PrefBlog

BC Hydro couldn’t care less about operating on a cost-recovery basis. That’s not important:

Energy Minister Rich Coleman says he has cut expected BC Hydro rate increases by 50 per cent over three years.

Mr. Coleman says he made the decision based on a government-ordered review of hydro services and because the government wants to keep rates affordable for families.

DBRS put Spain, Italy, Portugal and Ireland on Review-Negative:

This action reflects DBRS’s assessment that downside risks to growth in the Euro area have intensified as a result of systemic concerns emanating from Greece. Recent political developments have called into question the Greek government’s willingness and capacity to comply with its EU-IMF adjustment programme and sustain its membership in the European Monetary Union. DBRS will assess, over the next three months, the risks stemming from Greece and to what extent uncertainty over the future of Greece, combined with concerns over sovereign debt sustainability and financial sector fragility in the Euro area, may adversely affect Ireland’s efforts to stabilise its public debt.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums down 9bp, FixedResets winning 12bp and DeemedRetractibles gaining 4bp. The Performance Highlights table was well populated, entirely with winners. Volume was below average.

Never mind Greece and Spain, here’s some commentary about an old friend:

Ireland may be forced into a second bailout by mounting loan losses in its banking system, according to Deutsche Bank AG.

Ireland’s bailed-out banks may need capital to cover as much as 4 billion euros ($5.1 billion) more bad-loan provisions than assumed in stress tests last year, Deutsche Bank analysts David Lock and Jason Napier said in a report published today.
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“Although resilient during 2009 and 2010, mortgage arrears have risen sharply over the past year, house prices are continuing to fall, market liquidity is limited, and over half of customers are now in negative equity,” the analysts said. “We fear the size of negative equity balances for some mortgage holders may greatly reduce their incentive to cooperate, pushing them towards default.”

Meanwhile, on the other side of the world:

Australia and New Zealand Banking Group said volatile conditions in global markets have caused the wholesale funding market for Australian banks to freeze again, a worrying echo of the global financial crisis.
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“Right now, markets are closed again, and this is what happens in this sort of situation,” ANZ Chief Executive Mike Smith said after a speech to a business group.
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Australian banks raise about $100 billion annually from wholesale funding markets to bridge a gap between total loans and deposits.

Here’s a story you don’t see too often:

Investors Group Inc., which sells mutual funds through its own financial adviser network, plans to chop fees on many of its offerings in a bid to woo fee-conscious clients.

The move comes after the company saw net fund sales plunge to $175-million in the first quarter during the key registered retirement savings plan (RRSP) from $504-million a year earlier.

Reductions in management fees will range from .05-to 0.40-per-cent annually on the asset value of select funds, the Winnipeg-based firm said in a statement on Friday.

There’s some alarmist talk from S&P:

In a report last week, Standard & Poor’s said the world faces a mountain of roughly $46-trillion (U.S.) in corporate debt needs between now and the end of 2016. In addition to a $30-trillion “wall” of corporate debt that will come due and require refinancing, S&P estimated that corporations worldwide will need between $13-trillion and $16-trillion of new debt to meet their capital spending and working-capital needs – essentially, to finance growth.
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“This demand for funds will potentially compound the credit rationing that may occur as banks seek to restructure their balance sheets, and bond and equity investors reassess their risk-return thresholds. These factors, amid the current euro zone crisis, a soft U.S. economic recovery following the Great Recession, and the prospect of slowing Chinese growth, raise the downside risk of a perfect storm for credit markets, in our view,” S&P wrote.

The Canadian preferred share market got thumped today, with PerpetualPremiums off 10bp, FixedResets losing 45bp and DeemedRetractibles down 37bp. There is quite a lengthy list of Performance Highlights, all of them losers – the only pattern I see at first glance is that banks are relatively unscathed. Volume was below average.

Fitch downgraded Greece:

Greece’s credit rating was downgraded one level by Fitch Ratings on “heightened risk” that the country will not be able to sustain its membership of the euro area after inconclusive elections left the country without a stable government.

Greece was cut to CCC from B- by Fitch, according to an e- mailed statement today in London. The country’s ceiling was revised to B-, Fitch said in the statement.

“The strong showing of ‘anti-austerity’ parties in the May 6 parliamentary elections and subsequent failure to form a government underscores the lack of public and political support for” the country’s bailout from the European Union and the International Monetary Fund, Fitch said in the statement.

Moody’s downgraded a swathe of Spanish banks:

Banco Santander (SAN) SA and Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest lenders, were cut three levels by Moody’s Investors Service, which cited a recession and mounting loan losses in downgrading 16 of the nation’s banks.

Nine firms were cut three notches and seven were kept on review for further reductions, Moody’s said yesterday in a statement. Santander’s U.K.-based subsidiary also was cut.

The moves followed Moody’s May 14 downgrade of 26 Italian banks and its Feb. 13 cut of Spain’s sovereign debt. The main drivers for the Spanish bank downgrades were a surge in soured loans, the recession, restricted funding access and the reduced ability of the government to support lenders as its own creditworthiness diminishes, Moody’s said.

Nexen, proud issuer of NXY.PR.A was confirmed at Pfd-3 by DBRS:

DBRS has today confirmed the ratings of Nexen Inc.’s (Nexen or the Company) Long-Term Unsecured Debt at BBB, Subordinated Unsecured Notes at BBB (low) and Preferred Shares at Pfd-3, all with Stable trends. The rating confirmations reflect the Company’s adequate credit metrics and potential future reserve and production growth profile.

Nexen’s financial profile continued to improve in 2011 and Q1 2012, mainly attributable to top-of-cycle oil prices and execution on its aggressive debt reduction strategy. Nexen has used proceeds of asset sales to reduce its debt-to-capital ratio to 33% at March 31, 2012, down from 49% at year-end 2009. Nexen’s debt-to-cash flow ratios have decreased substantially, from 2.64 times (x) in 2010 to 1.93x in the 12 months ending March 31, 2012. Continued improvement will depend largely on Nexen’s ability to successfully ramp-up production at Long Lake, and to ensure reliability of production at Buzzard. Going forward, DBRS expects Nexen to continue to manage its debt levels in a manner consistent with its BBB rating category.

It was an uneventful day for the Canadian preferred share market,with PerpetualPremiums down 1bp, FixedResets up 4bp and DeemedRetractibles gaining 2bp. Lots of volatility, heavily skewed to the downside. Volume was average.

There are fears the Greek bank run is accellerating:

Greek President Karolos Papoulias was told by the nation’s central bank chief that financial institutions are worried about their survival as Greeks pull out euros amid a deepening political crisis.

Central bank head George Provopoulos told Papoulias that Greeks have withdrawn as much as 700 million euros ($891 million) and the situation could worsen, according to the transcript of the president’s meeting with party leaders on May 14 that was published yesterday.
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Banks in downtown in Athens were open as normal today with no signs of unusual activity. Deposits by businesses and households held in Greek banks stood at 165.4 billion euros in March, according to the last available data from the Bank of Greece. (TELL) In 2011, deposits declined 35.4 billion euros, or 17 percent.

The report of the Office of the Independent Police Review Director regarding police conduct during the G-20 has been released. In a nutshell (nut’s hell?) the police acted like maniacs. Unfortunately, Blair and his thugs still have jobs.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets losing 6bp and DeemedRetractibles down 2bp. Volatility was minor. Volume was well above average.