PrefBlog

EMA wants to issue new preferreds; Barry Critchley points out they’ll have to pay up relative to their last round:

This week Emera took another step on the way to rounding up the cash need to fund the US$10.4 billion acquisition of TECO Energy.

Emera, which expects to close the acquisition by mid-year, raised $544 million from the sale of most of its stake in Algonquin Power & Utilities Corp. After the share sale, Emera — which is expected to receive the second instalment of a $2.185 billion offering of convertible debentures when the TECO deal gets the final green light — will own about five per cent of Algonquin.

But lots of capital still needs to be raised — even if it seems that all the common equity has been obtained. In a presentation unveiled this week, Emera indicated it is seeking between US$3.4 billion and US$3.8 billion of debt (the US$10.4 billion acquisition cost includes US$3.9 billion of assumed debt). It is also after US$0.8 billion to US$1.2 billion in either preferred equity or hybrid securities.
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Emera last issued rate reset preferred shares in May 2014 when it raised $200 million at a yield of 4.25 per cent. At 4.25 per cent, the coupon represented a spread of 263 basis points above comparable five-year Canada bonds.

Next time out Emera will find that the preferred share market has changed in two ways.

IGM Financial has bought a piece of a robo-advisor:

IGM Financial Inc. has closed a $50 million (U.S.) investment in Personal Capital Corporation, a market-leading digital wealth advisor based in the U.S., with an agreement to invest an additional $25 million (U.S.) in the next year for a total of $75 million (U.S.). This would result in an initial 10% ownership stake increasing to 15% within 12 months, with the remaining interest owned by Personal Capital’s management team and existing investors.

Personal Capital’s approach to wealth management – combining dedicated financial advisors with innovative customer-facing technology – is unique in the industry. Led by a market-leading and experienced team with a long track record in financial services, Personal Capital has been growing rapidly in the mass affluent and high net worth investor segments of the market, offering a unique, compelling and valuable proposition for its clients.

This is kind of interesting, since IGM’s parent, PWF, already has a piece of WealthSimple, as discussed April 9, 2015.

PerpetualDiscounts now yield 5.59%, equivalent to 7.27% interest at the standard equivalency factor of 1.3x. Long corporates now yield 4.00%, so the pre-tax interest-equivalent spread is now about 325bp, a slight (and perhaps spurious) narrowing from the 330bp reported May 11.

The BoC has released the Bank of Canada Review – Spring 2016.

Assiduous Readers will remember my interest in the minimum wage debate and my position that an increase in the minimum wage is desirable, not because of any bleating about fairness, but because this will help to increase productivity as lower-skill jobs are automated. This automation is well-illustrated by McDonalds self-ordering kiosks in Europe; the issue was further discussed on August 6, 2015. We now have another data point – the hamburger chain Wendy’s is bringing in more self-ordering kiosks to reduce labour costs:

Wendy’s (WEN) said that self-service ordering kiosks will be made available across its 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages.

It will be up to franchisees whether to deploy the labor-saving technology, but Wendy’s President Todd Penegor did note that some franchise locations have been raising prices to offset wage hikes.

McDonald’s (MCD) has been testing self-service kiosks. But Wendy’s, which has been vocal about embracing labor-saving technology, is launching the biggest potential expansion.

Wendy’s Penegor said company-operated stores, only about 10% of the total, are seeing wage inflation of 5% to 6%, driven both by the minimum wage and some by the need to offer a competitive wage “to access good labor.”
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In addition to self-order kiosks, the company is also getting ready to move beyond the testing phase with labor-saving mobile ordering and mobile payment available systemwide by the end of the year. Yum Brands and McDonald’s already have mobile ordering apps.

… and Assiduous Reader SM draws my attention to drone racing:

With the drone industry charged, Mountain Dew® and DR1 Racing, announced a global partnership full of industry firsts. Featuring the top drone racing pilots in the world, this newly formed drone racing series marks the first branded partnership and national broadcast for this burgeoning sport. Headlining the series, the DR1 Invitational presented by Mountain Dew will air this August in a one-hour broadcast special. DR1 will also be the first truly live drone series to stream globally on Twitch, the world’s leading social video platform and community for gamers.
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The DR1 Invitational presented by Mountain Dew will showcase 12 of the top drone racing pilots in the world as they compete for the title at the iconic Sepulveda Dam in Los Angeles this summer. Pilots, who control drones from the top of the dam, will face down a gauntlet of environmental and man-made obstacles as they fly their drones at speeds of more than 80 MPH while spectators watch on from above.

Sounds great, but best of all would be a demolition derby! Have a field – say the size of a football field – with a large hoop at each end. Go through the hoops alternately. Most hoop passages in twenty minutes wins. I’d buy tickets for that!