Issue Comments

DF.PR.A To Get Bigger

Quadravest has announced:

Dividend 15 Split Corp. II (the “Company”) is pleased to announce that it has filed a preliminary short form prospectus in each of the provinces of Canada with respect to an offering of Preferred Shares and Class A Shares of the Company. The offering will be co-led by National Bank Financial Inc., CIBC, RBC Capital Markets and will also include BMO Capital Markets, TD Securities Inc., GMP Securities L.P. and Canaccord Genuity Corp.

The Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.25% on the issue price and the Class A Shares will be offered at a price of $8.50 per Class A Share to yield 14.12% on the issue price. The closing price on the TSX of each of the Preferred Shares and the Class A Shares on March 25, 2014 was $10.14 and $9.08, respectively.

The net proceeds of the secondary offering will be used by the Company to invest in an actively managed portfolio of dividend-yielding common shares which includes each of the 15 Canadian companies listed below:

Bank of Montreal Enbridge Inc. TELUS Corporation
The Bank of Nova Scotia Manulife Financial Corp. Thomson-Reuters Corporation
BCE Inc. National Bank of Canada The Toronto-Dominion Bank
Canadian Imperial Bank of Commerce Royal Bank of Canada TransAlta Corporation
CI Financial Corp. Sun Life Financial Inc. TransCanada Corporation

The Company’s investment objectives are:
Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends in the amount of $0.04375 per Preferred Share to yield 5.25% per annum on the original issue price; and
ii. on or about December 1, 2019, to pay the holders of the Preferred Shares the original issue price of those shares.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends initially targeted to be $0.10 per Class A; and
ii. on or about December 1, 2019, to pay the holders of Class A Shares at least the original issue price of those shares.

The sales period of this overnight offering will end at 9:00 a.m. (Toronto time) on March 27, 2014.

The pricing on this is interesting … as may be seen from the press release, the new units are being offered at a nice discount to market. Discerning investors will, however, note that the NAVPU on March 14 was 16.55 and that a reasonable proxy, XDV, is up only about 60bp since then … so the estimated current NAVPU is about 16.64 and the unit price for the offering is 18.50. Some bargain!

DF.PR.A was last mentioned on PrefBlog when it got bigger last November. DF.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Update, 2014-4-29: On April 10, Quadravest announced:

Dividend 15 Split Corp. II (the “Company”) is pleased to announce it has completed an overnight offering of 2,225,250 Preferred Shares and 2,225,250 Class A Shares. Total gross proceeds of the offering were $41.2 million, bringing the Company’s net assets to approximately $153.7 million. Shares will trade on the Toronto Stock Exchange under the existing symbol DF.PR.A (Preferred Shares) and DF (Class A shares).

The Preferred Shares were offered at a price of $10.00 per share to yield 5.25% annually and the Class A Shares were offered at a price of $8.50 per share targeting to yield 14.1%, based on the current distribution policy.

The offering was co-led by National Bank Financial Inc., CIBC and RBC Capital Markets and also included BMO Capital Markets, TD Securities Inc., GMP Securities L.P. and Canaccord Genuity Corp.

Issue Comments

NEW.PR.C To Be Refunded In June

Scotia Managed Companies has announced:

NewGrowth Corp. (the “Company”) announced today that holders of its Class A Capital Shares (“Capital Shares”) have overwhelmingly approved a share capital reorganization (the “Reorganization”) allowing holders of Capital Shares, at their option, to retain their investment in the Company after the scheduled redemption date of June 26, 2014. The Reorganization will permit holders of Capital Shares to extend their investment in the Company beyond the redemption date of June 26, 2014 for up to an additional 5 years. The Class B Preferred Shares, Series 2 will be redeemed on the same terms originally contemplated in their share provisions on June 26, 2014. In order to maintain the leveraged “split share” structure of the Company, the Company expects to create and issue a new series of Class B preferred shares on or about June 26, 2014.

Holders of Capital Shares electing to retain their investment in the Company will continue to enjoy the benefit of a leveraged participation in the capital appreciation of the Company’s portfolio while potentially deferring any capital gains tax liability which would otherwise be realized on the redemption of their Capital Shares. As part of the Reorganization, the Company’s portfolio of common shares of Canadian chartered banks, telecommunication, utility and pipeline companies will be expanded to include selected issuers in the oil and gas sector and will be rebalanced to equal weight.

Holders of Capital Shares who do not wish to continue their investment in the Company after June 26, 2014 must give notice that they wish to exercise their special retraction right and how they wish to be paid for their shares on or prior to April 18, 2014. Holders of Capital Shares who retract their Capital Shares will be paid on June 26, 2014. The Reorganization will become effective provided that holders of at least 1,287,000 Capital Shares retain their Capital Shares and do not exercise the special retraction right.

The proposal for the Capital Unit term extension was reported on PrefBlog. NEW.PR.C is tracked by HIMIPref™ but is assigned to the Scraps index on volume concerns.

Indices and ETFs

New S&P/TSX Preferred Share Sub-Indices?

I was a little startled to find some new entries on the TMXMoney indices page:

S&P/TSX Preferred Share Current Year Laddered Index ^TXLC 954.15 -0.51 -0.05
S&P/TSX Preferred Share Year 1 Laddered Index ^TXL1 886.44 -0.72 -0.08
S&P/TSX Preferred Share Year 2 Laddered Index ^TXL2 872.91 -0.19 -0.02
S&P/TSX Preferred Share Year 3 Laddered Index ^TXL3 875.73 0.44 0.05
S&P/TSX Preferred Share Year 4 Laddered Index ^TXL4 948.92 0.37 0.04

Clicking the names provides the inclusion criteria – just as one would expect from the names, e.g.:

•Same as the S&P/TSX Preferred Share Laddered Index, except that preferred stocks are restricted to those with reset dates in the current calendar year.

The “methodology” and “fact sheet” buttons lead only to the TXPL methodology and fact sheet.

There are no references to these subindices on S&P’s TXPL web page.

Mr. Google knows nothing about these indices.

So it’s all very mysterious. I suspect that there’s a new ETF family in the works, now that ZPR has attracted $972-million in about sixteen months making every promoter in the country salivate while kicking themselves for not thinking of it first; and I’m sure that the Exchange doesn’t create these things on spec.

The other puzzle is: what useful purpose could these things serve? I would be more interested in a slicing of TXPL by credit quality (investment grade & junk) and Issue Reset Spread (so that the bands were, effectively, ‘likely call’, ‘likely extension’ and ‘maybe’, but I know nothing of sales techniques.

Miscellaneous News

Registered Disability Savings Plans

I’m more of a portfolio manager than a financial planner, so it was only recently that I learned of Flaherty’s little-known legacy for a largely forgotten minority:

The RDSP is a cousin of the Registered Retirement Savings Plan (RRSP) but tweaked to fit the needs of those with physical, developmental and psychiatric disabilities.
…
Under the program, money can be set aside for a person with a disability (by family or the person him– or herself) and investments accrue tax-free; the RDSP is much like a RRSP, except withdrawals can begin at age 45. For example, the parent of a 15-year-old who puts $200 a month into the plan would provide her with an additional $2,500 a month by age 65. Also, the rules are such that her other income, such as disability benefits, would not be clawed back as a result.
…
What distinguishes it from a RRSP is that the federal government also makes a contribution, like it does with the Registered Education Savings Plan, but far more generous. Those eligible for a RDSP can get a grant of up to $3,500 a year, and low-income parents can receive an additional Disability Savings Bond of up to $1,000 annually.
…
The main knock on the program is that it takes a lot of paperwork – which is the reality with any program with eligibility. In this case, a person’s disability has to be so severe that they qualify for a Disability Tax Credit.

The main Revenue Canada web page which has links to Eligibility Requirements:

You can designate an individual as beneficiary if the individual:
•is eligible for the disability tax credit (DTC);
•has a valid social insurance number (SIN);
•is a resident in Canada when the plan is entered into; and
•is under the age of 60 (a plan can be opened for an individual until the end of the year in which they turn 59).The age limit does not apply when a beneficiary’s RDSP is opened as a result of a transfer from the beneficiary’s former RDSP.

… and links to grant information and savings bonds:

An RDSP can get a maximum of $3,500 in matching grants in one year, and up to $70,000 over the beneficiary’s lifetime. A grant can be paid into an RDSP on contributions made to the beneficiary’s RDSP until December 31 of the year the beneficiary turns 49.

The amount of the grant is based on the beneficiary’s family income. The beneficiary family income thresholds are indexed each year to inflation. The income thresholds for 2013 are as follows:

Amount of CDSG grant when family income is $87,123 or less:
•on the first $500 contribution—$3 grant for every dollar contributed, up to $1,500 a year.
•on the next $1,000 contribution—$2 grant for every dollar contributed, up to $2,000 a year.

Amount of CDSG grant when family income is more than $87,123:
•on the first $1,000 contribution—$1 grant for every dollar contributed, up to $1,000.

… and the savings bonds part …

A Canada disability savings bond (bond) is an amount paid by the Government of Canada directly into an RDSP. The Government will pay bonds of up to $1,000 a year to low-income Canadians with disabilities. No contributions have to be made to get the bond. The lifetime bond limit is $20,000. A bond can be paid into an RDSP until the year in which the beneficiary turns 49.

The amount of the bond is based on the beneficiary’s family income. The beneficiary family income thresholds are indexed each year to inflation. The income thresholds for 2013 are as follows:
•$25,356 or less (or if the holder is a public institution), the bond is $1,000;
•between $25,356 and $43,561, part of the $1,000 is based on the formula in the Canada Disability Savings Act;
•more than $43,561, no bond is paid.

This doesn’t really have a lot to do with preferred shares, I agree. But while I don’t consider myself to be a financial planning specialist, I do know more about financial matters than most people … and I’d never heard of this. Right off the top of my head, I knew of two families who might be eligible.

So … I decided this needed some more publicity, and this is it.

Issue Comments

TD.PR.E and TD.PR.G To Be Redeemed

The Toronto-Dominion Bank has announced:

that it will exercise its right to redeem all of its 12 million outstanding Non-cumulative 5-Year Rate Reset Preferred Shares, Series AE (the “Series AE Shares”) on April 30, 2014 at the price per share of $25.00, for an aggregate total of approximately $300 million.

TD also announced it will exercise its right to redeem all of its 15 million outstanding Non-cumulative 5-Year Rate Reset Preferred Shares, Series AG (the “Series AG Shares”) on April 30, 2014 at the price per share of $25.00, for an aggregate total of approximately $375 million.

On February 27, 2014, the Board of Directors of TD declared quarterly dividends of $0.390625 per Series AE Share and $0.390625 per Series AG Share. These will be the final dividends on the Series AE Shares and Series AG Shares, respectively, and will be paid in the usual manner on April 30, 2014 to shareholders of record on April 8, 2014, as previously announced. After April 30, 2014, the Series AE Shares and Series AG Shares will cease to be entitled to dividends and the holders of such shares will not be entitled to exercise any right in respect thereof except that of receiving the redemption amount.

Instructions with respect to receipt of the redemption amount will be set out in the Letter of Transmittal to be mailed to registered holders of the Series AE Shares and Series AG Shares shortly. Inquiries should be directed to our Registrar and Transfer Agent, CST Trust Company, at 1-800-387-0825 (or in Toronto 416-682-3860). Beneficial holders who are not directly the registered holder of these shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds.

There should be no surprise at these redemptions. TD.PR.E is a FixedReset, 6.25%+437, which commenced trading 2009-1-14 and TD.PR.G is a FixedReset, 6.25%+438, which commenced trading 2009-1-30.

Market Action

March 25, 2014

This BMO Field thing really irritates me, so I have sent the following eMail:

Dear Mr. Ford, Ms. Doucette, Ms. Nash and Ms. DiNovo [my Mayor, Councillor, MP & MPP]

I write to urge very close scrutiny of the proposed arrangement whereby the City, provincial government and federal government are being asked to invest $10-million each in leasehold improvements for BMO Field in Toronto.

It has been claimed (link ) that this represents “a pretty good healthy return on the $10 million”.

I have made approximate calculations of the Internal Rate of Return based on figures published in the Toronto Star (link ) and arrive at a figure of approximately 6.2%. While this certainly exceeds the rate available on twenty year bonds, it is far below the rule of thumb for equity and, I suspect, far below the rate of return expected by MLSE, which has been described as “really good” in the context of private equity investments (link ) which have historically averaged more than double the IRR offered to the city ( link )

In addition, it will be noticed that there will be no return of the provincial and federal contributions, which will be lost completely. I wish to remind you all that it is all taxpayer money and for my part I am not too greatly concerned with the details of the route my money takes between my pocket and MLSE’s coffers.

It is apparent that the City has been taken to the cleaners under the give-away splashed out by the previous city administration. The city’s gross undervaluation of naming rights allowed MLSE to make an instant profit from its investment (link ) and in addition, the city’s current and projected receipts from the stadium and parking (roughly $500,000 p.a. to increase to $1.3-million p.a.) are laughable when compared to receipts on, for example, Ricoh Coliseum, estimated at $4-million p.a. (link citing Peddie, Richard (2013). Dream Job. Harper Collins ).

It is my understanding that MLSE wishes to extend the term of their lease in connection with their leasehold improvements, which is entirely understandable. I strongly urge that any such lease extension be examined with great care, with the City taking the opportunity to negotiate much higher payments by MLSE.

Sincerely,

DBRS confirmed BRF at Pfd-3(high):

BREP’s business risk profile is in the BBB (high) range. The Company’s output is highly contracted (93% of expected 2014 generation) with investment-grade counterparties, with an above-average weighted-average duration of approximately 18 years. In addition, BREP’s significantly diversified portfolio of 193 hydro-electric generating stations mitigates the Company’s exposure to hydrology and operational risk at each facility. However, over the last year, BREP has repeatedly purchased hydroelectric facilities that are exposed to the wholesale pricing environment in North America, including the White Pine and Black Bear facilities. Although DBRS expects BREP to attempt to secure long-term contracts for these assets, should BREP’s contracted output fall below 80%, the Company’s business risk profile could be negatively affected.

BREP’s financial risk profile is based on its deconsolidated credit metrics and is reflective of a BBB (high) rating because of the Company’s prudent financing strategy. BREP finances its assets with mostly non-recourse project level debt. With hydrology returning to a long-term average, BREP’s deconsolidated EBITDA-to-interest and deconsolidated cash flow-to-debt ratios returned to ranges reasonable for its current rating. While BREP’s deconsolidated debt-to-capital ratio in 2013 was slightly above the 20% threshold, DBRS expects BREP to maintain this ratio below the 20% threshold as the Company closes the acquisition of Safe Harbor and Bord Gáis with a prudent mix of non-recourse project-level debt and equity.

Brookfield Renewable Power Preferred Equity Inc. is the proud issuer of BRF.PR.A, BRF.PR.C, BRF.PR.E and BRF.PR.F.

It was a mixed day for the Canadian preferred share market today, with PerpetualDiscounts up 4bp, FixedResets off 6bp and DeemedRetractibles gaining 3bp. Volatility was average. Volume was on the low side of average.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.6327 % 2,425.4
FixedFloater 4.70 % 4.30 % 37,057 17.72 1 0.3477 % 3,608.5
Floater 3.00 % 3.10 % 51,861 19.48 4 0.6327 % 2,618.7
OpRet 4.65 % -0.53 % 93,306 0.24 3 0.0775 % 2,687.9
SplitShare 4.81 % 4.18 % 68,365 4.30 5 -0.0080 % 3,078.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0775 % 2,457.9
Perpetual-Premium 5.62 % -3.75 % 91,000 0.08 11 0.1322 % 2,363.5
Perpetual-Discount 5.44 % 5.52 % 115,505 14.52 26 0.0366 % 2,447.1
FixedReset 4.69 % 3.61 % 223,889 4.43 79 -0.0649 % 2,515.9
Deemed-Retractible 5.05 % 3.07 % 154,817 0.33 42 0.0346 % 2,471.7
FloatingReset 2.62 % 2.60 % 198,837 7.06 5 0.1926 % 2,450.4
Performance Highlights
Issue Index Change Notes
FTS.PR.H FixedReset -1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 21.41
Evaluated at bid price : 21.41
Bid-YTW : 3.81 %
TRP.PR.C FixedReset -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 21.80
Evaluated at bid price : 22.30
Bid-YTW : 3.80 %
CGI.PR.D SplitShare -1.00 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2023-06-14
Maturity Price : 25.00
Evaluated at bid price : 24.75
Bid-YTW : 3.91 %
BAM.PR.K Floater 1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 16.83
Evaluated at bid price : 16.83
Bid-YTW : 3.11 %
Volume Highlights
Issue Index Shares
Traded		 Notes
ENB.PR.J FixedReset 145,857 TD crossed blocks of 70,000 and 50,000, both at 25.22.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 23.23
Evaluated at bid price : 25.20
Bid-YTW : 4.20 %
ENB.PR.T FixedReset 124,263 TD crossed blocks of 70,000 and 50,000, both at 25.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 22.85
Evaluated at bid price : 24.20
Bid-YTW : 4.25 %
MFC.PR.A OpRet 102,275 RBC crossed 100,000 at 25.59.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.25
Evaluated at bid price : 25.54
Bid-YTW : -0.53 %
MFC.PR.J FixedReset 102,080 RBC crossed 99,800 at 25.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.39
Bid-YTW : 3.61 %
ENB.PF.A FixedReset 85,052 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 23.13
Evaluated at bid price : 25.01
Bid-YTW : 4.30 %
BNS.PR.A FloatingReset 60,950 RBC crossed two blocks of 25,000 each, both at 25.30.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.33
Bid-YTW : 2.55 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.H FixedReset Quote: 21.41 – 21.75
Spot Rate : 0.3400
Average : 0.2132

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 21.41
Evaluated at bid price : 21.41
Bid-YTW : 3.81 %
MFC.PR.F FixedReset Quote: 22.57 – 22.93
Spot Rate : 0.3600
Average : 0.2512

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.57
Bid-YTW : 4.55 %
FTS.PR.G FixedReset Quote: 24.50 – 24.75
Spot Rate : 0.2500
Average : 0.1414

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 23.02
Evaluated at bid price : 24.50
Bid-YTW : 3.87 %
GWO.PR.N FixedReset Quote: 22.11 – 22.43
Spot Rate : 0.3200
Average : 0.2142

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.11
Bid-YTW : 4.51 %
CGI.PR.D SplitShare Quote: 24.75 – 25.03
Spot Rate : 0.2800
Average : 0.1839

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2023-06-14
Maturity Price : 25.00
Evaluated at bid price : 24.75
Bid-YTW : 3.91 %
PWF.PR.R Perpetual-Discount Quote: 25.22 – 25.47
Spot Rate : 0.2500
Average : 0.1593

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-25
Maturity Price : 24.79
Evaluated at bid price : 25.22
Bid-YTW : 5.52 %
Issue Comments

LB.PR.E To Be Redeemed

Laurentian Bank of Canada has announced (as part of their previously reported new issue announcement):

that it intends to redeem, on June 16, 2014, all of its 4,400,000 issued and outstanding Non-Cumulative Class A Preferred Shares, Series 10 (the “Preferred Shares Series 10”), at a price of $25.00 per share for an aggregate consideration of $110 million.

LB.PR.E is a Straight Perpetual with a 5.25% coupon that commenced trading 2004-4-15.

New Issues

New Issue: LB FixedReset, 4.30%+255

Laurentian Bank of Canada has announced:

that it has entered into an agreement with a syndicate of underwriters led by RBC Dominion Securities Inc., BMO Capital Markets and Laurentian Bank Securities Inc. (collectively, the “Underwriters”), under which the Underwriters have agreed to buy on a bought deal basis an aggregate of 5,000,000 Basel III-compliant Non-Cumulative Class A Preferred Shares, Series 13 (the “Preferred Shares Series 13”), at a price of $25.00 per Preferred Share Series 13 for gross proceeds of $125 million (the “Offering”). The Preferred Shares Series 13 will be offered for sale to the public in each of the provinces of Canada pursuant to a prospectus supplement to Laurentian’s short form base shelf prospectus dated October 10, 2012, which supplement will be filed with Canadian securities regulatory authorities in all Canadian provinces.

Holders of Preferred Shares Series 13 will be entitled to receive non-cumulative preferential fixed quarterly dividends for the initial period ending on, but excluding, June 15, 2019, as and when declared by the board of directors of the Bank, payable in the amount of $0.26875 per Preferred Share Series 13, to yield 4.30 per cent annually.

Thereafter, the dividend rate will reset every five years to be equal to the 5-Year Government of Canada Bond Yield plus 2.55 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 13 into an equal number of Basel III-compliant Non-Cumulative Class A Preferred Shares, Series 14 (the “Preferred Shares Series 14”) on June 15, 2019 and on June 15 every five years thereafter. Holders of the Preferred Shares Series 14 will be entitled to receive non-cumulative preferential floating rate quarterly dividends, as and when declared by the board of directors of the Bank, equal to the then 3-month Government of Canada Treasury Bill yield plus 2.55 per cent. The Offering is expected to close on or about April 3, 2014 and is subject to Laurentian receiving all necessary regulatory approvals.

Laurentian also announced today that it intends to redeem, on June 16, 2014, all of its 4,400,000 issued and outstanding Non-Cumulative Class A Preferred Shares, Series 10 (the “Preferred Shares Series 10”), at a price of $25.00 per share for an aggregate consideration of $110 million.

The net proceeds of the Offering will be added to Laurentian’s general funds and will be used for general corporate purposes (including, subject to the approval of the Office of the Superintendent of Financial Institutions, to fund the redemption of the Preferred Shares Series 10).

This issue is very similar to LB.PR.F, a FixedReset 4.00%+260 announced 2012-10-11 … except that the new issue is NVCC compliant and LB.PR.F ain’t.

Update: In connection with the NVCC compliance, it should be noted that DBRS has provisionally rated this paper at Pfd-3(low):

DBRS assigned the NVCC Preferred Shares Series 13 a rating equal to that Bank’s intrinsic assessment less four rating notches because the Series 13 has only an Office of the Superintendent of Financial Institutions (OSFI)-compliant non-viable contingent capital (NVCC) trigger, which is consistent with the OSFI requirements for NVCC instruments, and no additional triggers.

… which may be compared with Pfd-3 on non-compliant issues.

The new issue is rated P-3 by S&P (BB on the global scale):

The ‘BB’ rating stands three notches below the stand-alone credit profile (SACP), incorporating:

  • •A deduction of two notches, the minimum downward notching from the SACP under our criteria for a bank hybrid capital instrument; and
  • •The deduction of an additional notch to reflect that the preferred shares feature a contingent conversion trigger provision. Should a trigger event occur (as defined by The Office of the Superintendent of Financial Institutions’ [OSFI] guideline for Capital Adequacy Requirements, Chapter 2), each preferred share outstanding will automatically and immediately be converted, without the holder’s consent, into a number of fully paid and freely tradable common shares of the bank determined in accordance with a conversion formula.

… which may be compared with P-3(high) on non-compliant issues.

Market Action

March 24, 2014

Top o’ the news banner headline! Live, real-time stock quotes for Globe Unlimited subscribers!

We are pleased to bring our Globe Unlimited subscribers live, real-time stock quotes from the Toronto Stock Exchange and TSX Venture Exchange.

Our Globe Investor readers have asked for this feature for years, since Canadian media websites and portals offer stock quotes with a 15-minute delay. Our real-time quotes, which come with a Globe Unlimited subscription, are sourced from the TSX and reflect a large trading volume, for the most accurate price.

This is the first time a Canadian media site has integrated live stock quotes with market data and breaking news. Our subscribers can now see the latest news on their investments on the same page as real-time stock quotes. You can find them at the top of our company stock quote pages — all you need to do is type in a ticker symbol and click on it to get to the page.

They will probably just be the bare quote (i.e., no depth information, possibly no size), but I won’t know until I’ve looked at it during market hours tomorrow. But one way or another, it’s good news!

The Pension Fund That Doesn’t Do It’s Own Credit Analysis has won a round against S&P:

McGraw Hill Financial Inc. (MHFI)’s Standard & Poor’s unit must face California’s claims it deceived the state’s pension funds in its ratings of mortgage-back securities, a judge said in a provisional ruling.

California Superior Court Judge Curtis Karnow in San Francisco said yesterday he was inclined to deny the company’s request to throw out the state’s claims of deceptive conduct from a lawsuit alleging S&P violated false-advertising and business practices laws.
…
The California pension systems bought the securities because they had received AAA ratings, signaling they were low-risk, California Attorney General Kamala Harris said in the lawsuit.

Rob Ford doesn’t believe in corporate welfare:

The deal to expand BMO Field will see Maple Leaf Sports and Entertainment pony up $90 million to add a second deck, a roof over the stands and make it both football and soccer friendly.

But for it to go ahead they will be asking all three levels of government for $30 million, which would include a $10-million loan from Toronto.

“I just don’t think the taxpayers should have to pay for it,” said the mayor. “It should be paid for by the private sector. It would be nice if we wanted to expand Deco Labels and have the taxpayers help us out, but it doesn’t work like that.”

Ford says taxpayers already built a stadium on the CNE grounds to the tune of $55 million in cash and land contributions and if MLSE wants to change it, it should be them who pays for it.

… so naturally he’s getting criticized again:

It’s a measure of his frustration with Ford’s attempt to make the expansion of BMO Field a political issue that Leiweke chose this venue to air his grievances.

Leiweke first talked about the surprisingly decent weather, before segueing to more prosaic matters.

“The other good news I had today is that the mayor’s going to vote against our (stadium expansion) plan, which probably means we win 42-2.”

I don’t know the details on this particular issue, but I do know that the city got taken to the cleaners by the MLSE welfare bums on the initial deal:

Even before the team began playing its owner, Maple Leaf Sports and Entertainment, partnered with all three levels of government to build the team’s home stadium. MLSE pledged $18 million to the stadium’s $62.8 million cost, while the city contributed $9.8 million in cash and donated land worth $10 million.

MLSE quickly recouped its initial investment by selling the stadium’s naming rights to Bank of Montreal for a reported $27 million, but the cash-strapped city’s return on investment has materialized more slowly.

Monday MLSE and the city issued a joint press release stating that BMO Field had tuned a $1.1 million profit, which the city and MLSE would split.

In the five years since the stadium opened the city’s share of the profits has totaled $1.75 million, enough to make author Dave Zirin wonder whether Toronto had wasted cash on a team that didn’t need its help.

“The people of Toronto would be better off if that money was dropped from a plane and people could just pick it up and spend it (locally)” says Zirin, author of Bad Sports: How Owners are Ruining the Games we Love. “Every bit of factual data shows that the return on the investment is just not worth it.”

Poor Rob! He never learned the rules of the Club: when you get some influence, you have to grease the other club members. If he’d followed that rule, I don’t think there would be quite so many other issues.

A buddy sent me a link to Did Hyman Minsky find the secret behind financial crashes?:

The “Minsky moment”, a term coined by later economists, is the moment when the whole house of cards falls down. Ponzi finance is underpinned by rising asset prices and when asset prices eventually start to fall then borrowers and banks realise there is debt in the system that can never be paid off. People rush to sell assets causing an even larger fall in prices.

It is like the moment that a cartoon character runs off a cliff. They keep on running for a while, still believing they’re on solid ground. But then there’s a moment of sudden realisation – the Minsky moment – when they look down and see nothing but thin air. Then they plummet to the ground, and that’s the crisis and crash of 2008.

Those of a historical bent may find amusement in my market report of November 23, 2007:

Times are tough. There’s a big indigestible mass of dubious debt on the books all over the place, but – as far as I can see – the financial system is not melting down and we are not in a depression. I’ll simply repeat what I’ve been saying for the past several months: Times are tough. Firms that have been living on the edge may find they fall off. There may even be a spectacular blow-up or two, if a financial institution finds out its risk controls aren’t what they might have wished them to be. And I most certainly would not want to be earning my living as a casual labourer in the US housing industry. But it’s a pause, nothing more.

We arrived at the Minsky Moment about ten months later. To my astonishment, the blog Naked Capitalism is still going strong … gloom, doom and complete lack of analytical ability sells well!

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 20bp, FixedResets gaining 11bp and DeemedRetractibles up 12bp. There were quite a few performance highlights, all but one of them winners. Volume was below average.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.5150 % 2,410.1
FixedFloater 4.72 % 4.32 % 37,507 17.70 1 0.0497 % 3,596.0
Floater 3.02 % 3.11 % 51,502 19.44 4 -0.5150 % 2,602.3
OpRet 4.65 % -0.36 % 87,921 0.24 3 0.0258 % 2,685.9
SplitShare 4.81 % 4.35 % 67,552 4.30 5 -0.0953 % 3,079.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0258 % 2,456.0
Perpetual-Premium 5.63 % -2.05 % 90,186 0.08 11 0.1574 % 2,360.4
Perpetual-Discount 5.44 % 5.50 % 117,155 14.55 26 0.2000 % 2,446.2
FixedReset 4.69 % 3.50 % 224,032 4.43 79 0.1110 % 2,517.5
Deemed-Retractible 5.05 % 2.84 % 157,064 0.34 42 0.1185 % 2,470.8
FloatingReset 2.62 % 2.61 % 185,870 7.07 5 0.0723 % 2,445.7
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 16.52
Evaluated at bid price : 16.52
Bid-YTW : 3.17 %
ELF.PR.G Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 21.80
Evaluated at bid price : 21.80
Bid-YTW : 5.55 %
FTS.PR.H FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 21.42
Evaluated at bid price : 21.74
Bid-YTW : 3.73 %
ENB.PR.A Perpetual-Premium 1.19 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-23
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : -18.30 %
IFC.PR.A FixedReset 1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.19
Bid-YTW : 4.12 %
BAM.PR.N Perpetual-Discount 1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 5.77 %
Volume Highlights
Issue Index Shares
Traded		 Notes
RY.PR.Z FixedReset 96,552 RBC crossed blocks of 49,300 and 14,200, both at 25.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 3.70 %
TRP.PR.B FixedReset 68,539 Nesbitt crossed 60,000 at 20.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 3.83 %
BAM.PR.X FixedReset 60,034 RBC crossed 49,900 at 21.38.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 21.37
Evaluated at bid price : 21.37
Bid-YTW : 4.36 %
MFC.PR.F FixedReset 56,979 Scotia crossed 51,100 at 22.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.45
Bid-YTW : 4.61 %
MFC.PR.A OpRet 51,140 RBC crossed 48,900 at 25.59.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.25
Evaluated at bid price : 25.53
Bid-YTW : -0.36 %
BNS.PR.Z FixedReset 33,185 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.34
Bid-YTW : 3.71 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.B Floater Quote: 16.69 – 17.03
Spot Rate : 0.3400
Average : 0.2098

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 16.69
Evaluated at bid price : 16.69
Bid-YTW : 3.14 %
MFC.PR.K FixedReset Quote: 24.44 – 24.71
Spot Rate : 0.2700
Average : 0.1797

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.44
Bid-YTW : 4.17 %
BAM.PR.K Floater Quote: 16.52 – 16.89
Spot Rate : 0.3700
Average : 0.2862

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 16.52
Evaluated at bid price : 16.52
Bid-YTW : 3.17 %
GWO.PR.F Deemed-Retractible Quote: 25.32 – 25.57
Spot Rate : 0.2500
Average : 0.1717

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-23
Maturity Price : 25.00
Evaluated at bid price : 25.32
Bid-YTW : -10.86 %
CIU.PR.C FixedReset Quote: 21.78 – 22.19
Spot Rate : 0.4100
Average : 0.3392

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-03-24
Maturity Price : 21.44
Evaluated at bid price : 21.78
Bid-YTW : 3.63 %
TD.PR.Q Deemed-Retractible Quote: 26.30 – 26.50
Spot Rate : 0.2000
Average : 0.1397

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-23
Maturity Price : 25.75
Evaluated at bid price : 26.30
Bid-YTW : -10.84 %