PrefBlog

I complained earlier regarding the lack of communication regarding the extension and reset of FTS.PR.H.

An officer of Fortis has sent me a copy of the official notification to Computershare:

St. John’s, NL (April 28, 2015):

Effective April 28, 2015, Fortis Inc. (the “Corporation”) announced that it does not intend to exercise its right to redeem all or any part of the currently outstanding Cumulative Redeemable Five-Year Fixed Rate Reset First Preference Shares, Series H of the Corporation (the “Series H shares”) on June I, 2015.

There are currently 10,000,000 Series H shares outstanding.

Subject to certain conditions set out in the short form prospectus of the Corporation dated January 18, 2010 relating to the issuance of the Series H shares, the holders of the Series H shares have the right to convert all or part of their Series H shares, on a one-for-one basis, into Cumulative Redeemable Floating Rate First Preference Shares, Series I of the Corporation (the “Series I shares”) on June l, 2015 (the “Conversion Date”).

On such date, holders who do not exercise their right to convert their Series H shares into Series I shares will continue to hold their Series H shares.

The foregoing conversion right is subject to the following:
i. If the Corporation determines that there would be less than 1,000,000 Series I shares outstanding after the Conversion Date, then holders of Series H shares will not be entitled to convert their shares into Series I; and
ii. Alternatively, if the Corporation determines that there would remain outstanding less than 1,000,000 Series H shares after the Conversion Date, then all remaining Series H shares will automatically be converted into Series I shares on a one-for-one basis on the Conversion Date.

In either case, the Corporation will give written notice to that effect to holders of Series H shares no later than May 25, 2015.

The dividend rate applicable for the Series H shares for the five-year period from and including June 1, 2015 to but excluding June 1, 2020, and the dividend rate applicable to the Series I shares for the three-month period from and including June I, 2015 and ending on and including August 31, 2015, will be determined on May 4, 2015 and notice of such dividend rates shall be provided to the holders of the Series H shares on that day.

Beneficial owners of Series H shares who wish to exercise their conversion right, should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from May 4, 2015 until 5:00 p.m. (Eastern) on May 19, 2015.

Inquiries should be directed to Mr. Jim Spinney, Treasurer, Fortis at 709.737.2902.

Signed:
[signature]
Karl W. Smith
Executive Vice President, Chief Financial Officer

All that was provided regarding the reset was:

St. John’s, NL (May 4, 2015):

Fortis Inc. (the “Corporation”) hereby provides notice to the holders of its Cumulative Redeemable Five Year Fixed Rate Reset First Preference Shares, Series H of the Corporation (the “Series H shares”) of the following dividend rates, in each case payable if, as and when declared by the Board of Directors of the Corporation:

1. $0.15625 per Series H share, being the fixed dividend rate payable quarterly on the first day of’March, June, September and December of each year during the five-year period from and including June 1, 2015 to but excluding June 1, 2020; and

ii. $0.13125 per share on the Cumulative Redeemable Floating Rate First Preference Shares, Series I of the Corporation (the “Series I shares”), being the floating dividend rate applicable to the Series I shares for the 3-month period from and including June 1, 2015 and ending on and including August 31, 2015,

in each case determined in accordance with the corresponding rights, privileges, conditions and restrictions attached to the Series H shares and Series I shares, respectively, as a class, as set out in the short form prospectus of the Corporation dated January 18, 20 I 0 relating to the issuance of the Series H shares.

Inquiries should be directed to Mr. Jim Spinney, Treasurer, Fortis at 709.737.2902.

Signed:
[signature]
Karl W. Smith
Executive Vice President, Chief Financial Officer

The officer explained:

Fortis has provided the conversion notification as well as the new yields and notification deadlines to the official shareholders of Series H – that being CDS (Computershare). CDS confirmed that they have notified the brokers who in turn should notify the beneficial bondholders.

Well, that’s the good old book-based system for you! There’s only one registered shareholder – and as noted earlier, the prospectus states:

The Corporation will, on the Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series H First Preference Shares.

So, sure, the method they’ve chosen appears to be legal enough to my non-securities-lawyer eyes … but why do they do it this way? They are diligent enough to have a web page dedicated to their preferred shares, which includes links to the prospectuses … and that’s very good! That puts them a cut above most issuers. But why not take that one extra step and communicate with holders – and, more importantly, prospective holders – regarding details of the reset? BCE includes links to notices of this kind on their preferred share page – how difficult could it be to send a copy of notices of this nature to ‘the website guy’ who is already in charge of putting up the press releases?

So anyway, yeah, FTS.PR.H will reset at a dividend rate of 2.50% paid on par value, “a stunning 41% reduction in dividend from the original 4.25%” as reported earlier. FTS.PR.I will float at 145bp over three-month bills, reset quarterly. Holders of FTS.PR.H must notify the company through their broker and Computershare by 5:00 p.m. (Eastern) on May 19, 2015; but note that your broker’s internal deadline will be earlier than this; and also note that May 18 is the Victoria Day holiday in most of Canada and most brokers will be closed. So if you intend to convert, make sure you check with your broker regarding their internal deadlines!

I will post with my recommendation regarding whether or not to convert next week.

As I noted on May 4:

Fortis still hasn’t announced a reset rate for FTS.PR.H yet, despite the fact that it must have been calculated:

“Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.
…
“Subsequent Fixed Rate Period” means, for the initial Subsequent Fixed Rate Period, the period commencing on June 1, 2015 to, but excluding, June 1, 2020 and, for each succeeding Subsequent Fixed Rate Period, the period commencing on the first day of June immediately following the end of the immediately preceding Subsequent Fixed Rate Period to, but excluding, June 1 in the fifth year thereafter.
…
The Annual Fixed Dividend Rate applicable to a Subsequent Fixed Rate Period will be determined by the Corporation on the Fixed Rate Calculation Date. Such determination will, in the absence of manifest error, be final and binding upon the Corporation and upon all holders of the Series H First Preference Shares. The Corporation will, on the Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series H First Preference Shares.

I assume this figure will be released tomorrow morning:

Fortis Inc. (“Fortis” or the “Corporation”) (TSX:FTS) will release its first quarter 2015 results on Tuesday, May 5, 2015. A teleconference and webcast will be held the same day at 10:00 a.m. (Eastern). Barry Perry, President and Chief Executive Officer, Fortis, and Karl Smith, Executive Vice President, Chief Financial Officer, Fortis, will discuss the Corporation’s first quarter 2015 results.

Analysts, members of the media and other interested parties in North America are invited to participate by calling 1.877.223.4471. International participants may participate by calling 647.788.4922. Please dial in 10 minutes prior to the start of the call. No pass code is required.

Well, nothing was announced with the 15Q1 results and the company has yet to respond to two separate eMails I’ve sent, from which I conclude that Fortis management is arrogant shit.

However, as Assiduous Reader FletcherLynn points out in a comment, they have announced third quarter dividends:

$0.15625 per share on the First Preference Shares, Series “H” of the Corporation, payable on 1 September 2015 to the Shareholders of Record at the close of business on 19 August 2015, provided, for greater certainty, that if no such Series “H” shares are outstanding on such date as a result of the exercise by Shareholders of their right to convert Series “H” shares into Cumulative Redeemable Floating Rate First Preference Shares, Series “I” of the Corporation effective 1 June 2015 (the “Conversion Right”), no such dividend shall be payable.

5.$0.13125 per share on the First Preference Shares, Series “I” of the Corporation, payable on 1 September 2015 to the Shareholders of Record at the close of business on 19 August 2015, provided, for greater certainty, that if no such Series “I” shares are issued on 1 June 2015 pursuant to the Conversion Right, no such dividend shall be payable.

So $0.15625 per quarter for FTS.PR.H is $0.625 p.a., is 2.50% of par value which, given that FTS.PR.H resets at +145, as announced in January, 2010, means that GOC-5 must have been 1.05% on the Fixed Rate Calculation Date, which was 30 days prior to June 1, or May 2, which was a Saturday, which means that May 1 must have been used, for which I used 1.04% as the closing value for GOC-5.

In addition, the $0.13125 dividend for FTS.PR.I is $0.525 p.a., is 2.10% p.a., implying a 3-Month bill yield of 0.65%, which is reasonably close to the 0.64% I used on May 1 for the closing bill yield.

It will be noted that 2.50% on FTS.PR.H represents a stunning 41% reduction in dividend from the original 4.25%.

Since Fortis management is completely shitty and their investor relations department under a vow of silence, there is no information publicly available regarding conversion notification deadlines, but a little bird has given me information that the CDS notification deadline (the deadline for your broker to notify the Canadian Depository for Securities (which holds all the shares) is 5pm on May 19. Note that this is the Tuesday following the Victoria Day long weekend; since the market will be closed May 18, you probably won’t have much luck calling your broker the day before. So, while every brokerage will set its own internal deadline, I suggest Friday, May 15 is probably the last day they will take your instruction; although sometimes you can have them act on a best-efforts basis on the last day provided you grovel in a sufficiently entertaining fashion.

I will post in the middle of next week with my final recommendation, but at this point I will tentatively suggest that FTS.PR.I will trade lower than FTS.PR.H and hence those who really want the former issue will (probably!) be better off executing a trade in the market (assuming reasonable transaction costs.

Atlantic Power can’t be bothered to issue a press release or otherwise indicate on their website just what the results of the recent conversion option were, but there is information available on TMXMoney, maybe.

According to the TMX Money page for AZP.PR.C (the FloatingReset), there are 1,661,906 shares outstanding. They are reporting 2,338,094 AZP.PR.B outstanding, which miraculously (considering it’s the Toronto Stock Exchange doing the reporting) adds up to the 4-million EPP.PR.B issued in 2009, which became CZP.PR.B, which became AZP.PR.B.

So that’s a conversion rate of about 42%. In my post just before the decision deadline, I recommended conversion.

Fairfax can’t be bothered to issue a press release or otherwise indicate on their website just what the results of the recent conversion option were, but there is information available on TMXMoney, maybe.

According to the TMX Money page for FFH.PR.D (the FloatingReset), there are 3,983,616 shares outstanding. They are still reporting 10-million FFH.PR.C outstanding, which was the amount outstanding prior to conversion, but we’ll just assume that, well, you know, Toronto Stock Exchange.

So that’s a conversion rate of about 40%. In my post just before the decision deadline, I recommended conversion.

BCE Inc. has finally announced:

As a result of the amalgamation of Bell Aliant Preferred Equity Inc. (TSX: BAF) (Prefco), which was approved by preferred shareholders on October 31, 2014 and became effective November 1, 2014, Prefco became a wholly owned subsidiary of Bell Aliant.

Bell Aliant common shares were de-listed from the Toronto Stock Exchange (TSX) on October 31, 2014 and the Bell Aliant preferred shares will be delisted from the TSX at the close of trading today.

Naturally, it would have been far too much work to confirm the consideration given in exchange for the BAF preferreds, so after an annoying search through the website we find:

BCE’s preferred share offer expired at 5:00 pm (Eastern Time) on September 19, 2014. As all conditions of BCE’s preferred share offer have been satisfied, the BCE preferred shares exchanged for tendered Bell Aliant preferred shares were issued on September 24, 2014 and commenced trading on the Toronto Stock Exchange at the open of trading on the next day.
On October 3, 2014, BCE announced that the company has entered into an agreement with Bell Aliant Preferred Equity Inc. (TSX: BAF) (Prefco) to effect an amalgamation of Prefco with a newly incorporated, wholly owned subsidiary of BCE. Upon implementation:

• holders of Prefco preferred shares (other than shareholders who properly exercise their right of dissent in respect of the amalgamation) will receive for their shares the same consideration as was paid by BCE for preferred shares pursuant to the preferred share offer; and
• Prefco will become a wholly owned subsidiary of BCE.

A special meeting of the Prefco preferred shareholders will be held on October 31, 2014 at 9:30 am (Atlantic Time) to consider the amalgamation. BCE intends to vote all of the preferred shares that it owned as of September 30, 2014, the record date for the meeting, in favour of the amalgamation, which will be sufficient to approve the amalgamation and complete the privatization of Prefco.

The notice of meeting, accompanying management information circular and related meeting material, which contain full details of the amalgamation, was mailed to Prefco preferred shareholders early in October. The meeting material is also available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Because the jerk who approved this press release is a moron, this STILL doesn’t give the details of the consideration, so we reach back into the files to find the following table:

:

BCE / BAF Preferred Share Exchange
BCE Ticker	Description	BAF Ticker
BCE.PR.M	FixedReset 4.85%+209	BAF.PR.A
BCE.PR.O	FixedReset 4.55%+309	BAF.PR.C
BCE.PR.Q	FixedReset 4.25%+264	BAF.PR.E

Golly, republishing that table was a lot of work! I think I’ll take a few vacation weeks and spend my bonus. On the bright side, the BCE preferred share web page has finally been updated and, even better, there is confirmation from DBRS:

DBRS has today discontinued Bell Aliant Preferred Equity Inc.’s (Bell Aliant) preferred share ratings following their delisting as part of Bell Aliant Inc.’s privatization. This rating action removes Bell Aliant’s preferred shares from Under Review with Positive Implications.

On July 23, 2014, BCE Inc. (BCE) announced it would privatize its Bell Aliant Inc. affiliate by acquiring the interest of public minority shareholders for consideration of approximately $3.95 billion. DBRS subsequently placed Bell Aliant’s preferred shares Under Review with Positive Implications based on the stronger credit profile of BCE/Bell Canada. The transaction closed on October 31, 2014.

As part of BCE’s tender offer to acquire the minority interest in Bell Aliant Inc., BCE exchanged all of the issued and outstanding Series A Preferred Shares, Series C Preferred Shares and Series E Preferred Shares at Bell Aliant Preferred Equity Inc. on the basis of (a) one BCE Series AM Preferred Share for each Series A Preferred Share; (b) one BCE Series AO Preferred Share for each Series C Preferred Share; and (c) one BCE Series AQ Preferred Share for each Series E Preferred Share. Bell Aliant’s preferred shares were delisted from the TSX at the close of trading on November 3, 2014.

The Implied Volatility calculation actually looks pretty good:

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BCE Inc. has announced (emphasis added):

BCE has entered into an agreement with Bell Aliant Preferred Equity Inc. (TSX: BAF) (Prefco) to effect an amalgamation of Prefco with a newly incorporated, wholly owned subsidiary of BCE. Upon implementation:

• holders of Prefco preferred shares (other than shareholders who properly exercise their right of dissent in respect of the amalgamation) will receive for their shares the same consideration as was paid by BCE for preferred shares pursuant to the preferred share offer; and
• Prefco will become a wholly owned subsidiary of BCE.

A special meeting of the Prefco preferred shareholders will be held on October 31, 2014 at 9:30 am Atlantic to consider the amalgamation. BCE intends to vote all of the preferred shares that it owned as of September 30, 2014, the record date for the meeting, in favour of the amalgamation, which will be sufficient to approve the amalgamation and complete the privatization of Prefco.

The notice of meeting, accompanying management information circular and related meeting material, which contain full details of the amalgamation, will be mailed to Prefco preferred shareholders on or about October 7, 2014. The meeting materials will also be available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Subject to the terms and conditions of the amalgamation agreement, the amalgamation is expected to become effective on or about October 31, 2014. Prefco preferred shareholders will receive the same newly issued BCE preferred shares, with the same financial terms as the existing Prefco preferred shares, that were received by preferred shareholders who tendered to the preferred share offer.

The old and new symbols, as laboriously determined since BCE is too lazy to communicate them to investors are:

The dim bulbs at BCE have not yet updated their preferred share information page to reflect the existence of their three new issues.

Well, pig ignorance and a blithe disregard of the interests of preferred shareholders has struck again, with no announcement on the BCE Inc. preferred share information page regarding the three new series that will result from the BAF conversion.

However, a certain amount of checking permits the identification of at least two tickers:

For the first two, the correspondence of the first two columns has been established from the name information purchased from the Toronto Stock Exchange. The correspondence of the second column with the third has been established from the security descriptions contained within the Certificate of Amendment to the articles of BCE Inc., which may be found on SEDAR with the search results “BCE Inc. Sep 22 2014 16:50:17 ET Security holders documents – English PDF 847 K”.

I regret, as always, not being able to provide a link to this public document; however, bank-owned SEDAR prohibits direct links and hides them behind a secret API. This is in order to protect their monopoly. This monopoly has been granted to them by the Canadian Securities Administrators, of which the OSC is an important member. The banks are paying the OSC to help them preserve their hegemony over the Canadian financial system. So investors and the general public can stuff it.

Correspondence of the third and fourth columns was determined by looking up the description of the BAF issues in PrefLetter.

The third issue presents some problems. If we check TMX Money for BCE.PR.Q, we get the result:

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This is the standard result for a new ticker the day before it starts trading – I assume it results from the symbol being in the database, but none of the other data that would normally be reported on this page is present. I am unable to obtain such a screen by typing in “BCE.PR.?”, where “?” is any unused letter (other than “M” and “O”, for which satisfactory assignments have been determined), or BCE.PF.A or BCE.PF.Q.

However, the name information file purchased from the Exchange refers to this as Series Q, not as Series AQ. One might at first hope that this is simply a typo, but on the other hand the “Q” series is referenced in both the long name and in the short name.

Further, a quick check of the BCE preferred share information page reveals that there actually is a BCE preferred share Series Q that is not currently trading. It is the RatchetRate counterpart to the FixedFloater BCE.PR.R, and the opportunity to convert into BCE.PR.Q was offered to the R-holders in 2010 but hardly anybody wanted them so everything stayed as R. It will be noted that Series Q was issued in 1995; holders of BCE.PR.R will get another chance to convert in 2015.

It will be noted that other information available from the Exchange – for a price! – indicates the listing date of BCE.PR.Q is 1995/11/21 … so if it weren’t for the fact that I can’t find any other ‘null response’ on TMX Money for a BCE ticker symbol, there would be no reason to suppose that there is any BAF.PR.E / BCE.PR.Q correspondence.

So basically, Series AQ, the former BAF.PR.E, may or may not trade on September 25 as BCE.PR.Q; if it does, then God only knows what Series Q will trade as if it comes into existence next year and God only knows if or when the Exchange will correct their name descriptions. If it doesn’t trade at BCE.PR.Q tomorrow, I don’t know what it will trade as.

This screw up was brought to you courtesy of the bank-owned Toronto Stock Exchange; as we all know, banks in Canada have a near monopoly position over the Canadian financial system, helped along by their special extra monopoly-enhancing payments to the regulators, and employ hundreds of thousands of people, not a single one of whom has any brains at all. Their work in this matter was done on behalf of BCE Inc., which is (surprise!) another near-monopoly which also provides employment exclusively for the brainless.

What’s up with BPO.PR.L? This issue commenced trading 2009-9-24 after being announced 2009-8-21 and is a FixedReset, 6.75%+417, with many market participants believing that it will be called at the first opportunity, 2014-9-30.

But I don’t see anything happening! According to the prospectus (emphasis added):

The Series L Shares will not be redeemable by the Corporation prior to September 30, 2014. On September 30, 2014 and on September 30 every five years thereafter (or, if such date is not a business day, the immediately following business day), and subject to certain other restrictions set out in “Description of the Series L Shares — Restrictions on Dividends and Retirement and Issue of Shares”, the Corporation may, at its option, on at least 30 days and not more than 60 days prior written notice, redeem all or from time to time any part of the outstanding Series L Shares by payment in cash of a per share sum equal to $25.00, in each case plus an amount equal to the Accrued Amount (less any tax required to be deducted and withheld by the Corporation).

OK, 30 days’ notice required. What about if they let it reset?

“Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of
such Subsequent Fixed Rate Period.
…
“Subsequent Fixed Rate Period” means for the initial Subsequent Fixed Rate Period, the period commencing on October 1, 2014 and ending on and including September 30, 2019 and for each succeeding Subsequent Fixed Rate Period, the period commencing on the day immediately following the end of the immediately preceding Subsequent Fixed Rate Period and ending on and including September 30 in the fifth year thereafter.
…
The Annual Fixed Dividend Rate applicable to a Subsequent Fixed Rate Period will be determined by the Corporation on the Fixed Rate Calculation Date. Such determination will, in the absence of manifest error, be final and binding upon the Corporation and upon all holders of Series L Shares. The Corporation will, on the Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series L Shares.

OK, 30 days’ notice required.

But, according to my calculations, there are now less than 30 days left until September 30 or October 1 (as the case may be) and there has not been a press release issued by BPO on their press release page. There was only an incidental reference in the Plan of Arrangement Proxy Circular:

Treatment of BPO Preferred Shares and BPO Senior Notes

Except for the redemption of the BPO Class A Preferred Shares and the treatment of the BPO Convertible Preferred Shares described above, there are no changes being made to the BPO Preferred Shares, which will not be affected by the Arrangement and will continue to be listed on the TSX.

In addition, as of December 31, 2013, BPO had $187 million principal amount of BPO 4.30% Notes outstanding and $140 million principal amount of BPO 4.00% Notes outstanding. The BPO Senior Notes will remain outstanding following the consummation of the Arrangement and will not be affected.

There’s no dedicated press release on the Brookfield Property Partners press release page.

Preferred shares are not mentioned in the Brookfield Property Partners earnings release.

There’s a note in the Brookfield Office Properties financial statements (available on SEDAR) that:

On August 12, 2014, the Board of Directors of the company declared dividends payable for the Class A, Class AA Series E and Class AAA Series L, N, P, R, T, V, W, X, Y and Z preferred shares.

… but nothing about a redemption. A very promising entry on SEDAR regarding “Security Holders Documents – English” dated August 27, 2014 turns out to be simply a “Restated Certificate of Incorporation”, which describes Series L in loving detail, but makes no mention of an actual call for redemption.

I have sent the following eMail to the official investor inquiries guy:

Dear Mr. Cherry,

It is my understanding that the captioned series of shares is due to either reset or be redeemed on September 30, 2014, but that in either case notices will be made regarding the disposition of these shares thirty days prior to the applicable date.

I have been unable to find any such notices on your website.

Can you please tell me whether the captioned series will be redeemed or reset?

Sincerely,

So we shall see what we shall see! Implied Volatility theory suggests that there will be a very nice jump in price should the BPO.PR.L shares be reset:

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