Category: Market Action

BCE is buying Astral Media:

BCE Inc.’s (BCE-T39.64-0.42-1.05%) massive bet on media is going truly national, as the communications giant makes a $3-billion play for Astral Media Inc. (ACM.A-T48.5512.3033.93%)to shore up its broadcasting business in the one province where it was weak: Quebec.

The deal, announced Friday, gives the country’s largest communications firm a stable of French-language television and radio stations to compete with rival Quebecor Inc. It also cements BCE’s position as the leading force of consolidation in Canada’s media industry: Since 2010, it has announced deals worth nearly $7-billion to buy control of CTV Inc., Maple Leafs Sports and Entertainment Ltd., and now Montreal-based Astral.

DBRS considers it a non-event for credit:

DBRS has today confirmed the long- and short-term ratings of BCE Inc. (BCE) and its wholly-owned operating subsidiary, Bell Canada (the Company), at BBB (high)/R-1 (low) and A (low)/R-1 (low), respectively, following BCE Inc. and Bell Canada’s announcement today that they have entered into a definitive agreement to purchase the shares of Astral Media Inc. (Astral Media) for roughly $3 billion (valuing Astral Media at a total enterprise value of roughly $3.4 billion). The trend on all ratings is Stable.

With an EBITDA multiple of roughly 10 times (x) Astral Media’s F2012 EBITDA, DBRS notes that this transaction is reasonable and consistent with other recent media transactions in Canada. BCE/Bell Canada plans to fund the acquisition of the equity purchase price with cash/debt (for roughly three-quarters) and BCE Inc. common shares (for the remaining quarter, or $750 million). As part of the transaction, Ian Greenberg – one of the co-founders of Astral Media – will join the board of BCE Inc. upon closure of the acquisition.
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From a financial perspective, DBRS notes that leverage is expected to increase for Bell Canada with the addition of Astral Media, from approximately 1.8x gross debt-to-EBITDA expected at the end of 2011 to roughly 2.0x expected at the end of 2013. However, the Company’s commitment to deleverage within 24 months of the close of the transaction gives DBRS greater comfort that Bell Canada’s leverage will improve to more historical levels (and back within its own target range).

It was another quiet day for the Canadian preferred share market, with PerpetualPremiums down 5bp, FixedResets gaining 7bp and DeemedRetractibles off 5bp. The Performance Highlights table is suitably short. Volume was quite low.

It seems that BAM will spin out some real estate:

Now the company’s largest division by far, its $83-billion collection of real estate, is about to receive the spin-out treatment. And therein lies the potential opportunity for investors. The move to create the new venture, to be known as Brookfield Property Partners, could be a catalyst to move the share price higher.

The company states:

“As long-term, value-oriented real estate investors, we believe this is an excellent time to selectively build a portfolio of high-quality industrial properties, and we look forward to expanding our relationship with Hillwood,” said David Arthur, Managing Partner at Brookfield Asset Management. “This initiative expands the scope of our real estate platform in an exciting asset class, strengthening our global property operations in line with the expected launch later this year of our flagship property vehicle, Brookfield Property Partners.”

It was a poor day for the Canadian preferred share market, with PerpetualPremiums down 13bp, PerpetualDiscounts off 4bp and DeemedRetractibles losing 18bp. The Performance Highlights table is short, but comprised entirely of losers. Volume was pathetically, Christmasally low.

Nice story about technological disruption – a big change from The Diving Bell & the Butterfly:

Edwards, who suffered brain damage in 2001, can write e- mails, though, and she’s revisiting a favorite pastime, sketching, for the first time in a decade, thanks to her iPad and software applications that can cost as little as $7.

That’s a switch from the $15,000 communication device she had tried, a 9-pound machine approved by her insurer that tracks eye movement on a special grid corresponding to the alphabet. That device kept her tied to those in the room around her. The iPad, along with several other consumer-driven apps, has reopened the world to her.

Fitch has indicated a negative outlook on UK debt:

Fitch Ratings said Britain risks losing its top investment grade because of its limited ability to deal with shocks, days before Chancellor of the Exchequer George Osborne will present his annual budget.

Fitch changed the outlook on Britain to “negative” from “stable,” indicating a “slightly greater” than 50 percent chance that the AAA rating will be reduced within two years, the company said in a statement in London late yesterday, citing the weak economic recovery, high debt levels and threats from Europe’s debt crisis. Osborne will meet coalition partners later this week to agree on a budget he will present on March 21.

It was a quiet day for the Canadian preferred share market, with PerpetualPremiums gaining 3bp, FixedResets up 1bp and DeemedRetractibles off 1bp. There were no entries on the Performance Highlights table. Volume returned to average levels.

PerpetualDiscounts now yield 5.10%, equivalent to 6.63% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.60%, so the pre-tax interest-equivalent spread (which in this context is the Seniority Spread) is now about 205bp, a slight tightening from the 210bp reported March 7.

The FOMC Statement was released:

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
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Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.

Due to the inability of the Toronto Stock Exchange to maintain a simple on-line database in a competent manner, today’s report is based on Yahoo! data, which at times can contain … interesting errors.

It was a mostly-down day for the Canadian preferred share market, with PerpetualPremiums gaining 2bp, FixedResets down 6bp and DeemedRetractibles losing 11bp. The Performance Highlights table is suitably short. Volume was a little below average.

Are the European dominoes falling?

The good news is Greece won’t default on March 20, and 10-year borrowing costs for Spain and Italy have dropped below 5 percent. The bad news is similar- maturity Portuguese bonds still yield more than 13 percent.
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Unlimited European Central Bank loans to banks have halted a bond-market rout that prompted investors to drive German yields to record lows and yield premiums on the securities of its regional peers to euro-era highs. The Italian 10-year yield has dropped more than 150 basis points and the rate on similar- maturity Spanish debt is about 80 basis points lower since the ECB announced Dec. 8 it would offer loans to financial institutions through two longer-term refinancing operations.

It was another quiet day for the Canadian preferred share market, with PerpetualPremiums gaining 6bp, FixedResets exactly flat, and DeemedRetractibles winning 10bp. There was an appropriately small Performance Highlights table generated; volume was a little below average.

There was a good US jobs number today:

Employers in the U.S. boosted payrolls more than forecast in February, capping the best six- month streak of job growth since 2006 and sending stocks higher.

The 227,000 increase followed a revised 284,000 gain in January that was bigger than first estimated, Labor Department figures showed today in Washington. The median projection of economists in a Bloomberg News survey called for a 210,000 rise. The jobless rate held at 8.3 percent, even as 476,000 more workers sought employment.

More jobs are helping fuel the wage gains that drive consumer spending, which accounts for about 70 percent of the economy.

Canada, not so much:

Canada’s economy shed 2,800 jobs last month, extending a stretch of meagre job creation that began last summer.

The country’s jobless rate fell two notches to 7.4 per cent in February, but that was due to fewer people seeking work rather than any pickup in the labour market, Statistics Canada said Friday.

But fear not, Canadians! The wise men in Ottawa are exerting every effort to eliminate Twitter posting from government computers.

Amazingly, Greece CDSs reflect reality:

Greece’s use of collective action clauses forcing investors to take losses under its debt restructuring triggers payouts on $3 billion of default insurance, the International Swaps & Derivatives Association said.

A total 4,323 credit-default swap contracts may now be settled after ISDA’s determinations committee ruled the use of CACs is a restructuring credit event, according to a statement distributed today by Business Wire. Before the ruling, Greek swaps rose to a record $7.68 million in advance and $100,000 annually to insure $10 million of debt for five years.

Veresen, proud issuer of VSN.PR.A, issued two series of BBB(high) MTNs:

— $300 million 3.95% unsecured medium-term notes (MTNs) maturing on March 14, 2017.
— $50 million 5.05% unsecured MTNs maturing on March 14, 2022.

The 110bp premium for the extra five years compares with a 55bp relative term premium on Canadas.

Husky Energy, proud issuer of HSE.PR.A, was confirmed at Pfd-2(low) by DBRS:

Husky maintains a conservative financial profile. Its debt-to-capital and debt-to-cash flow ratios improved to 18% and 0.77 times, respectively, in 2011 from 22% and 1.39 times, respectively, in 2010. Common and preferred share issuance totaling $2.0 billion (including dividends paid in shares) strengthened its key credit metrics and liquidity position, with $3.3 billion of bank facility availability and $1.8 billion of cash at December 31, 2011.

DBRS expects Husky to maintain its conservative financial profile, with only modest weakening of its key credit metrics relative to year-end 2010 levels during the high capex period through 2015, as well as making significant progress on its upstream operational targets over the period in order to maintain the current ratings.

It was another day of little direction for the Canadian preferred share market, with PerpetualPremiums down 9bp, FixedResets gaining 3bp and DeemedRetractibles off 5bp. The market was affected by a new issue of ELF 5.50% Straight Perpetuals; given the lack of overall movement, the Performance Highlights table is surprisingly lengthy, with Floaters doing quite well, presumably due to speculation about future increases in the BoC overnight rate. Volume remained low.

Looks like the voluntary ha-ha Greek debt swap is done:

Private investors agreed to swap about 85 percent of their Greek government bonds for new securities in the biggest sovereign debt restructuring in history, according to a banker briefed on the results.
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While Greece would prefer a voluntary deal, the government has said it will use so-called collective action clauses to force holders of Greek-law bonds into the swap if the private sector involvement fell short and it got approval from investors to change the bonds’ terms. The Greek government had said it wanted participation above 90 percent and was seeking a minimum level of 75 percent.

“Ideally we get above 90 and it doesn’t need to be done,” said Geoffrey Yu, a currency analyst at UBS AG, said in an interview with Bloomberg Television’s Caroline Hyde yesterday.

Compelling holdouts to take part would likely trigger insurance contracts on the debt known as credit default swaps.

“We don’t see the Greeks failing to get a deal because the risk for everyone involved is just too high,” Tobias Basse, a cross market strategist at Norddeutsche Landesbank, said yesterday in a telephone interview.

An interesting game of Prisoners’ Dilemma! I wonder if the politicians will be able to bear the thought that non-participants will make good profits?

The BoC Rate was left unchanged:

Recent developments suggest that the outlook for the Canadian economy is marginally improved from the January MPR. Although the economy will likely grow faster than forecast in the first quarter due to temporary factors, underlying economic momentum remains around trend, balancing domestic strength and external weakness. Private demand is now expected to be slightly stronger than projected, owing to improved sentiment and highly-supportive financial conditions. Canadian household spending is expected to remain high relative to GDP as households add to their debt burden, which remains the biggest domestic risk. Net exports have been supported by stronger-than-anticipated U.S. activity but are expected to contribute little to growth, reflecting still-moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.

The profile for core and total CPI inflation is somewhat firmer than previously anticipated as a result of reduced economic slack and higher oil prices. After moderating in the second quarter, total inflation is expected, along with core inflation, to be around 2 per cent over the forecast horizon, reflecting the combination of modest growth of labour compensation, an economy operating around its potential over time, and well-anchored inflation expectations.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent.

The thugs in Ottawa reaffirmed their committment to central planning:

Federal Labour Minister Lisa Raitt has warded off threatened work stoppages at Air Canada, blocking a strike by ground crew and a lockout of pilots planned for March break.

It was a mild day for the Canadian preferred share market, with PerpetualPremiums up 4bp, FixedResets gaining 1bp and DeemedRetractibles winning 6bp. There was only one issue in the Performance Highlights table. Volume was extremely low.

The voluntary ha-ha Greek debt swap might succeed:

Investors with 58 percent of the Greek bonds eligible for the nation’s debt swap have so far indicated they’ll participate, putting the country on the verge of the biggest sovereign restructuring in history.

Greece’s largest banks, most of the country’s pension funds, and more than 30 European banks and insurers including BNP Paribas SA, Commerzbank AG (CBK) and Assicurazioni Generali SpA (G) have pledged to accept the offer. That brings the total so far to at least 120 billion euros ($157 billion), based on data compiled by Bloomberg from company reports and government statements.

CalPERS, the gigantic pension fund best known for not doing its own credit analysis, may lower its return expectations:

Actuary Alan Milligan recommended trimming the annual return estimate yesterday to 7.25 percent from 7.75 percent, potentially driving up what the fund, known as Calpers, requires from taxpayers to provide benefits for more than 1.6 million employees, retirees and their families.

Public funds have come under fire for using investment assumptions that hide the true size of shortfalls. The $238.1 billion fund last adjusted its rate of return in 2004, to 7.75 percent from 8.25 percent. The plan is to be considered by the Calpers board next week.
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The pension fund estimates that it has about 75 percent of the money it needs to cover promised benefits. That differs from a Stanford University report that said Calpers was only 58 percent funded, based on a 6.2 percent annual return on assets.

Will wonders never cease? There’s price competition in the Canadian mortgage market:

Canada’s fourth-largest bank is bringing historic low rates back into the market, only a few weeks after it and several other lenders pulled similar discounts, amid concerns over collapsing profit margins. The bank lowered the rate on a five-year mortgage to 2.99 per cent, a drop of a half a percentage point. It also cut the rate on 10-year mortgages to just 3.99 per cent, a level that no Big Five bank has posted until now.

It was a modestly positive day for the Canadian preferred share market, with PerpetualPremiums winning 7bp, FixedResets up 6bp and DeemedRetractibles gaining 4bp. Volatility was nothing special. Volume remained at low levels.

PerpetualDiscounts (all seven of them!) now yield 5.08%, equivalent to 6.60% interest at the standard 1.3x equivalency factor. Long corporates now yield a little under 4.5% (!) so the pre-tax interest-equivalent spread (which, in this context, is the Seniority Spread) is now about 210bp, a meaningful widening from the 195bp reported on February 22.

Equities got whacked:

The six largest S&P/TSX banks and all eight insurers fell. TD dropped 1.6 percent to C$80.55. Royal Bank of Canada (RY), its bigger domestic rival, lost 1.1 percent to C$56.15. Manulife Financial Corp. (MFC), North America’s third-largest insurer, retreated 4.1 percent to C$11.81.

The Canadian preferred share market followed equities, with PerpetualPremiums down 12bp FixedResets off 15bp and DeemedRetractibles losing 24bp. All entries on the relatively length Performance Highlights table, almost entirely comprised of insurers today, were negative. Volume was very low.

I was a bit short of time today, folks!

It was another day of little direction for the Canadian preferred share market, with PerpetualPremiumsu 3bp, FixedResets down 1bp and DeemedRetractibles gaining 3bp. The Performance Table was surprisingly normal in its length, given the small overall moves, and very skewed to the upside, which was comprised entirely of insurance issues. Volume was very low.