Category: New Issues

It’s been a long time since an investment grade Operating Retractible issue came out!

Issue: Brookfield Asset Management 5.00% Cumulative Class A Preference Shares, Series 21

Size: 6-million shares @ $25.00 (= $150-million); Greenshoe for 1-million shares (= $25-million) exercisable prior to closing.

Dividends: $1.25 p.a.; Long first dividend of $0.3299 planned for September 30

Redemption: Redeemable at $25.00 on and after 2013-6-30; Company may substitute common shares at greater 95% of market or $2

Retraction: Retractible into common at greater of 95% of market and $2. Company may elect to substitute cash.

Ratings: S&P: P-2; DBRS: Pfd-2(low)

Closing: 2008-6-25

Other BAM retractibles are BAM.PR.H, BAM.PR.I and BAM.PR.J

More later.

Later, More: Comparables – at intra-day prices – are:

The BAM.PR.H are interesting … callable at 25.75 commencing 2008-9-30, redemption price declines by $0.25 annually until 2011-9-30, callable at $25.00 thereafter; retractible into shares commencing 2012-3-31; yield until the softMaturity 2012-3-30 is 4.76%.

The new issue is nice – it’s very nice to see a new issue eligible for the OpRet index! – but appears to be no more than fairly priced relative to the extant BAM retractibles.

And now there are six!

Actually, I detect a move in the right direction with this issue. The most recent fixed-reset was from National Bank, 5.375%+205 and the penultimate was TD, 5.00% +160; the Canada 5-year is now at 3.52%, up 6bp from yesterday. As the initial 5-year rate creeps up, I get more interested … but I’m not willing to buy just yet! Not with, for instance, BMO.PR.J closing at 19.83-95 last night, with a bid-Yield-to-Worst of 5.73% and the chance for a capital gain of 25% if yields fall.

Issue: Bank of Montreal Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 16

Size: 10-million shares @25 (= $250-million); greenshoe of 2-million shares (=$50-million) exercisable prior to closing.

Exchange Dates: August 25, 2013 and every five years thereafter.

Dividends: 5.20% (=$1.30) p.a.; resets to 5-year Canadas +165bp every exchange date.

Exchange: Every Exchange Date to and from Series 17 Floaters, which pay 90-bills + 165, reset quarterly.

Redemption: Every Exchange Date at $25.00 for Resets; Floaters redeemable at $25 each Exchange Date and at $25.50 at all other times.

Ratings: S&P: P-1(low); DBRS: Pfd-1; Moody’s: Aa3

Closing: 2008-6-23

Loblaw Companies has announced:

a domestic public offering of 9 million cumulative redeemable convertible Second Preferred Shares, Series A (the “Preferred Shares Series A”) at a price of $25.00 per share, to yield 5.95% per annum, for an aggregate gross amount of $225 million.

Loblaw has agreed to sell the Preferred Shares Series A to a syndicate of underwriters co-led by RBC Dominion Securities Inc. and CIBC World Markets Inc. on a bought deal basis. Loblaw has granted to the underwriters an option to purchase an additional $75 million of the Preferred Shares Series A at any time up to 48 hours prior to closing.

The Preferred Shares Series A will be offered by way of prospectus supplement under the short form base shelf prospectus of Loblaw Companies Limited dated June 5, 2008. The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.

The net proceeds of the issue will be added to the general funds of Loblaw Companies Limited and used for general corporate purposes. The offering is expected to close on or about June 20, 2008.

Issue: Loblaw Companies Limited 5.95% Cumulative Redeemable Second Preferred Shares, Series A

Size: 9-million shares @ $25 (= $225-million) + greenshoe of 3-million shares (= $75-million) exercisable prior to closing.

Dividends: $1.4875 p.a., payable quarterly; long first dividend of $0.5394 payable 2008-10-31

Redemption: Redeemable at $25.75 commencing 2013-7-31; redemption price declines to $25.50 commencing 2014-7-31; declines to $25.00 if redeemed on or after 2015-7-31. Redemption price may be satisfied with shares of Loblaw at 95% of market (as defined).

Retraction: At $25 into shares of Loblaw at 95% of market (as defined), commencing 2015-7-31. Company can substitute cash at its option.

Ratings: S&P: P-3(high); DBRS Pfd-3 (negative trend)

Closing: 2008-6-20

Well, it’s certainly nice to see an operating-retractible issue offered in size; sadly, the ratings will keep it out of the HIMIPref™ indices and many portfolios. More later.

Update: This issue looks expensive.

And thick and fast they came at last, and more and more and more! National Bank has announced:

a public offering of 7 million, non-cumulative 5-year rate reset first preferred shares Series 21 (the “Preferred Shares Series 21”) at a price of $25.00 per share, for an aggregate amount of $175 million.

Holders of Preferred Shares Series 21 will be entitled to receive a non-cumulative quarterly fixed dividend for the initial period ending August 15, 2013 of 5.375% per annum, as and when declared by the Board of Directors of National Bank. Thereafter, the dividend rate will reset every five years at a level of 205 basis points over the 5-year Government of Canada bond yield. Holders will, subject to certain conditions, have the option to convert all or any part of their Preferred Shares Series 21 to non-cumulative floating rate first preferred shares Series 22 (the “Preferred Shares Series 22”) of National Bank on August 16, 2013 and on August 16, every five years thereafter. Holders of the Preferred Shares Series 22 will be entitled to receive a non-cumulative quarterly floating dividend equal to the 90-day Canadian Treasury Bill rate plus 205 basis points, as and when declared by the Board of Directors of National Bank.

National Bank has agreed to sell the Preferred Shares Series 21 to a syndicate of underwriters led by National Bank Financial Inc. on a bought deal basis. National Bank has granted to the underwriters an option to purchase up to an additional $26.25 million of the Preferred Shares Series 21 at any time up to 30 days after closing.

Issue: National Bank of Canada Non-Cumulative 5-Year Rate Reset Preferred Shares Series 21

Amount: 7-million shares @ $25.00 = $175-million

Greenshoe: 1,050,000 shares @ $25 = $26,250,000 up to thirty days after closing.

Initial Dividend: 5.375%, changes every Exchange Date

Subsequent Dividend: 5-Year Canadas + 205bp, determined 30 days prior to Exchange Dates

Exchangeable: To Series 22 Floaters, pay 90-day Canada T-Bills + 205, determined quarterly

Exchange Dates: August 15, 2013 and every five years thereafter

Redemption: Series 21 Resets redeemable every exchange date at $25.00. Series 22 Floaters at $25.00 on every exchange date and at $25.50 at all other times.

Rank: On parity with all other First Preferred Shares, senior to common, junior to everything else.

Ratings: S&P: P-2(High); DBRS: Pfd-1(low); Moody’s: A1

Don’t like ’em! The Big Black Mark against this structure is that it can be called in only five years. I’ve published my thoughts on the matter … but some people like ’em and they certainly seem to be selling well.

Update, 2013-8-14: This issue, NA.PR.N, was called for redemption on the first Exchange Date

And now there are four.

Hard on the heels of their second quarter report comes a new issue announcement:

it has entered into an agreement with a group of underwriters led by TD Securities Inc. for an issue of 8 million non-cumulative 5-Year Rate Reset Preferred Shares, Series S (the “Series S Shares”), carrying a face value of $25.00 per share, to raise gross proceeds of $200 million. TD intends to file in Canada a prospectus supplement to its January 11, 2007 base shelf prospectus in respect of this issue.
TD has also granted the underwriters an option to purchase, on the same terms, up to an additional 2 million Series S Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing. The maximum gross proceeds raised under the offering will be $250 million should this option be exercised in full.
The Series S Shares will yield 5.00% per cent annually, payable quarterly, as and when declared by the Board of Directors of the TD, for the initial period ending July 31, 2013. Thereafter, the dividend rate will reset every five years at a level of 160 basis points over the then five-year Government of Canada bond yield.
Holders of the Series S Shares will have the right to convert their shares into Non-cumulative Floating Rate Preferred Shares, Series T (the “Series T Shares”), subject to certain conditions, on July 31, 2013, and on July 31 every five years thereafter. Holders of the Series T Shares will be entitled to receive quarterly floating dividends, as and when declared by the
Board of Directors of TD, equal to the three-month Government of Canada Treasury Bill yield plus 160 basis points.
The issue qualifies as Tier 1 capital for TD and the expected closing date is June 11, 2008.

Issue: Non-Cumulative 5-Year Rate Reset Class A Preferred Shares, Series S

Size: 8-million shares @ $25.00 = $200-million

Greenshoe: 2-million shares (= $50-million) up to two days prior to closing.

Ratings: DBRS: Pfd-1; S&P: P-1(low); Moody’s: Aa2

Dividends: 5.00% until first Exchange Date; reset to 5-Year Canadas + 160bp every exchange date.

Convertible: Back & forth between Series T Floaters every exchange date. Series T pays 90-day T-Bills + 160bp

Exchange Date: July 31, 2013 and every five years thereafter

Redemption: Series S & Series T redeemable every exchange date at $25.00. Series T redeemable any other time at $25.50.

Rank: Parri Passu with all other preferreds, senior to common

Closing: June 11, 2008

Well … if I didn’t like the other ones, I’m not going to like these ones! But it looks like the structure is popular, so I guess I’d better start going over the HIMIPref™ code and determining just what will need to be done before I can add them to the universe.

As I’ve stated before … I’ll be adding the class to HIMIPref™ as soon as there are enough outstanding so that one could reasonably expect to execute profitable trades within the class.

Update, 2013-6-22: This trades as TD.PR.S

BNS has announced another issue, similar in structure to their March issuance.

Issue Name: Non-cumulative 5-Year Rate Reset Preferred Shares Series 20

Amount: 12-million shares @ $25 = $300-million

Greenshoe: 2-million shares (= $50-million) up to 48 hours before closing

Initial Rate: 5.00%, quarterly, until 2013-10-25 pay-date.

Reset: Resets every five years to 5-Year Canadas + 170bp, determined 30 days prior to the first day of a reset period.

Exchange: Exchangeable on every reset date to Series 21 (the Floaters), which pays 90-day bills + 170bp

Redemption: Redeemable every Exchange Date at $25.00. Floaters are redeemable every Exchange Date at 25.00 and at $25.50 at all other times.

Priority: Parri Passu with all other preferreds, senior to common, junior to everything else.

Ratings: S&P: P-1(low); DBRS: Pfd-1; Moody’s: Aa3

None for me thanks! I’ve commented on this structure previously and don’t like the fact that I’m expected to take perpetual credit risk for 5-year rates. It’s just another attempt to finance long with pretend-short-term paper … which was a major contributing factor to the Credit Crunch. However … some people like ’em!

Update: Oops! Forgot the closing! As noted on Scotia’s Press Release:

The Bank has agreed to sell the Preferred Shares Series 20 to a syndicate of underwriters led by Scotia Capital Inc. on a bought deal basis. The Bank has granted to the underwriters an option to purchase up to an additional $50 million of the Preferred Shares Series 20 at any time up to 48 hours before closing.
Closing is expected to occur on or after June 10, 2008. This domestic public offering is part of Scotiabank’s ongoing and proactive management of its Tier 1 capital structure.

It looks like the Desjardins Fixed-Reset idea used by Scotia’s recent new issue has found another customer.

Fortis has announced:

that it has entered into an agreement with a syndicate of underwriters led by Scotia Capital Inc. and CIBC World Markets Inc. pursuant to which they have agreed to purchase from Fortis and sell to the public 8,000,000 Cumulative Redeemable Five-Year Fixed Rate Reset Series G First Preference Shares (the “Series G First Preference Shares”) of the Corporation (the “Offering”). The underwriters will also have the option to purchase up to an additional 1,200,000 Series G First Preference Shares to cover over-allotments, if any, and for market stabilization purposes, during the 30 days following the closing of the Offering (the “Over-Allotment Option”).

Holders of Series G First Preference Shares will be entitled to receive a cumulative quarterly fixed dividend for the initial five-year period ending on August 31, 2013 of 5.25% per annum, if, as and when declared by the Board of Directors of the Corporation. Thereafter, the dividend rate will reset every five years at a level of 2.13% over the five-year Canada bond yield.

The purchase price of $25.00 per Series G First Preference Share will result in gross proceeds of $200,000,000 ($230,000,000, if the Over-Allotment Option is exercised in full). The net proceeds of the Offering will be used to repay the total amount outstanding of approximately $170 million under the Corporation’s committed credit facility, which indebtedness was incurred to fund a portion of the purchase price for the acquisition of Terasen Inc. on May 17, 2007 and the purchase price for the acquisition of the Delta Regina hotel on August 1, 2007. The balance will be used for general corporate purposes.

The Offering is subject to the receipt of all necessary regulatory and stock exchange approvals. Closing is expected to occur on or about May 23, 2008.

Issuer : Fortis Inc. (FTS)

Issue: Cumulative Redeemable Five-Year Fixed Rate Reset Preference Shares, Series G

Amount: 8-million shares @ $25 (= $200-million)

Greenshoe: 1.2-million shares @ $25.00, up to 30 days after closing.

Initial dividend rate: 5.25% (= $1.3125 p.a.) until the August 31, 2013. First reset date September 1, 2013.

Dividend Resets: Resets every 5 years to 5-year Canadas + 213bp, determined 30 days prior to the reset period.

Redemption: Redeemable on every reset date at $25.00

Priority: Parri Passu with other prefs, senior to common. Voting rights if eight dividends are missed.

Ratings: S&P: P-2 ; DBRS Pfd-3(high)

Closing: On or about May 23, 2008

I don’t like ’em. I’ve said it before … I’ll say it again. If I’m going to lend perpetual money, I want perpetual dividend rates!

Quadravest has announced:

the filing of a preliminary prospectus for a proposed new offering. The offering is an investment in common shares of TMX Group Inc. which is the company resulting from the combination of TSX Group Inc. and Montreal Exchange Inc. The Company will offer two investment choices: Class A Shares (a capital share) and Priority Equity Shares (a preferred share).

XTM Split’s Class A Shares offer regular monthly cash dividends targeted to be 5.00% per annum. The Class A Shares will also provide holders with any capital appreciation or dividend growth achieved in its shares of TMX Group Inc.

XTM Split’s Priority Equity Shares offer fixed, cumulative preferential monthly cash dividends at a yield of 5.25% per annum, with the objective of repaying their original issue price ($10) upon termination on December 1, 2015.

Prospective purchasers may acquire shares by either paying cash for the Priority Equity Shares or Class Shares, or by exchanging freely tradeable common shares of the TMX Group Inc. for a full or partial tax-deferred rollover for Canadian tax purposes.

According to the preliminary prospectus:

Based on the current dividends paid by TSX Group and MX on their common shares (and assuming that TMX pays dividends in an equivalent amount), the Company is expected to generate dividend income of approximately 3.72% per annum which, after deduction of expenses and net of taxes, will be distributed to shareholders. The Company would be required to generate an additional return of approximately 2.88% per annum, including from dividend growth, capital appreciation and option premiums, in order for the Company to maintain its targeted distributions and maintain a stable net asset value, plus approximately an additional 0.55% per annum to increase the Company’s net asset value to an amount sufficient to permit the Company to return the original issue prices of the Priority Equity Shares and the Class A Shares on the Termination Date.

I have not looked very carefully at this issue because …

The Priority Equity Shares have not been rated by any rating organization.

I won’t do it, guys! Maybe I’m good, maybe I’m bad (take your pick!) but I want a second opinion on credit quality and I want to know you’ve lifted your skirts for at least one interested party! I also want there to be public pressure for you to clean up your act, should your act ever need cleaning up.

Royal Bank has announced:

a domestic public offering of $200 million of Non-Cumulative First Preferred Shares Series AH.
The bank will issue eight million Preferred Shares priced at $25 per share and holders will be entitled to receive non-cumulative preferential quarterly dividends in the amount of $0.353125 per share, to yield 5.65 per cent annually. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 2 million Preferred Shares at the same offering price.
Subject to regulatory approval, on or after May 24, 2013, the bank may redeem the Preferred Shares in whole or in part at a declining premium.
The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is April 29, 2008.
The net proceeds of this transaction will be used for general business purposes and will strengthen the bank’s capital ratios.

Issue: 5.65% Non-Cumulative First Preferred Shares, Series AH

Amount: 8-million shares @ $25 = $200-million. Greenshoe exercisable prior to closing, for up to 2-million shares.

First Dividend: Long first dividend payable August 24, based on anticipated closing of April 29, of $0.452774.

Redemption: Redeemable at $26.00 commencing May 24, 2013. Redemption price declines by $0.25 every May 24 until May 24, 2017; redeemable at $25.00 thereafter.

Ratings (provisional): DBRS, Pfd-1; S&P, P-1(low).

Underwriting: Bought deal, expected closing April 29, 2008.

This is in addition to the $500-million Innovative Tier 1 Capital, a pretend-10-year priced at Canadas +310bp.

Later, More: Some comparables:

Note that “Curve Price” is a static calculation – it assumes that the yield curve will not change in the future. Convexity effects decrease the value of near-par-by-curve-price issues

It should also be noted – as indicated in the comments by Assiduous Reader madequota – that today, April 21, is the last cum-dividend trading day for the Royal issues. They are all expected to drop in price tomorrow, April 22, to reflect the fact that tomorrow the buyer will not receive this quarter’s dividend.

The conclusion to be drawn from the comparables is … this new issue is quite expensive. Avoid.

National Bank has announced:

that it has entered into an agreement with a group of underwriters led by National Bank Financial Inc. to sell an issue of 6 million Non-Cumulative Fixed Rate First Preferred Shares, Series 20 (the “Preferred Shares”), carrying a face value of $25 per share, to raise gross proceeds of $150 million. Holders will be entitled to receive non-cumulative preferential quarterly dividends in the amount of $0.375 per share, to yield 6.00% annually.

National Bank has also granted the underwriters an option to purchase, on the same terms, up to an additional 900,000 Preferred Shares. This option is exercisable in whole or in part by the underwriters at any time up to 30 days after closing of the offering. The maximum gross proceeds raised under the offering will be $172.5 million should this option be exercised in full.

National Bank may redeem the Preferred Shares, subject to regulatory approval, in whole or in part, at a declining premium after five years.

The net proceeds of this offering will be used for general corporate purposes and will qualify as Tier 1 capital for National Bank. The expected closing date is April 16, 2008.

Issue: National Bank of Canada 6.00% Non-Cumulative Fixed Rate First Preferred Shares Series 20

Size: 6-million shares @ $25.00 = $150-million; Greenshoe for 900,000 shares = $22.5-million

Dividend: $0.375 Quarterly; Long first dividend of $0.494178 payable August 15 based on April 16 Closing.

Redemption: Redeemable commencing 2013-5-15 @ $26.00; Redemption price declines by $0.25 annually until 2017-5-15; Redeemable at $25.00 thereafter. [nb: “Redemption” means at the bank’s option]

Priority: Parri Passu with all other 1st Preferred Shares, senior to Second Preferred Shares, Senior to Common shares, junior to everything else.

Provisional Ratings: Pfd-1(low) by DBRS; P-2(high) by S&P; A1 by Moody’s

Closing: April 16, 2008

More Later.

Later, More: Some comparables:

Update, 2008-3-31: After the carnage of March 31 – almost certainly brought about by retail looking at the handle on this coupon – the curvePrice is $25.21.