Category: Issue Comments

As previously discussed, FTU.PR.B is extending term for “a further six year period from December 1, 2018 to December 1, 2024.” It is also boosting its dividend to 10%.

Don’t be confused by the dividend boost – that’s all just a bit of flim-flam. According to the company the NAVPU of the corporation was 8.53 on October 15, which is all there is to meet its preferred share obligations of $10.00 per unit. It seems likely that this value will have declined since then, given recent market downdrafts.

The implication is that the entire value of the company belongs – or should belong – to the preferred shareholders. Many will realize a loss when retracting, but consider this: if the preferred shareholders take their money and invest it in a similar underlying portfolio of stocks, they will get every single penny of gains that that portfolio can conceivably generate. If they leave their money with the company, then the best they can possibly hope for is their highly touted 10% dividend and a maximum of $10.00 per share … any excess will accrue to the capital unitholders.

I will agree that it is not likely that the company will be able to pay the 10% preferred dividend and increase its unit value above 10.00 prior to the extended maturity date of 2024-12-1. But it’s not impossible. And to the extent that it’s possible, that is an absolutely free, no-risk call option that has been granted to Capital Unitholders by preferred shareholders who choose to extend.

In addition to this statement of facts, I will remind preferred shareholders of my view that:

they are now invested in an expensive mutual fund (MER = 1.53% according to the 18H1 Semi-annual report) with cruddy returns (-1.09% since inception, vs. +3.62% for the S&P 500 Financial Index, according to the 2017 Annual Report).

Holders of FTU.PR.B should retract them.

Remember November 1 is the deadline for notifying the company of retraction, so preferred shareholders who have not yet instructed their brokers to retract should not waste any time. Brokers and other intermediaries will normally have internal deadlines a day or two in advance of the company’s deadline, but will usually pass along instructions received after this date (but before the company’s date!) provided you grovel in a sufficiently entertaining fashion.

Strathbridge Asset Management has announced:

Premium Income Corporation (the “Fund”) is pleased to announce that it is undertaking an overnight treasury offering of Preferred Shares and Class A Shares.

The sales period for the overnight offering will end at 9:00 am EST tomorrow, October 26, 2018. The offering is expected to close on or about November 2, 2018 and is subject to certain conditions including approval by the Toronto Stock Exchange (“TSX”).The Preferred Shares will be offered at a price of $15.00 per Preferred Share to yield 5.75% and the Class A Shares will be offered at an indicative price of $6.60 per Class A Share to yield 12.3%. The trading price on the TSX for each of the Preferred Shares and Class A Shares as at 2:00pm EST on October 25, 2018 was $15.34 and $6.78, respectively.

Since the inception of the Fund, the aggregate dividends declared on the Preferred Shares have been $19.19 per share and the aggregate dividends declared on the Class A Shares have been $24.60 per share, for a combined total of $43.79 per unit.

The Fund invests in a portfolio consisting principally of common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and The Toronto-Dominion Bank (the “Banks”). To generate additional returns above the dividend income earned on the Fund’s portfolio, the Fund will selectively write covered call options in respect of some or all of the common shares in the Fund’s portfolio. The manager and investment manager of the Fund is Strathbridge Asset Management Inc.

The Preferred Shares pay fixed cumulative preferential quarterly cash distributions in the amount of $0.215625 ($0.8625 per annum) per preferred share representing a yield of 5.75% on the original issue price of $15.00. The Class A Shares currently pay quarterly distributions in the amount $0.20319 ($0.81276 per annum) per Class A Share.
The syndicate of agents for the offering is being co-led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank, and also includes BMO Capital Markets, TD Securities Inc., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., Echelon Wealth Partners Inc., GMP Securities L.P. and Industrial Alliance Securities Inc.

For further information, please contact Investor Relations at 416.681.3966, toll free at 1.800.725.7172, email at info@strathbridge.com or visit www.strathbridge.com

So they’re offering Whole Units at 21.60 (I think; it’s not clear to me what “indicative” means) compared to an October 24 NAVPU of 20.65 – a premium of 4.60%, which is good business.

I am not a big fan of this fund due to the low level of Asset Coverage and the lack of a ‘dividend stopper’ that would halt distributions when Asset Coverage is below a certain level.

Update, 2018-10-30: They raised about 17.2-million:

Premium Income Corporation (the “Fund”) is pleased to announce a successful overnight treasury offering of 795,000 Preferred Shares and 795,000 Class A Shares. Gross proceeds of the offering are expected to be approximately $17.2 million.

The offering is expected to close on or about November 2, 2018 and is subject to certain conditions including approval by the Toronto Stock Exchange (“TSX”).The Preferred Shares were offered at a price of $15.00 per Preferred Share to yield 5.75% and the Class A Shares were offered at a price of $6.60 per Class A Share to yield 12.3%.

Royal Bank of Canada has announced:

its intention to redeem all of its issued and outstanding Non-Cumulative First Preferred Shares Series AD (the “Series AD shares”) on November 24, 2018, for cash at a redemption price of $25.00 per share to be paid on November 26, 2018. Royal Bank of Canada also announced its intention to redeem all of its issued and outstanding Non-Cumulative Floating Rate First Preferred Shares Series AK (the “Series AK shares”) and Non-Cumulative 5-Year Rate Reset First Preferred Shares Series AJ (the “Series AJ shares”) and AL (the “Series AL shares”) on February 24, 2019, for cash at a redemption price of $25.00 per share to be paid on February 25, 2019.

There are 10,000,000 Series AD shares outstanding, representing $250 million of capital; 2,421,185 Series AK shares outstanding, representing approximately $61 million of capital; 13,578,815 Series AJ shares outstanding, representing approximately $339 million of capital; and 12,000,000 Series AL shares outstanding, representing $300 million of capital. The redemptions will be financed out of the general corporate funds of Royal Bank of Canada.

The final quarterly dividend of $0.28125 for each of the Series AD shares will be paid separately from the redemption price and in the usual manner on November 23, 2018 to shareholders of record on October 25, 2018. After such dividend payment, the holders of Series AD shares will cease to be entitled to dividends. The final quarterly dividends for each of the Series AK, AJ and AL shares, subject to declaration by the board of directors on November 27, 2018, will be paid separately from the redemption price for each of the Series AK, Series AJ and Series AL Shares and in the usual manner on February 22, 2019 to shareholders of record on January 24, 2019. After such dividend payments, the holders of Series AK, AJ and AL shares will cease to be entitled to dividends.

RY.PR.D is a 4.5% Straight Perpetual that was announced 2006-12-4 and commenced trading 2006-12-13. It has been assigned to the DeemedRetractibles sub-index since the imposition of the NVCC rules in 2011.

RY.PR.I was issued as a FixedReset, 5.00%+193, that commenced trading 2008-9-16 after being announced 2008-9-8. It was not called for redemption with others in the 2014-2-24 batch, and the extension became official on 2014-1-21, with the reset rate of 3.52% announced 2014-1-24. There was 15% conversion to RY.PR.K, its FloatingReset counterpart. The issue is currently assigned to the FixedReset Bank Non-NVCC Compliant subindex.

As noted above, RY.PR.K came into existence via partial conversion from RY.PR.I. It was posted for trading 2014-2-24. It is currently assigned to the “Scraps” sub-index due to low trading volume.

RY.PR.L was issued as a FixedReset, 5.60%+267, that commenced trading 2008-11-3 after being announced 2008-10-23 – very exciting times for the market! Like RY.PR.I, above, it was not called for redemption on 2014-2-24, with the extension becoming official on 2014-1-21 and the reset rate of 4.26% announced 2014-1-24. There was no conversion to FloatingReset. The issue is currently assigned to the FixedReset Bank Non-NVCC Compliant subindex.

The Bank of Nova Scotia has announced:

that it has completed the domestic public offering of Non-cumulative 5-Year Rate Reset Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 40”).

Scotiabank sold 12 million Preferred Shares Series 40 at a price of $25.00 per share and holders will be entitled to receive a non-cumulative quarterly fixed dividend for the initial period ending January 26, 2024 yielding 4.85% per annum, as and when declared by the Board of Directors of Scotiabank. The gross proceeds of the offering were $300 million.

The offering was made through a syndicate of underwriters led by Scotia Capital Inc. The Preferred Shares Series 40 commenced trading on the Toronto Stock Exchange today under the symbol BNS.PR.I.

On January 27, 2024 and on January 27 every five years thereafter, Scotiabank may, at its option, subject to regulatory approval, redeem all or any number of the then outstanding Preferred Shares Series 40 at a redemption price of $25 per share. Thereafter, the dividend rate will reset every five years at a rate equal to 2.43% over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series 40 will, subject to certain conditions, have the right to convert all or any part of their shares to Non-cumulative Floating Rate Preferred Shares Series 41 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 41”) of Scotiabank on January 27, 2024 and on January 27 every five years thereafter.

Holders of the Preferred Shares Series 41 will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 2.43%, as and when declared by the Board of Directors of Scotiabank. Holders of Preferred Shares Series 41 will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series 40 on January 27, 2029 and on January 27 every five years thereafter.

BNS.PR.I is a FixedReset, 4.85%+243, NVCC, issue that was announced 2018-10-2. It will be tracked by HIMIPref™ and has been assigned to the FixedReset-Discount sub-index.

The issue traded 644,420 shares today in a range of 24.90-97 before closing at 24.93-97. Vital statistics are:

The new issue is quite expensive according to Implied Volatility Analysis:

Click for Big

According to this analysis, the fair value of the new issue on October 12 is 23.05, down from the October 2 fair value of 23.43. However, it should be noted that the analysis is forced to do some major extrapolation, as the only other BNS FixedReset NVCC-compliant issues are BNS.PR.E, BNS.PR.G and BNS.PR.H, all of which have Issue Reset Spreads in excess of 400bp. On the other hand, the issue seems well aligned with the NVCC non-compliant issues, whereas it should be well above the regression line they form.

The ludicrously high figure of Implied Volatility is something I take to mean that the underlying assumption of the Black-Scholes model, that of no directionality of prices, is not accepted by the market; the market seems to be taking the view that since things seem rosy now, they will always be rosy and everything will trade near par in the future.

I balk at ascribing a 100% probability to the ‘all issues will be called, or at least exhibit price stability’ hypothesis. There may still be a few old geezers amongst the Assiduous Readers of this blog who can still (faintly) remember the Great Bear Market of 2014-16, in which quite a few similar assumptions made earlier turned out to be slightly inaccurate. The extra cushion implied by an Issue Reset Spread that is well over the market spread is worth something, even if nothing gets called. Or, to put it another way, one can buy a whole lot of downside protection for very little extra money, relative to this issue.

Standard & Poor’s has announced:

• •Toronto-based information services company Thomson Reuters Corp. completed the sale of its Financial & Risk (F&R) business, selling a controlling 55% equity interest to Blackstone Group alongside affiliates of Canada Pension Plan and GIC).
• •We view the divesture of the F&R business, which accounted for more than half of Thomson Reuters’ consolidated revenue and EBITDA in 2017, as a loss of the scale and diversification benefits that we previously factored into our rating.
• •We are lowering our issuer credit rating on Thomson Reuters and our senior unsecured issue-level ratings by one notch to ‘BBB’ from ‘BBB+’. We affirmed our ‘A-2’ short-term commercial paper rating.
• •The stable outlook reflects our expectation for modest organic revenue growth in the low- to mid-single-digit percentage range, EBITDA margins steadily rise to the mid-20% over the next two years as the company reduces costs and improves its operating efficiency, and that the company will maintain adjusted debt to EBITDA leverage below 3x.

NEW YORK (S&P Global Ratings) Oct. 4, 2018–S&P Global Ratings today lowered its long-term issuer credit rating on Toronto-based information services company Thomson Reuters Corp. to ‘BBB’ from ‘BBB+’ and affirmed its ‘A-2’ short-term issuer credit rating. The rating outlook is stable. We also lowered the issue-level ratings on the company’s senior unsecured debt to ‘BBB’ from ‘BBB+’. We removed the ratings from CreditWatch negative, where we placed them n Jan. 31, 2018, following the company’s announcement of the sale of majority stake in its F&R business.

We also lowered our Canadian scale preferred share rating to ‘P-3(High)’ from ‘P-2(Low)’, lowered our preferred share issue rating to ‘BB+’ from ‘BBB-‘ and affirmed our ‘A-2′ short-term rating on the company’s U.S. commercial paper facility.

The downgrade reflects the divesture of the F&R business, which accounted for more than half of Thomson Reuters’ consolidated revenue and EBITDA in 2017. As a result of this sale, we believe the company is losing the scale and diversification benefits that we previously factored into our rating.

As reported on PrefBlog, S&P placed TRI on Watch-Negative in January, 2018. DBRS downgraded the issue to Pfd-3(high) in October 2013.

The sole affected issue is TRI.PR.B

Element Fleet Management Corp. has announced:

a customer-centric plan to meaningfully improve financial performance, strengthen and de-risk the Company’s balance sheet, and position the business for growth.
…
The plan includes:

• •A series of concrete actions to improve the customer experience and generate an estimated $150 million in run-rate pre-tax operating income improvements in the fleet management business by the end of 2020;
• •A $150 million investment in the business to achieve those improvements, which will be funded in part by capital retained after a reduction in the Company’s quarterly common share dividend from $0.075 to $0.045, and the introduction of a dividend reinvestment plan;
• •An agreement, subject to the satisfaction of certain conditions, to purchase the interests in the 19th Capital joint venture that Element does not already own for nominal consideration, and Element plans to undertake an orderly run off of 19thCapital’s assets over the next 36 months. In conjunction with this initiative, Element will recognize an after-tax charge of approximately $360 million in the third quarter reflecting a write down of the carrying value of its remaining investment in 19th Capital;
• •Strengthening the Company’s investment-grade balance sheet through a $300 million offering of common shares via a bought deal transaction; and
• •A clear accountability plan, including a Transformation Management Office run by a leading global consulting firm that will bring focus, support and accountability for the duration of the program, as well as regular reporting to track our performance

DBRS has announced that it:

has confirmed the ratings for Element Fleet Management Corp. (EFN or the Company), including the Company’s Long-Term Issuer Rating of BBB (high) and Short-Term Issuer Rating of R-2 (high). The trend on all ratings is Stable. The Intrinsic Assessment (IA) for the Company is BBB (high), while its Support Assessment is SA3. As a result, EFN’s final ratings are equalized with its IA.

KEY RATING CONSIDERATIONS
The ratings consider Element’s action plan following an in-depth and broad review of three distinct workstreams completed by the new executive management team and the Board of Directors that should contribute to better operating performance going forward. Nonetheless, the plan does have execution risks, including the realization of synergies and efficiencies, as well as the successful wind down of 19th Capital without additional losses or costs to Element. The Company’s position as the market leader in North American commercial fleet as well as leading positions in Australia and New Zealand, its low risk balance sheet and well-aligned funding profile support the ratings. The ratings also consider the Company’s reliance on secured forms of wholesale funding, returns that are solid, but lag the peer group at the next rating level and elevated leverage.

The Stable trend reflects DBRS’s expectation that the Company will continue to produce solid earnings from its core fleet business as it executes the strategic plan, while maintaining strong asset performance. The Company’s ample available liquidity and good access to the capital markets are considered in the trend. The Stable trend also considers DBRS’s view that the long-term fundamentals for the commercial fleet industry will remain favorable supported by the continuing trend of large corporates outsourcing the management of their commercial fleets to save costs. Moreover, the increasing volume of data produced by vehicles that may be analyzed to increase driver productivity and the operating efficiency of the fleets requires scalable IT platforms, such as that offered by EFN, further underpinning demand for commercial fleet services.

Affected issues are EFN.PR.A , EFN.PR.C , EFN.PR.E , EFN.PR.G and EFN.PR.I .

Husky Energy Inc.has announced:

a proposal to acquire all of the outstanding shares of MEG Energy Corp. (TSX:MEG) (“MEG”) for implied total equity consideration of approximately $3.3 billion. This proposal values MEG at an implied total enterprise value of $6.4 billion, including the assumption of approximately $3.1 billion of net debt.

This caused immediate reaction by Standard & Poor’s:

• •We are placing our ratings on Husky Energy Inc. on CreditWatch with negative implications, following its announced unsolicited bid to acquire oil sands bitumen producer, MEG Energy Corp.
• •We are also placing our ‘BBB-‘ global scale and ‘P-2(Low)’ Canada scale preferred share ratings on CreditWatch with negative implications, as we would lower them to ‘BB+’ and ‘P-3(High)’, respectively, concurrent with a downgrade on the company to ‘BBB’.
• •We are assuming Husky’s major shareholder will retain its majority ownership in the company, so we expect the one-notch uplift to its rating, which is supported by this ownership, should remain in effect.
• •The negative CreditWatch reflects the potential deterioration of Husky’s cash flow and leverage metrics, with the addition of MEG’s existing C$3.6 billion of debt (at June 30, 2018), and the resulting deterioration of the company’s financial risk profile, which could lead to a downgrade.

…
The CreditWatch is based on the potential deterioration of Husky’s financial risk profile, if the company acquires MEG. The C$3.6 billion of MEG’s debt being assumed will materially weaken Husky’s pro forma cash flow and leverage metrics, and we believe the company’s financial risk profile might deteriorate by one category from our current weighted-average estimate for the 2018-2020 forecast period. At this time, we believe Husky’s major shareholder should retain its ownership position in the company, which would support the continued one-notch uplift to the credit rating. As a result, we believe the rating downside should be limited to one notch.
…
We expect to resolve the CreditWatch placement when the transaction closes.
This should occur in early 2019.

S&P currently rates the preferreds as P-2(low).

DBRS commented:

Nevertheless, DBRS notes that if Husky’s offer is successful in its current form, the addition of MEG’s assets would be mildly positive for Husky’s business risk profile. The inclusion of MEG’s assets (1) adds to Husky’s size, (2) improves the Company’s proven reserve life index, (3) complements Husky’s other thermal oil developments in Western Canada and (4) enhances Husky’s heavy oil integration plans. Tempering the improvement in the business risk profile is a higher level of asset concentration in Western Canada and a higher proportion of thermal oil in the Company’s production mix.

DBRS notes that Husky’s credit metrics (assuming Husky’s offer is successful in its current form) are modestly negatively affected initially due to the sizable amount of MEG debt that the Company would incur. On a pro forma basis (last 12 months ended June 30, 2018), Husky’s lease-adjusted debt-to-cash flow ratio rises from approximately 1.6 times (x) to 2.3x (outside the “A” range). However, Husky has noted that approximately $200 million in synergies could be realized annually from the acquisition of the MEG assets. Also, the combined entity is expected to generate material free cash flow (cash flow after capital spending and dividends) that can be deployed to reducing net debt and financial leverage. The Company anticipates a net debt-to-cash flow ratio of the combined entity (based on current strip pricing in 2019 for West Texas Intermediate oil of USD 70.50/bbl and a heavy light oil differential in Western Canada of USD 26.26/bbl) to be approximately 1.0x in 2019.

DBRS confirmed the preferreds at Pfd-2(low) on 2017-11-14.

Affected issues are HSE.PR.A, HSE.PR.B, HSE.PR.C, HSE.PR.E and HSE.PR.G.

Brompton Group has announced:

As a result of strong long-term performance, Dividend Growth Split Corp. (the “Fund”) is pleased to announce that the board of directors has approved an extension of the maturity date of the Class A and Preferred shares of the Company. The current maturity date of November 28, 2019 will be extended for an additional period of three to five years. The new term and the proposed rate for the preferred share dividend for the new term will be announced at least 60 days prior to the current November 28, 2019 maturity date. The preferred share dividend rate for the extended term will be based on market yields for preferred shares with similar terms at that time.

The extension of the term of the Fund is not expected to be a taxable event and should enable shareholders to defer potential capital gains tax liability that would have otherwise been realized on the redemption of the Class A shares or Preferred Shares at the end of the term until such time as such shares are disposed of by shareholders.
Since inception in December 2007 to August 31, 2018, the Class A share has delivered a 7.4%(1) per annum return, which outperformed the S&P/TSX Composite Index by 2.7% per annum. Since inception to August 31, 2018, Class A shareholders have received cash distributions of $12.39. Class A shareholders also have the option to reinvest their cash distributions in a dividend reinvestment plan which is commission free to participants. Class A shareholders can enroll in the DRIP program by contacting their investment advisor.

The term extension offers Preferred shareholders the opportunity to enjoy preferential cash dividends until the end of the extended term. Since inception to August 31, 2018, the Preferred share has delivered a 5.4% (1) per annum return.

The Fund invests, on an approximately equally-weighted basis, in a portfolio consisting primarily of equity securities of Canadian dividend growth companies. In addition, DGS may hold up to 20% of the total assets of the portfolio in global dividend growth companies for diversification and potentially enhanced return potential.

DGS.PR.A approved a term extension in 2011 which became official in 2013 and took effect in 2014 (these guys like to plan ahead!) with the dividend rate unchanged at 5.25%. The manager’s mandate expanded slightly in August, 2018.

DGS.PR.A is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Quadravest Capital Management has announced:

Canadian Life Companies Split Corp (the “Company”) is pleased to announce it has extended the termination date of the Company a further six year period from December 1, 2018 to December 1, 2024.

In connection with the extension, the Company will also amend the dividend entitlement of the LFE.PR.B Preferred Shares (“Preferred Shares”) effective December 1, 2018, to pay a cumulative preferential floating rate monthly dividend at an annual rate equivalent to the greater of, (i) 6.5% based on the $10 original issue price and (ii) the prevailing Canadian Prime Rate plus 2% annually based on the $10 original issue price, to a maximum of 8%. Based on the current Prime Rate of 3.7%, the annual rate would be 6.5%, which represents an increase of 0.25% per annum from the current rate of 6.25%.

The dividend policy for the LFE Class A Shares (“Class A Shares”) will remain unchanged.

In connection with the extension, the Company will offer a Special Retraction Right which will allow existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2018 net asset value per unit.

Since inception of the Company, Class A Shares have received a total of $7.15 per share and Preferred Shares have received a total of $7.64 per share, for a combined total of $14.79.

The Company invests in a portfolio of four publicly traded Canadian life insurance companies as follows: Great-West Lifeco Inc., Industrial Alliance Insurance & Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.

LFE.PR.B came into being in 2012, when it was received in exchange from LFE.PR.A (warrants were also part of the exchange consideration). The dividend was set to 6.25% – they had to be generous, because the NAVPU at the time was only about 11.55. The NAVPU is now 13.94 as of September 14, 2018.

From the Annual Information Form comes the following information:

In the event that the Termination Date is extended in any Extension Year, each holder of Preferred Shares or Class A Shares shall have the right to retract such Preferred Shares or Class A Shares effective December 1 of such Extension Year (the “Recurring Special Retraction Right”). The price payable per Preferred Share so retracted shall be equal to (i) the sum of (A) the lesser of (x) $10.00 and (y) the net asset value of the Company calculated on November 30 of such Extension Year, divided by the number of Preferred Shares then outstanding, plus (B) an amount equal to the accrued and unpaid dividends on each Preferred Share to but excluding November 30 of such Extension Year, plus (ii) all Dividends Owing thereon to but excluding November 30 of such Extension Year. The price payable per Class A Share so retracted shall be equal to the greater of (i) the net asset value per Unit calculated on November 30 of such Extension Year less $10.00, and (ii) zero. Holders of Preferred Shares or Class A Shares wishing to take advantage of the Recurring Special Retraction Right must surrender their Preferred Shares or Class A Shares for retraction no later than the close of business on November 1 of such Extension Year (or, if November 1 of such year is not a business day, on the immediately preceding business day). Payment of the retraction price per Preferred Share or Class A Share owing in respect of the exercise of the Recurring Special Retraction Right will be made on or before December 15 of such Extension Year (or, if December 15 of such year is not a business day, on the immediately succeeding business day).

November 1 is a Thursday this year, so the deadline to notify the company of a desire to retract is November 1 (brokerages will set their internal deadlines a few days earlier). LFE.PR.B is currently trading above its retraction price, however, so in the absence of extortionate transaction costs, holders who want to get out are better off selling.

Quadravest has announced:

Canadian Banc Corp. (the “Company’) is pleased to announce it has extended the termination date of the Company a further five year period from December 1, 2018 to December 1, 2023.

In connection with the extension, the Company will also amend the dividend entitlement of the BK.PR.A Preferred Shares (“Preferred Shares”) effective December 1, 2018, to pay a cumulative preferential floating rate monthly dividend at an annual rate equivalent to the prevailing Canadian Prime Rate plus 1.5% (previously 0.75%). The minimum rate per annum of which dividends will be paid on the Preferred Shares remains at 5% and the maximum rate will increase from 7% to 8%. Assuming no change in the current Prime Rate of 3.7%, the dividends paid on the Preferred Shares would increase from the current rate of 5.0% to 5.2% per annum on their $10 redemption value. The BK Class A Shares (“Class A Shares”) will continue to receive their targeted monthly payments currently set at an annualized rate of 10%, based on the volume weighted average market price of the Class A Shares over the last 3 trading days of the preceding month.

In connection with the term extension, the Company will offer a Special Retraction Right which will allow existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2018 net asset value per unit.

Since inception of the Company, the Class A Shares have received a total of $14.05 per share and the Preferred Shares have received a total of $6.98 per share, for a combined total of $21.03.

The Company invests in a portfolio of six publicly traded Canadian Banks as follows:

Bank of Montreal	Canadian Imperial Bank of Commerce	Royal Bank of Canada
The Bank of Nova Scotia	National Bank of Canada	The Toronto-Dominion Bank

BK.PR.A is currently backed by a NAVPU of 22.76 as of 2018-9-14. The fund has total assets (including Capital Units) of 255-million as of 2018-8-31.

BK.PR.A was extended in December, 2012, in accordance with a vote taken in 2011.

According to the 2018 Annual Information Form:

In the event that the Termination Date is extended in any Extension Year, each holder of Preferred Shares or Class A Shares shall have the right to retract such Preferred Shares or Class A Shares effective December 1 of such Extension Year (the “Recurring Special Retraction Right”). The price payable per Preferred Share so retracted shall be equal to (i) the sum of (A) the lesser of (x) $10.00 and (y) the net asset value of the Company calculated on November 30 of such Extension Year, divided by the number of Preferred Shares then outstanding, plus (B) an amount equal to the accrued and unpaid dividends on each Preferred Share to but excluding November 30 of such Extension Year, plus (ii) all declared and unpaid dividends thereon to but excluding November 30 of such Extension Year. The price payable per Class A Share so retracted shall be equal to the greater of (i) the net asset value per Unit calculated on November 30 of such Extension Year less $10.00, and (ii) zero. Holders of Preferred Shares or Class A Shares wishing to take advantage of the Recurring Special Retraction Right must surrender their Preferred Shares or Class A Shares for retraction no later than the close of business on November 1 of such Extension Year (or, if November 1 of such year is not a business day, on the immediately preceding business day). Payment of the retraction price per Preferred Share or Class A Share owing in respect of the exercise of the Recurring Special Retraction Right will be made on or before December 15 of such Extension Year (or, if December 15 of such year is not a business day, on the immediately succeeding business day).

November 1 is a Thursday this year so the deadline to notify the company of a desire to retract is November 1 (brokerages will set their internal deadlines a few days earlier). BK.PR.A is currently trading above its retraction price, however, so in the absence of extortionate transaction costs, holders who want to get out are better off selling.