PrefBlog

Industrial Alliance Insurance and Financial Services Inc. has announced:

has today entered into an agreement with a syndicate of underwriters led by Scotia Capital Inc. and RBC Dominion Securities Inc. under which the underwriters have agreed to buy, on a bought deal basis, 4,000,000 Non-Cumulative Class A Preferred Shares Series E (the “Series E Preferred Shares”) from Industrial Alliance for sale to the public at a price of $25.00 per Series E Preferred Share, representing aggregate gross proceeds of $100 million.

The Series E Preferred Shares will yield 6.00% per annum, payable quarterly, as and when declared by the Board of Directors of the Company.

The Series E Preferred Shares will not be redeemable prior to December 31, 2014. Subject to regulatory approval, on or after December 31, 2014, Industrial Alliance may, on no less than 30 or more than 60 days’ notice, redeem the Series E Preferred Shares in whole or in part, at the Company’s option, by the payment in cash of $26.00 per Series E Preferred Share if redeemed prior to December 31, 2015, at $25.75 per Series E Preferred Share if redeemed on or after December 31, 2015 but prior to December 31, 2016, at $25.50 per Series E Preferred Share if redeemed on or after December 31, 2016 but prior to December 31, 2017, at $25.25 per Series E Preferred Share if redeemed on or after December 31, 2017 but prior to December 31, 2018 and at $25.00 per Series E Preferred Share if redeemed on or after December 31, 2018, in each case together with all declared and unpaid dividends up to but excluding the date fixed for redemption.

The Series E Preferred Share offering is expected to close on October 15, 2009. The net proceeds will be used for general corporate purposes.

The first coupon is payable 2009-12-31 for $0.3139 assuming closing proceeds on 2009-10-15.

IAG.PR.A closed last night at 19.66-80, or 5.90-85% in yield terms.

Hard on the heels of the GWO 5.65% Straight announced last week comes an announcement from Power Financial Corporation:

Power Financial Corporation announced today that it has agreed to issue 6,000,000 Non-Cumulative First Preferred Shares, Series O (the “Series O Shares”) on a bought deal basis, for gross proceeds of $150 million. The Series O Shares will be priced at $25.00 per share and will carry an annual dividend yield of 5.80%. Closing is expected on or about October 9, 2009. The issue will be underwritten by a syndicate of underwriters led by BMO Capital Markets, Scotia Capital Inc. and RBC Capital Markets.

Power Financial has also granted the underwriters an option to purchase an additional 4,000,000 Series O Shares at the same offering price. Should the underwriters’ option be exercised fully, the total gross proceeds of the Series O Share offering will be $250 million.

Proceeds from the issue will be used to supplement the Corporation’s financial resources and for general corporate purposes.

The first dividend will be $0.45288 payable 2010-1-31 based on closing 2009-10-9

The shares are redeemable at 26.00 commencing 2014-10-31; the redemption price declines by $0.25 annually until 2018-10-31; redeemable at 25.00 thereafter.

Update: The issue may be compared with extant PWF issues outstanding:

Fairfax Financial Holdings has announced:

that it will issue in Canada 8 million Preferred Shares, Series C at a price of $25.00 per share, for aggregate gross proceeds of $200 million, on a bought deal basis to a syndicate of Canadian underwriters.

Holders of the Preferred Shares, Series C will be entitled to receive a cumulative quarterly fixed dividend yielding 5.75% annually for the initial five year period ending December 31, 2014. Thereafter, the dividend rate will be reset every five years at a rate equal to the then current 5-year Government of Canada bond yield plus 3.15%.

Holders of Preferred Shares, Series C will have the right, at their option, to convert their shares into Preferred Shares, Series D, subject to certain conditions, on December 31, 2014, and on December 31st every five years thereafter. Holders of the Preferred Shares, Series D will be entitled to receive cumulative quarterly floating dividends at a rate equal to the then current three-month Government of Canada Treasury Bill yield plus 3.15%.

Fairfax has granted the underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to closing, to purchase an additional 2 million Preferred Shares, Series C at the same offering price for additional gross proceeds of $50 million.

Fairfax intends to use the net proceeds of the offering to augment its cash position, to increase short term investments and marketable securities held at the holding company level, to retire outstanding debt and other corporate obligations from time to time, and for general corporate purposes. The offering is expected to close on or about October 5, 2009.

The first dividend is payable 2009-12-31 for $0.34362.

This issue continues – and extends – the trend towards lower quality in FixedReset issuance: the issue is provisionally rated Pfd-3(low) by DBRS and P-3 by S&P.

It is rather interesting that a financial holding company is issuing cumulative preferreds (and I gnash my teeth about it, because “cumulative” has been a very good proxy for “non-financial” in my analysis). Assiduous Readers will remember that Treasury’s wish-list for bank regulation includes:

many of the [Bank Holding Companies] that have been most active in volatile capital markets activities have not been held to the highest consolidated regulatory capital standard available. To remedy this situation, in addition to the current [Financial Holding Company (FHC)] eligibility requirements, all FHCs should be required to achieve and maintain well-capitalized and well-managed status on a consolidated basis.

In civilized countries (as opposed to Canada), Tier 1 Capital is not cumulative, so Fairfax is either unconcerned about the prospects of consolidation or is convinced that this issue will be grandfathered if consolidation becomes effective.

Great-West Lifeco has announced that it:

has today entered into an agreement … under which the underwriters have agreed to buy, on a bought deal basis, 6,000,000 Non-Cumulative First Preferred Shares, Series L … 5.65% per annum

The morons have copy-protected the PDF, since this press release is such a big secret. I’m not retyping all that!

Issue: Great-West Lifeco Inc. Non-Cumulative First Preferred Shares, Series L

Size: 6-million shares (=$150-million) + greenshoe 4-million shares (=$100-million)

Dividends: 5.65% p.a. (= $1.4125); first dividend payable 2009-12-31 for $0.34829 based on closing 2009-10-2

Redeemable: Black-out until 2014-12-31. Redeemable at $26.00 commencing 2014-12-31; redemption price declines by $0.25 p.a. until 2018-12-31; redeemable at $25.00 thereafter.

This issue has great significance: it is the first straight to be issued since RY.PR.H settled 2008-4-29 and … they didn’t fiddle with the standard redemption terms. I had been afraid that issuers would assume that market had been lulled into idiocy by the five-year redemption terms that are standard in the FixedReset sector and try to grab themselves a little more advantage.

The issue may be compared with extant GWO issues outstanding:

TransCanada Corporation has announced:

it will issue 12,000,0000 cumulative redeemable first preferred shares, series 1 (the “Series 1 Preferred Shares”) at a price of $25.00 per share, for aggregate gross proceeds of $300 million on a bought deal basis to a syndicate of underwriters in Canada led by Scotia Capital Inc., and RBC Capital Markets.

The holders of Series 1 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.15 per share, payable quarterly, as and when declared by the board of directors of TransCanada, yielding 4.6% per annum, for the initial five-year period ending December 31, 2014 with the first dividend payment date scheduled for December 31, 2009. The dividend rate will reset on December 31, 2014 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 1.92%. The Series 1 Preferred Shares are redeemable by TransCanada on or after December 31, 2014.

The holders of Series 1 Preferred Shares will have the right to convert their shares into cumulative redeemable first preferred shares, series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on December 31, 2014 and on December 31 of every fifth year thereafter. The holders of Series 2 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the board of directors of TransCanada, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate and 1.92%.

TransCanada has granted to the underwriters an option, exercisable at any time up to 48 hours prior to the closing of the offering, to purchase up to an additional 2,000,000 Series 1 Preferred Shares at a price of $25.00 per share.

The anticipated closing date is September 30, 2009. The net proceeds of the offering will be used to partially fund capital projects, for other general corporate purposes and to re-pay short term indebtedness of TransCanada and its affiliates.

The Series 1 Preferred Shares will be offered to the public in Canada pursuant to a prospectus supplement that will be filed with securities regulatory authorities in Canada under TransCanada’s short form base shelf prospectus dated September 21, 2009. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

The initial dividend will be payable 2009-12-31 for $0.2899, based on a September 30 closing.

The existing TRP straight perpetuals, TRP.PR.X and TRP.PR.Y, closed yesterday very near par to yield about 5.63%; the Break-Even Rate Shock on this issue is therefore 145bp, a fairly high figure. The analytical concept of Break-Even Rate Shock was introduced in the June PrefLetter; the next edition of Canadian Moneysaver will contain a briefer exposition of the technique.

I am advised that this issue has flown off the shelves and the books are closed, which brings with it the prospect of another flurry of new issues. This leads to interesting possibilities for future issuance and analysis … with the bank issues that reset at spreads of 300bp+, one might reasonably (rather aggressively, too aggressively according to me, but reasonably) have made the assumption that a call at the first reset date was a certainty. At +192bp for an issue of this credit quality, the future is somewhat murkier.

Update: “Flew off the shelves” was a bit of an understatement … TRP has announced that the customers wanted to supersize their orders:

TransCanada Corporation (TransCanada) today announced that as a result of strong investor demand for its domestic public offering of cumulative redeemable first preferred shares, series 1 (the “Series 1 Preferred Shares”), the size of the offering has been increased to a total of 22 million shares. The gross proceeds of the offering will now be $550 million.

There will not be an underwriters option, as was previously granted. The syndicate of underwriters is led by Scotia Capital Inc., and RBC Capital Markets. The anticipated closing date is September 30, 2009.

It should be noted that the TCA.PR.X and TCA.PR.Y issues referenced above are issued by the TransCanada Pipelines subsidiary, with all the usual complexities of determining relative credit quality (diversification vs. proximity to the money). The TransCanada 2008 Annual Report notes:

TransCanada’s issuer rating assigned by Moody’s Investors Service (Moody’s) is Baa1 with a stable outlook. TransCanada PipeLines Limited’s (TCPL) senior unsecured debt is rated A with a stable outlook by DBRS, A3 with a stable outlook by Moody’s, and A- with a stable outlook by Standard and Poor’s.

Further to their filing of a base prospectus announced last week, Transcontinental Inc. has announced:

that it will be issuing 4,000,000 cumulative rate reset preferred shares, series D (the “Series D Preferred Shares”) for aggregate gross proceeds of $100 million on a bought deal basis to a syndicate of underwriters led by Scotia Capital Inc. and CIBC World Markets Inc., acting as joint book-runners. The Series D Preferred Shares will pay cumulative dividends of $1.6875 per share per annum, yielding 6.75% per annum, payable quarterly, for the initial five year period ending October 15, 2014. The dividend rate will be reset on October 15, 2014 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 4.16%. The Series D Preferred Shares will be redeemable by Transcontinental on October 15, 2014, and every five years thereafter in accordance with their terms.

Holders of the Series D Preferred Shares will have the right, at their option, to convert their shares into cumulative floating rate preferred shares series E. (the “Series E Preferred Shares”) subject to certain conditions, on October 15, 2014 and on October 15 every five years thereafter. Holders of the Series E Preferred Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 4.16%.

Transcontinental has also granted the underwriters the option to purchase up to 600,000 additional Series D Preferred Shares to cover over-allotments, exercisable in whole or in part anytime up to 30 days following closing of the offering.

Net proceeds resulting from the sale of the Series D Preferred Shares of Transcontinental shall be used by the Corporation to repay indebtedness, and for general corporate purposes.

The Series D Preferred Shares will be offered for sale to the public in each of the provinces Canada pursuant to a prospectus supplement and the base shelf prospectus filed on September 17, 2009. The prospectus supplement will be filed with Canadian securities regulatory authorities in all provinces of Canada.

The offering is scheduled to close on or about October 2, 2009, subject to certain conditions, including conditions set forth in the underwriting agreement.

Assiduous, yet bewildered, Readers will note:

Transcontinental provides printing, publishing and marketing services that deliver exceptional value to its clients along with a unique, integrated platform for them to reach and retain their target audiences. Transcontinental is the largest printer in Canada and the sixth largest in North America. It is also Canada’s leading publisher of consumer magazines and French-language educational resources as well as the country’s second-largest community newspaper publisher. Transcontinental’s digital platform delivers unique content through more than 120 websites. Its Marketing Communications Sector provides advertising services and marketing products using new communications platforms supported by database analytics, premedia, email marketing, and custom communications. Transcontinental is a growing corporation with a culture of continuous improvement and financial discipline, whose values, including respect, innovation and integrity, are central to its operation.

I’m certainly glad that their values include respect, innovation and integrity. This is a highly unusual claim for a company to make and has been noted carefully.

The first dividend will be $0.4854, payable 2010-1-15, based on closing 2009-10-2.

The issue is rated Pfd-3(high) by DBRS. This issue continues the recent trend of the market towards lower-quality credits; but it is non-financial and cumulative, which will hold great attraction for many.

The issue will be tracked by HIMIPref™ but be relegated to the “Scraps” index on credit concerns.

Issue: YPG Holdings Inc. Cumulative Rate Reset Preferred Shares, Series 3

Size: 6-million shares (=$150-million) + greenshoe 0.9-million shares ($22.5-million)

Dividend: 6.75% (= $1.6875) p.a. until first Exchange Eate, then resets to 5-Year Canadas +417bp. First Dividend payable 2009-12-29 for $0.44846, assuming closing 2009-9-23. Dividends are cumulative.

Exchange Dates: 2014-9-30 and every five years thereafter.

Exchangeable: Every Exchange Date, to and from Series 4 Floaters, which pay 3-month bills +417bp, reset quarterly.

Redeemable: Every Exchange Date at 25.00. Series 4 are also redeemable at $25.50 at all other times.

Retraction: None.

Closing: 2009-9-23

Update: I have been advised that the deal size has been increased to 7.5-million shares (=$187.5-million) + greenshoe 1.125-million shares (=$28.125-million).

Issue: Brookfield Properties Corporation. Cumulative Class AAA Rate Reset Preference Shares Series L

Size: 6-million shares (=$150-million) + greenshoe 0.9-million shares (=$22.5-million)

Dividend: 6.75% (=$1.6875) p.a. until first Exchange Date, then resets to 5-Year GOC +417 if not called or exchanged. First Dividend $0.45308 payable 2009-12-31. Cumulative.

Exchange Dates: 2014-9-30 and every five years thereafter

Exchange: Every Exchange Date to and from Series M Floaters

Redemption: Every Exchange Date at $25.00. Series M are also redeemable at 25.50 at any time.

Closing: 2009-9-24

Update: Brookfield Properties has announced:

that as a result of strong investor demand for its previously announced public offering of 6.75% Preferred Shares, Series L, it has agreed to increase the size of the offering from C$150 million to C$250 million, or from 6.0 million shares to 10.0 million shares. The issue will be led by a syndicate of underwriters including CIBC and Scotia Capital Inc. for distribution to the public. The Preferred Shares, Series L will be issued at a price of C$25.00 per share, for aggregate gross proceeds of C$250 million. Holders of the Preferred Shares, Series L will be entitled to receive a cumulative quarterly fixed dividend yielding 6.75% annually for the initial five year period ending September 30, 2014. The dividend rate will be reset on September 30, 2014 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 4.17%.

Holders of Preferred Shares, Series L will have the right, at their option, to convert their shares into cumulative Preferred Shares, Series M, subject to certain conditions, on September 30, 2014 and on September 30 every five years thereafter. Holders of the Preferred Shares, Series M will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 4.17%.

Brookfield Properties Corporation has granted the underwriters an over-allotment option, exercisable in whole or in part anytime up to 30 days following closing, to purchase an additional 1,500,000 Preferred Shares, Series L at the same offering price. Should the over-allotment option be fully exercised, the total gross proceeds of the financing will be C$287.5 million.

Issue: Dundee Corporation Cumulative 5-Year Rate Reset First Preference Shares Series 2

Size: $100-million (=4-million shares) plus greenshoe $15-million (=600,000 shares)

Dividends: 6.75% on par value to first Exchange Date, then resets to 5-Year Canada +410bp. Dividends are cumulative. First dividend $0.49469 payable 2009-12-31.

Exchange Dates: 2014-9-30 and every five years thereafter.

Convertible: Every Exchange Date to and from Series 3, which pay 3-month Bills + 410, reset quarterly.

Redeemable: Every Exchange Date at 25.00. There is also a Special Redemption Right. The Series 3 Floaters are redeemable every Exchange Date at 25.00, at all other times 25.50, and also have a Special Redemption Right.

Special Redemption Right: If anything comes up that would allow the preferred shareholders to vote (e.g., an amalgamation) then the company has a redemption right: $26.25 if redeemed before 2010-9-30; redemption price declines by $0.25 annually until 2014-9-30; redeemable at $25.00 thereafter. Series 3 Floaters are redeemable at 25.00 in such an instance.

Credit Ratings: S&P: P-3; DBRS: Pfd-3(low)

Closing: 2009-9-15

Update: It is my understanding that due to strong demand the deal has been increased to 4.6-million shares (=$115-million) plus a 0.6-million share greenshoe (=$15-million).

Only very skimpy information is available to date – the following is from TD Waterhouse:

The coupon rate (to be determined) will be fixed until March 31, 2015. Thereafter, on and after March 31, 2015, and reset each anniversary thereafter, the Dividend Rate will be XXX% above the 5-year Government of Canada benchmark bond rate.

The Preferred Shares will be convertible into Common Shares of the Company at the option of the holder at any time or, if called for redemption, on the business day immediately preceding the date fixed for redemption, at a conversion price of (to be determined) per Common Share, being at a rate of (to be determined) Common Shares per $100 Par Value of Preferred Shares The conversion right shall be subject to the standard anti-dilution provisions. In the event that the holder of Preferred Shares exercises their conversion right following the notice of redemption, such holders will be entitled to receive declared and unpaid dividends.

The Preferred Shares will not be redeemable prior to September 12, 2012. On and after September 12, 20012 and prior to September 30, 2009, the Preferred Shares will be redeemable at the option of the Company, in whole or from time to time in part, on at least 30 days’ notice at a redemption price equal to Par plus accrued and unpaid interest, provided that the volume weighted average trading price of the Common Shares on The Toronto Stock Exchange (the “TSX”) for at least 20 trading days in any consecutive 30 day period ending five trading days prior to the date on which notice of redemption is given exceeds 135% of the Conversion Price. On and after September 30, 2014, the Preferred Shares will be redeemable at the option of the Company at any time, in whole or from time to time in part, at a redemption price equal to Par plus all declared and unpaid dividends.

This issue is unrated.

This issue will not be tracked by HIMIPref™:

• Too small – it will be quite illiquid
• Convertible – it will be more equity-like than compatible with the HIMIPref™ analysis
• Not Rated

Updated, 2009-8-24: From the prospectus, dated 2009-8-20:

The Preferred Shares will be entitled to fixed cumulative preferential cash dividends, if, as and when declared by our board of directors at a rate of $9.00 per share per annum, to accrue from the date of original issue, payable in equal instalments of $4.50 per share on March 31 and September 30 of each year until (and including) March 31, 2015. Assuming an issue date of September 3, 2009, the first dividend will be payable on March 31, 2010 in the amount of $5.17808 per Preferred Share. From March 31, 2015 until March 31, 2016 and recalculated each anniversary thereafter, the rate of the annual dividend on the Preferred Shares (which will continue to be paid in equal semi-annual instalments on March 31 and September 30 of each year, the first such dividend to be payable on September 30, 2015) will be 6.28% above the five year Government of Canada benchmark bond rate as quoted on the Bloomberg page “GCAN5YR ” or comparable sources at 10:00 a.m. (Toronto time) on the tenth business day prior to March 31, 2015 and each subsequent anniversary date.

Update, 2009-9-3: Succesfully closed, trades as WES.PR.C.