S&P Comments on Basel 3

April 15th, 2010

Standard & Poor’s has commented:

We understand that the Basel committee intends that Tier 1 capital should enable each bank to remain a going concern, with Tier 2 capital re-categorized as a “gone concern” reserve to protect depositors in the event of insolvency. We expect to assess the credit implications of the extension risk that may be created by the proposed introduction of a lock-in clause in respect of Tier 2 capital in the future.

The introduction of much stricter criteria for the inclusion of hybrid instruments into Tier 1 capital generally accords with our recent criteria refinement, under which our capital metrics would give only minimal equity content to certain types of hybrids that we do not view as providing sufficient flexibility to defer or suspend coupons. The loss absorption capacity provided by principal write-down or conversion features is not a condition for equity content under our criteria. (See “Assumptions: Clarification Of The Equity Content Categories Used For Bank And Insurance Hybrid Instruments With Restricted Ability To Defer Payments,” published Feb. 9, 2010.)

The proposals state that “innovative” capital instruments with an incentive to redeem through features like step-up clauses (currently limited to 15% of the Tier 1 capital base) will be phased out. We currently assign different levels of equity credit to some hybrids with step-up features (or equivalent features) depending on their individual features. As stated in our criteria, step-ups (and similar provisions) question the permanence of issues that incorporate them, and so undermine the equity content of a hybrid capital security. Such hybrids are in our view therefore a weaker form of capital than other hybrids included in our measures of capital, such as similar instruments without step-ups.

Contingent capital may address some of the demonstrated deficiencies of traditional hybrid structures. One of the difficulties in practice in our view, however, is how to assess whether contingent capital securities would convert into capital (through conversion or a form of write-down) early enough to help a bank experiencing capital pressures. Some triggers may be lagging indicators of the bank’s health.

As stated in our published criteria, we may take the view to deny equity credit to hybrid instruments even if regulators allow for grandfathering, based on our view of the fundamental characteristics of the instruments. We interpret the grandfathering proposals as being a method for regulators to enable banks to transition to a more conservative regulatory environment without requiring large capital-raising in the short- to medium-term. In our view, grandfathering can create inconsistencies and a lack of comparability in capital ratios that could remain for an extended period. Grandfathering could also result in hybrid instruments that have been demonstrated to be ineffective as a form of capital still being included in regulatory capital measures.
…
The proposal to discontinue regulatory adjustments for unrealized gains and losses on securities or properties we believe would likely exacerbate pro-cyclicality, which is already perceived as an issue under the Basel II regime.

Their emphasis on the need for contingent capital to have an effect early in a bank’s deterioration is sharply at variance with Flaherty’s position.

Posted in Contingent Capital | No Comments »

Flaherty Pushes Contingent Capital

April 15th, 2010

Julie Dickson recently wrote an opinion piece for the Financial Times that was startling in its lack of rigour, absence of detail and non-existent support in OSFI’s published papers. This bumbling approach to a serious issue has now been adopted by Canada’s finance minister, her boss:

While some countries may choose to pursue an ex ante systemic risk levy or a tax, I do not believe that this would be an appropriate tool for all countries. Such a levy would remove capital from an institution to an external fund or to general government revenues, which could result in weakening an institution’s ability to absorb losses. A global levy could also result in excessive risk taking as a result of a perceived government guarantee against an institution’s failure. In my view, contingent capital is aligned with the principles above and should be considered. As noted in the attached Financial Times editorial by Julie Dickson, the Canadian Federal Superintendent of Financial Institutions, contingent capital would create a notional systemic risk fund embedded in the capital structures of financial institutions. Embedded contingent capital would force the costs of excessive risk taking to be removed from taxpayers and placed on to the right people – shareholders and subordinated debt holders – thus improving market discipline and significantly reducing moral hazard in the banking sector. Moreover, for the same reduction in credit intermediation, contingent capital has the advantage over a levy or charge of leaving capital available in the institution to facilitate a more stable provision of credit during economic downturns.

Posted in Contingent Capital | 1 Comment »

April 14, 2010

April 14th, 2010

Price volatility slowed considerably today, although recent trends continued weakly, with PerpetualDiscounts gaining 7bp and FixedResets losing 7bp on continued heavy volume.

PerpetualDiscounts now yield 6.17%, equivalent to 8.64% at the standard equivalency factor of 1.4x. Long Corporates now yield about 5.7%, so the pre-tax interest-equivalent spread is now about 295bp, down substantially from the peak of 310bp reported April 7 though still wider than the 285bp reported at month-end.

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 2.58 % 2.66 % 55,605 20.92 1 0.9238 % 2,142.5
FixedFloater 4.92 % 2.98 % 47,691 20.42 1 0.4545 % 3,252.7
Floater 1.90 % 1.65 % 45,513 23.45 4 -0.1569 % 2,423.5
OpRet 4.88 % 3.42 % 111,354 0.29 10 0.0194 % 2,314.1
SplitShare 6.35 % 1.74 % 138,852 0.08 2 -0.1531 % 2,148.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0194 % 2,116.0
Perpetual-Premium 5.86 % 3.88 % 33,280 0.62 2 -0.6848 % 1,841.1
Perpetual-Discount 6.14 % 6.17 % 196,476 13.67 76 0.0743 % 1,734.3
FixedReset 5.43 % 3.94 % 498,483 3.66 44 -0.0653 % 2,172.3
Performance Highlights
Issue Index Change Notes
NA.PR.M Perpetual-Premium -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-14
Maturity Price : 23.90
Evaluated at bid price : 24.11
Bid-YTW : 6.22 %
IAG.PR.E Perpetual-Discount 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-14
Maturity Price : 24.38
Evaluated at bid price : 24.59
Bid-YTW : 6.15 %
RY.PR.W Perpetual-Discount 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-14
Maturity Price : 21.15
Evaluated at bid price : 21.15
Bid-YTW : 5.89 %
Volume Highlights
Issue Index Shares
Traded		 Notes
PWF.PR.J OpRet 101,607 Nesbitt crossed 100,000 at 25.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-05-30
Maturity Price : 25.50
Evaluated at bid price : 25.50
Bid-YTW : 3.02 %
TD.PR.A FixedReset 93,100 TD crossed two blocks of 25,000 each at 25.74 and two blocks of 12,500 each at 25.73. Desjardins crossed three blocks, of 15,000 shares, 18,000 and 20,000, all at 25.78.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 4.12 %
BMO.PR.N FixedReset 82,400 Nesbitt crossed 75,000 at 28.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-27
Maturity Price : 25.00
Evaluated at bid price : 27.99
Bid-YTW : 3.50 %
RY.PR.N FixedReset 68,945 RBC bought blocks of 19,200 shares, 10,000 and 20,000 from anonymous at 27.44.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 27.35
Bid-YTW : 3.92 %
RY.PR.X FixedReset 67,506 Anonymous crossed (?) two blocks 20,000 each at 27.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.71
Bid-YTW : 3.87 %
SLF.PR.C Perpetual-Discount 65,810 Nesbitt crossed blocks of 40,000 and 15,000 at 18.05.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-14
Maturity Price : 18.04
Evaluated at bid price : 18.04
Bid-YTW : 6.23 %
There were 63 other index-included issues trading in excess of 10,000 shares.

Posted in Market Action | No Comments »

FTN.PR.A Gets Bigger

April 14th, 2010

Financial 15 Split Corp has announced it has:

today completed its secondary offering of 1,980,000 Preferred Shares and 1,980,000 Class A Shares of the Company for aggregate gross proceeds of $39,105,000, bringing the Company’s net assets to approximately $169 million. The shares will continue to trade on the Toronto Stock Exchange under the existing symbols FTN (Class A shares) and FTN.PR.A (Preferred shares).

The Preferred Shares were offered at a price of $10.00 per share to yield 5.25% based on current distribution policy. The Class A shares were offered at a price of $9.75 per share to yield 15.47% based on current distribution policy. RBC Capital Markets and CIBC World Markets were co-lead agents for the offering.

The proceeds from the re-opening of the Company, net of expenses and Agents’ fee, will be used by the Company to invest in an actively managed portfolio of 15 financial services companies made up of 10 Canadian and 5 U.S. issuers

There were about 7.3-million units outstanding as at November 30, 2009, so this offering improves liquidity by about 25%.

FTN.PR.A was last mentioned when the treasury offering was announced. FTN.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Posted in Issue Comments | 1 Comment »

April 13, 2010

April 13th, 2010

Citigroup’s liquidity guarantees are attracting scrutiny:

Financial Crisis Inquiry Commission investigators may conclude a primary cause of Citigroup’s 2008 bailout was the use of “liquidity puts” by traders to bolster sales, Chairman Phil Angelides said in an interview yesterday. Those puts allowed customers to sell debt securities back to the bank at face value if credit markets froze, something that Citigroup’s traders bet would never happen, according to Angelides.
…
To raise money to buy the assets, Citigroup sold commercial paper, with the assets pledged as collateral. Commercial paper is a type of debt that matures in less than a year and was popular with money-market funds and corporate treasurers who want to invest their surplus cash in readily redeemable funds while earning higher yields.

Liquidity puts were added to “facilitate” the sales of the commercial paper, [Citigroup CDO boss Nestor] Dominguez said; investors could “put back” the commercial paper to Citigroup if the market went cold. Dominguez described this as a “significant widening in credit spreads or a temporary inability to issue commercial paper.” Widening credit spreads, or the gap between a bond’s yield and benchmark rates, indicate slackening investor demand.
…
Citigroup used the liquidity puts partly because they required less capital support than backup credit lines that bank’s typically offer, Georgiou said.

The liquidity puts were subject to a 0.8 percent capital charge, [commission member Byron] Georgiou said. Put another way, the bank had to set aside $1 of capital for every $125 of commercial paper. That compares with Citigroup’s overall ratio of $1 for every $14.50 of loans, securities and other investments as of Dec. 31.

The International Monetary Fund has released the April 2010 Global Financial Stability Report. I haven’t had a chance to do much besides skim it, but the big news is that they’re recommending capital charges on “systemically important” banks based on regulatory fiat, rather than any kind of formula:

Regulators may find it necessary to weigh “direct preemptive measures,” including constraining the size of certain activities to limit the emergence of “systemically important” firms, the Washington-based IMF said today in its bi-annual Global Financial Stability Report.

The report precedes an April 23 meeting of the Group of 20 nations in Washington, where the IMF plans to detail for finance chiefs ways that financial firms may help pay for the costs of bailouts. Since the start of the credit crisis, governments and central banks have spent more than $11 trillion to support the financial industry, according to the Paris-based Organization for Economic Cooperation and Development.

The capital surcharge would be “a buffer” designed to increase “the resiliency of the institution to sustain different shocks,” Juan Sole, one of the report’s authors, told reporters in Washington today.

Political momentum to overhaul financial regulations in some countries may be weakening as economic growth returns, IMF Managing Director Dominique Strauss-Kahn said in an interview in Kenya last month.

Parts of the financial industry have gone “back to practices of risk taking, which is probably not the most appropriate to have a stable financial system at the global level,” he said.

Now, more than ever, it is important for large banks to offer cushy jobs to ex-regulators!

The rebound in the market continued today on heavy volume, with PerpetualDiscounts up 26bp while FixedResets lost 4bp … taking the yield on the latter index within striking distance of 4%!

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 2.60 % 2.71 % 55,414 20.88 1 -0.2764 % 2,122.8
FixedFloater 4.94 % 3.01 % 47,480 20.39 1 0.3238 % 3,237.9
Floater 1.90 % 1.65 % 42,088 23.46 4 0.3755 % 2,427.3
OpRet 4.88 % 3.48 % 107,376 0.29 10 -0.0350 % 2,313.7
SplitShare 6.34 % -1.27 % 136,202 0.08 2 0.0438 % 2,151.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0350 % 2,115.6
Perpetual-Premium 5.82 % 3.86 % 34,650 0.62 2 0.4654 % 1,853.8
Perpetual-Discount 6.14 % 6.20 % 197,668 13.65 76 0.2626 % 1,733.0
FixedReset 5.43 % 3.93 % 479,541 3.66 44 -0.0373 % 2,173.7
Performance Highlights
Issue Index Change Notes
MFC.PR.C Perpetual-Discount -2.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-13
Maturity Price : 18.09
Evaluated at bid price : 18.09
Bid-YTW : 6.30 %
GWO.PR.I Perpetual-Discount -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-13
Maturity Price : 18.21
Evaluated at bid price : 18.21
Bid-YTW : 6.24 %
RY.PR.B Perpetual-Discount 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-13
Maturity Price : 20.11
Evaluated at bid price : 20.11
Bid-YTW : 5.94 %
SLF.PR.D Perpetual-Discount 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-13
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 6.24 %
POW.PR.B Perpetual-Discount 1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-13
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 6.31 %
POW.PR.D Perpetual-Discount 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-13
Maturity Price : 20.07
Evaluated at bid price : 20.07
Bid-YTW : 6.27 %
Volume Highlights
Issue Index Shares
Traded		 Notes
BNS.PR.Y FixedReset 92,850 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-13
Maturity Price : 24.35
Evaluated at bid price : 24.40
Bid-YTW : 3.95 %
RY.PR.R FixedReset 70,460 National crossed 55,000 at 27.61.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 27.57
Bid-YTW : 3.75 %
BNS.PR.T FixedReset 58,045 National crossed 50,000 at 27.44.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 27.37
Bid-YTW : 3.75 %
TD.PR.G FixedReset 53,818 RBC crossed 13,700 at 27.41; Nesbitt bought 10,000 from anonymous at 27.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.31
Bid-YTW : 3.82 %
SLF.PR.D Perpetual-Discount 44,253 RBC bought 10,000 from National at 18.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-13
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 6.24 %
MFC.PR.E FixedReset 44,214 National crossed 25,000 at 26.79.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-19
Maturity Price : 25.00
Evaluated at bid price : 26.68
Bid-YTW : 4.10 %
There were 61 other index-included issues trading in excess of 10,000 shares.

Posted in Market Action | 1 Comment »

S&P Downgrades SLF: Prefs now P-2(high) / BBB+

April 13th, 2010

Standard and Poor’s has announced:

  • We believe Sun Life Financial Inc.’s 2010 after-tax operating earnings will come in below our expectation and that the U.S. investment portfolio will show further asset impairments, which will add pressure to the group’s capital.
  • Based on weaker-than-expected operating earnings and expected future pressure on capital, we have lowered the ratings on SLF and its North American subsidiaries by one notch.
  • The outlook on SLF’s North American subsidiaries is stable, and the outlook on SLF is negative.

Standard & Poor’s Ratings Services said today that it lowered its long-term counterparty credit and financial strength ratings on Sun Life Financial Inc.’s (SLF) core insurance subsidiaries–Sun Life Assurance Co. of Canada (SLA), Sun Life Assurance Co. of Canada (U.S.) (SLUS), and Sun Life Insurance & Annuity Co. of New York–to ‘AA-‘ from ‘AA’.

Standard & Poor’s also said that it lowered its financial strength ratings on Independence Life & Annuity Co., which benefits from an explicit claims guarantee for policyholder obligations provided by SLUS–to ‘AA-‘ from ‘AA’. The outlook on these companies is stable.

In addition, Standard & Poor’s lowered its long-term counterparty credit rating on SLF to ‘A’ from ‘A+’. The outlook on SLF in negative.

The ratings and outlook on SLF’s Hong Kong subsidiary, Sun Life Hong Kong Ltd. (A+/Stable/—), remain unchanged…
…
Sun Life’s 2009 operating earnings were well below the C$1.75 billion normal run rate required for the higher ratings, as outlined within the report we published on March 6, 2009. We believe SLF’s 2010 after-tax operating earnings will also come in below our expectation of at least C$1.75 billion. The company’s current earnings guidance is for adjusted earnings from operations for 2010 to be C$1.4 billion-C$1.7 billion, which is notionally below the above target.

Supporting the ratings are Sun Life’s very strong business profile and competitive advantages in Canada as well as its very strong earnings, capitalization, and investments. We view Sun Life’s enterprise risk management (ERM) as strong and a neutral to the ratings given the group’s complexity and risks. We view Sun Life’s financial flexibility as a weakness to the ratings.

Sun Life has six issues of PerpetualDiscounts outstanding: SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D and SLF.PR.E, as well as one FixedReset, SLF.PR.F. All are tracked by HIMIPref™ and assigned to their expected subindices.

Posted in Issue Comments | 1 Comment »

April 12, 2010

April 12th, 2010

Greece is getting a bail-out:

Forced into action by a surge in Greek borrowing costs to an 11-year high, finance ministers from the 16 euro countries said they and the International Monetary Fund would offer the loans at non-subsidized interest rates in case Greece runs out of money-raising options. European Union Economic and Monetary Affairs Commissioner Olli Rehn said that the rate on the loans could be around 5 percent.

There’s no word regarding the attached strings.

PerpetualDiscounts continued their recovery today, gaining 38bp on continued heavy volume, while FixedResets were basically unchanged, gaining 1bp.

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 2.60 % 2.69 % 54,786 20.89 1 -0.8676 % 2,128.7
FixedFloater 4.90 % 3.02 % 47,787 20.12 1 -0.2247 % 3,227.5
Floater 1.91 % 1.67 % 42,337 23.41 4 -0.0242 % 2,418.2
OpRet 4.88 % 3.55 % 105,244 1.10 10 0.0000 % 2,314.5
SplitShare 6.35 % -3.32 % 133,872 0.08 2 0.1315 % 2,150.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,116.4
Perpetual-Premium 5.84 % 3.85 % 33,374 0.62 2 0.6517 % 1,845.2
Perpetual-Discount 6.16 % 6.19 % 196,893 13.66 76 0.3795 % 1,728.5
FixedReset 5.42 % 3.87 % 481,188 3.66 44 0.0052 % 2,174.5
Performance Highlights
Issue Index Change Notes
CU.PR.A Perpetual-Discount -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 23.84
Evaluated at bid price : 24.15
Bid-YTW : 6.08 %
CM.PR.I Perpetual-Discount 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.18 %
BNS.PR.K Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 6.04 %
TRP.PR.A FixedReset 1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.71
Bid-YTW : 4.00 %
RY.PR.H Perpetual-Discount 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 23.80
Evaluated at bid price : 24.00
Bid-YTW : 5.98 %
SLF.PR.A Perpetual-Discount 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 6.26 %
CM.PR.D Perpetual-Discount 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 22.84
Evaluated at bid price : 23.13
Bid-YTW : 6.23 %
BMO.PR.L Perpetual-Discount 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 24.14
Evaluated at bid price : 24.35
Bid-YTW : 6.05 %
GWO.PR.G Perpetual-Discount 1.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 21.09
Evaluated at bid price : 21.09
Bid-YTW : 6.23 %
Volume Highlights
Issue Index Shares
Traded		 Notes
BNS.PR.Y FixedReset 461,960 New issue settled today.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 24.37
Evaluated at bid price : 24.42
Bid-YTW : 3.94 %
TD.PR.E FixedReset 74,430 RBC crossed 60,000 at 27.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.40
Bid-YTW : 3.72 %
TD.PR.S FixedReset 65,920 TD bought 20,000 from anonymous at 25.72. National bought 11,000 from Desjardins at 25.70 and 11,200 from RBC at 25.71.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-30
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 4.18 %
RY.PR.T FixedReset 65,875 National crossed blocks of 30,000 and 10,000 at 27.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.90
Bid-YTW : 3.67 %
TD.PR.N OpRet 62,600 RBC crossed 50,000 at 25.78; National crossed 11,000 at 25.74.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-05-30
Maturity Price : 25.50
Evaluated at bid price : 25.72
Bid-YTW : 3.55 %
RY.PR.X FixedReset 52,551 National crossed blocks of 30,000 and 10,000 at 27.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.81
Bid-YTW : 3.77 %
There were 54 other index-included issues trading in excess of 10,000 shares.

Posted in Market Action | No Comments »

BNS.PR.Y Drops on Opening! FixedResetDiscount?

April 12th, 2010

This issue is a 3.85%+100 FixedReset announced March 25.

BNS has announced:

that as a result of investor demand for its domestic public offering of non-cumulative 5-year rate reset preferred shares Series 30 (the “Preferred Shares Series 30”), the size of the offering has been increased to 10.6 million Preferred Shares Series 30. The gross proceeds of the offering will now be $265 million.

The offering was made through a syndicate of investment dealers led by Scotia Capital Inc. The Preferred Shares Series 30 commence trading on the Toronto Stock Exchange today under the symbol BNS.PR.Y.

Holders of Preferred Shares Series 30 will be entitled to receive a non-cumulative quarterly fixed dividend for the initial period ending April 25, 2015 yielding 3.85% per annum, as and when declared by the Board of Directors of Scotiabank. Thereafter, the dividend rate will reset every five years at a rate equal to 1.00% over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series 30 will, subject to certain conditions, have the right to convert all or any part of their shares to non-cumulative floating rate preferred shares Series 31 (the “Preferred Shares Series 31”) of Scotiabank on April 26, 2015 and on April 26 every five years thereafter. Holders of the Preferred Shares Series 31 will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 1.00%, as and when declared by the Board of Directors of Scotiabank.

BNS.PR.Y traded 461,960 shares in a range of 24.30-64 (!) today, before settling at 24.42-49.

Vital statistics are:

BNS.PR.Y FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-12
Maturity Price : 24.37
Evaluated at bid price : 24.42
Bid-YTW : 3.94 %

BNS.PR.Y is tracked by HIMIPref™. It is assigned to the “FixedReset” index; when there is enough differentiation of prices to justify a new index, the FixedReset index will be split into discount and premium indices; just by price, I think: doing it by reset level and call expectation might be too complex for what is meant to be a simple index.

Posted in Issue Comments | 4 Comments »

WFS.PR.A Warrant Offering 10% Subscribed

April 12th, 2010

Mulvihill has announced 898,716 warrants for full units of World Financial Split Corp. were exercised. Issuance was 8,557,010, hence: 10%.

The 900,000-odd new shares added to the 8.6-million old ones should increase the liquidity of WFS.PR.A; it’s a shame about the credit quality.

WFS.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-4(high) by DBRS. WFS.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

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SBN.PR.A Warrant Offering 34% Subscribed

April 12th, 2010

Mulvihill has announced that the SBN.PR.A warrant offering has succeeded in selling slightly under 1.3-million units, for gross proceeds of $24.24-million.

The prospectus stated 3.8-million units were up for sale; hence, 34%.

The 1.3-million new shares, added to the 3.8-million old ones, means this fund is starting to get to a respectable size. Now, if only the credit quality was better…

SBN.PR.A was last mentioned on PrefBlog when the warrant prospectus was filed. SBN.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

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