PrefBlog

The three captioned issues were all placed on Review-Developing by DBRS on October 17, due to a change in sponsor.

Now, with respect to TDS.PR.C:

After conducting due diligence on Timbercreek, DBRS determined that the change in administrator and investment manager will not have a material impact on the rating of the Company. The performance of the Company has generally been positive since the last annual review, with the net asset value of the Company increasing to $41.13 as of November 15, 2014. Downside protection available to holders of the Class C Preferred Shares increased to 75.7% as of November 2014, compared with 70.2% in October 2013. As a result, the rating of the Class C Preferred Shares has been confirmed at Pfd-2.

Similarly, for BIG.PR.D:

After conducting due diligence on Timbercreek, DBRS determined that the change in administrator and investment manager will not have a material impact on the rating of the Company. The Company’s performance has generally been positive, with the net asset value (NAV) of the Company increasing to $24.11 as of November 15, 2014 with downside protection available to holders of the Class D Preferred Shares of 58.5%. As a result, the rating of the Class D Preferred Shares has been confirmed at Pfd-2 (low).

And finally, FBS.PR.C:

After conducting due diligence on Timbercreek, DBRS determined that the change in administrator and investment manager will not have a material impact on the rating of the Company. The Company’s performance has generally been positive, with the net asset value of the Company increasing to $35.17 as of November 15, 2014. Downside protection available to holders of the Class C Preferred Shares rose to 71.6% as of November 2014, compared with 68.6.2% in April 2014. As a result, the rating of the Class C Preferred Shares has been confirmed at Pfd-2.

Brookfield Renewable Energy Partners L.P. has announced:

an agreement to acquire a 488 MW multi-technology renewable portfolio in Brazil from Energisa S.A. The transaction represents a total enterprise value of approximately $R2.4 billion (US$935 million), subject to working capital adjustments. The equity purchase price is $R1.4 billion (US$545 million), net of assumed long-term non-recourse debt. Brookfield Renewable will acquire and fund the transaction with its institutional partners and maintain an economic interest in the portfolio of approximately 40 percent.
…
The acquisition will be funded through available capital from Brookfield Renewable and its institutional partners. The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close in the first quarter of 2015.

Brookfield Renewable Power Preferred Equity Inc. is a wholly owned subsidiary of Brookfield Renewable Energy Partners L.P., and is the issuer of record for BRF.PR.A, BRF.PR.C, BRF.PR.E and BRF.PR.F. The first two are FixedResets, the second two are Straight Perpetuals, all are tracked by HIMIPref™ and all are relegated to the Scraps index on credit concerns.

I have no idea why they issue these things through a subsidiary, quite frankly. At any rate, the guarantee is solid enough (sample language taken from BRF.PR.E prospectus dated 2013-1-22):

As described below, the Series 5 Shares will be guaranteed by the Partnership, Brookfield Renewable Energy L.P. (“BRELP”), Brookfield BRP Holdings (Canada) Inc. (“CanHoldco”) and BRP Bermuda Holdings I Limited (“Bermuda Holdco”, and collectively with the Partnership, BRELP and CanHoldco, the “Guarantors”).
…
Each Series 5 Share will be fully and unconditionally guaranteed, jointly and severally, by the Guarantors as to (i) the payment of dividends, as and when declared, (ii) the payment of amounts due on redemption of the Series 5 Shares, and (iii) the payment of the amounts due on the liquidation, dissolution and winding-up of the Corporation (the “Series 5 Guarantee”). As long as the declaration or payment of dividends on the Series 5 Shares are in arrears, the Guarantors will not make any distributions or pay any dividends on their respective equity securities or make any distributions or pay any dividends on securities of any successor entity to the Guarantors. The Series 5 Guarantee will be subordinated to all of the respective senior and subordinated debt of the Guarantors that is not expressly stated to be pari passu with or subordinate to the Series 5 Guarantee and will rank senior to the equity securities of the Guarantors. The Series 5 Guarantee will rank on a pro rata and pari passu basis with the obligations of the Guarantors under similar guarantees that may be provided by the Guarantors in respect of other Class A Preference Shares of the Corporation.

The rights, obligations and liabilities of a Guarantor pursuant to the Series 5 Guarantee will terminate upon the conveyance, distribution, transfer or lease of all or substantially all of its properties, securities and assets to another Guarantor. A Guarantor may not otherwise convey, distribute, transfer or lease all or substantially all of its properties, securities and assets to another person, unless the person which acquires the properties, securities and assets of such Guarantor assumes such Guarantor’s obligations under the Series 5 Guarantee.

There is no word from the credit agencies as yet regarding their perceptions of the deal, but it will be remembered that on November 4 I reported:

Brookfield’s aggressive approach to expansion has cost Brookfield Renewable Energy Partners L.P. it’s S&P ‘Positive’outlook:

• •We are revising our outlook on Brookfield Renewable Energy Partners L.P. (BREP) to stable from positive.
• •The outlook revision reflects our assessment of the amount of debt being maintained at the parent level in relation to parent-only cash flow that the partnership is generating.
• •We are also affirming our ratings on BREP and subsidiaries Brookfield Renewable Power Preferred Equity Inc. and BRP Finance ULC, including our ‘BBB’ long-term corporate credit rating on BREP.

…
At the same time Standard & Poor’s affirmed its ratings on BREP and subsidiaries Brookfield Renewable Power Preferred Equity Inc. and BRP Finance ULC, including its ‘BBB’ long-term corporate credit rating on BREP.

The outlook revision reflects our view of the company’s ability to generate strong remittable cash flows from its holdings and its increased level of holding company (holdco) recourse debt. The company has articulated a policy of maintaining relatively low levels of leverage at the holdco level with leverage at the holdco used opportunistically for acquisitions with equity as market conditions allow. However, during the course of the year, the company has made a number of acquisitions that, although partially funded with new equity issuance, maintained a higher level of debt at the holdco. This has resulted in lower credit metrics.
…
The stable outlook reflects our expectation that BREP will continue to increase its parent-only cash flow while maintaining modest amounts of debt at the holding company as well as maintaining the highly contracted and well-diversified portfolio of generation assets.

We could raise the ratings if we believe that parent-only cash flow to debt will continue at or above 30% assuming the current quality of cash flow score of ‘4’.

We could lower the rating if the partnership is unable to maintain parent-only cash flow to debt above 23% or if there is deterioration in the quality of cash flow score. This could result from acquisitions financed with substantially higher levels of holding-company debt or a material change in the partnership’s contractual profile.

DBRS has announced that it:

has today confirmed the Issuer Rating and Senior Unsecured Debt rating of RONA inc. (RONA or the Company) at BB (high) and the Preferred Share rating at Pfd-4 (high). The trends have been changed to Stable from Negative. The recovery rating on the Company’s Senior Unsecured Debt has been changed to RR3. The confirmation and trend change reflect improvement in the Company’s operating performance after three consecutive years of poor relative execution in an intense competitive environment. Positive trending same-store sales in the Company’s retail network (-3.4% in Q1, -0.7% in Q2 and +2.0% in Q3) as a result of changed merchandising strategies, the repositioning of the Reno-Depot and Totem banners, and the closure of 17 underperforming stores, combined with significant cost savings from recent reorganization efforts, to result in a notable improvement to EBITDA. The Company’s financial profile also improved at the end of F2013 and into F2014 as RONA used a portion of the proceeds from the sale of its Commercial and Professional division to reduce balance-sheet debt.
…
DBRS expects that RONA will continue to use free cash flow to increase shareholder returns. RONA’s credit risk profile will continue to strengthen within the current rating category if operating performance continues to improve (i.e., same-store sales growth and margin expansion), and key credit metrics remain in a range considered acceptable for the current rating (i.e., lease-adjusted debt-to-EBITDAR well below 4.0x and lease-adjusted EBITDA coverage above 4.5x) in the near-to medium-term.

As previously reported, RON.PR.A was downgraded to Pfd-4(high) [Trend Negative] by DBRS in March 2013, and to P-4(high) by S&P in April 2013. The issue was hammered after the first downgrade and has not recovered.

RON.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

On August 20, Quadravest announced:

M Split Corp. (the “Company”) is pleased to announce that it will be issuing Warrants to Capital and Class II Preferred shareholders as part of a series of changes that were approved by 99% of shareholders voting at the recent shareholders meeting held on May 14, 2014.

The issue of Warrants will be accomplished through a reorganization of shares which will occur prior to the opening of trading on the TSX on August 25, 2014 (the “effective date”).

The details are as follows:
Each holder of a Capital Share on the effective date will receive one Capital Share (2014), having the rights, privileges, restrictions and conditions approved by Shareholders at the 2014 Special Meeting, and one Warrant for each Capital Share held.
Each holder of a Class II Preferred Shares on the effective date will receive one Class II Preferred Share (2014), having the rights, privileges, restrictions and conditions approved at the 2014 Special Meeting, and one Warrant for each Class II Preferred Share held.
The Warrants will allow current Capital and Class II Preferred shareholders to increase their investment in the Company. Four Warrants will entitle the holder to purchase a Unit consisting of one Class I Preferred Share, one Class II Preferred Share and one Capital Share for a total subscription price of $8.15. The Warrants may be exercised on any business day commencing on August 26, 2014 and up until 5:00 p.m. (EST) on the expiry date of November 25, 2014.

The Class I Preferred Shares, Class II Preferred Shares and Capital Shares are listed on the Toronto Stock Exchange (“TSX”) under the symbols XMF.PR.B, XMF.PR.C and XMF.A, respectively. On August 19, 2014, the closing prices on the TSX of the Class I Preferred Shares, Class II Preferred Shares and Capital Shares were $5.35, $2.80 and $0.36, respectively. The Company has received conditional approval to list the Warrants on the TSX under the symbol XMF.WT effective August 25, 2014.

The reorganization of shares and issue of Warrants is a non-taxable event.

M Split invests in common shares of Manulife Financial Corporation, the largest life insurer in Canada offering financial products and wealth management services.

Additional information regarding the capital reorganization and Warrant offering is contained in the Management Information Circular dated April 11, 2014 as well as in the Information Statement dated August 18, 2014 which will be mailed to all Capital and Class II Preferred shareholders and will also be available on SEDAR at www.sedar.com.

They have now announced:

M Split Corp. (the “Company”) would like to provide an update on the Company’s outstanding warrants. The warrants can be exercised on any business day up until the expiry date of November 25, 2014 at 5:00 p.m. (EST).

Four Warrants plus the subscription price of $8.15 will entitle the holder to subscribe for one Unit. Each Unit consists of one Class I Preferred Share (XMF.PR.B), one Class II Preferred Share (XMF.PR.C) and one Capital Share (XMF.A) of the Company.

The subscription price is consistent with the combined recent trading prices of the Unit. Any warrants not exercised by November 25, 2014 will expire worthless.

Warrant holders should contact their advisors for more information on how to exercise their warrants in advance of the expiry date.

Warrant holders wishing to subscribe for additional shares above their allotment of warrants may do so by contacting their advisor.

The Company invests in common shares of Manulife Financial Corporation, the largest life insurer in Canada offering financial products and wealth management services.

The pending worthless expiration of the warrants isn’t much of a threat – the unit NAV was $7.85 on November 14, significantly below the $8.15 exercise price.

XMF.PR.A was last mentioned on PrefBlog when the 2010 Reorganization was completed. The 2014 Reorganization was merely a term extension, with the promise of this warrant offering.

On August 12, Quadravest announced:

Commerce Split (the “Company”) is pleased to announce it has today filed a Short Form Prospectus in each of the provinces of Canada relating to the issuance of Warrants, related to the recent Special Meeting of Shareholders. Shareholders voted 96% in favour of the proposals presented at the meeting including the issuance of Warrants. Warrants will allow current shareholders to increase their investment in the Company. Warrants will be issued to holders of Capital Shares on record at the close of business on August 25, 2014. Four Warrants plus the subscription price of $12.34 will entitle the holder to subscribe for one Unit. Each Unit consists of one Class I Preferred Share, one Class II Preferred Share and one Capital Share of the Company. The Warrants may be exercised on any business day commencing on August 26, 2014 and up until 5:00 p.m. (EST) on the expiry date of November 25, 2014.

The Class I Preferred Shares, Class II Preferred Shares and Capital Shares are listed on the Toronto Stock Exchange (the “TSX”) under the symbols YCM.PR.A, YCM.PR.B and YCM, respectively. On August 6, 2014, the closing prices on the TSX of the Class I Preferred Shares, Class II Preferred Shares and Capital Shares were $5.20, $5.15 and $1.91, respectively. The Company has applied to list the Warrants on the TSX, subject to approval.

The Company invests in common shares of Canadian Imperial Bank of Commerce, a Canadian financial institution.

They have now announced:

Commerce Split (the “Company”) would like to provide an update on the Company’s outstanding warrants. The warrants can be exercised on any business day up until the expiry date of November 25, 2014 at 5:00 p.m. (EST).

Four Warrants plus the subscription price of $12.34 will entitle the holder to subscribe for one Unit. Each Unit consists of one Class I Preferred Share (YCM.PR.A), one Class II Preferred Share (YCM.PR.B) and one Capital Share (YCM) of the Company.

The subscription price for the warrant represents a discount of 1.1% to the net asset value as of November 15, 2014 and is consistent with recent combined trading prices. Therefore it may be beneficial for shareholders to exercise their warrants. Any warrants not exercised by November 25, 2014 will expire worthless.

Warrant holders should contact their advisors for more information on how to exercise their warrants in advance of the expiry date.

Warrant holders wishing to subscribe for additional shares above their allotment of warrants may do so by contacting their advisor.

The Company invests in common shares of Canadian Imperial Bank of Commerce, a Canadian financial institution.

Expiring worthless won’t be much of a loss. The last trade of the warrants was at $0.015. The NAV per unit was $12.48 on November 14, and the underlying CM shares closed at $104.45 that day compared to $104.80 today. So there’s a very small profit possible – relative to NAV – from exercise, provided one likes to buy mutual funds with a Base Management Expense Ratio of 1.92%. When one adds up the quotes (as of today) for each of the three elements of a unit (YCM, YCM.PR.A and YCM.PR.B) the total is 12.19-34, so exercise looks like a dubious proposition.

YCM.PR.A and YCM.PR.B were last mentioned on PrefBlog when they were created in a reorganization. With only about 2.6-million units outstanding, these issues are far too small to be tracked by HIMIPref™.