Category: Issue Comments

Pembina Pipeline Corporation has announced:

that it does not intend to exercise its right to redeem the currently outstanding Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 19 (“Series 19 Shares”) (TSX: PPL.PR.S) on June 30, 2020 (the “Conversion Date”).

As a result, subject to certain terms of the Series 19 Shares, the holders of the Series 19 Shares will have the right to convert all or part of their Series 19 Shares on a one-for-one basis into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 20 of Pembina (“Series 20 Shares”) on the Conversion Date. Holders who do not exercise their right to convert their Series 19 Shares into Series 20 Shares will retain their Series 19 Shares.

As provided in the terms of the Series 19 Shares: (i) if Pembina determines that there would remain outstanding immediately following the conversion less than 1,000,000 Series 19 Shares, then all remaining Series 19 Shares will be automatically converted into Series 20 Shares on a one-for-one basis effective June 30, 2020; or (ii) if Pembina determines that there would be less than 1,000,000 Series 20 Shares after June 30, 2020, no Series 19 Shares will be converted into Series 20 Shares on the Conversion Date. There are currently 8,000,000 Series 19 Shares outstanding.

With respect to any Series 19 Shares that remain outstanding after June 30, 2020, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate for the Series 19 Shares for the five-year period from and including June 30, 2020 to, but excluding, June 30, 2025 will be 4.684 percent, being equal to the five-year Government of Canada bond yield of 0.414 percent determined as of today plus 4.27 percent, in accordance with the terms of the Series 19 Shares.

With respect to any Series 20 Shares that may be issued on June 30, 2020, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate applicable to Series 20 Shares for the three-month floating rate period from and including June 30, 2020 to, but excluding, September 1, 2020 will be 4.525 percent, being equal to the annual rate of interest for the most recent auction of 90-day Government of Canada treasury bills of 0.255 percent plus 4.27 percent, in accordance with the terms of the Series 20 Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial holders of Series 19 Shares who wish to exercise their right of conversion during the conversion period, which runs from June 1, 2020 until 3:00 (MT) / 5:00 pm (ET) on June 15, 2020, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with the time to complete the necessary steps. Any notices received after this deadline will not be valid.

As previously announced, the dividend payable on June 30, 2020 to holders of the Series 19 Shares of record on June 15, 2020 will be $0.312500 per Series 19 Share, consistent with the dividend rate in effect since issuance of the Series 19 Shares. For more information on the terms of the Series 19 Shares and the Series 20 Shares, please see the prospectus supplement dated March 25, 2015 which can be found on SEDAR, under the profile of Veresen Inc., at www.sedar.com.

PPL.PR.S is a FixedReset, 5.00%+427, that commenced trading 2015-4-1 as VSN.PR.E after being announced 2015-03-23. The ticker change became effective 2017-10-5 after the closing of a merger between the companies. The issue is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Husky Energy has announced:

that the Company does not intend to exercise its right to redeem its Cumulative Redeemable Preferred Shares, Series 7 (Series 7 Shares) on June 30, 2020. As a result, subject to certain conditions, the holders of Series 7 Shares have the right to choose one of the following options with regard to their shares:

retain any or all of their Series 7 Shares and continue to receive an annual fixed-rate dividend paid quarterly; or

convert, on a one-for-one basis, any or all of their Series 7 Shares into Cumulative Redeemable Preferred Shares, Series 8 (Series 8 Shares) of Husky and receive a floating rate quarterly dividend.
Conversion to Series 8 Shares is subject to the conditions that: (i) if Husky determines that there would be less than one million Series 7 Shares outstanding after June 30, 2020, then all remaining Series 7 Shares will automatically be converted to Series 8 Shares on a one-for-one basis on June 30, 2020, and (ii) if Husky determines that there would be less than one million Series 8 Shares outstanding after June 30, 2020, no Series 7 Shares will be converted into Series 8 Shares. In either case, Husky will issue a news release to that effect no later than June 23, 2020.

Holders of Series 7 Shares who choose to retain any or all of their shares will receive the new fixed-rate quarterly dividend applicable to the Series 7 Shares for the five-year period commencing June 30, 2020 to, but excluding, June 30, 2025 of 3.935%, being equal to the sum of the Government of Canada five-year bond yield of 0.415% plus 3.52% in accordance with the terms of the Series 7 Shares, subject to the conditions described above.

Holders of Series 7 Shares who choose to convert their shares to Series 8 Shares will receive a new floating-rate quarterly dividend applicable to the Series 8 Shares. The dividend rate applicable to the Series 8 Shares for the three-month period commencing June 30, 2020 to, but excluding, September 30, 2020 will be 3.775%, being equal to the annual rate for the most recent auction of 90-day Government of Canada Treasury Bills of 0.255% plus 3.52%, in accordance with the terms of the Series 8 Shares (the Floating Quarterly Dividend Rate), subject to the conditions described above. The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial owners of Series 7 Shares who wish to exercise the right of conversion should communicate as soon as possible with their brokers or other nominees in order to meet the deadline for registered holders to exercise such right, which is 5 p.m. ET on June 15, 2020. It is recommended this communication be had well in advance of the deadline in order to provide the brokers or other intermediaries with time to complete the necessary steps. Holders of Series 7 Shares who do not exercise the right of conversion by this deadline will continue to hold Series 7 Shares with the new annual fixed-rate dividend, subject to the conditions described above.

Holders of the Series 7 Shares and the Series 8 Shares will have the opportunity to convert their shares again on June 30, 2025 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 7 Shares and the Series 8 Shares, please see the Company’s prospectus supplement dated June 10, 2015 on www.sedar.com

HSE.PR.G is a FixedReset, 4.60%+352, that commenced trading 2015-6-17 after being announced 2015-6-9. It is tracked by HIMIPref™ and is assigned to the FixedReset subindex.

Brookfield Infrastructure Partners L.P. has announced:

that it has determined the fixed distribution rate on its Cumulative Class A Preferred Limited Partnership Units, Series 1 (“Series 1 Units”) (TSX: BIP.PR.A) for the five years commencing July 1, 2020 and ending June 30, 2025.

Series 1 Units and Series 2 Units

If declared, the fixed quarterly distributions on the Series 1 Units during the five years commencing July 1, 2020 will be paid at an annual rate of 3.974% ($0.248375 per unit per quarter).

Holders of Series 1 Units have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on June 15, 2020, to reclassify all or part of their Series 1 Units, on a one-for-one basis, into Cumulative Class A Preferred Limited Partnership Units, Series 2 (the “Series 2 Units”), effective June 30, 2020.

The quarterly floating rate distributions on the Series 2 Units will be paid at an annual rate, calculated for each quarter, of 3.56% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly distribution rate in respect of the July 1, 2020 to September 30, 2020 distribution period for the Series 2 Units will be 0.96159% (3.815% on an annualized basis) and the distribution, if declared, for such distribution period will be $0.2403975 per unit, payable on September 30, 2020.

Holders of Series 1 Units are not required to elect to reclassify all or any part of their Series 1 Units into Series 2 Units.

As provided in the unit conditions of the Series 1 Units, (i) if Brookfield Infrastructure determines that there would be fewer than 1,000,000 Series 1 Units outstanding after June 30, 2020, all remaining Series 1 Units will be automatically reclassified into Series 2 Units on a one-for-one basis effective June 30, 2020; or (ii) if Brookfield Infrastructure determines that there would be fewer than 1,000,000 Series 2 Units outstanding after June 30, 2020, no Series 1 Units will be permitted to be reclassified into Series 2 Units. There are currently 4,989,265 Series 1 Units outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 2 Units effective upon reclassification. Listing of the Series 2 Units is subject to Brookfield Infrastructure fulfilling all the listing requirements of the TSX and, upon approval, the Series 2 Units will be listed on the TSX under the trading symbol “BIP.PR.G”.

BIP.PR.A is a FixedReset, 4.50%+356, that commenced trading 2015-3-12 after being announced 2015-3-4. It is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

Note that the tax treatment of distributions on BIP.PR.A are complex and change annually.

Brookfield Asset Management Inc. has announced:

that it has determined the fixed dividend rate on its Cumulative Class A Preference Shares, Series 42 (“Series 42 Shares”) (TSX: BAM.PF.G) for the five years commencing July 1, 2020 and ending June 30, 2025, and also determined the quarterly dividend on its floating rate Cumulative Class A Preference Shares, Series 25 (“Series 25 Shares”) (TSX: BAM.PR.S).

Series 42 Shares and Series 43 Shares

If declared, the fixed quarterly dividends on the Series 42 Shares during the five years commencing July 1, 2020 will be paid at an annual rate of 3.254% ($0.203375 per share per quarter).

Holders of Series 42 Shares have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on June 15, 2020, to convert all or part of their Series 42 Shares, on a one-for-one basis, into Cumulative Class A Preference Shares, Series 43 (the “Series 43 Shares”), effective June 30, 2020.

The quarterly floating rate dividends on the Series 43 Shares will be paid at an annual rate, calculated for each quarter, of 2.84% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly dividend rate in respect of the July 1, 2020 to September 30, 2020 dividend period for the Series 43 Shares will be 0.78011% (3.095% on an annualized basis) and the dividend, if declared, for such dividend period will be $0.1950275 per share, payable on September 30, 2020.

Holders of Series 42 Shares are not required to elect to convert all or any part of their Series 42 Shares into Series 43 Shares.

As provided in the share conditions of the Series 42 Shares, (i) if Brookfield determines that there would be fewer than 1,000,000 Series 42 Shares outstanding after June 30, 2020, all remaining Series 42 Shares will be automatically converted into Series 43 Shares on a one-for-one basis effective June 30, 2020; or (ii) if Brookfield determines that there would be fewer than 1,000,000 Series 43 Shares outstanding after June 30, 2020, no Series 42 Shares will be permitted to be converted into Series 43 Shares. There are currently 11,887,500 Series 42 Shares outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 43 Shares effective upon conversion. Listing of the Series 43 Shares is subject to Brookfield fulfilling all the listing requirements of the TSX and, upon approval, the Series 43 Shares will be listed on the TSX under the trading symbol “BAM.PF.K”.

BAM.PF.G is a FixedReset, 4.50%+284, that commenced trading 2014-10-8 after being announced 2014-10-1. It is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

Fortis Inc. has announced:

that 267,341 of its 7,024,846 issued and outstanding Cumulative Redeemable Five-Year Fixed Rate Reset First Preference Shares, Series H (“Series H Shares”) were tendered for conversion, on a one-for-one basis, into Cumulative Redeemable Floating Rate First Preference Shares, Series I (“Series I Shares”) and that 907,577 of its 2,975,154 Series I Shares were tendered for conversion, on a one-for-one basis, into Series H Shares. As a result of the conversion, Fortis has 7,665,082 Series H Shares and 2,334,918 Series I Shares issued and outstanding. The Series H Shares and the Series I Shares will continue to be listed on the Toronto Stock Exchange (“TSX”) under the symbols FTS.PR.H and FTS.PR.I, respectively.

The Series H Shares will pay on a quarterly basis, for the five-year period beginning on June 1, 2020, if, as and when declared by the Board of Directors of Fortis, a fixed dividend based on an annual fixed dividend rate of 1.835 percent.

The Series I Shares will pay a floating quarterly dividend for the five-year period beginning on June 1, 2020, if, as and when declared by the Board of Directors of Fortis. The floating quarterly dividend rate for the Series I Shares for the first quarterly floating rate period (being the period from and including June 1, 2020 and ending on and including August 31, 2020) is based on an annual floating dividend rate of 1.722 percent and will be reset every quarter based on the applicable three-month Government of Canada Treasury Bill rate plus 1.450 percent.

For more information on the terms of, and risks associated with an investment in, the Series H Shares and the Series I Shares, please see the Corporation’s short form prospectus dated January 18, 2010 relating to the issuance of the Series H Shares, which can be found under the Corporation’s profile on SEDAR at www.sedar.com and on the Corporation’s website at www.fortisinc.com.

FTS.PR.H was issued a FixedReset, 4.25%+145, that commenced trading 2010-1-26 after being announced 2010-1-11. In 2015 it reset to 2.50% amid great secrecy as they prefer to maintain selective disclosure through the old boys’ club. It reset to 1.835% effective 2020-6-1.

FTS.PR.I commenced trading 2020-6-2 after its creation via partial conversion from FTS.PR.H.

Enbridge Inc. has announced (on May 19):

that none of its outstanding Cumulative Redeemable Preference Shares, Series 13 (Series 13 Shares) will be converted into Cumulative Redeemable Preference Shares, Series 14 of Enbridge (Series 14 Shares) on June 1, 2020.

After taking into account all conversion notices received from holders of its outstanding Series 13 Shares by the May 19, 2020 deadline for the conversion of the Series 13 Shares into Series 14 Shares, less than the 1,000,000 Series 13 Shares required to give effect to conversions into Series 14 Shares were tendered for conversion.

ENB.PF.E is a FixedReset, 4.40%+266, that commenced trading 2014-7-17 after being announced 2014-7-8. The issue reset to 3.043% effective 2020-6-1. It is tracked by HIMIPref™ and has been assigned to the Scraps – FixedReset (Discount) subindex on credit concerns.

DBRS has announced that it:

placed the Preferred Shares issued by Dividend 15 Split Corp. II (the Company) Under Review with Negative Implications. The Company invests in a portfolio of securities (the Portfolio) funded by issuing two classes of shares: dividend-yielding Preferred Shares and capital shares (the Capital Shares). In such structure, the Preferred Shares normally benefit from the downside protection provided by the net asset value (NAV) of the Capital Shares. Following the stock market sell-off in response to the worldwide spread of the Coronavirus Disease (COVID-19) and various geopolitical news, the Preferred Shares experienced substantial declines in their downside protection. As a result, DBRS Morningstar has placed the Preferred Shares Under Review with Negative Implications. DBRS Morningstar will take further rating action on the Preferred Shares once a longer-term trend has been established for the NAV of the Company.

This rating action was based on factors that included additional analysis and, where appropriate, additional assumptions were applied to expected performance as a result of the global efforts to contain the spread of the coronavirus. On April 16, 2020, the DBRS Morningstar Sovereigns group published its outlook on the impact on key economic indicators for the 2020–22 time frame. For details see https://www.dbrsmorningstar.com/research/359679. For the current rating action, DBRS Morningstar’s analysis considered impacts consistent with the moderate scenario in the referenced commentary.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

The NAVPU was 11.67 as of May 15, so it’s no real surprise!

DBRS has announced (on May 15):

DBRS Limited (DBRS Morningstar) discontinued and withdrew its rating on the Preferred Shares issued by Brompton Oil Split Corp. following the downgrade of the Preferred Shares rating to D on April 9, 2020.

About 70% of the fund disappeared following the preferred shareholders exercise of their special retraction rights. There was widespread confusion over the calculated redemption price on this retraction, but it’s because they have two ways of determining security value for NAV calculation purposes, depending on the purpose of the calculation:

the value of any security, that is listed or traded upon a stock exchange (or if more than one, on the principal stock exchange for the security, as determined by the Manager) shall be determined by taking the latest available sale price of recent date, or lacking any recent sales or any record thereof, the simple average of the latest available offer price and the latest available bid price (unless in the opinion of the Manager such value does not reflect the value thereof and in which case the latest offer price or bid price shall be used), as at the NAV Valuation Date on which the NAV of the Company is being determined, all as reported by any means in common use. For a retraction or redemption of the Company’s shares, the value of the common shares will be equal to the weighted average trading price of such shares over the last three business days of the relevant month;

At one point, long ago, I discussed “gating” of mutual fund redemptions in times of serious illiquidity and suggested that the approaches being discussed were wrong; it wasn’t enough to delay the redemption, I argued, one also had to take an average of the daily prices over the delay period to calculate the final redemption price, because a simple delay simply moved the problem from “You are assumed to be selling all your securities at this particular price” to “You are assumed to be selling all your securities at that particular price.” For gating to be fair and effective, you have to calculate the price in a manner similar to that in which you expect the manager to accomplish the liquidation.

Unfortunately, I can’t find the posts where I discussed this. It has me very upset.

Brompton Group announced (on May 19):

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 Wednesday, May 20, 2020. The offering is expected to close on or about May 27, 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 $8.00 per Class A Share for a distribution rate of 15% on the issue price, and the Preferred Shares will be offered at a price of $9.60 per Preferred Share for a yield to maturity of 7.1%.(1) The closing price on the TSX for each of the Class A and Preferred Shares on May 15, 2020 was $7.72 and $9.59, 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 (calculated as at May 15, 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.

They later announced (on May 20):

Brompton Split Banc Corp. (the “Company”) is pleased to announce a successful overnight treasury offering of class A shares and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively). Gross proceeds of the offering are expected to be approximately $22.9 million. The offering is expected to close on or about May 27, 2020 and is subject to certain closing conditions. The Company has granted the Agents (as defined below) an over-allotment option, exercisable for 30 days following the closing date of the offering, to purchase up to an additional 15% of the number of Class A Shares and Preferred Shares issued at the closing of the offering.

The Class A Shares were offered at a price of $8.00 per Class A Share for a distribution rate of 15.0% on the issue price, and the Preferred Shares were offered at a price of $9.60 per Preferred Share for a yield to maturity of 7.1%.(1) 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 (calculated as at May 15, 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 syndicate of agents for the offering was led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank and includes BMO Capital Markets, TD Securities Inc., Canaccord Genuity Corp., Stifel Nicolaus Canada Inc., Raymond James Ltd., Echelon Wealth Partners Inc., Hampton Securities Limited, Industrial Alliance Securities Inc., Desjardins Securities Inc., and Mackie Research Capital Corporation.

The NAVPU on May 20 was 16.49, indicated a premium on this offering of 6.7% … not a bad business, when it works!

Royal Bank of Canada has announced:

that during the conversion notice period, which ran from April 24, 2020 to May 11, 2020, 325,968 Non-Viability Contingent Capital (NVCC) Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series BD (the “Series BD shares”) were tendered for conversion, on a one-for-one basis, into NVCC Non-Cumulative Floating Rate First Preferred Shares, Series BE (the “Series BE shares”). As per the conditions set out in the prospectus supplement dated January 27, 2015, since less than 1,000,000 Series BE shares would be outstanding after May 24, 2020, holders of Series BD shares will not be entitled to convert their shares into Series BE shares. As a result, Series BE shares will not be issued at this time and holders of Series BD shares will retain their shares.

On May 24, 2020, Royal Bank of Canada will have 24,000,000 Series BD shares issued and outstanding. The Series BD shares are currently listed on the Toronto Stock Exchange under the symbol RY.PR.J.

RY.PR.J is a FixedReset, 3.60%+274, NVCC-compliant, that commenced trading 2015-1-30 after being announced 2015-1-26. It will reset to 3.20% effective 2020-5-24. The issue is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.