PrefBlog

TC Energy Corporation has announced:

that 1,297,203 of its 18,000,000 fixed rate Cumulative Redeemable First Preferred Shares, Series 9 (Series 9 Shares) have been elected for conversion on a one-for-one basis into floating rate Cumulative Redeemable First Preferred Shares, Series 10 (Series 10 Shares) effective on Oct. 30, 2024. As a result, on Oct. 30, 2024, TC Energy will have 16,702,797 Series 9 Shares and 1,297,203 Series 10 Shares issued and outstanding. The Series 9 Shares and Series 10 Shares will be listed on the Toronto Stock Exchange under the symbols TRP.PR.E and TRP.PR.L, respectively.

TRP.PR.E was issued as a FixedReset, 4.25%+235, that commenced trading 2014-1-20 after being announced 2014-1-13. Notice of extension was provided on 2019-9-18. TRP.PR.E reset at 3.762% effective 2019-10-30. I recommended against conversion and there was no conversion. The issue resets to 5.08% effective 2024-10-30. TRP.PR.E is tracked by HIMIPref™ and assigned to the FixedReset-Discount subindex.

So, if you think about it: TRP.PR.E reset to 5.08% in accordance with a GOC-5 rate of 2.73%. So those who converted to the FloatingRate are betting that the 3-Month bill rate for the next five years will average better than 2.73%. Given that 3-Month bills are now at about 3.54% and that the swaps market is forecasting an overnight rate of 2.58% at the end of 2025, it’s not the most horrible bet I’ve seen people make.

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

DBRS has announced:

changed the trends on all long-term credit ratings of The Toronto-Dominion Bank (TD or the Bank), and its related entities, to Negative from Stable and confirmed all credit ratings, including TD’s Long-Term Issuer Rating at AA (high). At the same time, Morningstar DBRS confirmed all short-term credit ratings, including TD’s Short-Term Issuer Rating of R-1 (high), with Stable trends, with the exception of TD Bank, N.A. and TD Bank US Holding Company whose short-term credit rating trends were changed to Negative from Stable. TD’s Long-Term Issuer Rating is composed of an Intrinsic Assessment (IA) of AA and a Support Assessment (SA) of SA2, which reflects the expectation of timely systemic support from the Government of Canada (rated AAA with a Stable trend). As a result of the SA2 designation, the Bank’s Long-Term Issuer Rating benefits from a one-notch uplift to the Bank’s IA.

KEY CREDIT RATING CONSIDERATIONS
The trend change to Negative from Stable reflects the significant failures in corporate governance related to antimoney laundering (AML) at TD’s U.S. retail operations and what Morningstar DBRS views as the heightened risk of discovering additional past transgressions or new missteps, including the potential for not remediating identified regulatory issues in a timely, effective manner. Moreover, Morningstar DBRS believes that profitability may be negatively affected for a prolonged period, which could lead to further negative credit rating pressure.

Certain U.S. subsidiaries of TD pleaded guilty to multiple criminal charges, including conspiracy to commit money laundering, as part of a global resolution to its AML investigations with the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board, the Financial Crimes Enforcement Network, and the U.S. Department of Justice. Total fines of USD 3.09 billion were substantial and the largest ever imposed on a bank for AML-related matters, although Morningstar DBRS notes the USD 3.05 billion in provisions the Bank had already put aside. In addition, the OCC Consent Order included an asset cap on TD’s two U.S. banking subsidiaries (TD Bank USA, N.A. and TD Bank, N.A.) of approximately USD 434 billion. Morningstar DBRS considers this to be the outcome from multiple corporate governance failures at the Bank and expects the asset cap, combined with ongoing AML remediation efforts necessary to address TD’s material shortcomings, to reduce the Bank’s earnings power over the intermediate term. TD estimates its pretax U.S. governance and control costs to be USD 350 million in F2024 and USD 500 million in F2025. The extent of the AML resolution’s medium to long-term impact, including the asset cap, on TD’s reputation and earnings power remains uncertain. Further, TD’s AML remediation efforts will be a multiyear undertaking that will require a significant time commitment from the Bank’s revamped senior executive team if TD is to avoid any missteps, which could have further asset cap implications.

TD has some flexibility and levers to mitigate a prolonged and adverse impact to earnings. While the asset cap will hamper U.S. growth, Morningstar DBRS estimates the Bank is operating with a roughly USD 40 billion to USD 50 billion surplus in U.S. assets that can be redeployed to create loan capacity to support existing or new U.S. customer relationships. With U.S. assets representing 28.5% of total Bank assets at Q3 2024 and U.S. revenue comprising approximately 25% of total Bank revenue, Morningstar DBRS also views the Bank as having the ability to pivot its growth focus toward Canada and TD Securities to minimize the impact on earnings. TD has leading market positions in Canada in both retail and commercial, along with a large, integrated wealth management franchise. TD Securities, which is not affected by the asset cap, has a top two market share position in Canada and the integration of TD Cowen has notably increased its U.S. capital markets business while expanding the wholesale bank’s capabilities and product set, providing additional opportunities for growth in the U.S.

Finally, TD currently has an elevated liquidity position. At Q3 2024, the liquidity coverage ratio was 129%, representing a surplus of $75 billion over the published regulatory minimum. The Bank also currently has a solid capital position, with a healthy CET1 position of 12.8% in Q3 2024, which Morningstar DBRS expects to rise to 13% going forward. Both are expected to remain well above their respective regulatory minimum thresholds and remain supportive of the current credit ratings.

CREDIT RATING DRIVERS
Given the Negative trends, credit rating upgrades are unlikely. Morningstar DBRS would change the trends back to Stable if TD demonstrates substantial progress in its AML remediation efforts while demonstrating a credible path to return to profitability metrics commensurate with its credit rating category.

A credit ratings downgrade would occur if the Bank experienced any additional missteps or failures, including in its AML remediation efforts. Additionally, the credit ratings would be downgraded if profitability is negatively affected for a prolonged period, there is notable deterioration in franchise strength, or there is a sustained deterioration in asset quality.

CREDIT RATING RATIONALE
Franchise Combined Building Block (BB) Assessment: Very Strong

Earnings Combined Building Block (BB) Assessment: Strong/Good

Risk Combined Building Block (BB) Assessment: Strong

Funding and Liquidity Combined Building Block (BB) Assessment: Strong

Capitalization Combined Building Block (BB) Assessment: Strong

Affected issues are TD.PF.A, TD.PF.C, TD.PF.D, TD.PF.E, TD.PF.I and TD.PF.J.

Bank of Montreal has announced:

its intention to redeem all of its 12,000,000 outstanding Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 31 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 31”) (TSX: BMO.PR.W) for an aggregate total of $300 million on November 25, 2024. The redemption has been approved by the Office of the Superintendent of Financial Institutions.

The Preferred Shares Series 31 are redeemable at the Bank’s option on November 25, 2024 (the “Redemption Date”) at a redemption price of $25.00 per share. Payment of the redemption price will be made by the Bank on the Redemption Date.

Separately from the payment of the redemption price, the final quarterly dividend of $0.240688 per share for the Preferred Shares Series 31 announced by the Bank on August 27, 2024 will be paid in the usual manner on November 25, 2024, to shareholders of record on October 30, 2024.

Notice will be delivered to holders of the Preferred Shares Series 31 in accordance with the terms thereof.

BMO.PR.W was issued as a FixedReset, 3.80%+222, that commenced trading 2014-7-30 after being announced 2014-7-22. Notice of extension was given 2019-9-27. BMO.PR.W reset at 3.851% effective 2019-11-25. I recommended against conversion and there was no conversion. It is tracked by HIMIPref™ and has been assigned to the FixedReset – Discount subindex.

BMO.PR.W closed at 23.89 today, with a VWAP of 23.898 on volume of 31,400, so maybe some of the speculators who lost money on the extension of TD.PF.A recouped their losses.

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

The Toronto-Dominion Bank has announced:

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset Class A First Preferred Shares, Series 1 (Non-Viability Contingent Capital (NVCC)) (the “Series 1 Shares”) and Non-Cumulative Floating Rate Class A First Preferred Shares, Series 2 (NVCC) (the “Series 2 Shares”).

With respect to any Series 1 Shares that remain outstanding after October 31, 2024, holders of the Series 1 Shares will be entitled to receive quarterly fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the 5-year period from and including October 31, 2024 to but excluding October 31, 2029 will be 4.97%, being equal to the 5-Year Government of Canada bond yield determined as at October 1, 2024 plus 2.24%, as determined in accordance with the terms of the Series 1 Shares.

With respect to any Series 2 Shares that may be issued on October 31, 2024, holders of the Series 2 Shares will be entitled to receive quarterly floating rate non-cumulative preferential cash dividends, calculated on the basis of the actual number of days elapsed in such quarterly period divided by 365, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the floating rate period from and including October 31, 2024 to but excluding January 31, 2025, will be 6.219%, being equal to the 3-month Government of Canada Treasury Bill yield determined as of October 1, 2024 plus 2.24%, as determined in accordance with the terms of the Series 2 Shares.

Beneficial owners of Series 1 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right on or prior to the deadline for exercise, which is 5:00 p.m. (Toronto time) on October 16, 2024.

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

TD.PF.A was issued as a FixedReset, 3.90%+224, NVCC-compliant issue that commenced trading 2014-6-4 after being announced 2014-5-26. TD.PF.A reset at 3.662% effective October 31, 2019. I recommended against conversion and there was no conversion. Notice of extension in late September, 2024, took the market by surprise. The issue is tracked by HIMIPref™ and is assigned to the FixedReset – Discount subindex.

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

TC Energy Corporation has announced:

that it does not intend to exercise its right to redeem its Cumulative Redeemable First Preferred Shares, Series 9 (Series 9 Shares) on Oct. 30, 2024. As a result, subject to certain conditions, the holders of Series 9 Shares have the right to choose one of the following options regarding their shares:

• to retain any or all of their Series 9 Shares and continue to receive a fixed rate quarterly dividend, or
• to convert, on a one-for-one basis, any or all of their Series 9 Shares into Cumulative Redeemable First Preferred Shares, Series 10 (Series 10 Shares) of TC Energy and receive a floating rate quarterly dividend.

Should holders of Series 9 Shares choose to retain their shares, such shareholders will receive the new annual fixed dividend rate applicable to the Series 9 Shares of 5.080 per cent for the five-year period commencing Oct. 30, 2024 to, but excluding, Oct. 30, 2029.

Should holders of Series 9 Shares choose to convert their shares to Series 10 Shares, holders of Series 10 Shares will receive the floating quarterly dividend rate applicable to the Series 10 Shares of 6.329 per cent for the first quarterly floating rate period commencing Oct. 30, 2024 to, but excluding, Jan. 30, 2025. The floating quarterly dividend rate will be reset every quarter.

Beneficial owners of Series 9 Shares who want to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions to meet the deadline to exercise such right, which is 5 p.m. (EDT) on Oct. 15, 2024. Any notices received after this deadline will not be valid. It is recommended that this be done well in advance of the deadline to provide the broker or other nominee with time to complete the necessary steps.

Beneficial owners of Series 9 Shares who do not exercise their conversion right through their broker or other nominee by the deadline will retain their Series 9 Shares and receive the new annual fixed dividend rate applicable to the Series 9 Shares, subject to the conditions stated below.

The foregoing conversions are subject to the conditions that: (i) if TC Energy determines that there would be less than one million Series 9 Shares outstanding after Oct. 30, 2024, then all remaining Series 9 Shares will automatically be converted into Series 10 Shares on a one-for-one basis on Oct. 30, 2024 and (ii) alternatively, if TC Energy determines that there would be less than one million Series 10 Shares outstanding after Oct. 30, 2024, no Series 9 Shares will be converted into Series 10 Shares. In either case, TC Energy will issue a news release to that effect no later than Oct. 23, 2024.

Holders of Series 9 Shares and Series 10 Shares will have the opportunity to convert their shares again on Oct. 30, 2029 and in every fifth year thereafter as long as the shares remain outstanding. For more information on the terms of, and risks associated with an investment in the Series 9 Shares and the Series 10 Shares, please see the Corporation’s prospectus supplement dated Jan. 13, 2014 which is available on sedarplus.ca or on our website.

About TC Energy
We’re a team of 7,000+ energy problem solvers working to safely move, generate and store the energy North America relies on. Today, we’re delivering solutions to the world’s toughest energy challenges – from innovating to deliver the natural gas that feeds LNG to global markets, to working to reduce emissions from our assets, to partnering with our neighbours, customers and governments to build the energy system of the future. It’s all part of how we continue to deliver sustainable returns for our investors and create value for communities.

TC Energy’s common shares trade on the Toronto (TSX) and New York (NYSE) stock exchanges under the symbol TRP. To learn more, visit us at TCEnergy.com.

TRP.PR.E is a FixedReset, 4.25%+235, that commenced trading 2014-1-20 after being announced 2014-1-13. Notice of extension was provided on 2019-9-18. TRP.PR.E reset at 3.762% effective 2019-10-30. I recommended against conversion and there was no conversion. The issue is tracked by HIMIPref™ and assigned to the FixedReset-Discount subindex.

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

AltaGas Ltd. has announced (on 2024-9-30):

that 1,114,177 Cumulative Redeemable Floating Rate Preferred Shares, Series H (the “Series H Shares”) (TSX: ALA.PR.H) were converted into Cumulative Redeemable Five-Year Rate Reset Preferred Shares, Series G (the “Series G Shares”) (TSX: ALA.PR.G) on a one-for-one basis today (the “Conversion Date”). This included 883,163 Series H Shares tendered for conversion to Series G Shares prior to the conversion period deadline of 5:00 pm Eastern Time on September 13, 2024, and the remaining 231,014 Series H Shares converted automatically into Series G Shares in accordance with the terms of the Series H Shares. In addition, any of the Series G Shares that were tendered for conversion into Series H Shares were not converted and remain Series G Shares.

Following the conversion of Series H Shares, 8,000,000 Series G Shares are now outstanding while no Series H Shares remain outstanding. AltaGas made an application to the Toronto Stock Exchange (“TSX”) to have the Series H Shares voluntarily de-listed following the Conversion Date. AltaGas expects the TSX to de-list the Series H Shares as of close of markets on September 30, 2024.

As a reminder, holders of Series G Shares shall be entitled to receive, as and when declared by the Board of Directors of AltaGas, fixed cumulative preferential cash dividends, payable quarterly. The annual dividend rate applicable to the Series G Shares for the five-year period commencing on and including September 30, 2024 to, but excluding, September 30, 2029, is 6.017 percent. The Series G Shares will continue to be listed on the TSX under the symbol ALA.PR.G. Quarterly dividend payments for the prior period were paid on September 27, 2024.

Holders of Series G Shares will have the right to convert all or any of their shares into Series H Shares again in September 2029 (every fifth year) in accordance with the terms of the shares, subject to AltaGas’ option to redeem such shares for cash at that time.

ALA.PR.G was issued as a FixedReset, 4.75%+306, that commenced trading 2014-7-3 after being announced 2014-6-23. Notice of extension was announced 2019-8-29. The issue reset at 4.242% effective 2019-9-30. I recommended against conversion. News that some were converted was reported on 2019-9-24; there was, in fact a 14% conversion. A very confused notice of extension was issued on 2024-8-30 and resulted in an exchange of eMails with Investor Relations. The issue reset to 6.017% effective 2024-9-30. The issue is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns. In December, 2018, the issue was downgraded to Pfd-3(low) by DBRS and to P-3 by S&P. DBRS withdrew its rating in November 2021. S&P continues to rate the ALA preferreds at P-3.

ALA.PR.H is a FloatingReset, Bills+306, that arose through a 14% conversion from ALA.PR.G in September, 2019.

Partners Value Split Corp. has announced (although not yet on their website):

the completion of its previously announced offering of Class AA Preferred Shares, Series 14 (the “Series 14 Preferred Shares”). A total of 6,000,000 Series 14 Preferred Shares were issued at an offering price of $25.00 per Series 14 Preferred Share, raising gross proceeds of $150,000,000. The issuance included 1,000,000 Series 14 Preferred Shares issued pursuant to the exercise, in full, of the underwriters’ option granted by the Company to the underwriters in the offering. The Series 14 Preferred Shares carry quarterly fixed cumulative preferential dividends representing a 5.50% annualized yield on the offering price and have a final maturity of June 30, 2030. The Series 14 Preferred Shares have been listed and posted for trading on the Toronto Stock Exchange under the symbol PVS.PR.L.

The net proceeds of the offering will be used by the Company in connection with the Company’s redemption of its outstanding Class AA Preferred Shares, Series 8 and to pay a special dividend on the Company’s capital shares.

Prior to the closing of the offering, the Company subdivided the existing capital shares held by Partners Value Investments Inc. so that there are an equal number of preferred shares and capital shares outstanding.

The Company owns a portfolio consisting of approximately 120 million Class A Limited Voting Shares of Brookfield Corporation and approximately 30 million Class A Limited Voting Shares of Brookfield Asset Management Ltd. (collectively, the “Brookfield Securities”), which are expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Securities.

Brookfield Corporation is a leading global investment firm focused on building long term-wealth for institutions and individuals around the world. Brookfield Corporation has three core businesses: alternative asset management, wealth solutions, and its operating businesses which are in renewable power, infrastructure, business and industrial services, and real estate. Brookfield Corporation is listed on the New York Stock Exchange and Toronto Stock Exchange under the symbol BN.

Brookfield Asset Management Ltd. (“BAM”) is a leading global alternative asset manager with approximately US$1 trillion of assets under management across renewable power & transition, infrastructure, private equity, real estate, and credit. BAM’s objective is to generate attractive, long-term risk-adjusted returns for the benefit of its clients and shareholders. BAM is listed on the New York Stock Exchange and Toronto Stock Exchange under the symbol BAM.

PVS.PR.L is a new issue announced 2024-9-23.

Vital statistics are:

The Toronto-Dominion Bank has announced (press release dated 2024-09-23):

that it does not intend to exercise its right to redeem all or any part of the currently outstanding 20,000,000 Non-Cumulative 5-Year Rate Reset Class A First Preferred Shares, Series 1 (Non-Viability Contingent Capital (NVCC)) (the “Series 1 Shares”) of TD on October 31, 2024. As a result and subject to certain conditions set out in the prospectus supplement dated May 28, 2014 relating to the issuance of the Series 1 Shares, the holders of the Series 1 Shares have the right to convert all or part of their Series 1 Shares, on a one-for-one basis, into Non-Cumulative Floating Rate Class A First Preferred Shares, Series 2 (Non-Viability Contingent Capital (NVCC)) (the “Series 2 Shares”) of TD on October 31, 2024. Holders who do not exercise their right to convert their Series 1 Shares into Series 2 Shares on such date will continue to hold their Series 1 Shares, subject to the conditions described below.

The foregoing conversion right is subject to the conditions that: (i) if TD determines that there would be less than 1,000,000 Series 2 Shares outstanding after taking into account all shares tendered for conversion on October 31, 2024, then holders of Series 1 Shares will not be entitled to convert their shares into Series 2 Shares, and (ii) alternatively, if TD determines that there would remain outstanding less than 1,000,000 Series 1 Shares after taking into account all shares tendered for conversion on October 31, 2024, then all remaining Series 1 Shares will automatically be converted into Series 2 Shares on a one-for-one basis on October 31, 2024. In either case, TD will give written notice to that effect to holders of Series 1 Shares no later than October 24, 2024.

The dividend rate applicable to the Series 1 Shares for the 5-year period from and including October 31, 2024 to but excluding October 31, 2029, and the dividend rate applicable to the Series 2 Shares for the 3-month period from and including October 31, 2024 to but excluding January 31, 2025, will be determined and announced by way of a press release on October 1, 2024.

Beneficial owners of Series 1 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from October 1, 2024 until 5:00 p.m. (Toronto time) on October 16, 2024.

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

TD.PF.A was issued as a FixedReset, 3.90%+224, NVCC-compliant issue that commenced trading 2014-6-4 after being announced 2014-5-26. TD.PF.A reset at 3.662% effective October 31, 2019. I recommended against conversion and there was no conversion. It is tracked by HIMIPref™ and is assigned to the FixedReset – Discount subindex.

The extension caused shock and consternation in the market today: the issue closed 9/23 at 24.52 and today at 22.73, down 7.30%. TD.PF.C, which resets 2025-1-31 closed 9/23 at 23.96 and today at 22.71, down 5.21%. There were a fair number of bets that redemption was in the cards!

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

Quadravest has announced (on 2024-9-18):

Dividend 15 Split Corp. II (the “Company”) is pleased to announce an increase in the Preferred share dividend rate to 7.00% from 5.75% on the $10.00 repayment value for the new five-year term effective December 1, 2024. The Preferred Share monthly dividends will be $0.05833 per share or $0.70 per annum and the new distribution rate represents an increase of $0.13 per annum from the previous rate. Preferred shareholders have received a total of $9.58 per share in distributions since inception. The dividend policy for the Class A Shares will remain at the current targeted rate of $0.10 per month, or $1.20 per annum.

A previously announced on March 12, 2024 the Company will extend the termination date a further five year period from December 1, 2024 to December 1, 2029. In relation to the term extension and the Preferred Share rate increase, the Company has an additional retraction right for those shareholders not wishing to continue holding their investment, allowing existing shareholders to tender one or both classes of shares and receive a retraction price based on the November 29, 2024 net asset value per unit. Alternatively, shareholders may sell their shares for the market price at any time, potentially at a higher price than would be achieved through retraction, or shareholders may take no action and continue to hold their shares.

The Company invests in a high quality portfolio of leading Canadian dividend-yielding stocks as follows: Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, TorontoDominion Bank, National Bank of Canada, CI Financial Corp., BCE Inc., Manulife Financial, Enbridge, Sun Life Financial, TELUS Corporation, Thomson Reuters Corporation, TransAlta Corporation, TC Energy Corporation.

The extension announcement was previously reported.

Thanks to Assiduous Reader RAV4guy for bringing this to my attention!