Category: Market Action

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TXPR closed at 614.22, up 1.21% on the day. Volume today was 2.79-million, behind only November 24 and November 20 in the past 20 trading days.

CPD closed at 12.225, up 0.78% on the day. Volume was 86,780, a little above the median of the past 20 trading days.

ZPR closed at 9.73, up 0.83% on the day. Volume of 122,016 was below the median of the past 20 trading days.

Five-year Canada yields were down 1bp to 0.46% today.

PerpetualDiscounts now yield 5.06%, equivalent to 6.58% interest at the standard equivalency factor of 1.3x. Long corporates now yield 2.84%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed slightly (and perhaps spuriously) to 375bp from the 380bp reported November 25.

FAIR Canada, the superannuation scheme for OSC hacks, has got yet another payoff from the regulator:

The primary advocacy group for Canadian investors is receiving $3.75-million in funding to help it continue to operate over the next five years.

The Canadian Foundation for the Advancement of Investor Rights, known as FAIR Canada, will receive annual instalments of $750,000 over five years from Ontario’s provincial securities regulator.

The Ontario Securities Commission (OSC) will provide the funding as an allocation from its “designated fund” – money collected from sanction payments that can be used for investor protection, compensation for victims who have suffered financial losses, whistle-blower payments and for third parties such as FAIR.
…
The funding comes several months after FAIR appointed a new executive director, Jean-Paul Bureaud, a former regulator who had worked for the OSC for 19 years before leaving in October, 2018. Mr. Bureaud replaced founder Ermanno Pascutto, who had returned to the position of executive director in early 2019 on an interim basis. Mr. Pascutto departed FAIR last month and is no longer on the board.

FAIR also boasts in an eMail:

In addition to OSC funding, FAIR Canada has received funding this year from the Investment Industry Regulatory Organization of Canada (IIROC), a national self-regulatory organization (SRO), and is having discussions with other organizations about contributing to FAIR’s future sustainability.

There’s just no shame in any of these guys.

How about that federal deficit, eh?

The federal government is planning a major stimulus program worth as much as $100-billion over three years to jolt the Canadian economy once the pandemic is under control, a pledge that is in addition to the hundreds of billions of dollars it has already spent to support workers and businesses through the COVID-19 crisis.

Finance Minister Chrystia Freeland announced the new figures Monday in a wide-ranging fall economic statement that is essentially a mini-budget, complete with billions in new spending and targeted tax measures.

The update pushes the projected size of this year’s deficit to $381.6-billion, up from the $343.2-billion forecast in early July. The report notes that the deficit could be just shy of $400-billion if the pandemic worsens, leading to more restrictions.

There is still no indication as to how we’re going to pay for it.

OSFI is changing the rules for insurers’s seg fund capital requirements:

OSFI is developing a new approach to determine capital requirements for SFG risk, which will reflect the International Financial Reporting Standard 17 – Insurance Contracts (IFRS 17) that will become effective on January 1, 2023. The purpose of this letter is to provide additional details on the development of the approach.

Current regulatory capital requirements for SFG risk are determined using an approach that was implemented in the early 2000s. Here, requirements are calculated using a factor-based methodology or, if approved for use by OSFI, an insurer’s own internal model. The approach is based on calibrations that were developed several years ago and relies on IFRS 4 (i.e. the Canadian Asset Liability Method or CALM). Also, over the years, SFG product offerings have evolved and, in some cases, are not entirely addressed with the current methodology.

The new approach is being designed to address these issues. Under the new approach, capital requirements will be calculated by applying shocks to SFG liabilities. Internal models that were previously approved for use by OSFI to calculate SFG capital requirements will no longer be permitted for this purpose, once the new approach is implemented.

PerpetualDiscounts now yield 5.09%, equivalent to 6.62% interest at the standard equivalency factor of 1.3x. Long corporates now yield 2.84%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened slightly (and perhaps spuriously) to 380bp from the 375bp reported November 18.

Brompton Group has announced:

Global Dividend Growth Split Corp. (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively).

The sales period for this overnight offering will end at 9:00 a.m. (ET) on Wednesday, November 25, 2020. The offering is expected to close on or about December 2, 2020 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Class A Shares will be offered at a price of $10.75 per Class A Share for a distribution rate of 11.2% on the issue price, and the Preferred Shares will be offered at a price of $10.00 per Preferred Share for a yield to maturity of 6.6%.(1) The closing price on the TSX for each of the Class A Shares and Preferred Shares on November 23, 2020 was $10.86 and $10.25, respectively. The Class A Share and Preferred Share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company (“Unit”) (calculated as at November 23, 2020), as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank.

The Company is also pleased to announce that its board of directors has approved an extension of the maturity date of the Class A Shares and Preferred Shares of the Company for an additional 5-year term, to June 30, 2026. The Preferred Share dividend rate for the extended term will be announced at least 60 days prior to the original June 30, 2021 maturity date. The new dividend rate will be determined based on the market yields for Preferred Shares with similar terms.

The Company invests in a diversified portfolio (the “Portfolio”) of equity securities of large capitalization global dividend growth companies selected by the Brompton Funds Limited (the “Manager”). In order to qualify for inclusion in the Portfolio, at the time of investment and at the time of each periodic reconstitution and/or rebalancing of the Portfolio, each global dividend growth company included in the Portfolio must (i) have a market capitalization of at least $10 billion; and (ii) have a history of dividend growth or, in the Manager’s view, have high potential for future dividend growth.

The investment objectives for the Class A Shares are to provide holders with regular monthly cash distributions and to provide the opportunity for growth in the net asset value per Class A Share.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.125 per Preferred Share, and to return the original issue price to holders of Preferred Shares on June 30, 2026.

So the new Units are being sold for 20.75, while the November 23 NAVPU is 19.92, for a premium of 4.2%. What a great business it is!

Update, 2020-11-26: The company has further announced:

a successful overnight treasury offering of class A shares and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively). Gross proceeds of the offering are expected to be approximately $13.1 million. The offering is expected to close on or about December 2, 2020 and is subject to certain closing conditions. The Company has granted the Agents (as defined below) an over-allotment option, exercisable for 30 days following the closing date of the offering, to purchase up to an additional 15% of the number of Class A Shares and Preferred Shares issued at the closing of the offering.