PrefBlog

DBRS Limited (DBRS Morningstar) has announced:

placed the Issuer Rating, long-term obligations, and preferred shares credit ratings of Brookfield Corporation (BN or the Company, formerly Brookfield Asset Management Inc.) and its guaranteed subsidiaries Under Review with Positive Implications. In addition, DBRS Morningstar placed the short-term credit ratings of BN and its guaranteed subsidiaries Under Review with Developing Implications. These rating actions are not the result of any change in credit risk of the Company (or its guaranteed subsidiaries).

Following the annual surveillance review of the credit ratings of the Company on July 5, 2023, DBRS Morningstar identified an error in the application of certain methodologies used in the determination of the credit ratings of BN. DBRS Morningstar believes the rating rationale for the credit ratings of BN, and the applicable methodological approach, was not adequately disclosed previously. This error is not connected in any way to the data and information provided by the Company for the purposes of providing the relevant credit ratings.

Over the course of the coming weeks, DBRS Morningstar will conduct a review of the Company and the applicable methodological approach(es). Further to that review, DBRS Morningstar may apply additional or different DBRS Morningstar methodologies from those that have been applied in the past in the determination of the credit ratings of BN. Such methodologies may include the “Global Methodology for Rating Investment Management Companies” and the “Global Methodology for Rating Insurance Companies and Insurance Organizations.” The application of a different methodological approach may result in changes in the level of one or more outstanding credit ratings of BN. DBRS Morningstar will provide information regarding the rationale for any such changes in connection with the announcement of the related credit rating actions.

Affected issues are (deep breath): BN.PF.A, BN.PF.B, BN.PF.C, BN.PF.D, BN.PF.E, BN.PF.F, BN.PF.G, BN.PF.H, BN.PF.I, BN.PF.J, BN.PF.K, BN.PF.L, BN.PR.B, BN.PR.C, BN.PR.K, BN.PR.M, BN.PR.N, BN.PR.R, BN.PR.T, BN.PR.X, BN.PR.Z and (this one not tracked by HIMIPref™) BRN.PR.A,

The Toronto-Dominion Bank has announced:

that it will exercise its right to redeem all of its 16,000,000 outstanding Non-Cumulative 5-Year Rate Reset Class A First Preferred Shares, Series 20 (Non-Viability Contingent Capital) (the “Series 20 Shares”) on October 31, 2023 at the price of $25.00 per Series 20 Share for an aggregate total of approximately $400 million. The redemption has been approved by the Office of the Superintendent of Financial Institutions.

On August 24, 2023, TD announced that dividends of $0.296875 per Series 20 Share had been declared. These will be the final dividends on the Series 20 Shares, and will be paid in the usual manner on October 31, 2023 to shareholders of record on October 6, 2023, as previously announced. After October 31, 2023, the Series 20 Shares will cease to be entitled to dividends and the only remaining rights of holders of such shares will be to receive payment of the redemption amount.

Beneficial holders who are not directly the registered holder of Series 20 Shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds. Inquiries should be directed to our Registrar and Transfer Agent, TSX Trust Company, at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.K was issued as a FixedReset, 4.75%+259 that commenced trading 2018-9-13 after being announced 2018-9-4. It is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

The redemption comes as quite a surprise, given that the closing price on 2023-9-22 was 21.79 with most VWAPs for September being below 22.00. It has been clear for a while that TD has been awash in excess capital since the Horizons deal was abandoned; in addition, OSFI has been twisting bank arms to get them to issue LRCNs and OTC preferreds. Still, I would have liked to have been a fly on the wall at the meeting where this redemption was approved by the bank!

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!

Quadravest has announced:

Financial 15 Split Corp. (the “Company”) is pleased to announce the Preferred Share dividend rate for the fiscal year beginning December 1, 2023, will increase by 1.75% over the current rate. Monthly payments to FTN.PR.A will be $0.07708 per share for an annual yield of 9.25% on their $10 redemption value.

The Company invests in an actively managed, high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal	National Bank of Canada	Bank of America Corp.
The Bank of Nova Scotia	Manulife Financial Corporation	Citigroup Inc.
Canadian Imperial Bank of Commerce	Sun Life Financial Inc.	Goldman Sachs Group Inc.
Royal Bank of Canada	Great-West Lifeco Inc.	JP Morgan Chase & Co.
The Toronto-Dominion Bank	CI Financial Corp.	Wells Fargo & Co.

As I stated when reporting last year’s reset:

I must say, I am growing to dislike these annual resets intensely. The minimum rate on these resets is only 5.5% and apart from this the company has full discretion. A prudent analysis must therefore assume that next year the rate will reset to 5.5% but there is every possibility, of course, that it will not. So refusing to buy these things might result in leaving money on the table. All in all, though, assuming the worst is always the way to go in securities analysis!

FTN.PR.A matures 2025-12-1 and has a NAVPU of 16.82 as of 2023-9-15.

Thanks to Assiduous Reader newbiepref for bringing this to my attention!

Quadravest has announced:

Under the distribution policy announced in November 2021, … Preferred shareholders will receive prime plus 1.50% with a minimum rate of 5.00% and a maximum rate of 8.00%

As previously announced on March 2, 2023, the termination date of the Company was extended a futher five years from December 1, 2023 to December 1, 2028. In connection with the extension, the Company has the right to amend the annual rate of cumulative preferential monthly dividends to be paid to the BK.PR.A Preferred Shares for the five year renewal period, commencing December 1, 2023. In keeping with market yields for preferred shares with similar terms, there will be no change to the rate of the BK.PR.A Preferred Shares.

In relation to the term extension, the Company has an additional retraction right for those shareholders not wishing to continue holding their investment, allowing existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2023 net asset value per unit.

Alternatively, shareholders may sell their shares for the market price at any time, potentially at a higher price than would be achieved through retraction, or shareholders may take no action and continue to hold their shares.

Thanks to Assiduous Reader niagara for bringing this to my attention!

Quadravest has announced:

North American Financial 15 Split Corp. (the “Company”) is pleased to announce the Preferred Share dividend rate for the fiscal year beginning December 1, 2023, will increase by 1.75% over the current rate. Monthly payments to FFN.PR.A will be $0.07917 per share for an annual yield of 9.50% on their $10 redemption value.

The Company invests in an actively managed, high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal	National Bank of Canada	Bank of America Corp.
The Bank of Nova Scotia	Manulife Financial Corporation	Citigroup Inc.
Canadian Imperial Bank of Commerce	Sun Life Financial Inc.	Goldman Sachs Group Inc.
Royal Bank of Canada	Great-West Lifeco Inc.	JP Morgan Chase & Co.
The Toronto-Dominion Bank	CI Financial Corp.	Wells Fargo & Co

I find I can’t much to say about this that’s better than what I said last year:

I must say, I am growing to dislike these annual resets intensely. The minimum rate on these resets is only 5.5% and apart from this the company has full discretion. A prudent analysis must therefore assume that next year the rate will reset to 5.5% but there is every possibility, of course, that it will not. So refusing to buy these things might result in leaving money on the table. All in all, though, assuming the worst is always the way to go in securities analysis!

And actually, these things mature next year, so when they (almost inevitably) extend the Capital Units and refund the preferreds, there’s no minimum … except that holders of the current version of FFN.PR.A will get a $10.00 retraction option if they don’t like the dividend on the reissued preferreds, assuming that the NAVPU is higher than that.

However, one point of interest is that the current NAVPU of the fund is only $13.81. So for the next year the fund will be paying dividends at the rate of 9.50% on the $10.00 par value of the preferreds, which is $0.95, which must be earned by a portfolio worth only $13.81 … meaning that to break even BEFORE FEES the portfolio has to earn 6.88% income. Given that their base management expense ratio is 0.92%, the portfolio has to earn 7.80% income just to pay their preferred shareholders. That’s a helluva drag, when according to DBRS:

Holders of the Preferred Shares used to receive cumulative monthly cash dividends at a rate of 6.75% annually until November 2022. However, with effect from December 1, 2022, this rate has been increased to 7.75% annually.
…
The current Preferred Share dividend coverage ratio is approximately 0.43 times (x). The average grind on the Portfolio is expected to be 5.3% annually for the next two years.

While an argument can be made that capital gains will save the day, I don’t see any reason to believe that their highly touted covered-call writing programme is going to make any net difference. As a point of interest, the cash weighting in the portfolio was 13% as of 2023-8-31.

Thanks to Assiduous Reader niagara for bringing this to my attention!