PrefBlog

Brascan Soundvest Rising Distribution Split Trust has released via SEDAR the materials for the Extraordinary Meeting of Capital Unitholders previously reported on PrefBlog.

Sadly, it appears that no material change in the management of the fund can be expected – it is merely a name change and ownership shuffle. It appears that Kevin Charlebois, who has presided over the appallingly poor performance of the trust since inception, will continue his endeavors.

Two elements of the reorganization not previously reported are:

(b) removing the fixed termination date for the Fund, which is currently set at March 31, 2015;

(c) permitting the Manager, in its sole discretion, to wind-up the Fund should the net asset value (“NAV”) of the Fund fall below $15 million, subject to compliance with the trust indenture between the Fund and CIBC Mellon Trust Company dated March 16, 2005 governing the 6% Preferred Securities (the “Trust Indenture”);

The second of those items is of great interest since:

The Fund was launched in 2005 with a mandate to deliver a stable stream of monthly distributions and to maximize long-term total return. As of March 12, 2010, the Fund had 5,662,643 Units and 5,662,643 Preferred Securities outstanding, and its total NAV was $17,211,757 or $3.04 per Unit. The Fund’s Units closed at $2.36 on the TSX on March 12, 2010.

While the manager’s abuse of discretion in suspending the annual retraction does not provide a lot of hope that they will exercise their discretion to shut down the fund in the event of continued poor performance, the availability of that discretion must be considered a Good Thing.

I’m not entirely sure that this is the first time it’s happened, because I don’t keep track of such things … but at the very least, it’s one of the first times this has happened!

RY.PR.R is a 6.25%+450 FixedReset, announced 2009-1-21. It is callable 2014-2-24 at par and was most recently mentioned in the volume highlights for 2010-3-22.

It traded 5,593 shares today in a range of 28.24-43 before closing at 28.31-40, 20×35.

HIMIPref™ reports that the yield to a call 2014-3-26 at par is now 2.93% (pre-tax, bond-equivalent); recall that a slight inaccuracy in HIMIPref™ conventions means that the calculated call date is maturityNoticePeriod days after the actual call date.

That’s a pretty low yield! The reset to +450bp makes it almost certain to be called at the first opportunity, but one of the words that can hurt in the investment game is “almost”!

I have uploaded two charts for your edification and amusement:

• Bid YTW
• Bid Price

RY.PR.R was last mentioned on PrefBlog (other than in routine reports) when it was added to TXPR in July 2009. It is tracked by HIMIPref™ and is a member of the FixedReset index.

Hard on the heels of the DFN.PR.A enlargement, Financial 15 Split Corp. has announced:

it has filed a short form prospectus in each of the provinces of Canada with respect to an additional offering of Preferred Shares and Class A Shares. The offering will be available through a group of underwriters, co-led by RBC Capital Markets and CIBC World Markets. The Company will file an amended and restated prospectus shortly outlining the offering prices set forth below.

The Preferred Shares will be offered at a price of $10.00 per share to yield 5.25% based on current distribution policy. The closing price of the Preferred Shares on March 25, 2010 on the TMX was $10.41.

The Class A Shares will be offered at a price of $9.75 per share to yield 15.5% based on current distribution policy. The closing price of the Class A Shares on March 25, 2010 on the TMX was $10.40.

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

The Net Asset Value Per Unit was 17.84 on March 15.

FTN.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-3 by DBRS.

FTN.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Lifeco Split Corporation has announced:

that it is considering the merits of a possible extension of the term of the Capital Shares and the Preferred Shares beyond their scheduled redemption date of July 31, 2010. Lifeco has retained Scotia Capital Inc. to assist in this regard. There is no guarantee that after such review an extension will be proposed or if proposed will be approved by shareholders.

Lifeco is a mutual fund corporation created to hold a portfolio of common shares of selected publicly listed Canadian life insurance companies. Lifeco will generate a fixed quarterly dividend for the Preferred shareholders and provide the Capital shareholders with a leveraged investment, the value of which is linked to changes in the market price of the portfolio shares.

Capital Shares and Preferred Shares of Lifeco are listed for trading on The Toronto Stock Exchange
under the symbols LSC and LSC.PR.C respectively.

Asset coverage is 1.7+:1 according to the company; total asset value is about $32-million.

LSC.PR.C is not tracked by HIMIPref™. LSC.PR.C was last mentioned on PrefBlog when the capital unit dividend was suspended (it has since been reinstated).

Thomson Reuters has announced:

the offering of US$500 million of 5.85% notes due 2040. The offering is expected to close on March 30, 2010, subject to customary closing conditions. Thomson Reuters plans to use the net proceeds from this offering and available cash to repurchase all of its US$700 million principal amount of 6.20% notes due 2012, as previously announced earlier today.

J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated, RBS Securities Inc. and UBS Securities LLC are the joint book-running managers for the offering.

DBRS rates it A(low).

USD 30-Year Swaps are now at 4.45%, implying that the issue could be swapped into 3-month USD LIBOR +140bp. This in turn implies (to me!) that TRI.PR.B, paying 70% of Prime and quoted today at 23.75-95 (95% of par; hence paying about 74% of Prime as a dividend (so call it pre-tax interest equivalent = prime, close enough for government work).

Therefore TRI.PR.B pays the pre-tax equivalent of Prime, which is equal to about the overnight rate +200bp … so you’re getting a yield increment for the prefs of about +60bp, which is way, way less than you get for nominals … although, mind you, there is a LOT of basis risk in this calculation.

So I say TRI.PR.B is expensive.

Dividend 15 Split Corp. announced on March 3:

that it has filed a short form prospectus in each of the provinces of Canada with respect to an additional offering of Preferred Shares and Class A Shares. The offering will be co-led by RBC Capital Markets and CIBC World Markets. The Company will file an amended and restated prospectus shortly outlining the offering prices set forth below.

The Preferred Shares will be offered at a price of $10.00 per share to yield 5.25% based on current distribution policy. The closing price of the preferred shares on March 2, 2010 on the TMX was $10.40.

The Class A shares will be offered at a price of $11.00 per share to yield 10.91% based on current distribution
policy. The closing price of the preferred shares on March 2, 2010 on the TMX was $11.99.

It announced on March 10 that it:

filed a final prospectus for its secondary offering of 2,400,000 Preferred Shares and 2,400,000 Class A Shares of the Company for aggregate gross proceeds of $50,400,000, bringing the Company’s net assets to approximately $273 million.

Finally, it announced on March 16 that it:

completed its secondary offering of 2,400,000 Preferred Shares and 2,400,000 Class A Shares of the Company for aggregate gross proceeds of $50,400,000, bringing the Company’s net assets to approximately $273 million.

DFN.PR.A was last mentioned on PrefBlog when it was reviewed by Larry MacDonald.

DFN.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.