PrefBlog

OSFI has announced:

The Superintendent of Financial Institutions, Julie Dickson, will deliver remarks on the topic of boards and risk governance at the Toronto Board of Trade on Thursday, April 5th.

The Superintendent will address the role of corporate governance in managing risk and elements that make for strong, transparent and accountable boards of directors.

The Superintendent will be available to respond to questions from the news media following her remarks.

I can’t remember anything like this before – it’s a great departure from OSFI’s tradition of secrecy. It could be a major announcement, for all the preciousness of the topic. Who knows? Maybe they will announce that regulated companies can no longer hire senior civil servants within five years of their leaving government service – but knowing OSFI, it’s more likely to be the other way around.

This is the future of retail:

A new front in virtual retailing has emerged on a wall at a busy subway station in downtown Toronto.

An online health and beauty retailer on Monday launched a pop-up store at a key commuter hub that features images of Pampers diapers and Tide detergent, rather than the products themselves. Using a smartphone app, shoppers place their orders by scanning quick response codes – QR codes, for short – on pictures of products, which are then shipped, often as quickly as the next day, to customers free of charge.

My quibble is that displaying images only makes it no different from shopping on-line. I think this kind of thing needs samples to look at and touch – and as soon as those store move in, the big box is dead:

After 50 years of putting mom and pops out of business, big-box retail is having a mid-life crisis. A slow economy has hurt same-store sales, narrowing margins at big stores. Meanwhile, consumers, armed with price-comparison technology, are visiting more stores seeking deals or exclusive merchandise rather than making one-stop, fill-the-cart excursions.

It was a good day for the Canadian preferred share market, with PerpetualPremiums gaining 22bp, FixedResets up 22bp and DeemedRetractibles winning 26bp. The Performance Highlights table is well populated and uniformly positive. Volume was very light.

Sino-Forest is for sale! Who wants to buy … er … something?

Sino-Forest Corp., the embattled timber firm facing fraud allegations is filing for court protection from creditors as it tries to find a buyer for what was once the largest publicly traded forestry firm on the Toronto Stock Exchange.
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While under court protection from its creditors, Sino-Forest hopes to sell its assets to a third party. It has launched a process to consider offers. If the company is unable to find a buyer its assets will be transferred to its debtholders, Sino-Forest said in a statement.

The Canadian preferred share market had a strong day to close the quarter, with PerpetualPremiums up 14bp, FixedResets winning 20bp and DeemedRetractibles gaining 12bp. Volatility was low. Volume was very light.

PerpetualDiscounts now yield 5.26%, equivalent to 6.84% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.5% (maybe just a little bit over) so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 230bp, a significant narrowing over two days from the 240bp reported March 28.

The Canada budget today continued to reward paperwork and subsidize marginal industry.

Canadian Finance MinisterJim Flaherty is aiming to boost flagging job growth and investment with C$3 billion ($3 billion) over two years for research and job subsidies.

The federal budget set aside C$1.1 billion over five years to support research and development and offered another C$500 million for venture capital.
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The budget also proposed extending a 15 percent mineral exploration tax credit for another year through the end of March 2013 at a cost of about C$100 million.

The penny’s gone:

Canada is scrapping the penny, ending production of the country’s smallest unit of currency this spring.
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The last one-cent coin will be minted this April, ending close to 150 years of the issuance of Canadian pennies. This unit of currency was first produced in 1858 although Canadian-based minting of the coin only began in 1908.

However, the most poignant part of the budget is this:

The budget also announced that the government would conduct a study, including consultation with taxpayers, to better understand why companies choose to hire consultants on a contingency fee basis to prepare their SR&ED claims. The result of this study will determine whether any action is required.

It’s no wonder that What-Debt? and Spend-Every-Penny are confused, seeing as how neither of them has much actual work experience, so out of the kindness of my heart, I’ll explain it to them:

Companies that do actual research do not, as a rule, have Suck-Arse Departments. Sucking government arse is a highly specialized field and requires years of brown-nosing (and, usually, a few more years in Cabinet) before proficiency is acquired. Therefore, a company interested in getting government money will hire an outside consultant. Since actually getting the money is a matter of random chance, contingency fees make more sense than anything else. Thank you. That will be $200-million, please.

If they were really interested in promoting research and development, they would create more centres of excellence in academia (by which I mean science and engineering, not sociology. Also, some may associate “Centres of Excellence” with applied research, which is not what I mean – it’s perfectly fine to fund the occasional one-man band to ‘think about smart stuff’. It pays off, in the end). They would evaluate potential hires solely on merit, rather than whether they’re Canadian or not. And they’d recruit grad students on a full ride according to the same criteria. But that’s not going to happen:

R&D is a long-acknowledged driver of economic prosperity and competitiveness, and the prevalent view is that more private investment in R&D will yield significant social benefit. A key driver to the government’s overall innovation strategy is to create new knowledge and a highly skilled workforce. The budget announced that the government will continue to support advanced research at universities and other leading research institutions by providing direct support to granting councils, genomics research, international research and infrastructure investment for Canadian universities, colleges, research hospitals and other not-for-profit research institutes across Canada.

Notice the word “continue”, and no new funding? See that bit about “highly skilled workforce”? That’s code for “undergraduates in sociology, political science, economics and business”, all the little talky-talky pseudo-disciplines.

Canadian Utilities, proud issuer of CU.PR.A, CU.PR.B and CU.PR.C, was confirmed at Pfd-2(high) by DBRS:

DBRS has today confirmed the ratings of the Commercial Paper, Unsecured Debentures and Cumulative Preferred Shares of Canadian Utilities Limited (CU or the Company) at R-1 (low), “A” and Pfd-2 (high), respectively, all with Stable trends. The ratings reflect the Company’s stable portfolio of regulated, low-risk utilities, strong cash flows from its diversified non-regulated operations and its strong financial profile.

The diversity of CU’s asset base provides stability to overall earnings and cash flow, with earnings split approximately 58/42 between CUI’s regulated operations and CU’s non-regulated businesses (including ATCO Gas Australia). DBRS notes that dividends flowing up from CUI has significantly declined over the past two years as CU continues to provide support to CUI during the build-out phase and to preserve the utility’s credit profile. The decline is offset by strong dividends coming from its regulated generation business and non-regulated operations and by CU’s significant cash balance compared with its modest debt and preferred obligations. CU is expected to issue more long-term debt/preferred shares to fund its equity requirement at CUI over the next two years, however, the Company’s non-consolidated debt to capital will remain below 20%.

CU Inc., proud issuer of CIU.PR.A, CUI.PR.B and CIU.PR.C, was confirmed at Pfd-2(high) by DBRS:

DBRS has today confirmed the ratings of the Unsecured Debentures & Medium-Term Notes, Cumulative Preferred Shares and Commercial Paper of CU Inc. (CUI or the Company) at A (high), Pfd-2 (high) and R-1 (low) respectively, all with Stable trends. The rating confirmations are based on CUI’s low business risk, which stems from the regulated nature of its operations supported by a reasonable regulatory environment, its strong portfolio of diversified regulated businesses and its strong and stable financial profile.

The Company’s business risk profile is viewed as strong, as all of its earnings are generated from regulated electricity and gas businesses, which operate under a reasonably stable regulatory framework. The Company is allowed to earn an adequate return on equity on a reasonable deemed equity ratio for all of its diversified regulated businesses. In addition, the decision of the Alberta Utilities Commission to approve significant credit relief measures to help support the CUI’s credit metrics during construction remains credit positive.

It was a down day for the Canadian preferred share market, with PerpetualPremiums losing 12bp, FixedResets down 8bp and DeemedRetractibles off 9bp. Volatility was fair. Volume was average. ENB issues figured prominently in the volume table, presumably due to the new issue.