Issue Comments

YLD.PR.A, YLD.PR.B: Default

Split Yield Corporation (run by Quadravest):

Split Yield Corporation (the “Company”) provides final redemption prices pursuant to the termination of the Company effective February 1, 2012.

As more fully described in the December 6, 2011 press release, the Company’s annual information form,
financial statements and other continuous disclosure documents, the final formula to calculate the termination payment is as follows: Each Class I Preferred share (YLD.PR.A) will be valued at the lesser of (i) $20; and (ii) the Net Assets per unit for the Company on the termination date. Each Class II Preferred share (YLD.PR.B) will be valued at the amount, if any, of the difference between the Net Assets per unit of the Company and $20 (the original issue price of the Class I Preferred shares) subject to a maximum value of $15 per share. Capital shares (YLD) will receive no payment unless the unit value was in excess of $35 per unit at termination date.

The final net asset value per unit as at February 1, 2012 was $18.6989. As a result of the final redemption formula outlined above, a payment of $18.6989 per Class I Preferred share (YLD.PR.A) will be made on February 16, 2012. No payment will be made to Class II Preferred shares (YLD.PR.B) or Capital shares (YLD) as a result of the formula above.

Class I Preferred shareholders have received total dividends of $15.17 per share since inception. The final quarterly dividend of $0.275 to Class I Preferred shareholders was made on January 31, 2012. Class II Preferred shareholders have received total dividends of $10.54 per share since inception. Capital shares have received total dividends of $7.25 per share since inception. Overall, a total of $32.96 per unit in distributions was made since inception.

Payment of the redemption prices as applicable are expected to be made on February 16, 2012 and will be paid to the beneficial holders of such shares through payment to the CDS participant through which such shares are held.

According to DBRS:

DBRS has today downgraded the rating of the 5.5% Class I Cumulative Preferred Shares (the Class I Preferred Shares) issued by Split Yield Corporation (the Company) from Pfd-5 to D and confirmed the rating of the 7.0% Class II Cumulative Preferred Shares (the Class II Preferred Shares) issued by the Company at D.

On December 6, 2011, the Company announced that all of its outstanding Class I and Class II Preferred Shares would be redeemed as scheduled on February 1, 2012 (the Redemption Date), in accordance with the redemption provisions of the shares. Quadravest Capital Management, manager of the Company, began liquidating the portfolio during the latter half of January 2012 in preparation for the final redemption.

On February 1, 2012, all outstanding Class I and Class II Preferred Shares were redeemed. The final redemption prices were $19.00 and $0.005 for the Class I and II Preferred Shares, respectively, which were less than the issue prices of the Class I and Class II Preferred Shares. As a result, the holders of the Class I and Class II Preferred Shares suffered a loss on their principals.

These issues were last mentioned on PrefBlog in the post YLD.PR.A, YLD.PR.B Redemption Announced; Default Almost Certain. YLD.PR.A and YLD.PR.B have both been tracked by HIMIPref™, but have been relegated to the Scraps index on credit concerns.

New Issues

New Issue: VSN FixedReset 4.40%+292

Veresen Inc. has announced:

it will issue 6,000,000 Cumulative Redeemable Preferred Shares, Series A (“Series A Preferred Shares”) at a price of $25.00 per share (the “Offering”) for aggregate gross proceeds of $150 million on a bought deal basis. The Series A Preferred Shares will be offered to the public through a syndicate of underwriters co-led by Scotiabank, TD Securities Inc. and CIBC.

The holders of Series A Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of 4.40%, payable quarterly for an initial period up to but excluding September 30, 2017, as and when declared by the Board of Directors of Veresen. The first quarterly dividend payment date is scheduled for June 30, 2012. The dividend rate will reset on September 30, 2017 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 2.92%. The Series A Preferred Shares are redeemable by Veresen, at its option, on September 30, 2017 and on September 30 of every fifth year thereafter.

Holders of Series A Preferred Shares will have the right to convert all or any part of their shares into Cumulative Redeemable Preferred Shares, Series B (“Series B Preferred Shares”), subject to certain conditions, on September 30, 2017, and on September 30 of every fifth year thereafter. The holders of Series B Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of Veresen, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 2.92%.

Veresen has granted the underwriters an option to purchase at the offering price an additional 2,000,000 Series A Preferred Shares exercisable in whole or in part at any time up to 6:30 AM (Calgary time) on the date that is two business days prior to closing. Should the option be fully exercised, the total gross proceeds of the Offering will be $200 million.

The Offering is expected to close on or about February 14, 2012. Net proceeds from the Offering will be used to reduce indebtedness, partially fund capital expenditures and for other general corporate purposes.

The Series A Preferred Shares will be issued pursuant to a prospectus supplement that will be filed with the securities regulatory authority in each of the provinces of Canada under Veresen’s short form base shelf prospectus dated August 22, 2011. An application has been made to list the Series A Preferred Shares and the Series B Preferred Shares on the Toronto Stock Exchange. The Offering is subject to receipt of all necessary regulatory and stock exchange approvals.

I have mixed feelings about this one. On the one had, it’s nice to see a new issuer. On the other hand, we already have lots of junk (it’s rated Pfd-3(high) by DBRS and the shelf prospectus was at P-3(high) by S&P). So, whatever.

Market Action

February 2, 2012

Nothing happened today.

It was a good day for the Canadian preferred share market, helped along by my decision to stop commenting daily on the four issue PerpetualDiscount index. FixedResets were up 14bp and DeemedRetractibles wone 32bp. Volatility was average. Volume was huge.

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 -0.0702 % 2,414.4
FixedFloater 4.70 % 4.07 % 39,986 17.24 1 -0.4926 % 3,315.7
Floater 2.77 % 2.98 % 62,755 19.77 3 -0.0702 % 2,607.0
OpRet 4.81 % -1.03 % 68,171 1.29 6 0.0378 % 2,528.2
SplitShare 5.30 % -0.84 % 78,308 0.85 4 -0.0100 % 2,639.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0378 % 2,311.8
Perpetual-Premium 5.31 % -3.51 % 109,144 0.09 26 0.1947 % 2,226.3
Perpetual-Discount 5.05 % 4.92 % 189,124 15.59 4 -0.1549 % 2,446.0
FixedReset 5.01 % 2.63 % 212,461 2.32 65 0.1389 % 2,395.9
Deemed-Retractible 4.87 % 2.01 % 222,141 1.20 45 0.3187 % 2,327.8
Performance Highlights
Issue Index Change Notes
POW.PR.C Perpetual-Premium -1.22 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-03
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 0.51 %
BAM.PR.R FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-02
Maturity Price : 23.67
Evaluated at bid price : 26.70
Bid-YTW : 3.53 %
PWF.PR.K Perpetual-Premium 1.06 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-10-31
Maturity Price : 25.50
Evaluated at bid price : 25.70
Bid-YTW : 3.83 %
POW.PR.D Perpetual-Premium 1.37 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-03
Maturity Price : 25.75
Evaluated at bid price : 25.85
Bid-YTW : 3.05 %
GWO.PR.G Deemed-Retractible 1.96 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-03
Maturity Price : 25.50
Evaluated at bid price : 25.95
Bid-YTW : -10.36 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.Z FixedReset 654,812 Holy smokes, I’ll be here all night … TD sold blocks of 28,200 and 29,400 to Nesbitt, then crossed 72,400, all at 25.10. Desjardins crossed two blocks of 120,000 each at the same price. RBC crossed 16,900 and TD crossed 35,000, all at 25.10. Desjardins crossed 100,000 at 25.15. TD crossed 47,700 at 25.15, then 45,000 at 25.10.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : 3.04 %
CM.PR.L FixedReset 88,498 Scotia crossed blocks of 19,700 and 25,000, both at 27.20. RBC crossed 18,200 and Desjardins crossed 13,000, both at 27.20.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.25
Bid-YTW : 2.39 %
SLF.PR.E Deemed-Retractible 59,174 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.19
Bid-YTW : 5.54 %
ENB.PR.F FixedReset 58,350 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-02
Maturity Price : 23.22
Evaluated at bid price : 25.40
Bid-YTW : 3.65 %
PWF.PR.P FixedReset 49,197 RBC crossed 34,500 at 26.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-02
Maturity Price : 23.52
Evaluated at bid price : 25.90
Bid-YTW : 2.85 %
MFC.PR.G FixedReset 46,218 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.16
Bid-YTW : 4.32 %
There were 85 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
POW.PR.C Perpetual-Premium Quote: 25.18 – 25.68
Spot Rate : 0.5000
Average : 0.3093

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-03
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 0.51 %

CM.PR.K FixedReset Quote: 26.76 – 27.20
Spot Rate : 0.4400
Average : 0.2677

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.76
Bid-YTW : 2.45 %

ENB.PR.B FixedReset Quote: 25.91 – 26.30
Spot Rate : 0.3900
Average : 0.2355

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-02
Maturity Price : 23.41
Evaluated at bid price : 25.91
Bid-YTW : 3.53 %

PWF.PR.F Perpetual-Premium Quote: 25.51 – 25.89
Spot Rate : 0.3800
Average : 0.2304

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-03
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : -18.28 %

RY.PR.I FixedReset Quote: 26.20 – 26.52
Spot Rate : 0.3200
Average : 0.1883

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 2.46 %

TRP.PR.C FixedReset Quote: 25.88 – 26.24
Spot Rate : 0.3600
Average : 0.2285

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-02
Maturity Price : 23.52
Evaluated at bid price : 25.88
Bid-YTW : 2.80 %

Market Action

February 1, 2012

Greece is a problem. Portugal, not so much:

Portugal doesn’t present the risk of default that Greece does to the rest of the European Union because officials there are seeking to contain the nation’s financial crisis, according to Fitch Ratings.

“The government there is committed and credible. The economy is highly indebted, but they are working on organizing a debt-for-equity swap,” David Riley, head of the sovereign-debt unit at Fitch Ratings, said at a conference in New York today. “That is the right strategy and in the near term we don’t see them as a significant risk to the rest of the euro zone.”

Banks in Germany, France, Belgium and the U.K. have the least periphery exposure to Portugal, excluding Ireland, among the debtor nations at the heart of the region’s financial crisis, according to data provided by Fitch at a presentation today. Riley wasn’t immediately available to elaborate on a possible debt-to-equity exchange.

Here in Soviet Canuckistan, we know what to do when demand exceeds supply – we allocate the supply:

Canada Mortgage & Housing Corp. said it is rationing mortgage insurance for lenders as the country’s housing agency approaches the legal limit of its ability to backstop the loans.

“CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance,” Charles Sauriol, a spokesman for the Ottawa-based agency, said in an e-mailed statement. “To ensure equitable access to portfolio insurance within CMHC’s annual limits, an allocation process is being established which has caused some delays.”

The agency said that lenders have increased their demand for insurance of their mortgages amid “liquidity needs” since the 2007 financial crisis.

“This does not affect the availability of CMHC’s mortgage loan insurance for qualified home buyers and will not impact the cost of buying a house,” Sauriol said in the statement.

Portfolio insurance allows lenders to insure mortgages that aren’t already backstopped by the housing agency. Under Canadian law, homebuyers who put down less than 20 percent of the cost must insure the mortgage. Banks also buy insurance for other home loans before securitizing them.

CMHC said it had C$541 billion ($539 billion) of insurance in force as of Sept. 30. The organization’s legislated limit is C$600 billion, it said.

This comes after news of OSFI micro-management of the banking business:

Canada’s banking regulator is stepping up its scrutiny of the housing sector, concerned about speculators in Toronto and Vancouver as well as riskier lending practices.

In a series of documents made public on Monday, the Office of the Superintendent of Financial Institutions says existing market analysis does not capture the degree of speculation in the condo markets of the two cities. The regulator is also concerned about the long-term risks home equity lines of credit (HELOCs) could pose to the banking sector in a downturn.

As a result, OSFI has told the banks it will now monitor on a quarterly basis what steps the lenders are taking to avoid problems in the HELOC market. It also wants to spend more time compiling data on speculators in the real estate market, and the impact they are having on prices.

The basic problem – such as there is one – is that 40%+ of Canadian banks’ assets are now mortgage related, compared to 30% historically. But it doesn’t occur to the useless twerps at OSFI that they should simply apply a surcharge on the capital required when proportions get massively and quickly out of whack. It’s much more fun to play ‘Let’s pretend we’re bankers!’.

BNS is raising equity capital:

It has long been assumed that Bank of Nova Scotia (BNS-T51.840.310.60%) would need to issue common equity to boost its capital ratios after acquiring abroad. No surprise, then, that the bank is in the market with a new bought deal this afternoon.

But no one was quite sure of when exactly the equity raise would come, and how much it would be worth — especially after it was revealed that the bank is looking to sell its flagship office tower in downtown Toronto for around $1-billion. That money, many believed, could supplant some of the much-needed common equity

For that reason, it is a bit surprising that the bank has gone so big with its capital raise, opting to selling $1.5-billion of new common shares at $50.25 each. And the timing is a little odd considering that the office tower sale is just getting under way.

DBRS confirmed ALA.PR.A at Pfd-3:

DBRS has today confirmed the ratings on the Medium-Term Notes (MTNs) and Preferred Shares – Cumulative of AltaGas Ltd. (AltaGas or the Company) at BBB and Pfd-3, respectively, both with Stable trends.

The rating actions follow the announcement that AltaGas has agreed to acquire SEMCO Holding Corporation (SEMCO). SEMCO is the sole shareholder of SEMCO Energy, Inc., a regulated public utility company with natural gas distribution and storage operations in Michigan and Alaska. The proposed purchase price of approximately US$1.135 billion, including assumed debt of approximately US$355 million, represents about 1.5 times the combined regulated rate base of US$725 million. The transaction value equates to approximately 8.7 times SEMCO’s expected EBITDA of approximately US$130 million in the first full year of ownership in 2013, which is reasonable.

Trading in ALA.PR.A was halted for the last 50 minutes of the day:

TORONTO, Feb. 1, 2012 /CNW/ – The following issues have been halted by IIROC:

Company: AltaGas Ltd.

TSX Symbol: ALA (all issues)

Reason: Pending News

Halt Time (ET): 3:09 PM ET

It was a good strong day for the Canadian preferred share market,with PerpetualDiscounts (all four of them! Both issuers!) up 28bp, FixedResets gaining 22bp and DeemedRetractibles winning 37bp. There was a good long list of Performance Highlights, all winners. Volume was high.

PerpetualDiscounts now yield 4.93%, equivalent to 6.41% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.5%, so the pre-tax interest-equivalent spread is now about 190bp, an interesting, but possibly spurious widening from the 180bp reported January 31.

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 0.3521 % 2,416.1
FixedFloater 4.68 % 4.05 % 40,412 17.28 1 0.2469 % 3,332.1
Floater 2.76 % 2.97 % 62,512 19.79 3 0.3521 % 2,608.8
OpRet 4.82 % -0.36 % 70,204 1.29 6 0.2714 % 2,527.2
SplitShare 5.30 % -0.84 % 74,498 0.86 4 0.1302 % 2,639.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2714 % 2,310.9
Perpetual-Premium 5.32 % -6.17 % 108,021 0.09 26 0.2865 % 2,221.9
Perpetual-Discount 5.05 % 4.93 % 182,875 15.58 4 0.2796 % 2,449.7
FixedReset 5.02 % 2.64 % 207,473 2.32 65 0.2170 % 2,392.5
Deemed-Retractible 4.88 % 2.59 % 211,617 1.24 45 0.3679 % 2,320.4
Performance Highlights
Issue Index Change Notes
ENB.PR.B FixedReset 1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 26.04
Bid-YTW : 3.44 %
SLF.PR.A Deemed-Retractible 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.09
Bid-YTW : 5.31 %
GWO.PR.I Deemed-Retractible 1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.61
Bid-YTW : 4.77 %
PWF.PR.K Perpetual-Premium 1.19 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.43
Bid-YTW : 4.31 %
TRP.PR.B FixedReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-01
Maturity Price : 23.59
Evaluated at bid price : 25.89
Bid-YTW : 2.49 %
POW.PR.D Perpetual-Premium 1.39 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.50
Bid-YTW : 4.52 %
BAM.PR.X FixedReset 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-01
Maturity Price : 23.28
Evaluated at bid price : 25.47
Bid-YTW : 3.25 %
MFC.PR.C Deemed-Retractible 1.94 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.66
Bid-YTW : 5.30 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.Z FixedReset 326,734 Block City! RBC crossed blocks of 99,400 shares, 65,000 and 34,800, then sold 17,700 to GMP, al at 25.10. TD crossed 50,000 at the same price. Nesbitt bought 10,000 from anonymous and 30,000 from TD at the same price again.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 3.06 %
MFC.PR.D FixedReset 125,039 RBC crossed 14,000 at 27.48; Nesbitt crossed blocks of 50,000 shares, 25,700 and 25,000, all at 227.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 27.48
Bid-YTW : 2.64 %
SLF.PR.D Deemed-Retractible 123,828 Nesbitt crossed 100,000 at 22.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.05
Bid-YTW : 5.56 %
BMO.PR.M FixedReset 113,555 Nesbitt crossed 100,000 at 25.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 2.58 %
CM.PR.E Perpetual-Premium 103,974 Desjardins crossed blocks of 40,000 shares, 23,400 and 16,000, all at 26.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-02
Maturity Price : 25.25
Evaluated at bid price : 26.01
Bid-YTW : -28.35 %
ENB.PR.F FixedReset 89,530 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-01
Maturity Price : 23.22
Evaluated at bid price : 25.40
Bid-YTW : 3.65 %
There were 42 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
SLF.PR.I FixedReset Quote: 25.15 – 25.38
Spot Rate : 0.2300
Average : 0.1572

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : 4.19 %

PWF.PR.E Perpetual-Premium Quote: 25.70 – 26.09
Spot Rate : 0.3900
Average : 0.3194

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 2.66 %

BAM.PR.T FixedReset Quote: 25.49 – 25.80
Spot Rate : 0.3100
Average : 0.2427

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-01
Maturity Price : 23.30
Evaluated at bid price : 25.49
Bid-YTW : 3.61 %

CM.PR.G Perpetual-Premium Quote: 26.08 – 26.29
Spot Rate : 0.2100
Average : 0.1463

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-02
Maturity Price : 25.75
Evaluated at bid price : 26.08
Bid-YTW : -10.01 %

IAG.PR.C FixedReset Quote: 26.69 – 26.90
Spot Rate : 0.2100
Average : 0.1508

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.69
Bid-YTW : 2.85 %

PWF.PR.A Floater Quote: 21.51 – 22.10
Spot Rate : 0.5900
Average : 0.5421

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-01
Maturity Price : 21.51
Evaluated at bid price : 21.51
Bid-YTW : 2.43 %

Issue Comments

SBC.PR.A: Proposal to Extend Term

Brompton Split Banc Corp. has announced:

that its board of directors (the “Board”) has approved a proposal to extend the term of SBC beyond its current final redemption date of November 30, 2012. Under the proposal, the term of SBC may be extended for an additional term of up to 5 years, as determined by the Board. In addition, the termination date may be extended further for successive terms of up to 5 years thereafter, as determined by the Board. The distribution rates on the preferred shares and class A shares for the new term will be announced prior to the extension of the term. If the proposal is approved, class A shareholders and preferred shareholders will be provided a special retraction right which is designed to provide shareholders with an additional option to retract either preferred shares or class A shares at the end of each term (and each successive term thereafter) and receive a retraction price that is calculated in the same way that such price would be calculated if SBC were to terminate on November 30, 2012.

SBC invests in a portfolio, on an approximately equal weight basis, in common shares of 6 Canadian Banks: Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, The Bank of Nova Scotia and The Toronto-Dominion Bank.

SBC will hold a special meeting of holders of preferred shares and class A shares on March 29, 2012 to consider and vote upon the proposal. Shareholders of record at the close of business on February 28, 2012 will be provided with the notice of meeting and management information circular in respect of the meeting and will be entitled to vote at the meeting. The proposal is also subject to any required regulatory approvals.

I recommend a favourable vote, assuming that there is nothing material in the final documents that isn’t in the press release. Credit quality is good, with a NAV of 20.74 as of 2012-1-26 and the special retraction right is good.

Market Action

January 31, 2012

The Greek tragedy continues:

Greece pledged a last-ditch effort to prevent the collapse of a second rescue package from creditors, aiming to complete talks this week on a financial lifeline that’s been in the works for six months.

Greek Premier Lucas Papademos said he would try to meet German-led demands for a bigger debt writedown by investors and deeper budget cuts by his government.

Papademos said “some difficulties” beset the debt-swap talks and hinted that donor governments may have to put up more money. Greek Finance Minister Evangelos Venizelos said today in Athens that a formal debt-swap offer must be made by Feb. 13.

Greek Needs
Merkel’s comments indicated that governments are loath to boost an October offer of 130 billion euros of loans in a second package, forcing investors to absorb net-present-value losses on Greek bonds that go beyond the 69 percent now on the table. Greece’s initial rescue of 110 billion euros in 2010 was fully taxpayer-funded.

Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds, said a person familiar with the talks, who declined to be identified because a final deal hasn’t been struck yet. As recently as Jan. 23, creditors wanted an average coupon of about 4.25 percent, two people familiar with the talks said then.

In turn, Greece’s feuding political parties face pressure to deliver more savings and to verify in writing that the austerity program will be carried out, no matter who wins elections to replace Papademos’s interim Cabinet.

I suggest they call in Canadian defence minister Peter MacKay for a consultation. He’s good at putting things in writing!

But there’s a fascinating twist to the Greek negotiations:

In discussions late last week in Athens, creditors lowered their demands for an average coupon on the new 30-year securities they would receive to as little as 3.6 percent from 4.25 percent after European officials demanded they take steeper losses, people familiar with the matter said at the time.

While the lower coupon would lead to an estimated loss of 70 percent or more for investors, adding a so-called gross domestic product warrant — which would pay bondholders more if the Greek economy rebounds — would trim the loss in net present value terms by an estimated 0.5 to 3 percentage points, said two people, who declined to be identified because the talks are confidential.

I bet some people are watching the negotiations with keen interest:

California (STOCA1)’s cash may be exhausted by March, Controller John Chiang said in a letter to lawmakers.

The nation’s most-populous state needs $3.3 billion to deal with liquidity needs for March and the first two weeks of April, Chiang said in the letter to state Senator Mark Leno and Assemblyman Bob Blumenfield, who leads the Joint Legislative Budget Committee

State receipts were $2.6 billion lower than forecast through Dec. 31, while expenditures were an equal amount higher, Chiang said.

BRF.PR.A was affirmed at P-3(high) by S&P:

  • We are assigning our ‘BBB’ long-term corporate credit rating and ‘A-2’ short-term rating to the newly formed Brookfield Renewable Energy Partners L.P. (BREP).
  • We are also affirming our ‘BBB’ issue-level rating on the approximately C$1.1 billion rated unsecured debt at BRP Finance ULC and ‘BB+’ global scale and ‘P-3(High)’ Canada scale ratings on Brookfield Renewable Power Preferred Equity Inc.’s preferred stock that BREP assumed as part of the combination.
  • In addition, we are withdrawing our ratings, including our ‘BBB’
    long-term corporate credit rating, on both Brookfield Renewable Power Inc. (BRPI) and Brookfield Renewable Power Fund (BRPF) at the companies’ request as a consequence of combination of the two companies.

  • We base the rating on our view that the combined credit risk profile of BREP’s portfolio being at least as good as BRPI’s portfolio combined with BRPF.
  • The stable outlook reflects our view of the company’s satisfactory business risk profile, which reflects its diversified electricity generation asset portfolio.

The DBRS report on CZP.PR.A’s parent has been updated:

DBRS has today updated its report on Capital Power Income L.P. (the Partnership or CPILP). CPILP’s ratings were downgraded on November 16, 2011, following the close of the acquisition of CPILP by Atlantic Power Corporation (ATP, not rated by DBRS) (the Transaction) on November 7, 2011. At that time, an Issuer Rating of BB was assigned based on the assessment of the new combined entity and a recovery rating of RR4 (indicating an expected recovery of 30% to 50%) was assigned to the Senior Unsecured & Medium-Term Notes.

Post acquisition, CPILP is expected to generate reasonable cash flows from its diverse long-term power contracts. However, the overall credit quality of CPILP has deteriorated due to its weakened financial profile, complex financial structure and subordination implications. These factors have offset increases in the average power purchase agreement (PPA) term, asset base and market capitalization as well as benefits from the greater diversification of fuel source, geography and counterparty risk of the combined entity.

In the medium to long term, CPILP’s cash flow stability will be largely dependent upon its ability to continue to improve operating performance, enhance revenue by ensuring it renegotiates and renews PPAs expiring in the near term at economically acceptable terms and secure long-term energy supply and operating contracts. DBRS estimates cash flow-to-debt and EBITDA interest coverage ratios to average approximately 11% and 2.7 times respectively in the near to medium term. These metrics remain adequate for the current BB rating. DBRS expects that existing outstanding CPILP debt will be refinanced at the ATP level as they mature.

It was a calm day for the Canadian preferred share market, with PerpetualDiscounts up 1bp, FixedResets gaining 9bp and DeemedRetractibles winning 13bp. All entries on the Performance Highlights table were winners. Volume was above average.

PerpetualDiscounts now yield 4.90%, equivalent to 6.37% interest at the standard equivalency factor of 1.3x; note that this measure is plagued by the fact that there are only seven PerpetualDiscounts left in the index and that after the month-end index rebalacing there will only be four! The figures should be taken with a grain of salt – or perhaps a truckload. Long corporates now yield about 4.55%, so the pre-tax interest-equivalent spread (in this context it is referred to as the Seniority Spread) is now aout 180bp, slightly narrower than the 185bp reported on January 18.

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 0.7807 % 2,407.7
FixedFloater 4.69 % 4.07 % 42,041 17.26 1 0.0000 % 3,323.9
Floater 2.77 % 2.98 % 62,619 19.77 3 0.7807 % 2,599.6
OpRet 4.90 % 0.37 % 66,130 1.29 7 -0.0326 % 2,520.4
SplitShare 5.31 % -0.39 % 72,679 0.86 4 0.3819 % 2,636.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0326 % 2,304.6
Perpetual-Premium 5.40 % -6.34 % 101,888 0.09 23 0.0776 % 2,215.6
Perpetual-Discount 4.96 % 4.90 % 180,893 15.21 7 0.0058 % 2,442.9
FixedReset 5.03 % 2.68 % 206,878 2.33 65 0.0913 % 2,387.4
Deemed-Retractible 4.89 % 3.47 % 206,338 1.28 46 0.1270 % 2,311.9
Performance Highlights
Issue Index Change Notes
SLF.PR.F FixedReset 1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.95
Bid-YTW : 2.87 %
BAM.PR.R FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-31
Maturity Price : 23.64
Evaluated at bid price : 26.55
Bid-YTW : 3.56 %
PWF.PR.A Floater 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-31
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 2.45 %
BNA.PR.E SplitShare 1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 5.43 %
BAM.PR.K Floater 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-31
Maturity Price : 17.70
Evaluated at bid price : 17.70
Bid-YTW : 2.98 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.L FixedReset 100,840 Scotia bought 12,400 from Nesbitt at 27.15, then crossed 25,000 at the same price. TD crossed 34,300 at the same price again.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.16
Bid-YTW : 2.54 %
ENB.PR.F FixedReset 68,461 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-31
Maturity Price : 23.21
Evaluated at bid price : 25.36
Bid-YTW : 3.66 %
BNS.PR.N Deemed-Retractible 60,810 TD crossed 50,000 at 26.72.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.73
Bid-YTW : 2.18 %
BNS.PR.Z FixedReset 58,196 TD crossed 22,000 at 25.515.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 3.05 %
SLF.PR.H FixedReset 55,291 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 4.20 %
CM.PR.I Deemed-Retractible 46,966 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-31
Maturity Price : 25.25
Evaluated at bid price : 25.98
Bid-YTW : 3.65 %
There were 38 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PR.O Deemed-Retractible Quote: 25.95 – 26.19
Spot Rate : 0.2400
Average : 0.1422

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-01
Maturity Price : 25.75
Evaluated at bid price : 25.95
Bid-YTW : -4.82 %

SLF.PR.H FixedReset Quote: 24.05 – 24.30
Spot Rate : 0.2500
Average : 0.1695

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 4.20 %

ENB.PR.A Perpetual-Premium Quote: 26.40 – 26.65
Spot Rate : 0.2500
Average : 0.1782

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-01
Maturity Price : 25.00
Evaluated at bid price : 26.40
Bid-YTW : -44.06 %

PWF.PR.L Perpetual-Premium Quote: 25.30 – 25.56
Spot Rate : 0.2600
Average : 0.2022

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.30
Bid-YTW : 5.00 %

BMO.PR.N FixedReset Quote: 27.08 – 27.22
Spot Rate : 0.1400
Average : 0.0870

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-25
Maturity Price : 25.00
Evaluated at bid price : 27.08
Bid-YTW : 2.17 %

MFC.PR.C Deemed-Retractible Quote: 23.21 – 23.48
Spot Rate : 0.2700
Average : 0.2178

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.21
Bid-YTW : 5.54 %

Issue Comments

CFS.PR.A to Mature on Schedule

On January 6, Connor, Clark & Lunn Capital Markets Inc. announced:

that that CANADIAN Financials & Utilities Split Corp. (the “Company”) will redeem its Preferred Shares and Class A Shares as scheduled on January 31, 2012 (the “Maturity Date”).

The redemption price payable by the Company for a Preferred Share will be equal to the lesser of (i) $10.00 plus any accrued and unpaid distributions in respect of the Preferred Shares, and (ii) the NAV of the Company on that date divided by the number of Preferred Shares then outstanding.

The redemption price payable by the Company for a Class A Share on that date will be equal to the greater of (i) the NAV per Unit on that date minus the sum of $10.00 plus any accrued and unpaid distributions on the Preferred Shares, and (ii) nil. One Unit means one Preferred Share and one Class A Share.

As at December 31, 2011, the NAV per Unit of the Company was estimated to be $15.33, which equates to $5.33 per Class A Share and $10.00 per Preferred Share.

The Company’s Preferred Shares and Class A Shares are listed on the TSX under the symbols CFS.PR.A and CFS, respectively.

This was a tiny little issue with less than 1-million shares outstanding. It was added to the HIMIPref™ database because I really liked the credit quality when the issue was announced – but alas, the sponsor was unable to sell enough of them to make the effort worthwhile.

Rating discontinued by DBRS.

Market Action

January 30, 2012

Greece is kicking against the pricks:

European leaders sparred with Greece over a second rescue program, clouding progress toward a permanent aid fund and tougher budget rules designed to stabilize the euro.

Greece faced criticism that its economic makeover is faltering, and it fended off German and Dutch calls for a European overseer to take command of its budget after its deficits surpassed targets for two years.

Greece is making progress on one component of the package, nearing an agreement for bondholders to accept deeper losses on a 50 percent cut in the face value of more than 200 billion euros of debt.

European concerns that Greece can deliver budget cuts and economic reforms are holding up other parts of the package, which Greece needs to meet a 14.5 billion-euro bond payment due on March 20.

However, it is beginning to dawn on the Europeans that when the party’s over, somebody has to pay the bills:

Euro leaders left a Brussels summit late yesterday with no accord over how to plug Greece’s widening budget hole and German Chancellor Angela Merkel voicing frustration with the Athens government’s failure to carry out an economic makeover.

“Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”

DBRS downgraded Portugal:

DBRS, Inc. (DBRS) has downgraded the Republic of Portugal’s long-term foreign and local currency debt to BBB (low) from BBB. The trend on both ratings remains Negative. The downgrade reflects weaker growth prospects in Portugal, which are likely to make achieving ambitious deficit-reduction targets very challenging. Moreover, the unstable economic environment in Europe, uncertainty over the Greek debt exchange, and ongoing tensions in financial markets intensify downside risks to Portugal’s growth outlook and prospects for debt stabilisation.

The Negative trends reflect our assessment that the ratings have yet to stabilise and that further deterioration in the growth or fiscal outlook could result in a further ratings downgrade. Growth prospects are particularly important to debt stabilisation in Portugal, given the size of the fiscal consolidation programme and the high and rising public debt burden.

The outlook for the Portuguese economy has deteriorated since DBRS’s last review in October 2011. The Bank of Portugal estimates that the economy will contract by 3.1% in 2012 – the second consecutive year of recession – and expand by just 0.3% in 2013.

It is not clear when Portugal will be able to reenter the long-term debt markets. According to the EU-IMF programme, Portugal is expected to return to the markets in time to cover a EUR 9.7 billion bond redemption in September 2013.

Sarkozy had some good news for the City:

France plans to unilaterally impose a 0.1 percent tax on financial transactions starting in August, President Nicolas Sarkozy said, brushing aside opposition from the nation’s banks.

“What we want to do is provoke a shock, to set an example,” Sarkozy said late yesterday on French television from Paris. “There’s no reason why deregulated finance, which brought us to the current situation, can’t participate in the restoration of our accounts.”

A France-only levy is opposed by the country’s financial community and its feasibility has been questioned by the Bank of France.

The financial transactions tax is among measures Sarkozy unveiled to shrink the French budget deficit and spur growth. He’s also increasing sales taxes and levies on financial incomes to fund a 13 billion-euro cut in payroll charges aimed at reducing labor costs and making France more competitive.

S&P downgraded Encana, which has no preferreds outstanding:

  • On Jan. 18, 2012, Standard & Poor’s revised its natural gas price assumptions following a decline in spot and forward North American natural gas prices. Notably, we lowered our long-term price assumptions based on our view that although prices will likely stabilize or modestly
    improve in 2012 due to production curtailment, fundamental supply characteristics will constrain pricing.

  • As a result, we are lowering our long-term corporate credit and senior unsecured debt ratings on Calgary, Alta.-based Encana Corp. to ‘BBB’ from ‘BBB+’.
  • We are also lowering our senior unsecured debt rating on subsidiary Encana Holdings Finance Corp. to ‘BBB’ from ‘BBB+’.
  • We are affirming our ‘A-2’ Canada scale commercial paper rating on Encana.
  • The ratings reflect our assessment of the company’s strong internal growth prospects from its large reserve base and undeveloped land holdings, low operating-cost structure, and strong liquidity.
  • The stable outlook reflects our view that Encana’s cash flow from asset sales combined with its increasing liquids production while maintaining competitive operating costs will allow the company to maintain its funds from operations-to-debt at more than 30% through 2013.

It was another mixed day for the Canadian preferred share market as PerpetualDiscounts – those few that are left – continue to bounce around like mad. PerpetualDiscounts won 66bp, FixedResets gained 8bp and DeemedRetractibles were down 3bp. Volatility was skewed to the upside. Volume was 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 0.7328 % 2,389.0
FixedFloater 4.69 % 4.06 % 41,901 17.27 1 0.3469 % 3,323.9
Floater 2.79 % 2.96 % 63,143 19.81 3 0.7328 % 2,579.5
OpRet 4.90 % 0.42 % 67,093 1.29 7 0.4912 % 2,521.2
SplitShare 5.33 % -0.39 % 72,758 0.86 4 -0.2956 % 2,626.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.4912 % 2,305.4
Perpetual-Premium 5.40 % -5.12 % 101,778 0.09 23 0.0506 % 2,213.9
Perpetual-Discount 4.96 % 4.93 % 181,383 14.82 7 0.6558 % 2,442.8
FixedReset 5.04 % 2.69 % 209,811 2.33 65 0.0779 % 2,385.2
Deemed-Retractible 4.90 % 3.50 % 205,499 1.68 46 -0.0276 % 2,308.9
Performance Highlights
Issue Index Change Notes
BNA.PR.D SplitShare -1.16 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-29
Maturity Price : 26.00
Evaluated at bid price : 26.50
Bid-YTW : -3.79 %
FTS.PR.E OpRet 1.14 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 27.44
Bid-YTW : 0.42 %
ELF.PR.F Perpetual-Discount 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-30
Maturity Price : 24.48
Evaluated at bid price : 24.71
Bid-YTW : 5.40 %
BAM.PR.K Floater 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-30
Maturity Price : 17.44
Evaluated at bid price : 17.44
Bid-YTW : 3.03 %
BMO.PR.Q FixedReset 1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 2.82 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.O Deemed-Retractible 70,711 Nesbitt crossed blocks of 18,000 and 30,000, both at 27.13. Desjardins bought 15,900 from TD at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-26
Maturity Price : 26.00
Evaluated at bid price : 27.14
Bid-YTW : 1.77 %
RY.PR.F Deemed-Retractible 66,792 TD crossed blocks of 22,100 and 27,500, both at 25.79.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-05-24
Maturity Price : 25.25
Evaluated at bid price : 25.78
Bid-YTW : 3.65 %
RY.PR.E Deemed-Retractible 53,675 Desjardins crossed 23,400 at 25.85; TD crossed 20,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-02-24
Maturity Price : 25.25
Evaluated at bid price : 25.83
Bid-YTW : 3.58 %
GWO.PR.M Deemed-Retractible 39,360 Nesbitt crossed 30,000 at 26.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-31
Maturity Price : 26.00
Evaluated at bid price : 26.60
Bid-YTW : 4.97 %
PWF.PR.L Perpetual-Premium 37,504 Nesbitt crossed 18,000 at 25.20; RBC crossed 13,800 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.32
Bid-YTW : 4.97 %
HSE.PR.A FixedReset 30,771 RBC crossed 19,900 at 25.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-30
Maturity Price : 23.52
Evaluated at bid price : 25.95
Bid-YTW : 2.99 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.C OpRet Quote: 26.25 – 27.25
Spot Rate : 1.0000
Average : 0.6650

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-29
Maturity Price : 25.50
Evaluated at bid price : 26.25
Bid-YTW : -18.46 %

PWF.PR.A Floater Quote: 21.10 – 22.10
Spot Rate : 1.0000
Average : 0.8620

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-30
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 2.48 %

BNA.PR.D SplitShare Quote: 26.50 – 26.90
Spot Rate : 0.4000
Average : 0.2641

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-29
Maturity Price : 26.00
Evaluated at bid price : 26.50
Bid-YTW : -3.79 %

BMO.PR.H Deemed-Retractible Quote: 25.76 – 26.04
Spot Rate : 0.2800
Average : 0.1685

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-02-25
Maturity Price : 25.00
Evaluated at bid price : 25.76
Bid-YTW : 2.08 %

BNS.PR.M Deemed-Retractible Quote: 26.17 – 26.44
Spot Rate : 0.2700
Average : 0.1942

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-07-27
Maturity Price : 26.00
Evaluated at bid price : 26.17
Bid-YTW : 2.97 %

TCA.PR.Y Perpetual-Premium Quote: 52.10 – 52.55
Spot Rate : 0.4500
Average : 0.3777

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-05
Maturity Price : 50.00
Evaluated at bid price : 52.10
Bid-YTW : 3.51 %

Market Action

January 27, 2012

There is some indication that the Europeans are beginning to realize that their voluntary debt exchange idea is stupid:

Opposition to payouts on Greek credit-default swaps from European Union policy makers is softening as disputes over a voluntary debt exchange threaten to push the nation into default.

Any agreement between the Greek government and the Washington-based Institute of International Finance on debt writedowns will only bind 50 percent of investors in the 206 billion euros ($270 billion) of notes being negotiated, Barclays Capital estimates. Hedge funds may resist a deal, seeking to get paid in full or compensated from insurance contracts.

“Politicians seem less concerned than before about CDS triggers,” said Michael Hampden-Turner, a credit strategist at Citigroup Inc. in London. “Having a payout on Greek CDS is probably better than the alternative: a loss in market faith of the product’s ability to provide a hedge against sovereign risk.”

Officials, including former European Central Bank President Jean-Claude Trichet, have insisted that a swaps trigger was unacceptable because traders would be encouraged to bet against indebted nations and worsen the crisis.

Fitch is not impressed:

Spain, Italy, Belgium, Cyprus and Slovenia had their debt ratings cut by Fitch Ratings, which said these nations do not accure [sic] “the full benefits of the euro’s reserve currency status.”

Ireland had its ratings affirmed by Fitch. The outlook on all six nations is negative.

But fear not! Soon credit rating agencies in Canada will have a lot more forms to fill out and boxes to tick and regulatory employment will increase so everything will be fine!

Canadian securities regulators are preparing to impose new rules on agencies that assess the creditworthiness of the millions of dollars in debt issued by corporations, governments and other instructions.

The Canadian Securities Administrators said Friday that credit ratings agencies in this country who want their opinions to be eligible for use under securities laws will need to apply to become a “designated rating organization.”

The Volcker Rule continues re-shuffle the deck:

Citigroup Inc. (C), the third-biggest U.S. lender, will close a proprietary-trading desk that makes bets with the firm’s own money and most of the unit’s staff will leave before rules banning the practice take effect.

Citigroup is shutting the Equity Principal Strategies business and most staff will leave the bank after Feb. 6, according to a memo by Derek Bandeen, head of equities for the New York-based bank, and obtained by Bloomberg News.

“Pursuant to various regulatory initiatives and changes, we have made the strategic decision to exit the Principal Strategies business,” Bandeen said in the memo. “The team, led by Sutesh Sharma, have been aware of this for some time and have worked diligently to wind down the positions over the last few months.”

Sharma intends to form a hedge fund, two people familiar with the matter said in August. His Citigroup team managed about $2 billion, one of the people said.

It was another mixed day for the Canadian preferred share market, as the (relatively tiny) PerpetualDiscounts index shot ahead 54bp, FixedResets lost 6bp and DeemedRetractibles gained 9bp. Volatility was good, skewed to the upside; volume was above 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 0.5933 % 2,371.6
FixedFloater 4.71 % 4.08 % 42,119 17.25 1 0.5982 % 3,312.4
Floater 2.82 % 2.98 % 63,870 19.77 3 0.5933 % 2,560.7
OpRet 4.93 % 1.29 % 69,731 1.30 7 0.0601 % 2,508.9
SplitShare 5.31 % -0.28 % 70,419 0.87 4 -0.3196 % 2,633.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0601 % 2,294.1
Perpetual-Premium 5.41 % -5.67 % 94,185 0.09 23 0.0498 % 2,212.8
Perpetual-Discount 4.99 % 4.98 % 180,463 15.50 7 0.5416 % 2,426.9
FixedReset 5.03 % 2.74 % 211,302 2.34 65 -0.0562 % 2,383.3
Deemed-Retractible 4.89 % 3.56 % 202,525 1.68 46 0.0889 % 2,309.6
Performance Highlights
Issue Index Change Notes
BAM.PR.R FixedReset -1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 23.51
Evaluated at bid price : 26.04
Bid-YTW : 3.78 %
BNA.PR.E SplitShare -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 5.58 %
RY.PR.A Deemed-Retractible 1.03 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.57
Bid-YTW : 3.63 %
ELF.PR.G Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 22.60
Evaluated at bid price : 23.00
Bid-YTW : 5.18 %
PWF.PR.A Floater 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 2.49 %
BAM.PR.J OpRet 1.31 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-31
Maturity Price : 26.00
Evaluated at bid price : 27.16
Bid-YTW : 3.25 %
POW.PR.D Perpetual-Discount 1.66 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 4.99 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.G Deemed-Retractible 78,380 Nesbitt crossed 60,000 at 25.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.26
Bid-YTW : 4.86 %
RY.PR.A Deemed-Retractible 63,595 Desjardins crossed 25,000 at 25.57.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.57
Bid-YTW : 3.63 %
MFC.PR.B Deemed-Retractible 58,743 Nesbitt crossed 50,000 at 23.95.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.80
Bid-YTW : 5.37 %
BNS.PR.N Deemed-Retractible 54,015 TD crossed 50,000 at 26.71.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.68
Bid-YTW : 2.35 %
PWF.PR.F Perpetual-Premium 52,900 TD crossed 49,900 at 25.42.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-26
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : -12.17 %
HSB.PR.D Deemed-Retractible 33,000 TD crossed 30,000 at 25.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.66
Bid-YTW : 4.28 %
There were 37 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.A Floater Quote: 21.00 – 22.10
Spot Rate : 1.1000
Average : 0.7107

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 2.49 %

BAM.PR.R FixedReset Quote: 26.04 – 26.67
Spot Rate : 0.6300
Average : 0.4015

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 23.51
Evaluated at bid price : 26.04
Bid-YTW : 3.78 %

BAM.PR.I OpRet Quote: 25.52 – 25.99
Spot Rate : 0.4700
Average : 0.3172

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-26
Maturity Price : 25.25
Evaluated at bid price : 25.52
Bid-YTW : -2.63 %

ENB.PR.B FixedReset Quote: 25.72 – 25.99
Spot Rate : 0.2700
Average : 0.1586

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 23.36
Evaluated at bid price : 25.72
Bid-YTW : 3.67 %

BAM.PR.O OpRet Quote: 26.10 – 26.49
Spot Rate : 0.3900
Average : 0.2812

YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 2.12 %

BNA.PR.E SplitShare Quote: 24.31 – 24.70
Spot Rate : 0.3900
Average : 0.2889

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 5.58 %

Market Action

January 26, 2012

All I can say is: it’s about time:

The federal government says it is abandoning plans to create a national securities regulator following a stinging courtroom defeat.

Finance Minister Jim Flaherty on Thursday delivered his most elaborate public reaction since last month’s critical ruling by the Supreme Court of Canada.

Mr. Flaherty told The Canadian Press that he recognizes that the day-to-day regulation of financial markets is a provincial responsibility — as determined by the high court.

Another bank is going to limit cash bonuses for investment bankers:

Bank of America Corp., the U.S. lender seeking to preserve capital, will freeze base salary levels and limit cash bonuses to $150,000 for some investment bankers, said two people with knowledge of the plans.

The cap on cash payments applies to those getting as much as $1 million in total year-end bonuses, with the rest coming in shares of the Charlotte, North Carolina-based lender, said the people, who asked for anonymity because the matter is private. Employees are being told of their payments today and can sell some of the stock starting on Feb. 15, the people said.

So my question is: when we will see the first public offering underwritten by a hedge fund? A hedge fund based in Singapore? But at the moment, the mood among investment bankers leans to fear more than greed:

In London, with financial sector jobs on the chopping block, bankers lucky enough to have a job are staying put even if they are dismayed when they hear about their bonus.

A new survey of almost 1,400 bankers and fund employees shows that far fewer employees are likely to try to swap jobs if they don’t like their bonuses. The research, done by recruiting firm Astbury Marsden, found that only one-third of workers in London who were surveyed said they would seek a new job. A year ago, the figure was 48 per cent.

They are facing a job market where finding a new spot is tough. According to the firm’s earlier research, competition for roles is rising fast. In 2011, there were 3.16 qualified candidates for financial job in London, up from 2.17 in 2010.

Such figures are likely to embolden bank bosses as they face political and shareholder pressure to cut bonuses. The usual threat of “cut my bonus and I leave” is a lot less threatening in a market where jobs are disappearing.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 21bp, FixedResets gaining 5bp and DeemedRetractibles up 1bp. There was a lengthy list of volatile issues, with a preponderance losers but no clear pattern. Volume was high.

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 -0.1616 % 2,357.6
FixedFloater 4.74 % 4.11 % 42,213 17.20 1 -1.9071 % 3,292.7
Floater 2.83 % 3.00 % 64,354 19.73 3 -0.1616 % 2,545.6
OpRet 4.93 % 1.78 % 69,330 1.30 7 0.2848 % 2,507.4
SplitShare 5.29 % -0.28 % 68,336 0.87 4 0.0400 % 2,642.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2848 % 2,292.7
Perpetual-Premium 5.41 % -3.97 % 87,162 0.09 23 -0.0228 % 2,211.7
Perpetual-Discount 5.02 % 5.00 % 180,340 15.48 7 -0.2115 % 2,413.8
FixedReset 5.03 % 2.70 % 213,509 2.34 65 0.0462 % 2,384.7
Deemed-Retractible 4.90 % 3.51 % 205,061 1.69 46 0.0102 % 2,307.5
Performance Highlights
Issue Index Change Notes
CIU.PR.B FixedReset -2.13 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.10
Bid-YTW : 3.44 %
BAM.PR.G FixedFloater -1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-26
Maturity Price : 21.37
Evaluated at bid price : 20.06
Bid-YTW : 4.11 %
POW.PR.D Perpetual-Discount -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-26
Maturity Price : 24.16
Evaluated at bid price : 24.66
Bid-YTW : 5.08 %
RY.PR.A Deemed-Retractible -1.40 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-24
Maturity Price : 25.25
Evaluated at bid price : 25.31
Bid-YTW : 4.16 %
NA.PR.M Deemed-Retractible -1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-15
Maturity Price : 26.00
Evaluated at bid price : 26.70
Bid-YTW : 3.40 %
BAM.PR.O OpRet 1.04 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.18
Bid-YTW : 1.89 %
RY.PR.B Deemed-Retractible 1.31 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-25
Maturity Price : 26.00
Evaluated at bid price : 26.30
Bid-YTW : -13.35 %
BAM.PR.P FixedReset 1.50 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-30
Maturity Price : 25.00
Evaluated at bid price : 27.66
Bid-YTW : 3.05 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.J FixedReset 213,900 Nesbitt crossed 100,000 at 26.80 RBC crossed 112,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 2.50 %
CM.PR.I Deemed-Retractible 205,252 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.75
Evaluated at bid price : 25.99
Bid-YTW : 3.57 %
CM.PR.L FixedReset 110,149 Scotia crossed blocks of 15,000 shares, 29,900 and 19,400, all at 27.15. Desjardins crossed 30,000 at the same price; TD crossed 12,600 at the same price again.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.15
Bid-YTW : 2.54 %
RY.PR.H Deemed-Retractible 106,625 Nesbitt crossed 50,000 at 26.90, then sold 16,400 to TD at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 26.91
Bid-YTW : 2.41 %
ENB.PR.D FixedReset 83,920 Nesbitt crossed blocks of 20,000 and 60,000, both at 25.55.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-26
Maturity Price : 23.28
Evaluated at bid price : 25.57
Bid-YTW : 3.65 %
CM.PR.K FixedReset 83,339 Desjardins crossd 29,500 at 26.79; Scotia crossed 20,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.69
Bid-YTW : 2.54 %
There were 47 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CIU.PR.B FixedReset Quote: 27.10 – 27.80
Spot Rate : 0.7000
Average : 0.4818

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.10
Bid-YTW : 3.44 %

FTS.PR.E OpRet Quote: 26.96 – 27.59
Spot Rate : 0.6300
Average : 0.4131

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.96
Bid-YTW : 1.78 %

BAM.PR.G FixedFloater Quote: 20.06 – 20.49
Spot Rate : 0.4300
Average : 0.2891

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-26
Maturity Price : 21.37
Evaluated at bid price : 20.06
Bid-YTW : 4.11 %

NA.PR.O FixedReset Quote: 27.34 – 27.69
Spot Rate : 0.3500
Average : 0.2192

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 27.34
Bid-YTW : 1.78 %

NA.PR.M Deemed-Retractible Quote: 26.70 – 27.05
Spot Rate : 0.3500
Average : 0.2381

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-15
Maturity Price : 26.00
Evaluated at bid price : 26.70
Bid-YTW : 3.40 %

RY.PR.L FixedReset Quote: 26.32 – 26.58
Spot Rate : 0.2600
Average : 0.1687

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.32
Bid-YTW : 2.77 %