Category: Issue Comments

TC Energy Corporation has announced:

that it does not intend to exercise its right to redeem its Cumulative Redeemable First Preferred Shares, Series 5 (Series 5 Shares) and Cumulative Redeemable First Preferred Shares, Series 6 (Series 6 Shares) on January 30, 2021. As a result, subject to certain conditions:

(a) the holders of Series 5 Shares have the right to choose one of the following options with regard to their shares:

to retain any or all of their Series 5 Shares and continue to receive a fixed rate quarterly dividend; or

to convert, on a one-for-one basis, any or all of their Series 5 Shares into Series 6 Shares and receive a floating rate quarterly dividend, and
(b) the holders of Series 6 Shares have the right to choose one of the following options with regard to their shares:

to retain any or all of their Series 6 Shares and continue to receive a floating rate quarterly dividend; or

to convert, on a one-for-one basis, any or all of their Series 6 Shares into Series 5 Shares and receive fixed rate quarterly dividend.
Should a holder of Series 5 Shares choose to retain their shares, such shareholders will receive the new annual fixed dividend rate applicable to Series 5 Shares of 1.949% for the five-year period commencing January 30, 2021 to, but excluding, January 30, 2026. Should a holder of Series 5 Shares choose to convert their shares to Series 6 Shares, holders of Series 6 Shares will receive the floating quarterly dividend rate applicable to the Series 6 Shares of 1.655% for the three-month period commencing January 30, 2021 to, but excluding, April 30, 2021. The floating dividend rate will be reset every quarter.

Should a holder of Series 6 Shares choose to retain their shares, such shareholders will receive the floating quarterly dividend rate applicable to Series 6 Shares of 1.655% for the three-month period commencing January 30, 2021 to, but excluding, April 30, 2021. The floating dividend rate will be reset every quarter. Should a holder of Series 6 Shares choose to convert their shares to Series 5 Shares, holders of Series 5 Shares will receive the new fixed quarterly dividend rate applicable to the Series 5 Shares of 1.949% for the five-year period commencing January 30, 2021 to, but excluding, January 30, 2026.

Beneficial owners of Series 5 Shares and Series 6 Shares who want to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is 5 p.m. (EST) on January 15, 2021. Any notices received after this deadline will not be valid. As such, it is recommended that this be done well in advance of the deadline in order to provide the broker or other nominee with time to complete the necessary steps.

Beneficial owners of Series 5 or Series 6 Shares who do not provide notice or communicate with their broker or other nominee by the deadline will retain their respective Series 5 Shares or Series 6 Shares, as applicable, and receive the new dividend rate applicable to such shares, subject to the conditions stated below.

The foregoing conversions are subject to the conditions that: (i) if TC Energy determines that there would be less than one million Series 5 Shares outstanding after January 30, 2021, then all remaining Series 5 Shares will automatically be converted into Series 6 Shares on a one-for-one basis on January 30, 2021, and (ii) if TC Energy determines that there would be less than one million Series 6 Shares outstanding after January 30, 2021, then all of the remaining outstanding Series 6 Shares will automatically be converted into Series 5 Shares on a one-for-one basis on January 30, 2021. In either case, TC Energy will issue a news release to that effect no later than January 22, 2021.

Holders of Series 5 Shares and Series 6 Shares will have the opportunity to convert their shares again on January 30, 2021 and every five years thereafter as long as the shares remain outstanding. For more information on the terms of, and risks associated with an investment in the Series 5 Shares and the Series 6 Shares, please see the prospectus supplement dated June 17, 2010 which is available on sedar.com or on our website.

TRP.PR.C was issued as a FixedReset, 4.40%+154, that commenced trading 2010-06-29 after being announced 2010-6-17. Notice of extension was published in 2015 and the issue reset to 2.263%. There was 9% conversion to the FloatingReset TRP.PR.I.

TRP.PR.I is a FloatingReset, Bills+154, that arose from a partial conversion from the FixedReset TRP.PR.C.

Atlantic Power Corporation has announced:

that the Toronto Stock Exchange (“TSX”) has approved Atlantic Power’s renewal of its normal course issuer bid (“NCIB”) for the following series of the Company’s convertible unsecured subordinated debentures and its common shares and APPEL’s renewal of its NCIB for each of the following series of its preferred shares (collectively, the “Public Securities”):

a) the 6.0% Series E Convertible Unsecured Subordinated Debentures due January 31, 2025 (the “6.0% Cdn$115.0 Million Debentures”) (TSX: ATP.DB.E).

b) the common shares (the “Common Shares”) (TSX:ATP);

c) the 4.85% Cumulative Redeemable Preferred Shares, Series 1 (the “Series 1 Preferred Shares”) (TSX: AZP.PR.A);

d) the Cumulative Rate Reset Preferred Shares, Series 2 (the “Series 2 Preferred Shares”) (TSX: AZP.PR.B); and

e) the Cumulative Floating Rate Preferred Shares, Series 3 (the “Series 3 Preferred Shares”) (TSX: AZP.PR.C).

Atlantic Power and APPEL intend to commence their NCIBs on December 31, 2020. The NCIBs will expire on December 30, 2021 or such earlier date as the Company and/or APPEL complete their respective purchases pursuant to the NCIBs or terminate them at their option. Under its current NCIB which expires December 30, 2020, Atlantic Power has purchased 7,476,213 of its common shares at an average price of Cdn$2.85. There were no purchases of its 6.0% Series E Convertible Unsecured Subordinated Debentures. APPEL has purchased 381,794 of its Series 1 Preferred Shares at an average price of Cdn$15.17; 62,365 of its Series 2 Preferred Shares at an average price of Cdn$15.20; and 120,000 of its Series 3 Preferred Shares at an average price of Cdn$17.90.

So to put those 2020 numbers into tabular form:

So a total of about $8.9-million was spent on preferreds, about 45% of the amount spent on common. Certainly not enough to cause a scarcity, but every little bit helps!

DBRS has announced that it:

placed Artis Real Estate Investment Trust’s (Artis or the REIT) Issuer Rating and Senior Unsecured Debentures rating of BBB (low) and Preferred Trust Units rating of Pfd-3 (low) Under Review with Negative Implications. These rating actions reflect DBRS Morningstar’s expectation that the announcement of Artis’ current management team leaving the REIT may have a negative impact on its credit risk profile and may impair its ability to reduce leverage in a timely manner.

Artis announced an agreement through which certain members of the management team, including the chief executive officer (CEO) and the chief financial officer (CFO), are stepping down as a result of activist unitholder (the Sandpiper Group) pressure. Sandpiper has been advocating against Artis for the spinoff of its retail portfolio, cutting costs, and increasing distributions to unitholders as well as other initiatives. The REIT also announced the reconstitution of its board and a new interim CEO, who is also the CEO of Sandpiper. DBRS Morningstar notes that Artis had been engaged in a strategic debt reduction initiative, including the retail portfolio spinoff, that had the potential to stabilize Artis’ credit profile within an acceptable time frame (see DBRS Morningstar’s commentary “Artis REIT’s Proposed Spin-Off and Debt Reduction Could Stabilize Rating Trend,” dated September 9, 2020).

As a result of the uncertainty created by the change in management, DBRS Morningstar is placing Artis’ ratings Under Review with Negative implications. As part of its review, DBRS Morningstar will determine the new management team’s commitment to and updated plans for lowering leverage. Should DBRS Morningstar determine that the REIT’s successful reduction of leverage is likely, DBRS Morningstar would likely change the trend for Artis’ ratings to Stable upon completion of the review. Conversely, DBRS Morningstar would likely take a negative rating action on Artis’ ratings should it determine that management is unlikely to reduce total debt-to-EBITDA ratio below 9.8 times (x) or increase EBITDA interest coverage above 2.70x.

Affected issues are AX.PR.A, AX.PR.E and AX.PR.I.

Standard & Poor’s has announced:

• On Dec. 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating (ICR) on Innergex Renewable Energy Inc. to ‘BB+’ from ‘BBB-‘.
• We also lowered our global scale rating and Canada scale rating on Innergex’s preferred shares by two notches to ‘B+’ and ‘P-4(High)’, respectively, from ‘BB’ and ‘P-3’.
• The downgrade reflects credit metrics that continue to show weakness in light of the company’s aggressive expansion, moderate distribution growth, negative free cash flow, and reliance on corporate debt to fund acquisitions and development.
• The stable outlook reflects our expectation that the company’s cash flow quality will continue to benefit from its portfolio of contracted assets, which will generate sufficient cash flows to support debt obligations at the holdco level. Under our base-case scenario, we forecast that funds from operations (FFO)-to-debt will be around 19% through 2022.

…
Although Innergex has added considerable generation capacity to its portfolio, its capital and investment spending has exceeded cash flow growth. The downgrade essentially reflects credit metrics that continue to reflect weakness in light of the company’s aggressive expansion, moderate distribution growth, negative free cash flow, and heavy reliance on corporate debt to fund acquisitions and development projects. Since the beginning of 2017, Innergex has brought into operation more than 1.8 gigawatts of net capacity, either through developments, or via opportunistic acquisitions across different markets. Although this has helped increase scale, as well as improve asset and geographical diversity, the growth in distributable cash at the holdco level has lagged our expectations, and, combined with an increasing dividend and ongoing capital spending requirements, has left the company with limited, or no room for debt reduction.
…
We view Innergex’s financial risk profile as aggressive based on projected FFO-to-debt of about 19% and debt-to-EBITDA of 4.0x-4.5x through our two-year outlook period. Our analysis excludes both nonrecourse project debt (and associated debt service) from corporate debt and adjusted interest expense.

The stable outlook reflects our expectation that Innergex’s cash flow quality will continue to benefit from its portfolio of contracted assets, which will generate sufficient cash flows to support debt obligations at the holdco level. We also expect that the company’s future investments and developments will remain backed by commercial certainty via contracts or PPAs. Finally, under our base-case scenario, we forecast that FFO-to-debt will remain around 19% through 2022.

We could lower the rating if we forecast FFO-to-debt will remain below 16% on a consistent basis. This could occur if the company’s reliance on corporate-level debt financing to support growth or expansion plans is higher than expected, or if its financial performance falls short of our base-case forecast.

We could consider a positive rating action if Innergex achieves and maintains FFO-to-debt ratio of at least 23% on a sustained basis. This could be achieved if the company experiences better-than-expected financial performance, or if it reduces debt at the holdco level.

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

Great-West Lifeco Inc. has announced:

that holders of 59,830 Lifeco Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) have elected to convert their shares into Non-Cumulative Floating Rate First Preferred Shares, Series O (the “Series O Shares”) and that holders of 547,303 Series O Shares have elected to convert their shares into Series N Shares.

Lifeco currently has 8,524,422 Series N Shares and 1,475,578 Series O Shares outstanding. After taking into account all shares tendered for conversion, there would be less than one million Series O Shares outstanding on December 31, 2020. As a result and in accordance with the terms and conditions attached to the shares, no Series N Shares may be converted into Series O Shares and all remaining Series O Shares will automatically be converted into Series N Shares on a one-for-one basis on December 31, 2020. Lifeco will give written notice to that effect to any registered holder on or before Thursday, December 24, 2020.

Following the automatic conversion, Lifeco will have 10,000,000 Series N Shares and no Series O Shares issued and outstanding. The Series N Shares and Series O Shares are currently listed on the Toronto Stock Exchange under the symbols GWO.PR.N and GWO.PR.O, respectively.

GWO.PR.N was issued as a FixedReset, 3.65%+130, that commenced trading 2010-11-23 after being announced 2010-11-15. The issue was met with disfavour and there was an inventory clearance sale closing 2010-12-3. After a notice of extension the issue issue reset to 2.176% in 2015. I recommended against conversion; there was a 15% conversion to the FloatingReset GWO.PR.O anyway. The company provided another notice of extension in November, 2020. The issue will reset to 1.749% effective 2020-12-31. It is tracked by HIMIPref™ and is assigned to the FixedReset (Insurance) subindex.

GWO.PR.O is a FloatingReset, Bills+130, that arose in 2015 via a partial conversion from GWO.PR.N. GWO.PR.O is tracked by HIMIPref™ but has been relegated to the Scraps – FloatingReset subindex on volume concerns.

Capital Power Corporation has announced:

that after having taken into account all Election Notices following the December 16, 2020 conversion deadline, in respect of the Cumulative Rate Reset Preference Shares, Series 1 (Series 1 Shares) tendered for conversion into Cumulative Floating Rate Preference Shares, Series 2 (Series 2 Shares), the holders of Series 1 Shares were not entitled to convert their shares. There were 687,245 Series 1 Shares tendered for conversion, which was less than the required one million shares required for conversion into Series 2 Shares.

There are five million Series 1 Shares listed on the Toronto Stock Exchange (TSX) under the symbol CPX.PR.A. Effective December 31, 2020, the Annual Fixed Dividend Rate for the next five-year period has been reset to 2.62100%.

For more information on the terms of, and risks associated with an investment in the Series 1 Shares, please see Capital Power’s (final) short form prospectus dated December 8, 2010 which is available on sedar.com or on Capital Power’s website at capitalpower.com.

CPX.PR.A was issued as a FixedReset 4.60%+217 that commenced trading 2010-12-16 after being announced 2010-12-1. It reset to 3.06% effective 2015-12-31 and I recommended against conversion; there was no conversion to FloatingResets. It will reset to 2.621% effective 2020-12-31. The issue is tracked by HIMIPref™ but is relegated to the Scraps – FixedReset (Discount) subindex on credit concerns.

Enbridge Inc. has announced:

that Westcoast Energy Inc. (“Westcoast”) intends to exercise its right to redeem all of its outstanding Cumulative 5-Year Minimum Rate Reset Redeemable First Preferred Shares, Series 10 (“Series 10 Shares”) on January 15, 2021 at a price of $25.00 per Series 10 Share, together with all accrued and unpaid dividends, if any.

Beneficial holders who are not directly the registered holders of the Series 10 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 from registered shareholders should be directed to Westcoast’s Registrar and Transfer Agent, Computershare Investor Services Inc., at 1 800-564-6253 (Canada and United States) or 1-514-982-7555 (Outside North America).

W.PR.K was issued as a FixedReset, 5.25%+426M525, that commenced trading 2015-12-15 after being announced 2015-11-24.

DBRS has announced that it:

placed iA Financial Corporation Inc.’s (iA or the Company) Issuer Rating of A (low) and Subordinated Debentures rating of BBB (high) Under Review with Positive Implications. DBRS Morningstar also placed the Issuer Rating of A (high), the Financial Strength Rating of A (high), the Subordinated Debentures rating of “A,” and the Non-Cumulative Preferred Shares rating of Pfd-2 (high) for Industrial Alliance Insurance and Financial Services Inc., iA’s major insurance operating subsidiary, Under Review with Positive Implications.

KEY RATING CONSIDERATIONS
The Under Review with Positive Implications status reflects DBRS Morningstar’s view that iA has made significant efforts over the past few years to improve its risk profile, in particular its sensitivities to market-related risks. The Company has materially reduced its sensitivities to interest rate and equity market movements, an important consideration given the relatively large proportion of individual insurance and segregated fund products in the Company’s product portfolio, and the sustained low interest rate environment that continues to put pressure on life insurers. The Company has also experienced some success in shifting its product portfolio toward less capital-intensive products, reducing the level of guarantees offered and increasing its proportion of fee-based business. During the review period, which is expected to be concluded within 90 days, DBRS Morningstar will focus on the Company’s improving capabilities in limiting the impact of adverse market movements on its net income and regulatory solvency ratios. In addition, DBRS Morningstar will assess the impact of the Coronavirus Disease (COVID-19), which has been more limited than expected so far, on iA’s credit fundamentals.

Affected issues are IAF.PR.B, IAF.PR.G and IAF.PR.I. There was ticker change for these issues in 2019.

The Bank of Nova Scotia has announced (on December 7):

its intention to redeem all outstanding Non-cumulative 5-Year Rate Reset Preferred Shares Series 32 (“Series 32 Shares”) and Non-cumulative Floating Rate Preferred Shares Series 33 (“Series 33 Shares”) of Scotiabank on February 2, 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 December 1, 2020, the Board of Directors of Scotiabank declared quarterly dividends of $0.128938 per Series 32 Share and $0.093638 per Series 33 Share. This dividend on the Series 32 Shares and Series 33 Shares will be paid on January 27, 2021, to shareholders of record at the close of business on January 5, 2021, as previously announced. In addition, holders of Series 32 and Series 33 Shares will be entitled to receive, on a pro rata basis, any dividend that may be declared by the Board of Directors of the Bank for Series 32 and Series 33 Shares for the period from, and including, January 26, 2021 to, but excluding, February 2, 2021. On February 2, 2021, the Series 32 and the Series 33 Shares will cease to be entitled to dividends.

This is neither a surprise nor related to LRCN issuance, since these issues are NVCC non-compliant.

BNS.PR.Z was issued as a FixedReset, 3.70%+134, which commenced trading 2011-2-3 after being issued as part of the acquisition of DundeeWealth. The issue reset to 2.063% in 2016 and there was a 32% conversion to the FloatingReset BNS.PR.F.

BNS.PR.F is a FloatingReset, Bills+134, that came into being via a partial conversion from BNS.PR.Z.

Great-West Lifeco Inc. has announced:

the dividend rates for its Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) and for its Non-Cumulative Floating Rate First Preferred Shares, Series O (the “Series O Shares”).

The annual fixed dividend rate for the five-year period commencing on December 31, 2020 and ending on December 30, 2025 applicable to any Series N Shares that remain outstanding on December 31, 2020 will be 1.749% per annum (or $0.109313 per Series N Share per quarter). The 1.749% annual rate is equal to the sum of the Government of Canada Yield (as defined in the Series N Share conditions) on December 1, 2020 plus 1.30%.

The floating dividend rate for the period commencing on December 31, 2020 and ending on March 30, 2021 applicable to any Series O Shares that remain outstanding on December 31, 2020 will be 1.409% per annum (or $0.086855 per Series O Share per quarter). The 1.409% annual rate is equal to the sum of the T-Bill Rate (as defined in the Series O Share conditions) on December 1, 2020 plus 1.30%.

A news release announcing conversion rights for the Series N Shares and the Series O Shares was issued on November 4, 2020 and can be viewed on Great-West Lifeco’s website. Beneficial owners of Series N Shares and Series O Shares who wish to convert their shares should communicate as soon as possible with their broker or other nominee to ensure their instructions are followed so that the registered holder of the Series N Shares or Series O Shares (as applicable) can meet the deadline to exercise such conversion right(s), which is 5:00 p.m. (ET) on Wednesday, December 16, 2020.

GWO.PR.N was issued as a FixedReset, 3.65%+130, that commenced trading 2010-11-23 after being announced 2010-11-15. The issue was met with disfavour and there was an inventory clearance sale closing 2010-12-3. After a notice of extension the issue issue reset to 2.176% in 2015. I recommended against conversion; there was a 15% conversion to the FloatingReset GWO.PR.O anyway. The company provided another notice of extension in November, 2020.

GWO.PR.O is a FloatingReset, Bills+130, that arose in 2015 via a partial conversion from GWO.PR.N.