Archive for the ‘Issue Comments’ Category

IFC.PR.A To Reset to 4.841%

Thursday, December 1st, 2022

Intact Financial Corporation has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Non-cumulative Rate Reset Class A Shares Series 1 of IFC (the “Series 1 Preferred Shares”) (TSX: IFC.PR.A) on December 31, 2022. As a result, subject to certain conditions set out in the prospectus dated July 5, 2011 relating to the issuance of the Series 1 Preferred Shares (the “Prospectus”), the holders of the Series 1 Preferred Shares will have the right, at their option, to elect to convert all or any of their Series 1 Preferred Shares into Non-cumulative Floating Rate Class A Shares Series 2 of IFC (the “Series 2 Preferred Shares”) on a one-for-one basis on December 31, 2022. Holders who do not exercise their right to convert their Series 1 Preferred Shares into Series 2 Preferred Shares on such date will retain their Series 1 Preferred Shares, unless automatically converted in accordance with the conditions below.

With respect to any Series 1 Preferred Shares that may remain outstanding after December 31, 2022, commencing as of such date, holders thereof will be entitled to receive fixed non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of IFC. The annual dividend rate for the Series 1 Preferred Shares for the five-year period from and including December 31, 2022 to but excluding December 31, 2027 will be 4.841%, as determined in accordance with the terms of the Series 1 Preferred Shares.

With respect to any Series 2 Preferred Shares that may be issued on December 31, 2022, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of IFC. The dividend rate for the Series 2 Preferred Shares for the 3-month floating rate period from and including December 31, 2022 to but excluding March 31, 2023 will be 1.44321% (5.853% on an annualized basis), as determined in accordance with the terms of the Series 2 Preferred Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

The foregoing conversion right for the Series 1 Preferred Shares is subject to the conditions that: (i) if IFC determines that there would be less than 1,000,000 Series 1 Preferred Shares outstanding on December 31, 2022, then all remaining Series 1 Preferred Shares will automatically be converted into an equal number of Series 2 Preferred Shares on December 31, 2022, and (ii) alternatively, if IFC determines that there would be less than 1,000,000 Series 2 Preferred Shares outstanding on December 31, 2022, then no Series 1 Preferred Shares will be converted into Series 2 Preferred Shares. In either case, IFC will give written notice to that effect to any registered holders of Series 1 Preferred Shares on or before December 23, 2022.

The Series 1 Preferred Shares are issued in “book entry only” form and must be purchased or transferred through a participant in the CDS depository service (“CDS Participant”). All rights of holders of Series 1 Preferred Shares must be exercised through CDS or the CDS Participant through which the Series 1 Preferred Shares are held. The deadline for the registered shareholder of any Series 1 Preferred Shares to provide notice of exercise of the right to convert is 5:00 p.m. (ET) on December 16, 2022. Any notices received after this deadline will not be valid. As such, beneficial holders of Series 1 Preferred Shares who wish to exercise their right to convert their shares during the conversion period, which will run from Thursday, December 1, 2022 until 5:00 p.m. (ET) on Friday, December 16, 2022, should contact their broker or other intermediary for more information and it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

Holders of the Series 1 Preferred Shares and the Series 2 Preferred Shares (if issued on December 31, 2022) will have the opportunity to convert their shares again on December 31, 2027, and every five years thereafter as long as the shares remain outstanding. Subject to certain conditions described in the Prospectus, IFC may redeem the Series 1 Preferred Shares, in whole or in part, on December 31, 2027 and on December 31 every five years thereafter and may redeem the Series 2 Preferred Shares (if issued), in whole or in part, on any date after December 31, 2022.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 2 Preferred Shares effective on conversion. Listing of the Series 2 Preferred Shares is subject to IFC fulfilling all the listing requirements of the TSX.

For more information on the terms of, and risks associated with an investment in, the Series 1 Preferred Shares and the Series 2 Preferred Shares, please see IFC’s prospectus dated July 5, 2011 which is available on www.sedar.com.

IFC.PR.A was issued as a FixedReset, 4.20%+172, that commenced trading 2011-7-12 after being announced 2011-6-22. IFC.PR.A reset at 3.396% effective December 31, 2017, and I recommended against conversion. There was no conversion. The issue is tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

NPI.PR.C To Be Redeemed

Monday, November 28th, 2022

Northland Power Inc. has announced:

that it intends to redeem all of its 4,800,000 issued and outstanding Cumulative Rate Reset Preferred Shares, Series 3 (the “Series 3 Preferred Shares”) on January 3, 2023 (the “Redemption Date”) at a price of $25.00 per Series 3 Preferred Share together with all accrued and unpaid dividends thereon up to, but excluding, December 31, 2022 (less any tax required to be deducted or withheld by the Company) (the “Redemption Price”) for an aggregate total of $121.5 million.

The final quarterly dividend of $0.3175 per Series 3 Preferred Share payable on December 30, 2022 will be the final quarterly dividend on the Series 3 Preferred Shares and shall be considered to be an accrued and unpaid dividend and included in the Redemption Price.

The Company has provided notice today of the Redemption Price and the Redemption Date to the sole registered holder of the Series 3 Preferred Shares in accordance with their terms. Non-registered holders of Series 3 Preferred Shares should contact their broker or other intermediary for information regarding the redemption process for the Series 3 Preferred Shares in which they hold a beneficial interest.

After the Series 3 Preferred Shares are redeemed, holders of Series 3 Preferred shares will cease to be entitled to distributions of dividends and will not be entitled to exercise any rights as holders other than to receive the Redemption Price.

NPI.PR.C was issued as a FixedReset, 5.00%+346, that commenced trading 2012-5-24 after being announced 2012-5-14. It reset to 5.08% effective 2018-1-1 and I recommended against conversion. It has been tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Thanks to Assiduous Reader niagara for bringing this to my attention!

SBC.PR.A Suffers ~41% Retraction; Resells Shares

Friday, November 18th, 2022

Brompton Group has announced (on 2022-11-16):

Brompton Split Banc Corp. (the “Company”) is pleased to announce it is undertaking a treasury offering of preferred shares (“Preferred Shares”) (the “Offering”).

The sales period for this offering will end no later than 9:00 a.m. (ET) on Friday, November 18, 2022. The offering is expected to close on or about November 24, 2022 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Preferred Shares will be offered at a price of $9.55 per Preferred Share for a yield to maturity of 7.5%.
(1) The closing price on the TSX for the Preferred Shares on November 15, 2022 was $9.64. The offering is being led by RBC Capital Markets.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions and to return the original $10.00 issue price to holders of Preferred Shares on the maturity date. On March 24, 2022, the Company announced that the Board of Directors approved an extension of the maturity date of the Company for an additional 5-year term to November 29, 2027. On September 26, 2022, the Company announced that the distribution rate for the Preferred Shares for the new 5-year term from November 30, 2022 to November 29, 2027 will be $0.625 per annum.

Based on the most recently calculated net asset value per unit of the Company on November 10, 2022, the Preferred Shares have downside protection from a decline in the value of the Company’s portfolio of approximately 51%. The Preferred Shares have delivered a 5.1% per annum total return over the last 5 years, outperforming the S&P/TSX Preferred Share Index by 4.7% per annum.(1) The Preferred Shares have a DBRS rating of Pfd-3(high).

The Company received retraction notices from certain holders of Preferred Shares in connection with the non-concurrent retraction right on November 29, 2022. The Company is offering Preferred Shares under the Offering in order to, to the extent possible, have a matched number of Preferred Shares and Class A Shares of the Company (“Class A Shares”) outstanding following the nonconcurrent retraction and secure term financing for the Class A shareholders for the next 5-year term ending on November 29, 2027. Class A shareholders enjoy the opportunity for enhanced capital appreciation because of the leverage provided by the Preferred Shares. Class A Shares have generated a 14% per annum return over the past 10 years, outperforming the S&P/TSX Capped Financials Index by 3.1% per annum. (1)

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.

They have now announced:

Brompton Split Banc Corp. (the “Company”) is pleased to announce a successful treasury offering of preferred shares (“Preferred Shares”). Gross proceeds of the offering are expected to be approximately $74 million. The offering is expected to close on or about November 24, 2022 and is subject to certain closing conditions. Following closing of the offering and after giving effect to the November 29, 2022 non-concurrent retraction it is
expected that there will be a matched number of Preferred Shares and class A shares of the Company outstanding. 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 additional Preferred Shares up to such number as is equal to 15% of the number of Preferred Shares issued at the closing of the offering.

The “nonconcurrent retraction” mentioned in the first press release is the Special Retraction granted to the preferred shareholders in lieu of the previously scheduled maturity. It will be remembered that the preferreds reset to 6.25% effective 2022-11-30, up from 5.00% for the past five years. At the time, this rate was, perhaps, a little on the skimpy side but still within reasonable bounds; but by mid-October times had changed and much better yields were available elsewhere. Hence, a big retraction at par.

$74-million at a price of 9.55 implies that this offering totalled about 7.75-million shares; the 2022-9-30 Fund Profile implies that about 18.6-million shares were outstanding at that time. Hence, a 41% retraction rate (assuming that this issuance precisely covers the retraction); and the non-exercising shareholders should kick themselves, because they could have retracted at $10.00 and repurchased at $9.55, which is good business. The shares traded in a range of 9.41-49 today.

One can calculate how much the company lost on this deal fairly easily (don’t forget underwriting commissions!), but management will argue that boosting the dividend to a level at which retractions would be negligible would cost the company more. It’s also true, of course, that if they had restored the equality of Capital Units and Preferreds by consolidating the former, this would have meant reduced assets in the fund and, alas, reduced fees.

Thanks to assiduous readers EW and JD for bringing this to my attention!

BCE.PR.Z To Reset To 5.346%; Interconvertible with BCE.PR.Y

Tuesday, November 15th, 2022

BCE announced (on 2022-10-14):

Holders of fixed-rate BCE Inc. Series Z Preferred Shares have the right to convert all or part of their shares, effective on December 1, 2022, on a one-for-one basis into floating-rate Cumulative Redeemable First Preferred Shares, Series Y of BCE Inc. (the “Series Y Preferred Shares”). In order to convert their shares, holders must exercise their right of conversion during the conversion period which runs from October 17, 2022 until 5:00 p.m. (Eastern time) on November 17, 2022.

As of December 1, 2022, the Series Z Preferred Shares, should they remain outstanding, will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on a fixed rate equal to the product of: (a) the yield to maturity compounded semi-annually (the “Government of Canada Yield”), computed on November 10, 2022 by two investment dealers appointed by BCE Inc., that would be carried by a non-callable Government of Canada bond with a 5-year maturity, multiplied by (b) the “Selected Percentage Rate”. The “Selected Percentage Rate” determined by BCE Inc. is 160%. The annual dividend rate applicable to the Series Z Preferred Shares will be published on November 15, 2022 in the national edition of The Globe and Mail, the Montreal Gazette and Le Devoir and will be posted on BCE Inc.’s website at www.bce.ca.

There was a similar announcement for BCE.PR.Y:

Holders of floating-rate BCE Inc. Series Y Preferred Shares have the right to convert all or part of their shares, effective on December 1, 2022, on a one-for-one basis into fixed-rate Cumulative Redeemable First Preferred Shares, Series Z of BCE Inc. (the “Series Z Preferred Shares”). In order to convert their shares, holders must exercise their right of conversion during the conversion period which runs from October 17, 2022 until 5:00 p.m. (Eastern time) on November 17, 2022.

Today the new dividend rate for BCE.PR.Z was announced:

BCE Inc. will, on December 1, 2022, continue to have Cumulative Redeemable First Preferred Shares, Series Z (“Series Z Preferred Shares”) outstanding if, following the end of the conversion period on November 17, 2022, BCE Inc. determines that at least one million Series Z Preferred Shares would remain outstanding. In such a case, as of December 1, 2022, the Series Z Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on a fixed rate equal to the product of: (a) the average of the yields to maturity compounded semi-annually, determined on November 10, 2022 by two investment dealers selected by BCE Inc., that would be carried by non-callable Government of Canada bonds with a 5-year maturity (the “Government of Canada Yield”), multiplied by (b) a percentage rate determined by BCE Inc. (the “Selected Percentage Rate”) for such period. The “Selected Percentage Rate” determined by BCE Inc. for such period is 160%. The “Government of Canada Yield” is 3.341%. Accordingly, the annual dividend rate applicable to the Series Z Preferred Shares for the period of five years beginning on December 1, 2022 will be 5.346%.

BCE.PR.Z reset to 4.331% in 2007; to 3.152% in 2012; and to 3.904% in 2017.

BCE.PR.Y is a ratchetRate preferred.

The terminology, mechanics and analysis of interconvertible shares of this type have been discussed on many occasions:

Thanks to Assiduous Reader cwrea for bringing this to my attention!

TD.PF.I: No Conversion To FloatingReset

Friday, November 11th, 2022

The Toronto-Dominion Bank has announced (on 2022-10-19):

that none of its 14 million Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 16 (Non-Viability Contingent Capital (NVCC)) (the “Series 16 Shares”) will be converted on October 31, 2022 into Non-Cumulative Floating Rate Preferred Shares, Series 17 (NVCC) (the “Series 17 Shares”) of TD.

During the conversion period, which ran from October 3, 2022 to October 17, 2022, 131,188 Series 16 Shares were tendered for conversion into Series 17 Shares, which is less than the minimum 1,000,000 shares required to give effect to the conversion, as described in the prospectus supplement for the Series 16 Shares dated July 7, 2017. As a result, no Series 17 Shares will be issued on October 31, 2022 and holders of Series 16 Shares will retain their Series 16 Shares.

The Series 16 Shares are currently listed on the Toronto Stock Exchange under the symbol TD.PF.I. As previously announced on October 3, 2022, the dividend rate for the Series 16 Shares for the 5-year period from and including October 31, 2022 to but excluding October 31, 2027 will be 6.301%.

TD.PF.I was issued as a FixedReset, 4.50%+301, NVCC-compliant issue that commenced trading 2017-7-14 after being announced 2017-07-05. The issue reset to 6.301% in 2022. It is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

DBRS Downgrades RS.PR.A To Pfd-3(high)

Tuesday, November 8th, 2022

DBRS Limited has announced:

that, effective January 1, 2022, Real Estate & E-Commerce Split Corp. changed its name to Real Estate Split Corp.

DBRS Morningstar has also downgraded its rating on the Preferred Shares issued by Real Estate Split Corp. (the Company) to Pfd-3 (high) from Pfd-2 (low). The Preferred Shares have experienced a considerable reduction in downside protection since February 2022 as a result of the decline in the net asset value (NAV) of the portfolio in response to the broad stock market sell-off, which was triggered by the mix of the global high inflationary environment, tighter monetary policies, and various geopolitical events, such as the Russia-Ukraine war.

Considering a deterioration in downside protection (to 54.8% in November 2022 from 64.2% in November 2021), together with the increase in Class A shares distribution (to 10.4% on the original issue price of $15.0 from 8.0% in September 2021), the amount of grind present (6.8% per year over the remaining term), and the foreign-exchange risk exposure, DBRS Morningstar downgraded the rating on the Preferred Shares to Pfd-3 (high) from Pfd-2 (low).

The Company invests in a diversified portfolio composed of approximately 19 real estate issuers (the Portfolio) operating in the real estate or related sectors, including real estate investment trusts. The Portfolio may include securities denominated in currencies other than the Canadian dollar, exposing the Preferred Shares to foreign currency risk. The Company takes a tactical approach to determine whether to hedge the exposure to foreign currencies. The Company is managed by Middlefield Limited (the Manager).

Holders of the Preferred Shares receive quarterly fixed cumulative preferential cash distributions of $0.13125 (or $0.525 annually) per share, representing a 5.25% per-annum return on the original issue price of $10.00. The fixed distributions of dividends on the Preferred Shares are funded from the dividends received on the securities in the Portfolio, which cover approximately 1.4 times the annual Preferred Shares distributions. Holders of the Class A Shares receive regular monthly noncumulative distributions targeted to be $0.13 (or $1.56 annually) per Class A Share to yield 10.4% per annum on the original issue price of $15.00. Distributions to the Class A Shares were increased from the initial amount of $0.10 (or $1.20 annually) per Class A Share as of September 15, 2021. The Class A Share distributions are subject to the asset coverage test, which does not permit any distributions to holders of the Class A Shares if the Company’s NAV falls below $15.00 or if the dividends of the Preferred Shares are in arrears.

As of November 2, 2022, the downside protection available to the Preferred Shares was approximately 54.8%. Regular distributions to holders of the Class A Shares are projected to cause an average annual portfolio grind of about 6.8% over the remaining term. To supplement Portfolio income, the Manager may engage in covered call option writing on all, or a portion of the securities held in the Portfolio, engage in securities lending, or rely on realized capital gains.

The Company established a loan facility for working capital purposes, with the maximum amount of 5% of the total assets of the Company. The Company may pledge the Portfolio securities as collateral for amounts borrowed under the loan facility.

Recent Updates/Treasury Offerings

(i) On February 9, 2022
The company completed an overnight treasury offering of Class A Shares and Preferred Shares, raising approximately $16.3 million in gross proceeds. The Class A Shares were offered at a price of $19.10 per share for a distribution rate of 8.2% on the issue price, and the Preferred Shares were offered at a price of $10.55 per share for a yield to maturity of 5.0%.

(ii) On May 12, 2022
The company completed an overnight treasury offering of Class A Shares and Preferred Shares, raising approximately $15.2 million in gross proceeds. The Class A Shares were offered at a price of $18.00 per share for a distribution rate of 8.7% on the issue price, and the Preferred Shares were offered at a price of $10.10 per share for a yield to maturity of 5.2%.

(iii) On June 29, 2022
The company completed an overnight treasury offering of Class A Shares and Preferred Shares, raising approximately $10.1 million in gross proceeds. The Class A Shares were offered at a price of $15.30 per share for a distribution rate of 10.2% on the issue price, and the Preferred Shares were offered at a price of $10.12 per share for a yield to maturity of 5.2%.

(iv) On October 12, 2022
The company completed an overnight treasury offering of Class A Shares and Preferred Shares, raising approximately $11.8 million in gross proceeds. The Class A Shares were offered at a price of $14.40 per share for a distribution rate of 10.8% on the issue price, and the Preferred Shares were offered at a price of $9.80 per share for a yield to maturity of 5.4%.

A limited number of Class M Shares that rank junior to the Preferred Shares and Class A Shares in respect of capital upon the dissolution, winding up, or liquidation of the Company have been issued by the Company. There are currently $10 worth of such shares outstanding. The Class M Shares are not entitled to receive any dividends for as long as any Preferred Shares or Class A Shares are outstanding. Furthermore, no additional Class M Shares can be issued until the Preferred Shares and the Class A Shares have been retracted, redeemed, or purchased for cancellation.

The maturity date for both classes of shares is December 31, 2025. On maturity, the holders of the Preferred Shares will be entitled to the value of the Portfolio up to the face value of the Preferred Shares and any accrued but unpaid dividends in priority to the holders of the Class A Shares and the Class M Shares.

The main constraints to the rating are the following:

(1) Market fluctuations resulting from high inflation, interest rate hikes, oil prices, and global supply chain issues could further affect the Company’s NAV. The downside protection available to holders of the Preferred Shares depends on the value of the common shares held in the Portfolio.

(2) Volatility of price and changes in the dividend policies of the underlying issuers may result in significant reductions in the Preferred Shares dividend coverage or downside protection from time to time.

(3) Reliance on the manager to generate a high yield on the investment portfolio to meet distributions and other trust expenses without having to liquidate portfolio securities.

(4) The high concentration of the Portfolio in one industry (Real Estate).

(5) Potential foreign-exchange risk because the income received on the Portfolio is not hedged all the time.

The affected issue is RS.PR.A

TA.PR.H: No Conversion to FloatingReset

Monday, November 7th, 2022

TransAlta Corporation has announced (way back on 2022-9-21):

that after taking into account all election notices received for the conversion of the Cumulative Redeemable Rate Reset Preferred Shares, Series E (the “Series E Shares”) into Cumulative Redeemable Floating Rate Preferred Shares, Series F (the “Series F Shares”), there were only 89,945 Series E Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series F Shares. As a result, none of the Series E Shares will be converted into Series F Shares on September 30, 2022.

TA.PR.H was issued as a FixedReset, 5.00%+365, that commenced trading 2012-8-10 after being announced 2012-8-2. It reset to 5.194% in 2017; I recommended against conversion; and there was no conversion. TA.PR.H reset to 6.894% in 2022. The issue is tracked by HIMIPref™ but has been assigned to the Scraps index on credit concerns.

CCS.PR.C Upgraded to Pfd-2 by DBRS

Monday, October 31st, 2022

DBRS has announced that it:

upgraded the ratings of Co-operators Financial Services Limited (CFSL or the Company), including its Issuer Rating, to BBB (high) from BBB. The ratings of Co-operators General Insurance Company (CGIC) were also upgraded, including its Financial Strength Rating, to “A” from A (low). Lastly, a Financial Strength Rating was assigned to Co-operators Life Insurance Company at “A.” The trends are all Stable.

KEY RATING CONSIDERATIONS
The ratings upgrades reflect the Company’s strong and consistent growth and improved underwriting profitability. While the Company’s strong 2021 performance was supported by extraordinarily favourable Canadian auto insurance results that benefitted from the pandemic, DBRS Morningstar views CFSL as well positioned to maintain adequate underwriting profitability going forward, which will allow it to fund its strategic initiatives.

The ratings and Stable trend reflect the Company’s prudent liquidity, leverage, and capital positions. Moreover, the franchise benefits from a diversified product offering, although its core property and casualty (P&C) business is by far the largest contributor to earnings. CFSL has been able to expand into new product lines, relying on its distribution strengths. The ratings also consider that the life insurance and wealth management businesses would benefit from additional scale to improve profitability.

RATING DRIVERS
Given the recent upgrades, further positive ratings movement is unlikely in the near term. Over the longer term, a significant improvement in profitability that includes a greater contribution from CFSL’s life insurance and asset management businesses would result in a ratings upgrade.

Conversely, a sustained deterioration in underwriting and overall profitability combined with lower capital levels would result in a ratings downgrade.

RATING RATIONALE
CFSL is one of Canada’s leading P&C insurers with a growing presence in life insurance, wealth, and asset management services. It has a resilient business model with solid brand recognition and access to multiple distribution channels, including proprietary agency and brokerage networks as well as a unique partnership with Canadian credit unions. CFSL is ranked fourth in the Canadian P&C insurance market and 14th in the life insurance market according to MSA Research 2021 direct written premium data. The Company continues to dedicate significant resources to strengthening its customer relationships through digitalization, client engagement, and advertising.

CFSL is exposed to a diversified portfolio of insurance risks, with individual P&C insurance being its largest exposure. Its investment portfolio is mainly composed of high-quality fixed-income assets but also includes sizable allocations to equities, preferred shares, and mortgages. CFSL has a comprehensive risk management and stress testing framework that it uses to set adequate risk limits consistent with its risk appetite. CFSL’s insurance operating subsidiaries maintain prudent reinsurance coverage, which mitigates large losses caused by catastrophic claims events.

CFSL has consistently grown revenues over the past five years, and earnings have benefitted. For 2021, the Company reported record earnings of $477 million and a return on average shareholders’ equity of 13.1%, reflecting strong financial markets and favourable P&C claims experience. In 2022, financial market volatility and rising interest rates have affected profitability with net income decreasing to $86 million for H1 2022 from $476 million in H1 2021. Going forward, the Company is expected to maintain adequate underwriting profitability and is also likely to be affected by any further financial market volatility.

CFSL has a healthy liquidity position with a large buffer of highly liquid assets in excess of its liquidity requirements. It has a $98 million undrawn credit facility and has surplus capital held at the holding company level, which is invested in liquid assets and is sufficient to cover the principal of its senior debentures.

CFSL maintains adequate capital buffers in its insurance subsidiaries with the minimal capital test ratio of its P&C subsidiary at 219% and the life insurance capital adequacy test ratio of its life subsidiary at 152% at Q2 2022; both are well above regulatory targets of 150% and 100%, respectively. These capital ratios have declined since YE2021 because of rising interest rates and equity market declines in the first half of the year. CFSL’s consolidated financial leverage ratio (including preferred shares of CGIC) was 12.3% as at Q2 2022, which is conservative. The Company’s earnings are sufficient to easily cover interest payments on its debt.

The affected issue is CCS.PR.C.

NA.PR.C To Reset To 7.027%

Monday, October 17th, 2022

National Bank of Canada has announced:

the dividend rates applicable to the Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series 38 Non-Viability Contingent Capital (NVCC) (the “Series 38 Shares”) and the Non-Cumulative Floating Rate First Preferred Shares, Series 39 (NVCC) (the “Series 39 Shares”).

Holders of Series 38 Shares, should any remain outstanding after November 15, 2022, will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on November 16, 2022, and ending on November 15, 2027, will be 7.027% being equal to the sum of the five-year Government of Canada Bond yield (3.597%) plus 3.43%, as determined in accordance with the terms of the Series 38 Shares.

Holders of Series 39 Shares, should any be issued on November 15, 2022, will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the three-month period commencing on November 16, 2022, and ending on February 15, 2023, will be 7.256%, being equal to the sum of the 90-day Government of Canada Treasury Bill yield (3.826%) plus 3.43%, calculated on the basis of actual number of days elapsed in such quarterly floating rate period divided by 365, as determined in accordance with the terms of the Series 39 Shares.

Holders of the Series 38 Shares have, subject to certain conditions, the right to convert all or part of their Series 38 Shares on a one-for-one basis into Series 39 Shares on November 15, 2022.

Beneficial owners of Series 38 shares who wish to exercise their conversion right 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 October 31, 2022, at 5:00 p.m. (EDT).

NA.PR.C is a FixedReset, 4.45%+343, NVCC-compliant, that commenced trading 2017-6-13 after being announced 2017-6-1. Notice of extension was given in 2022. It is tracked by HIMIPref™ and has been assigned to the FixedResets (Discount) subindex.

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!

PPL.PF.C To Be Redeemed

Friday, October 14th, 2022

Pembina Pipeline Corporation has announced:

its intention to redeem its issued and outstanding Cumulative Redeemable Minimum Rate Reset Class A Preferred Shares, Series 23 (“Series 23 Shares”) (TSX: PPL.PF.C) on November 15, 2022 (the “Redemption Date”).

Pembina intends to redeem all of its 12,000,000 issued and outstanding Series 23 Shares, in accordance with the terms of the Series 23 Shares, as set out in the Company’s articles of amendment dated December 16, 2019, on the Redemption Date for a redemption price equal to $25.00 per Series 23 Share (the “Redemption Price”), less any tax required to be deducted or withheld by the Company. The total redemption price to Pembina will be $300 million.

As previously announced, the dividend payable on November 15, 2022, to holders of the Series 23 Shares of record on October 31, 2022, will be $0.328125 per Series 23 Share. This will be the final quarterly dividend on the Series 23 Shares. Upon payment of the November 15, 2022, dividend, there will be no accrued and unpaid dividends on the Series 23 Shares as at the Redemption Date.

The Company has provided notice today of the Redemption Price and the Redemption Date to the sole registered holder of the Series 23 Shares in accordance with the terms of the Series 23 Shares, as set out in the Company’s articles of amendment dated December 16, 2019. For non-registered holders of Series 23 Shares, no further action is required however, they should contact their broker or other intermediary with any questions regarding the redemption process for the Series 23 Shares in which they hold a beneficial interest. The Company’s transfer agent for the Series 23 Shares is Computershare Investor Services Inc. Questions regarding the redemption process may also be directed to Computershare at 1-800-564-6253 or by email to corporateactions@computershare.com.

PPL.PF.C was originally issued as KML.PR.A; the ticker changed in December, 2019. KML.PR.A was a FixedReset 5.25%+365M525 that commenced trading 2017-8-15 after being announced 2017-8-3. It has been tracked by HIMIPref™ but relegated to the Scraps – FixedReset Discount subindex on credit concerns. There was some, although not universal, expectation of redemption; PPL.PF.C was yielding significantly less than its peers at today’s closing quote of 24.05-20; however, the low yield may be more reflective of the Minimum Rate Guarantee than of redemption expectations.

Thanks to Assiduous Reader skeptical for bringing this to my attention!