Category: Market Action

Barclays is buying back some Tier 1 Capital:

Barclays Plc (BARC), the U.K.’s second- largest bank by assets, offered to buy back as much as 2.5 billion pounds ($3.9 billion) of capital notes to improve the quality of the capital it holds.

The lender will offer to buy back the Tier 1 securities for a discount of as much as 30 percent to face value, London-based Barclays said in a statement today.
…
The “offers will enable the issuer to enhance further the quality of its capital structure through the reduction of non- Basel III compliant tier one capital and subsequent generation of additional core tier one capital,” Barclays said in the statement.

There may be a mass downgrade of Europe brewing:

Standard & Poor’s said Germany and France may be stripped of their AAA credit ratings as the debt crisis prompts 15 euro nations to be put on review for possible downgrade.

The euro area’s six AAA rated countries are among the nations to be placed on a negative outlook, and their credit ratings may be cut depending on the result of a summit of European Union leaders on Dec. 9, S&P said today in a statement. The euro reversed its gains and U.S. Treasuries rose earlier today after the Financial Times reported that the credit-ranking firm planned to reduce six AAA outlooks.

“Systemic stress in the eurozone has risen in recent weeks and reached such a level that a review of all eurozone sovereign ratings is warranted,” S&P said in a statement.
…
The firm said that ratings could be cut by one level for Austria, Belgium, Finland, Germany, Netherlands and Luxembourg, and by up to two notches for the other governments. The euro pared gains against the dollar, trading at $1.3401 per euro at 5:01 p.m. in New York after rising as high as $1.3487.

S&P said it maintained the negative outlook for Cyprus, and Greece wasn’t put on “creditwatch.”

Even Japan’s getting a little desperate:

Japanese Finance Minister Jun Azumi will be rewarding investors who buy more than 10 million yen ($129,000) in reconstruction bonds with gold in the government’s latest attempt to bolster demand for the debt.

Individual investors who hold the bonds for three years will be eligible for a gold commemorative coin valued at 10,000 yen, the Finance Ministry said in Tokyo today. At 15.6 grams, (0.55 ounces), it would be worth about $948 based on prices for the precious metal. Only a limited number of coins will be issued, the Finance Ministry said in a statement.

DBRS confirmed BPP at Pfd-3:

DBRS has today confirmed the Issuer Rating of Brookfield Office Properties Canada (BOPC or the Trust) at BBB with a Stable trend. DBRS has also confirmed the Issuer Rating of BPO Properties Ltd. (BPO or the Company) at BBB and its Cumulative Redeemable Preferred Shares ratings at Pfd-3. The trends are Stable.

The confirmations follow BOPC’s announcement of the acquisition of the Canadian Office Fund portfolio (the Acquisition) from BPO for approximately $362 million, including assumed mortgages totaling approximately $140 million. DBRS expects BOPC to fund the balance of the Acquisition primarily with cash on hand and a drawdown on the Trust’s revolving credit facility. The Acquisition includes an undivided 25% interest in nine Class AA and Class A office properties, including such high-quality office properties as First Canadian Place in downtown Toronto and Jean Edmonds Towers, Place de Ville I and Place de Ville II in Ottawa.

The financial impact of the Acquisition is expected to result in BOPC’s leverage increasing to approximately 44.7% (debt-to-capital ratio based on fair value) from 42.0%, while EBITDA interest coverage is expected to improve to 2.50 times, which DBRS considers appropriate for the current rating category

The confirmation of BPO’s ratings reflects its 83.3% equity interest in BOPC and strong ownership by Brookfield Office Properties, Inc.

BPP has three issues of shares outstanding: BPP.PR.G (1.8-million shares); BPP.PR.J (3.8-million) and BPP.PR.M (2.8-million). These are the Amazing Shares That Would Not Die, having been issued by Royal Trustco in 1985, 1986 and 1986, respectively, and changing their name from Gentra to BPO Properties effective 2001-5-7, following a name change from Royal Trustco 1993-6-18.

It was an uneventful day for the Canadian preferred share market, with PerpetualDiscounts down 6bp, FixedResets off 2bp and DeemedRetractibles gaining 9bp. Volatility was muted, but positive. Volume was above average.

There was a decent US jobs number:

Treasuries pared losses after the U.S. jobless rate unexpectedly fell to 8.6 percent as the workforce shrank, indicating moderate economic growth.

U.S. debt extended the first weekly loss in three weeks as employers added 120,000 jobs in November after an increase of 100,000 positions in the previous month, the Labor Department reported today in Washington. A European proposal to channel central-bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis, two people familiar with the negotiations said.

There is some hope that the increase is understated:

American households may be signaling the job market is stronger than the payroll numbers indicate.

Employers said they took on 120,000 workers in November, bringing job gains over the past four months to 534,000, Labor Department data showed today in Washington. A separate survey of households showed 278,000 more people were employed last month, pushing the increase during the same period to 1.28 million.

At turning points in the economy, the latter may prove more accurate because it’s more likely to pick up hiring at small companies and new firms that may be under the government’s radar. In another sign of recovery, the payroll figures the last three reports have been revised up by a combined 91,000 on average for the prior two months.

Rotman B-School is discussing the Coventree decision:

Monday, December 19, 2011
Capital Markets Institute @ Rotman Roundtable Discussion

3:00pm to 5:00pm Roundtable Discussion
TOPIC: Disclosure and Materiality: The Coventree Decision
SYNOPSIS: In looking at the Coventree Decision by the OSC our panelists will go through the following questions:
What is materiality? What is a material change? When to disclose? Risks of disclosing too early OR too late; insights from the Coventree decision, securities law, issuers and investors; What does the Coventree decision signal regarding disclosure going forward?
PANELISTS:
Jeremy Fraiberg, Partner, Osler, Hoskin & Harcourt LLP
Paul Halpern, Director, Capital Markets Institute, Professor Emeritus of Finance, Rotman School of Management
Christopher C. Nicholls, Stephen Dattels Chair in Corporate Finance Law at the University of Western Ontario
Sean Vanderpol, Partner, Stikeman Elliott
G. Wesley Voorheis, Partner, Voorheis & Co. LLP and member of the Special Committee established by the Coventree Board of Directors
PLACE: Rotman School (South) Room 209 – 149 College Street, Toronto (ON)
TO REGISTER: www.rotman.utoronto.ca/cmi-dec19
QUESTIONS: 416.978.5654 or email Kathleen.Coulson@Rotman.Utoronto.Ca

Greece is engaged in talkes regarding how to default without defaulting. No doubt they are hoping that Pythagorus will come back to square the circle:

Greece and its private creditors are involved in “complicated” negotiations on a debt-swap agreement and scenarios coming to light shouldn’t be seen as indicative of the final result, said Prime Minister Lucas Papademos.

“Each side has its strategies and has starting positions,” Papademos said today in comments to lawmakers televised live on Vouli TV. “Greece’s national interest is our basic goal and the basis supporting our position. That’s self- evident and a given.”
…
Greece’s 206 billion euros of privately held debt would be reduced by 50 percent under an agreement announced at an Oct. 26 summit of European leaders in Brussels. The accord didn’t resolve details of the swap, such as the reduction in net present value investors would face.
…
Greece and its private creditors are in disagreement over the interest rate on new bonds and how 30 billion euros intended to sweeten the deal will be used, said a person who is on the lenders’ negotiating committee. Greece is pushing for a coupon of 4.5 percent on new 20-year to 30-year bonds, while the banks are seeking a rate of 7 percent to 8 percent, said the person, who declined to be identified because the discussions are private.

The TMX DataLinx service has collywobbles again, so today’s data have been prepared using unofficial data from Yahoo!

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 29bp, FixedResets up 3bp and DeemedRetractibles gaining 17bp. Volatility was reasonable. Volume was average.

Sorry this is so late, folks!

The Competition Bureau is leaning against TMX / Maple:

Dealing a major blow to the proposed acquisition of TMX Group, Canada’s Competition Bureau has informed the 13 financial institutions behind the takeover that it has “serious concerns” with their plan.

On Tuesday competition commissioner Melanie Aitken privately informed the consortium, named Maple Group Acquisition Corp., that she has concerns “about the likely competitive effects of the proposed transactions in the current environment, primarily in connection with equities trading and clearing and settlement services in Canada,” according to a statement from Maple Group.

The central banks are mitigating market discipline:

Six central banks led by the Federal Reserve made it cheaper for banks to borrow dollars in emergencies in a global effort to ease Europe’s sovereign-debt crisis.

Stocks rallied worldwide, commodities surged and yields on most European debt fell on the show of force from central banks aimed at easing strains in financial markets. The cost for European banks to borrow dollars dropped from the highest in three years, tempering concerns about the euro’s worsening crisis after leaders said they’d failed to boost the region’s bailout fund as much as planned.
…
The premium banks pay to borrow dollars overnight from central banks will fall by half a percentage point to 50 basis points, the Fed said today in a statement in Washington. The so- called dollar swap lines will be extended by six months to Feb. 1, 2013. The Fed coordinated the move with the European Central Bank and the central banks of Canada, Switzerland, Japan and the U.K.

The six central banks also agreed to create temporary bilateral swap programs so funding can be provided in any of the currencies “should market conditions so warrant.” Those swap lines were also authorized through Feb. 1, 2013.

I won’t go so far as to say I don’t like it, but I will say that I’m deeply suspicious. Central Bank financing should be available, certainly, for solvent but illiquid banks, but these loans should be at punitive, not concessionary rates.

With overnight money so cheap, the cost of failing a trade is derisory, so the Fed’s Treasury Market Practice Group has suggested a surcharge that effectively puts a floor of 3% on fail money. It is strictly voluntary, of course, BUT THE FED WOULD REALLY, REALLY LIKE YOU TO DO THIS!

It was a modestly down day for the Canadian preferred share market, with PerpetualDiscounts losing 12bp, FixedResets off 3bp and DeemedRetractibles down 8bp. Volatility was good. Volume was above average.

PerpetualDiscounts now yield 5.32%, equivalent to 6.92% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.8% so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 210bp, a significant widening from the 195bp reported November 23 as PerpetualDiscounts got smacked for 17bp dividend yield on the week, while long corporates edged up only 5bp.

S&P had an exciting day, downgrading HSB preferreds as well as a few other important names:

Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS) and Citigroup Inc. had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the world’s biggest lenders.

S&P made the same cut to Morgan Stanley and Bank of America’s Merrill Lynch unit today. JPMorgan Chase & Co. (JPM) was reduced one level to A from A+. S&P upgraded Bank of China Ltd. (3988) and China Construction Bank Corp. to A from A- and maintained the A rating on Industrial & Commercial Bank of China Ltd. (1398), giving all three lenders higher grades than most big U.S. banks.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 21bp, FixedResets down 9bp and DeemedRetractibles off 9bp. Volatility was good, volume was average.

Europe is considering another step towards effective nationalization of the banking system:

Banks in states roiled by Europe’s sovereign-debt crisis may be partly shielded from extra costs when they seek government guarantees, according to two people familiar with the situation.

The European Commission will publish rules on state aid for lenders that may dilute the effect of turmoil in the euro area on the fees that banks have to pay for guarantees on their loans and bonds, said the people who couldn’t be identified because the discussions aren’t public. Under the plans, the formula for setting the fees would reduce the impact of soaring debt- insurance costs for the country giving the backstops, one of the people said.

“Renewed tensions” in financial markets are forcing European Union regulators to extend into 2012 special state aid rules for banks that have allowed governments to inject billions of euros into the industry, said EU Competition Commissioner Joaquin Almunia this month. He said he was planning to “clarify and update the rules on pricing and other conditions.”

I’m not saying that’s necessarily the wrong response – I’m just saying that if it is the right response then banks are just another arm of government.

BRF.PR.A was confirmed at Pfd-3(high) by DBRS:

DBRS has today assigned an Issuer Rating of BBB (high) with a Stable trend to Brookfield Renewable Energy Partners L.P. (BREP) and a rating of BBB (high) with a Stable trend to the Senior Unsecured Debentures and Notes (the Notes) of BRP Finance ULC (BRPF). DBRS has also confirmed the Pfd-3 (high) rating with a Stable trend of Class A Preference Shares, Series 1 (the Prefs) of Brookfield Renewable Power Preferred Equity Inc. (BRPP). The ratings of the Notes of BRPF and the Prefs of BRPP are based on guarantees of the parent company, BREP, and its operating subsidiaries. In addition, the rating on the Senior Unsecured Debentures and Notes of Brookfield Renewable Power Inc. (BRPI) and the Issuer Rating and Income Fund rating of Brookfield Renewable Power Fund (the Fund) have been discontinued. These actions resolve the Under Review with Developing Implications assigned to the ratings of BRPI and the Fund on September 13, 2011.

These rating actions follow the closing of the anticipated business combination (the Transaction) today in which in BREP acquired all of the units of the Fund and the equity interests in all of BRPI’s U.S., Brazilian and Canadian power assets not already owned by the Fund. The Transaction and the expected rating outcomes were described in more detail in the DBRS press release dated September 13, 2011.

It was a mixed, uneventful day for the Canadian preferred share market, with PerpetualDiscounts losing 8bp, FixedResets down 5bp and DeemedRetractibles gaining 4bp. Volatility was negligible; volume was average.

In today’s cheerful European news, Italy got whacked at a bill auction:

Italy had to pay almost 7 percent to sell six-month bills at an auction today, fanning investor concern that the world’s fourth-biggest borrower may struggle to finance its debt. The euro fell to a seven-week low.

The Italian Treasury paid 6.504 percent to auction 8 billion euros ($10.6 billion) of the debt, almost twice the 3.535 percent a month ago and the highest since August 1997. Italy’s two-year bonds yielded a euro-era record 7.83 percent, almost 50 basis points more than 10-year notes.

The euro extended declines, shedding 0.9 percent to $1.3213, the lowest since Oct. 3. Italy’s FTSE MIB index was the biggest decliner among European benchmarks, shedding 1.3 percent at 3 p.m. in Rome. Banks tumbled with Banca Monte Paschi di Siena SpA (BMPS) dropping 3.9 percent.

S&P downgraded Belgium to AA:

Belgium’s credit rating was cut one step to AA by Standard & Poor’s, which said bank guarantees, lack of policy consensus and slowing growth will make it difficult to reduce the euro region’s fifth-highest debt load.

The rating was lowered from AA+, with a negative outlook, London-based S&P said yesterday in a statement. The action by S&P is the first downgrade for Belgium in almost 13 years and puts its credit ranking on a par with the S&P local-currency ratings of the Czech Republic, Kuwait and Chile.

Belgium’s borrowing costs have surged to the highest level in 11 years in the past two months after the nation’s government agreed to buy Dexia SA’s Belgian bank unit and guarantee part of the crisis-hit lender’s liabilities for 10 years. Investors continued a selloff in Belgian bonds after six-party coalition talks ran aground this week as Liberals and Socialists clashed over how to cut the budget deficit.

TransCanada Corporation and its subsidiary TransCanada Pipelines Ltd., issuers of TRP.PR.A, TRP.PR.B, TRP.PR.C, TCA.PR.X and TCA.PR.Y were confirmed at Pfd-2(low) by DBRS:

DBRS has confirmed the ratings of TransCanada PipeLines Limited (TCPL or the Company) as listed below. DBRS has also confirmed the rating of the Preferred Shares of TransCanada Corporation (TCC) at Pfd-2 (low). The rating of TCC, which owns 100% of TCPL and holds no other material assets, is based on the credit strength of TCPL.
…
The confirmation reflects the Company’s continued predictable cash flow from its regulated pipelines, which accounted for over 70% of consolidated EBITDA (for the first nine months (9M) of 2011). Pipeline EBITDA is supported by stable earnings that are mostly on a cost-of-service basis and/or contracted, and by incremental earnings contributed by newly constructed pipelines The remaining 30% of EBITDA is mostly contributed by power generation assets (60% in Canada and 40% in the United States). Although EBITDA from power generation is less predictable than the pipeline business, a sizable share of the power output is protected by long-term contracts with creditworthy parties.
…
Capex over the next two years (excluding the Keystone XL project) is likely to be much lower than the $3.6 billion level of the 12 months ending September 30, 2011. DBRS expects free cash flow to be relatively neutral until the significant capex on Keystone XL or another large project is well underway. As a result, debt levels are expected to remain stable or decrease slightly over the medium term. Combined with higher cash flow expected from newly completed pipeline projects, DBRS expects TCPL’s credit metrics to improve modestly and remain well within the current rating category.

EMA.PR.A was confirmed at Pfd-3(high) by DBRS:

DBRS has today confirmed the Medium-Term Notes and Preferred Shares – Cumulative ratings of Emera Inc. (Emera or the Company) at BBB (high) and Pfd-3 (high), respectively, with Stable trends, based on the strong earnings and cash flows generated by its regulated operations and on Emera’s, reasonable non-consolidated financial profile. The ratings also reflect increasing diversification through the ownership of regulated utilities in different jurisdictions, which reduces dependence on earnings and cash flows from any one entity and reduces volatility of earnings. However, Nova Scotia Power Inc. (NSPI) continues to account for the majority (approximately 70%) of Emera’s consolidated EBIT.

NSI.PR.D was confirmed at Pfd-2(low) by DBRS:

DBRS has today confirmed the ratings of the Unsecured Debentures & Medium-Term Notes, Commercial Paper and Cumulative Preferred Shares of Nova Scotia Power Inc. (NSPI or the Company) at A (low), R-1 (low) and Pfd-2 (low), respectively, all with Stable trends. The ratings reflect stable and predictable regulated cash flows generated by the Company’s regulated monopolistic operations, diverse customer base and a supportive regulatory environment.

INE.PR.A was confirmed at Pfd-3(low) by DBRS:

DBRS has today confirmed the Issuer Rating of BBB (low) and the Preferred Shares rating of Pfd-3 (low) of Innergex Renewable Energy Inc. (Innergex or the Company). Both ratings have Stable trends. The ratings reflect the strength of the Company’s high-quality, low-cost renewable power generating assets, operating under long-term off-take contracts with highly-rated counterparties, and its consistent execution in developing and constructing new generating assets.
…
Consolidated credit metrics are expected to remain weak for the rating category through the medium term, with EBITDA-to-interest in the 2.3 times (x) to 2.5x range and cash flow-to-debt in the 5% to 8% range. DBRS expects future modest improvement in coverage metrics as assets under construction are completed and enter service. Consolidated debt-to-capital, currently 63%, is expected to increase modestly over the next several years and peak in 2013 to 2014 until new construction assets begin to operate. Most of the consolidated debt (82%) is project-level debt and non-recourse to the Company.
…
Business risk factors are low for the rating category. Innergex’s competitive position, asset composition and contractual position are all strong for the BBB (low) rating. Asset diversification and operational expertise also support the investment-grade quality assessment. In addition, the focus on renewable assets minimizes exposure to environmental regulation and is positive for the rating. The Company’s low business risk profile mitigates weaker financial credit metrics. Renewable resources are variable, reducing energy production stability and related cash flows. However, this risk is mainly offset by the geographic diversity of the generating portfolio. Also, the Company has cash-funded reserves at the project level (typically six months of debt service) to smooth variability in cash flows from wind/hydrology resources.

Today’s cheerful credit news is about Japan:

Standard & Poor’s said Japanese Prime Minister Yoshihiko Noda’s administration hasn’t made progress in tackling the public debt burden, an indication it may be preparing to lower the nation’s sovereign grade.

“Japan’s finances are getting worse and worse every day, every second,” Takahira Ogawa, director of sovereign ratings at S&P in Singapore, said in an interview. Asked if that means he’s closer to cutting Japan, he said it “may be right in saying that we’re closer to a downgrade. But the deterioration has been gradual so far, and it’s not like we’re going to move today.”

Meanwhile, in Europe:

Stocks fell, Italian bonds declined and the cost of insuring European government debt against default rose to a record after German Chancellor Angela Merkel ruled out joint euro-area borrowing.
…
The yield on Italy’s 10-year bond climbed 14 basis points to 7.11 percent, while similar-maturity French debt yields rose three basis points to 3.72 percent.

Portugal’s bonds fell, with 10-year note yields climbing 90 basis points to 12.21 percent after Fitch Ratings cut the nation’s credit grade one step to BB+, the highest junk status.

Germany’s 10-year bond yield rose as much as 12 basis points to 2.26 percent before trading five basis points higher at 2.20 percent. Two-year note yields increased three basis points to 0.47 percent.

The Royal Canadian Mint’s gold receipt IPO appears to be going very well:

The Royal Canadian Mint raised C$600 million ($573 million) in an initial public offering of securities tied to its gold reserves, more than double its IPO target, according to two people familiar with the sale.

The mint initially sought to raise C$250 million from selling units in Canadian or U.S. dollars at C$20 or $19.29 each, the Ottawa-based firm said. Strong demand from institutional and individual investors drove up the size of the sale, said the people, who declined to be named because terms aren’t public.
…
Each exchange-traded receipt represents ownership in physical gold bullion held in custody of the Royal Canadian Mint. Proceeds from the sale will be used to buy gold, and the buyers of the receipts will own the metal rather than a stake in the mint, according to an Oct. 28 statement.

Huxley said “History is bunk.” Moody’s says Hungary is junk:

Hungary lost its investment-grade rating at Moody’s Investors Service after 15 years as the Cabinet seeks International Monetary Fund help to boost confidence in the European Union’s most-indebted eastern member.

The foreign- and local-currency bond ratings were cut one step to Ba1, the highest junk-level score, from Baa3, the company said today in a statement. Moody’s, which awarded Hungary its investment grade in 1996, assigned a negative outlook. The country is rated the lowest investment grade at Standard & Poor’s and Fitch Ratings.

The government has scrapped two debt sales and reduced the size of another eight auctions in the last three months as the euro region’s debt crisis deepened. Prime Minister Viktor Orban’s Cabinet on Nov. 17 asked for IMF “insurance” that doesn’t entail a loan and doesn’t impose conditions.

It was a rough day for the Canadian preferred share market, with PerpetualDiscounts losing 24bp, FixedResets down 13bp and DeemedRetractibles off 8bp. Not much volatility. Volume was very light – not unexpectedly, what with the US turkeys.

Remember Iceland? The first domino? It’s through the worst of it, according to S&P:

Iceland had its credit rating outlook revised to stable from negative by Standard & Poor’s Ratings Services, which cited economic growth in the country after two years of “severe contraction.”

“Significant headway has been made in restructuring the private-sector balance sheet and we expect the process to be mostly completed by mid-2012,” S&P said. The BBB-/A-3 sovereign ratings were affirmed.

But other dominoes are toppling:

Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, propelling borrowing costs in Europe higher and the euro lower on concern the region’s debt crisis is driving away investors.
…
The yield on Germany’s 2.25 percent securities maturing in September 2021 climbed 15 basis points to 2.06 percent at 4:46 p.m. London time.
…
Belgian 10-year yields surged 41 basis points to 5.48 percent, after reaching 5.53 percent, the highest since November 2000. French 10-year bond yields climbed 16 basis points to 3.69 percent. The yield on Greek two-year notes jumped to more than 120 percent for the first time, before slipping back to 116.59 percent.

Total bids at the auction of securities due in January 2022 amounted to 3.889 billion euros, out of a maximum target for the sale of 6 billion euros, according to Bundesbank data.

Six of the last eight bond sales by Germany have been “technically uncovered,” with fewer bids than the maximum amount on offer, Norbert Aul, a rates strategist at RBC Capital Markets in London, said in an e-mailed note.

Under the German auction system, the central bank retains securities at sales for the secondary market. In today’s offering, the debt agency allotted 3.644 billion euros of the securities, leaving the Bundesbank to retain 2.356 billion euros, or 39 percent of the supply. That’s the highest proportion of unsold debt at a 10-year sale since 1995, according to Bloomberg data. The securities were sold at an average yield of 1.98 percent. In the secondary market, the rate rose to 2.13 percent.

DBRS confirmed Westcoast at Pfd-2(low):

DBRS has today confirmed the Unsecured Debentures, First Preferred Shares and Commercial Paper ratings of Westcoast Energy Inc. (Westcoast or the Company) at A (low), Pfd-2 (low) and R-1 (low), respectively, all with Stable trends.
…
On a consolidated basis (excluding the intercompany transaction), the Company’s external debt-to-capital ratio (52% at September 30, 2011; 54% at year-end 2008) and cash flow-to-external debt (19% for both the 12 months ending September 30, 2011, and in 2008) were relatively unchanged, while external fixed charges coverage (2.8 times, up from 2.5 times) improved marginally, partly due to contributions from expansions placed in service as noted above.

On a non-consolidated basis, Westcoast’s direct ownership of BCPFS fully supports its ability to meet its direct debt obligations. Its credit metrics are enhanced by cash dividends from several sources, the largest of which is Union Gas, which generate approximately 50% of the Company’s non-consolidated cash flow. Excluding the intercompany transaction, Westcoast’s non-consolidated external debt-to-capital ratio increased to 36% in 2010 from 32% in 2008, while cash flow-to-external debt (25%, up from 16%) and external fixed charges coverage (3.2 times, up from 2.2 times) improved significantly, mainly as a result of contributions from expansions noted above.

TMX DataLinx has collywobbles yet again, so this report is being prepared with Yahoo! data.

It was a rough day for the Canadian preferred share market, with PerpetualDiscounts down 9bp, FixedResets off 12bp and DeemedRetractibles losing 14bp. All five entries in the Performance Highlights table were losers. Volume was average.

PerpetualDiscounts now yield 5.15% (this figure is somewhat distorted by the fact that five of the seventeen issues are actually at a premium now and another two are bang-on par; the index is only rebalanced monthly), equivalent to 6.70% interest at the standard equivalency factor of 1.3x. Long Corporates are now at about 4.75%, so the pre-tax interest-equivalent spread is now about 195bp, tightening a bit (perhaps spuriously) from the 205bp reported November 16.

The SEC’s campaign to create a society of paid informers is proving remarkably successful:

Bounty-hunting corporate tipsters are filing reports of potential wrongdoing with the U.S. Securities and Exchange Commission at a rate of about seven per day, according to the first progress report from the agency’s new whistle-blower program.

The public snapshot released last week counted 334 tips in the first 50 days after the program — revamped under the Dodd- Frank Act — became fully operational on Aug. 12.

The program gives whistle-blowers a share of proceeds if their tips lead to more than $1 million in penalties. So far, the top three categories of tips are those alleging market manipulation, problems with public disclosure or fraud in offerings.

I hope they’re managing it all right. I’m sure there’s still lots of ex-officers around from the East German STASI – perhaps they can be recruited as case managers.

The Fed’s stress test is … stressful:

The Federal Reserve told the 31 largest U.S. banks to test their loan portfolios and trading books against a deep recession and a European market shock to ensure they have enough capital to withstand losses.

The most severe test scenarios outlined by the Fed today include an unemployment rate of as much as 13 percent, an 8 percent drop in gross domestic product and a 21 percent plunge in home prices.
…
The Fed will also publish the results of the tests for the 19 largest bank holding companies. Six institutions with large trading operations will have to estimate potential losses from a hypothetical “global market shock,” the Fed said. That shock will be based on market price movements seen during the second half of 2008, it said, and include a scenario involving “sharp market price movements in European sovereign and financial sectors.”

The Fed said it would publish the results of the market shock scenario of the six institutions: Bank of America Corp., Citigroup Inc., Goldman Sachs Group, Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Company.
…
The Fed said it would approve dividend increases and other capital distributions “only for companies whose capital plans are approved by supervisors and are able to demonstrate sufficient financial strength to operate as successful financial intermediaries under stressed macroeconomic and financial market scenarios.”

It was a mild day for the Canadian preferred share market, with PerpetualDiscounts up 2bp, FixedResets gaining 2bp and DeemedRetractibles winning 4bp. The Performance Highlights table was very short, with only three entries. Volume was average.