed and secondly because as of the close 2020-9-28 it was quoted at 25.19-28, meaning that holders have captured a large capital gain overnight, given that it is quoted 2020-9-29 at 26.23-26.

It is something of a puzzle as to why it has been redeemed, but a look at the TD Annual Report for 2019 provides a clue. This report discloses Risk-Weighted Assets of 456-billion and preferred share capital of 5.8-billion. It will be remembered that the total allowance for Alternative Tier 1 Capital is 1.5% of RWA, of which up to half may be the new LRCN structure.

This implies that the AT1 Limit for TD Bank is 6.84-billion; given that preferred share capital is already 5.8-billion, they only have room for 1-billion in LRCN issuance unless they redeem something. TD may well have decided that redeeming this $150-million preferred share issue, even at a premium, was worthwhile. Note, however that TD.PF.E, a FixedReset 3.70%+287, will be extended, so there are limits to TD’s desire to expand their LRCN issuance room!

Brompton Group has announced:

Brompton Split Banc Corp. (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively).

The sales period for this overnight offering will end at 9:00 a.m. (ET) on Tuesday, September 29, 2020. The offering is expected to close on or about October 6, 2020 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Class A Shares will be offered at a price of $9.10 per Class A Share for a distribution rate of 13.2% on the issue price, and the Preferred Shares will be offered at a price of $9.95 per Preferred Share for a yield to maturity of 5.3%. (1) The closing price on the TSX for each of the Class A and Preferred Shares on September 25, 2020 was $9.31 and $10.12, respectively. The Class A Share and Preferred Share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company (“Unit”) (calculated as at September 24, 2020), as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The Company invests in a portfolio (the “Portfolio”) consisting of common shares of the six largest Canadian banks: Royal Bank of Canada, The Bank of Nova Scotia, National Bank of Canada, The Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Bank of Montreal. In addition, the Company may hold up to 10% of the total assets of the Portfolio in investments in global financial companies for the purpose of enhanced diversification and return potential.

The investment objectives for the Class A Shares are to provide holders with regular monthly cash distributions targeted to be at least $0.10 per Class A Share and to provide the opportunity for growth in the net asset value per Class A Share.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.125 per Preferred Share, and to return the original issue price to holders of Preferred Shares on November 29, 2022.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank.

The NAVPU was 18.24 on 2020-9-24 and this offering is for Whole Units at 19.05, so the premium is 4.44% – not the biggest ever seen, but quite enough to be worth doing!

Update, 2020-9-30: They raised 23.6-million.

Partners Value Split Corp. has announced a new issue and as part of the announcement stated:

The net proceeds of the offering will be used to partially fund the redemption of the Company’s Class AA Preferred Shares, Series 6.

The Series 6 Preferreds that are going to be redeemed are PVS.PR.D, currently redeemable at 25.50, redeemable commencing 2020-10-8 at 25.25 and maturing 2021-10-8 at 25.00. It only pays 4.50%, so it’s a bit surprising that they’re going to call it at a premium – although that is not yet 100% certain. PVS.PR.D was originally issued as BNA.PR.F, which commenced trading 2014-7-4 after being announced 2014-6-16.

Quadravest has announced:

North American Financial 15 Split Corp. (the “Company”) is pleased to announce the Preferred Share dividend rate for the fiscal year beginning December 1, 2020. Monthly payments to the FFN.PR.A Preferred Share will be $0.05625 per Share for an annual yield of 6.75% on their $10 redemption value. This is an increase of one and a quarter percent over the current rate.

The Company invests in an actively managed, high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal	National Bank of Canada	Bank of America Corp.
The Bank of Nova Scotia	Manulife Financial Corporation	Citigroup Inc.
Canadian Imperial Bank of Commerce	Sun Life Financial Services of Canada Inc.	Goldman Sachs Group Inc.
Royal Bank of Canada	Great-West Lifeco Inc.	JP Morgan Chase & Co.
The Toronto-Dominion Bank	CI Financial Corp.	Wells Fargo & Co.

DBRS has announced:

DBRS Limited (DBRS Morningstar) upgraded the Issuer Rating and Medium-Term Notes rating of Manulife Financial Corporation (Manulife or the Company) to A (high) from “A,” its Unsecured Subordinated Debentures rating to “A” from A (low), and its Non-Cumulative Preferred Shares rating to Pfd-2 (high) from Pfd-2. In addition, DBRS Morningstar upgraded the Issuer Rating and Financial Strength Rating of The Manufacturers Life Insurance Company (MLI) to AA from AA (low), its Unsecured Subordinated Debentures rating to AA (low) from A (high), and its Non-Cumulative Preferred Shares rating to Pfd-1 from Pfd-1 (low). Concurrently, DBRS Morningstar upgraded the Fixed/Floating Subordinated Debentures of Manulife Finance (Delaware), L.P. to “A” from A (low). DBRS Morningstar also changed the trend on all ratings to Stable from Positive.

KEY RATING CONSIDERATIONS
The ratings upgrade reflects the Company’s powerful franchise in Canada, the United States and Asia as well as the execution of a renewed strategic vision that has focused on derisking the legacy insurance portfolio and reducing the volatility of earnings from movements in equity markets and interest rates, while leading its Canadian peers in terms of regulatory capitalization ratios. This derisking of the legacy insurance portfolio has materially improved the risk profile over the past decade. Moreover, we view Manulife’s performance in 2020 as resilient, given the adverse economic impact brought on by the Coronavirus Disease (COVID-19) pandemic globally. The ratings also consider Manulife’s relatively large exposure to guaranteed products in Canada and the United States, which can result in earnings volatility, as well as the additional complexities of operating an international insurance organization.

RATING DRIVERS
Given Manulife’s recent ratings upgrade, DBRS Morningstar does not see upward ratings pressure over the intermediate term. Over the longer term, if Manulife continues to improve profitability and derisk by further reducing its exposures to product guarantees and long-term care products, while maintaining its capital profile, the ratings would be upgraded.

Conversely, persistent weaker and volatile profitability combined with a sustained deterioration in financial leverage and coverage ratios would result in a ratings downgrade. An adverse event causing regulatory capital to decline substantially would also result in a ratings downgrade.

RATING RATIONALE
The Company’s broad and diverse franchise is supported by leading market shares in Canada, the United States, and Asia. The Company also has strong distribution capabilities, a broad product mix, global brand recognition, and management agility, all of which is supported by a solid risk management framework.

Positively, the Company continues to make improvements in its risk profile, earnings ability, and capitalization levels. Although profitability has weakened in the first half of 2020 because of the initial impact of the pandemic, earnings have remained resilient and in line with relevant peers by achieving a return on equity of 8.2% in the first half of 2020, per DBRS Morningstar’s calculations. Importantly, the Company’s financial leverage has improved to close to 25%, and Senior Management expects to maintain leverage around this level going forward.

Manulife has been making progress with its focus on growing its Global Wealth and Asset Management and Asian insurance operations, the business lines that provide the highest growth opportunities compared with the more mature insurance markets in North America. Together with the focus on expense management and a reduction of the impact of equity and interest rates volatility on the bottom line, these strategies have allowed Manulife to improve profitability in recent years.

Affected issues are MFC.PR.B, MFC.PR.C, MFC.PR.F, MFC.PR.G, MFC.PR.H, MFC.PR.I, MFC.PR.J, MFC.PR.K, MFC.PR.L, MFC.PR.M, MFC.PR.N, MFC.PR.O, MFC.PR.P, MFC.PR.Q and MFC.PR.R.

Quadravest has announced:

Financial 15 Split Corp. (the “Company”) announced previously on March 2, 2020 it will extend the termination date of the Company a further five-year period from December 1, 2020 to December 1, 2025.

In connection with the extension, the Company may amend the prescribed minimum annual rate of cumulative preferential monthly dividends to be paid to the FTN.PR.A Preferred Shares (“Preferred Shares”) for the five-year renewal period, commencing December 1, 2020. The Company may also amend the dividend entitlement of the Preferred Shares on an annual basis.

Based on current market rates for preferred shares with similar terms, the minimum annual rate for the five-year term will be set at 5.5% (previously 5.25%). The annual payment rate will be set at 6.75% per annum, based on the $10 repayment value. This is an increase of one and a quarter percent from the current rate. The Preferred shareholders have received a total of $8.89 per Share in distributions since inception. The dividend policy for the FTN Class A Shares (“Class A Shares”) will remain unchanged.

In relation to the term extension and the Preferred Share rate increase, the Company has an additional retraction right for those shareholders not wishing to continue holding their investment, allowing existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2020 net asset value per unit. Alternatively, shareholders may sell their Shares for the market price at any time, potentially at a higher price than would be achieved through retraction, or shareholders may take no action and continue to hold their Shares.

The Company invests in a high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows: Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, Toronto-Dominion Bank, National Bank of Canada, Manulife Financial Corporation, Sun Life Financial, Great-West Lifeco, CI Financial Corp, Bank of America, Citigroup Inc., Goldman Sachs Group, JP Morgan Chase & Co. and Wells Fargo & Co.

Congratulations to Assiduous Reader cowboylutrell for his awesome prediction:

Thus, my expectation is that they will announce in the next few days a new annual dividend rate of 6.75% on FTN.PR.A to begin in December 2020, compared to 5.50% currently.

DBRS has announced:

DBRS Limited (DBRS Morningstar) discontinued and withdrew the rating on the Preferred Shares issued by S Split Corp. following the issuer’s request.

SBN.PR.A was downgraded to Pfd-4 by DBRS last June. I imagine that having such a credit rating does not attract sufficient investors to be worth the rating fee.