PrefBlog

Manulife Financial has announced:

that it has completed its offering of 18 million Non-cumulative 5-Year Rate Reset Class A Shares, Series 4 (the “Series 4 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $450 million.

The offering was underwritten by a syndicate of investment dealers led by RBC Capital Markets and CIBC World Markets. The sale of 18 million Series 4 Preferred Shares included the exercise in full by the underwriters of their option to purchase four million shares. The Series 4 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.D.

The original size was 8-million shares plus 3-million greenshoe; the thing sold like hotcakes!

The issue traded 541,409 shares in a range of 24.65-78 before closing at 24.70-73, 12×45.

On interesting thing about this issue is that it is non-cumulative. There is no real reason for this; MFC is a holding company. It is, technically, an insurance company – but has no policy holders and is therefore not required to file MCCSR reports with OFSI. There is therefore no real need, from a regulatory perspective, to have this qualify as Tier 1 capital – it appears that the non-cumulativity has been chosen solely to help with the credit ratings; as a precautionary measure in case management ever wants to do something with MFC’s insurance license; and, perhaps, to hoodwink the gullible into believing that there is no difference between the holding company and operating company.

MFC.PR.D has been added to HIMIPref™ and is now part of the Fixed-Reset subindex.

These are total returns, with dividends presumed to have been reinvested at the bid price on the ex-date. The list has been restricted to issues in the HIMIPref™ indices.

BNS Split Corp. II has announced:

The Company has revised its Capital Share dividend policy and has determined that it will not pay a dividend on the Capital Shares if the Net Asset Value per Unit at the time of declaration, after giving effect to the dividend, would be less than or equal to the original issue price of the Preferred Shares. In such circumstances, any excess dividends received on The Bank of Nova Scotia common shares (“BNS Shares”) minus the dividends payable on the Preferred Shares and all administrative, operating and income tax expenses will be reinvested in short-term debt securities or BNS Shares. However, as long as the Net Asset Value per Unit at the date of declaration exceeds such amount, the Company intends to pay a dividend on the Capital Shares equal to the excess of the dividends received on the BNS Shares minus the Preferred Share dividends and all administrative, operating and income tax expenses. Based on yesterday’s closing sale prices of the BNS Shares and after giving effect to the Capital Share dividend, the Net Asset Value per Unit would be $27.10 or $6.27 in excess of the original issue price of the Preferred Shares.

Not much, perhaps (as noted by DBRS when downgrading ES.PR.B), but better than nothing! The original policy had no Asset Test:

It will be the policy of the Board of Directors to declare and pay quarterly dividends on the Capital Shares in an amount equal to the dividends received by the Company on the BNS Shares minus the distributions payable on the Preferred Shares and all administrative and operating expenses. Based on the current BNS Share dividends and estimated expenses of the Company, the Company expects to pay quarterly dividends of $0.0420 per Capital Share ($0.1680 per year or approximately 1.46% of the Capital Share offering price).

BSC.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-3 as part of the DBRS Mass SplitShare Downgrade. BSC.PR.A is not tracked by HIMIPref™.

DBRS has announced that it:

has today downgraded the Class B, Preferred Shares (the Preferred Shares) issued by Energy Split Corporation (the Company) to Pfd-5 from Pfd-4 (low), with a Stable trend. The rating has been removed from Under Review with Negative Implications.
…
All of the downside protection available to the Preferred Shares has been eroded. Based on the most recent net asset value (NAV), holders of the Preferred Shares would experience a loss of approximately 17% of their initial issuance price if the Forward Agreement were terminated and proceeds distributed.

The Company’s dividend policy has been to pay quarterly distributions to the Capital Shares equal to the excess income available from the quarter after paying Preferred Shares dividends and other Company expenses. On February 18, 2009, DBRS downgraded the Preferred Shares to Pfd-4 (low) and left the rating Under Review with Negative Implications. It was noted that the Company’s dividend policy allowed for a very high level of payouts to the Capital Shares compared to what would be expected based on the asset coverage available to the Preferred Shares. On February 26, 2009, the Company declared a distribution of $0.60 per Capital Share and announced a revision of its distribution policy. On the next distribution date (June 16, 2009), the Company will not pay a distribution on the Capital Shares if the NAV at the time of declaration, after giving effect to the distribution, would be less than or equal to the original issue price of the Preferred Shares. Considering the current NAV of the Company and the amount of excess income available, DBRS believes that the revised policy is not restrictive enough in limiting payouts to the Capital Shares.

As a result of the current asset coverage and dividend policy for payouts to the Capital Shares, DBRS has downgraded the rating of the Preferred Shares to Pfd-5. A main constraint to the rating is that volatility of the market price and changes in distribution policies of the oil and gas trusts in the Portfolio may result in reductions in asset coverage or dividend coverage from time to time.

ES.PR.B had assets of $18.27 to cover preferred obligations of $21.00 as of February 26.

ES.PR.B was last mentioned on PrefBlog when the Dividend Policy change was announced. ES.PR.B is not tracked by HIMIPref™.

DBRS has announced that it:

has today revised the trends on most ratings of HSBC Bank Canada (the Bank) to Negative from Stable following Negative trends being placed on the ratings of HSBC Holdings plc (the Parent). (Please see DBRS’s HSBC Holdings plc press release dated March 3, 2009).

DBRS’s ratings of HSBC are based on the relationship the Bank has with its ultimate parent, which is one of the largest global banking groups. DBRS’s long-term Issuer Rating of HSBC Holdings plc is now AA (high) with a Negative trend.

Under DBRS’s bank rating methodology, DBRS has assigned HSBC Bank Canada a support assessment of SA1, reflecting a strong expectation of timely support from HSBC Holdings plc. All guaranteed debts are rated at the same level as the Parent. The guaranteed short-term obligations remain Stable, as a AA long-term rating would continue to support an R-1 (high) short-term rating.

Given the strategic nature of the relationship between HSBC Bank Canada and HSBC Holdings plc, but the lack of an explicit guarantee, the non-guaranteed Long-Term Deposits and Senior Debt rating of HSBC is one notch lower than HSBC Holdings plc.

The referenced press release states:

The Negative trend reflects DBRS’s concern that further economic weakening in HSBC’s markets will result in continued elevated credit costs, which will pressure earnings. Moreover, the Negative trend reflects DBRS’s expectation that the global economic slowdown may pressure revenue generation ability. While DBRS considers the Group’s solid earnings power a fundamental strength and a significant factor supporting HSBC’s rating, the unprecedented weakness and the global recessionary environment may result in a weakening of HSBC’s sizeable pre-provisioning earnings generation ability and lead to earnings pressure.

S&P took no action; Moody’s downgraded the Household Finance unit which is being de-emphasized within HSBC.