PrefBlog

I speculated last week that EPP.PR.A was at risk for a downgrade, and today DBRS downgraded EPP.PR.A to Pfd-3:

DBRS has today downgraded the rating of EPCOR Power Equity Ltd.’s (Power Equity) Cumulative Redeemable Preferred Shares, Series 1 (Series 1 Preferreds), to Pfd-3 from Pfd-3 (high). The trend remains Negative. This action follows Power Equity’s announcement that it has sold, via a bought deal arrangement, $100 million of Cumulative Rate Reset Preferred Shares, Series 2 (Series 2 Preferreds), to which DBRS has assigned a rating of Pfd-3 with a Negative trend.

Power Equity is a wholly-owned subsidiary of EPCOR Power L.P. (Power LP), with Power LP guaranteeing, on a subordinated basis, certain amounts relating to Power Equity’s Series 1 Preferreds and Series 2 Preferreds (including payment of dividends, as and when declared). As such, the preferred share ratings of Power Equity continue to be based on the credit profile of Power LP. Following the sale of the Series 2 Preferreds, Power LP’s capitalization will include an amount of preferred equity (totalling approximately $220 million) that is large compared with the amount of the Partners’ equity on the balance sheet ($564 million as of June 30, 2009). The rating on the Series 1 Preferreds has been downgraded by one notch to Pfd-3 (with the same rating assigned to the Series 2 Preferreds) to reflect the now-significant amount of preferred equity Power LP carries in relation to its level of Partners’ equity.

Not the same reasons that triggered my speculation! That’s forecasting for you! DBRS continues:

The change in Power Equity’s preferred rating has no impact on the ratings of Power LP, which stand at: Senior Unsecured Debt & Medium-Term Notes of BBB (high) with a Negative trend, and a stability rating of STA-2 (low). See the DBRS press releases dated April 29, 2009, and June 8, 2009, for additional details on recent rating actions and the Negative trends. Since the change in trend from Stable to Negative in April, there have been two developments viewed as positive for Power LP’s credit profile: 1) a reduction in unit distributions, expected to conserve approximately $40 million in cash flow per year; and 2) the proceeds from the sale of the Series 2 Preferreds will be applied to debt reduction. Both of these developments should help Power LP avoid moving closer to its 65% debt-to-capitalization covenant. However, the trends will remain Negative until DBRS views Power LP’s capitalization as stable on a sustainable basis, and expected levels of cash flow are maintained.

Power LP recently stated that it was modestly reducing its financial expectations for 2009, largely as a result of low operating margins at its two North Carolina facilities. DBRS does not view this as a material change, as a reduced level of contributions from these facilities has already been factored into our analysis.

Power Financial Corporation has announced:

the successful completion and closing of an offering of 6,000,000 Non-Cumulative First Preferred Shares, Series O (the “Series O Shares”), priced at $25.00 per share to raise gross proceeds of $150 million.

The issue was bought by an underwriting group led by BMO Capital Markets, Scotia Capital Inc. and RBC Capital Markets.

The Series O Shares will be listed and posted for trading on the Toronto Stock Exchange under the symbol “PWF.PR.O”. Proceeds from the issue will be used to supplement Power Financial’s financial resources and for general corporate purposes.

This 5.80% Straight was announced last week.

PWF.PR.O traded 149,780 shares in a range of 25.35-50 before closing at 24.35-39.

Vital statistics are:

PWF.PR.O is tracked by HIMIPref™. It has been assigned to the PerpetualDiscount index.

It’s interesting to look at the comparators:

S Split Corp has announced:

that it has filed a preliminary short form prospectus relating to an offering of Warrants to holders of Class A Shares of the Fund. Each Class A sharholder of record on the record date will receive one Warrant for each Class A Share held. Each Warrant will entitle its holder to acquire one Class A Share and one Preferred Share upon payment of the subscription price. The record date and the subscription price will be determined at the time the Fund files its final prospectus for the offering. The Fund has applied to list the Warrants and the Class A Shares and the Preferred Shares issuable upon the exercise thereof on the Toronto Stock Exchange. The exercise of Warrants by holders will provide the Fund with additional capital that can be used to take advantage of attractive investment opportunities and is also expected to increase the trading liquidity of the Class A Shares and the Preferred Shares and to reduce the management expense ratio of the Fund.

The Fund invests in a portfolio of common shares of The Bank of Nova Scotia. To generate additional returns above the distributions earned on its securities, the Fund may, from time to time, write covered call options in respect of some or all of the securities in its portfolio. The Fund may also, from time to time, write cash-covered put options in respect of securities in which the Fund is permitted to invest. The Fund’s investment portfolio is managed by its investment manager, Mulvihill Capital Management Inc.

The preliminary prospectus does not yet appear to be available.

SBN.PR.A is scheduled to be wound-up 2014-12-1. It seems too early to be looking for a term extension; perhaps the prospectus, when available, will clarify the matter. SBN.PR.A has an Asset Coverage of 2.1-:1 as of September 30.

SBN.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-3 by DBRS. SBN.PR.A is tracked by HIMIPref™, but has been relegated to the Scraps index on credit concerns.

World Financial Split Corp. has announced:

that it has filed a preliminary short form prospectus relating to an offering of Warrants to holders of Class A Shares of the Fund. Each Class A shareholder of record on the record date will receive one Warrant for each Class A Share held. Each Warrant will entitle its holder to acquire one Class A Share and one Preferred Share upon payment of the subscription price. The record date and the subscription price will be determined at the time the Fund files its final prospectus for the offering. The Fund has applied to list the Warrants and the Class A Shares and the Preferred Shares issuable upon the exercise thereof on the Toronto Stock Exchange. The exercise of Warrants by holders will provide the Fund with additional capital that can be used to take advantage of attractive investment opportunities and is also expected to increase the trading liquidity of the Class A Shares and the Preferred Shares and to reduce the management expense ratio of the Fund.

The Fund invests in a portfolio that includes common equity securities selected from the ten largest financial services companies by market capitalization in each of Canada, the United States and the rest of the world (the “Portfolio Universe”). In addition, up to 20% of the NAV of the Fund may be invested in common equity securities of financial services companies that are not in the Portfolio Universe but meet certain market capitalization and credit rating thresholds. To generate additional returns above the distributions earned on its securities, the Fund may, from time to time, write covered call options in respect of some or all of the securities in its portfolio. The Fund may also, from time to time, write cash-covered put options in respect of securities in which the Fund is permitted to invest. The Fund’s investment portfolio is managed by its investment manager, Mulvihill Capital Management Inc.

The preliminary prospectus does not yet appear to be available.

WFS.PR.A has an Asset Coverage of 1.4-:1 as of September 30 and is scheduled to be wound-up 2011-6-30; I suspect that a term extension is in the works.

WFS.PR.A was last mentioned on PrefBlog with the reminder that the Capital Unit dividend was still suspended – it cannot be paid unless Asset Coverage of the preferreds is greater than 1.5:1. WFS.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.