Issue Comments

NSI.PR.C to be Redeemed

Nova Scotia Power has announced:

that effective April 1, 2009 (the “redemption date”) the Company will redeem all of its outstanding Cumulative Redeemable First Preferred Shares, Series C (the “Series C shares”) for a redemption price of $25.00 per share.

The Notice of Redemption and associated documents are being sent to Registered holders of these shares today. Beneficial holders of the Series C 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.

After the redemption date, holders of the Series C shares will cease to be entitled to dividends or to exercise any rights of shareholders.

NSI.PR.C was last mentioned on PrefBlog when it was added to the TXPR index at the January rebalancing.

NSI.PR.C is tracked by HIMIPref™; it is included in the “Scraps” sub-index due to volume concerns.

Regulatory Capital

NA Capitalization: 1Q09

NA has released its First Quarter 2009 Report and Supplementary Package, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!

Step One is to analyze their Tier 1 Capital, reproducing the prior format:

NA Capital Structure
October, 2008
& January 2009
  4Q08 1Q09
Total Tier 1 Capital 5,480 5,709
Common Shareholders’ Equity 86.2% 80.9%
Preferred Shares 14.1% 19.1%
Innovative Tier 1 Capital Instruments 15.1% 15.4%
Non-Controlling Interests in Subsidiaries 0.3% 0.3%
Goodwill -13.5% -13.0%
Miscellaneous -2.3% -2.8%
Shareholders’ equity includes ‘Foreign Currency Translation Adjustment’
‘Miscellaneous’ includes ‘unrealized gain of available for sale equity securities’ and ‘securitization related deductions’

Next, the issuance capacity (from Part 3 of the introductory series):

NA
Tier 1 Issuance Capacity
October 2008
& January 2009
  4Q08 1Q09
Equity Capital (A) 3,878 3,740
Non-Equity Tier 1 Limit B=0.666*A 2,585 2,491
Innovative Tier 1 Capital (C) 828 880
Preferred Limit (D=B-C) 1,757 1,611
Preferred Actual (E) 774 1,089
New Issuance Capacity (F=D-E) 983 522
Items A, C & E are taken from the table
“Risk Adjusted Capital Ratiosl”
of the supplementary information;
Note that Item A includes everything except preferred shares and innovative capital instruments

Item B is as per OSFI Guidelines; the limit was recently increased.
Items D & F are my calculations

and the all important Risk-Weighted Asset Ratios!

NA
Risk-Weighted Asset Ratios
October 2008
& January 2009
  Note 4Q08 1Q09
Equity Capital A 3,878 3,740
Risk-Weighted Assets B 58,069 57,312
Equity/RWA C=A/B 6.67% 6.53%
Tier 1 Ratio D 9.4% 10.0%
Capital Ratio E 13.2% 14.0%
Assets to Capital Multiple F 16.7x 17.0x
A is taken from the table “Issuance Capacity”, above
B, D & E are taken from RY’s Supplementary Report
C is my calculation
F is not yet available from OSFI for 4Q08; is not disclosed by the bank on a timely basis; and is not required to be disclosed by OSFI on a timely basis. Pondering the question of which of these three faults is most disgraceful provides me with many happy hours of rumination. The 4Q08 figure is approximated by subtracting goodwill of 740 from total assets of 129,332 to obtain adjusted assets of 128,592 and dividing by 7,679 total capital. The 1Q09 figure is approximated by subtracting goodwill of 741 from total assets of 136,989 to obtain adjusted assets of 136,248 and dividing by 8,034 of total capital

Prior Reports to Shareholders have included statements such as:

In addition to regulatory capital ratios, banks are expected to meet an assets-to-capital multiple test. The assets-to-capital multiple is calculated by dividing a bank’s total assets, including specified off-balance sheet items, by its total capital. Under this test, total assets should not be greater than 23 times the total capital. The Bank met the assets-to-capital multiple test in the third quarter of 2008.

… but they can no longer be bothered to note that they can’t be bothered to disclose this critical figure.

Earnings in the quarter were affected by a charge due to ABCP:

National Bank reported net income of $69 million for the first quarter of fiscal 2009, compared to net income of $255 million in the first quarter of 2008. Diluted earnings per share stood at $0.36, as against diluted earnings per share of $1.58 for the corresponding quarter of 2008. The results for the quarter included charges attributable to the impact of asset backed commercial paper (ABCP). These charges comprise the after-tax cost of holding ABCP of $98 million, which consisted of a net loss on available for sale securities related to ABCP of $129 million, financing costs, professional fees and the cost of economic hedge transactions totalling $10 million and interest income on ABCP further to the restructuring of $41 million. In addition, an after-tax loss related to commitments to extend credit to clients holding ABCP of $86 million was recorded in the first quarter of 2009. In the first quarter of 2008, the Bank had recorded after-tax charges related
to holding ABCP of $14 million, as well as a gain of $32 million on the sale of its subsidiary in Nassau.

Readers will remember that National Bank had an ownership interest in ABCP packagers, and their branded Money Market Fund was a major investor in these assets.

Regulatory Capital

RY Capitalization: 1Q09

RY has released its Fourth Quarter 2008 Earnings and Supplementary Package, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!

Step One is to analyze their Tier 1 Capital, reproducing the prior format:

RY Capital Structure
October, 2008
& January, 2009
  4Q08 1Q09
Total Tier 1 Capital 25,173 28,901
Common Shareholders’ Equity 115.0% 108.0%
Preferred Shares 10.6% 13.2%
Innovative Tier 1 Capital Instruments 15.4% 14.3%
Non-Controlling Interests in Subsidiaries 1.4% 1.2%
Goodwill -39.6% -34.4%
Miscellaneous -2.7% -2.4%
‘Miscellaneous’ includes ‘Substantial Investments’, ‘Securitization-related deductions’, ‘Expected loss in excess of allowance’ and ‘Other’

Next, the issuance capacity (from Part 3 of the introductory series):

RY
Tier 1 Issuance Capacity
October 2008
& January 2009
  4Q08 1Q09
Equity Capital (A) 18,637 20,949
Non-Equity Tier 1 Limit B=0.666*A 12,425 13,952
Innovative Tier 1 Capital (C) 3,879 4,141
Preferred Limit (D=B-C) 8,546 9,811
Preferred Actual (E) 2,657 3,811
New Issuance Capacity (F=D-E) 5,889 6,000
Items A, C & E are taken from the table
“Regulatory Capital”
of the supplementary information;
Note that Item A includes everything except preferred shares and innovative capital instruments

Item B is as per OSFI Guidelines; the limit was recently increased.
Items D & F are my calculations

and the all important Risk-Weighted Asset Ratios!

RY
Risk-Weighted Asset Ratios
October 2008
& January 2009
  Note 4Q08 1Q09
Equity Capital A 18,637 20,949
Risk-Weighted Assets B 278,579 273,561
Equity/RWA C=A/B 6.69% 7.66%
Tier 1 Ratio D 9.0% 10.6%
Capital Ratio E 11.1% 12.5%
Assets to Capital Multiple F 20.1x 17.5x
A is taken from the table “Issuance Capacity”, above
B, D, E & F are taken from RY’s Supplementary Report
C is my calculation.

Derivatives exposure, which was an issue last quarter as their long-term FX contracts grossed up the balance sheet, declined in notional terms but the risk-weighting increased to leave the risk-weighted exposure flat on the quarter. The notional decline was due to a reduction in short-term exposures; values for terms extending beyond one year were flat. It is possible – though not discussed! – that Royal is using its counterparty strength to go after the more profitable long-term business. Additionally, there appears (page 37 of the supplementary PDF) to be a shift from Foreign Exchange to Interest Rate derivatives.

It was a good solid quarter with nothing particularly exciting happening … just the way we like it! Very nice to see the delevering indicated by the Assets to Capital Multiple and improved Preferred Share subordination shown by the the Equity/RWA ratio.

Regulatory Capital

CM Capitalization: 1Q09

CIBC (Stock symbol CM … I can never quite decide how to present it!) has released its 1Q09 Earnings Report and 1Q09 Supplementary Package, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!

Step One is to analyze their Tier 1 Capital, reproducing the prior format:

CM Capital Structure
October, 2008
& January, 2009
  4Q08 1Q09
Total Tier 1 Capital 12,365 12,017
Common Shareholders’ Equity 91.2% 92.3%
Preferred Shares 26.1% 26.9%
Innovative Tier 1 Capital Instruments 0% 0%
Non-Controlling Interests in Subsidiaries 1.4% 1.5%
Goodwill -17.0% -17.7%
Misc. -1.8% -3.0%
Shareholders’ Equity includes “Common Shares”, “Contributed Surplus”, “Retained Earnings”, “Net after tax fair value losses arising from changes in institution’s own credit risk”, “Foreign Currency translation adjustments”, and “Net after tax undrealized holding loss on AFS equity securities in OCI”

‘Misc.’ is comprised of Basel II adjustments to Tier 1 Capital

Next, the issuance capacity (from Part 3 of the introductory series):

CM
Tier 1 Issuance Capacity
October 2008
& January 2009
  4Q08 1Q09
Equity Capital (A) 9,134 8,786
Non-Equity Tier 1 Limit B=0.666*A 6,089 5,851
Innovative Tier 1 Capital (C) 0 0
Preferred Limit (D=B-C) 6,089 5,851
Preferred Actual (E) 3,231 3,231
New Issuance Capacity (F=D-E) 2,858 2,620
Items A, C & E are taken from the table
“Regulatory Capital”
of the supplementary information;
Note that Item A is defined as total Tier 1 Capital, less preferred shares.

Item B is as per OSFI Guidelines; the limit was recently increased.
Items D & F are my calculations

and the all important Risk-Weighted Asset Ratios!

CM
Risk-Weighted Asset Ratios
October 2008
& January 2009
  Note 4Q08 1Q09
Equity Capital A 9,134 8,786
Risk-Weighted Assets B 117,900 122,400
Equity/RWA C=A/B 7.75% 7.18%
Tier 1 Ratio D 10.5% 9.8%
Capital Ratio E 15.4% 14.8%
Assets to Capital Multiple F 17.9x 17.7x
A is taken from the table “Issuance Capacity”, above
B, D & E are taken from CM’s Supplementary Report
C is my calculation.
F is taken the Shareholders’ Report

The Shareholders’ Report comments:

The Tier 1 ratio was down by 0.7% from the year end mainly due to structured credit charges in the quarter and higher credit risk weighted assets in the trading book resulting primarily from financial guarantor downgrades. The Tier 1 ratio was also adversely impacted by the expiry of OSFI’s transition rules related to the grandfathering of substantial investments pre-December 31, 2006, which were deducted entirely from Tier 2 capital at year end. The Tier 1 ratio benefited from lower risk weighted assets on residential mortgages resulting from higher insured mortgages.
The total capital ratio was down 0.6% from year end mainly due to structured credit charges in the quarter and higher credit risk weighted assets in the trading book, resulting primarily from financial guarantor downgrades. The ratio benefited from lower risk weighted assets on residential mortgages resulting from higher insured mortgages.

The big news in the reports was:

$708 million ($483 million after-tax, or $1.27 per share) loss on structured credit run-off activities

… which meant they didn’t make much money this quarter – only $147-million. They warn:

As at January 31, 2009, the fair value, net of valuation adjustments, of purchased protection from financial guarantor counterparties was $2.4 billion (US$1.9 billion). Market and economic conditions relating to these financial guarantors may change in the future, which could result in significant future losses.

In addition, it should be noted (page 9 of the report) that they still have $38.8-billion of actual ($10.2-billion) and notional ($28.6-billion) exposure in their “run-off portfolio”, offset by notional protection of $36.1-billion. It is the creditworthiness of the notional protection that is an issue.

Roughly half the notional exposure is derivatives written on Corporate Debt, while another quarter is writes on Collaterallized Loan Obligates; protection has been bought within these two sub-classes to basically offset. On Page 13 of the report, they do a very good job of breaking down these exposures by counterparty credit rating. About $8.7-billion of the notional exposure is to counterparties rated below investment grade; they do not disclose collateralization agreements that would give some comfort if they existed.

DRIPs

BNS DRIP: Preferred Dividends into Discounted Common

BNS has announced (a long time ago, but hey! better late than never, right?):

On August 26, 2008, the Bank announced that participants in the Plan will receive a two per cent discount from the Average Market Price (as defined in the Plan) on the purchase of additional common shares with reinvested dividends. The discount will not apply to the purchase of common shares with the optional cash payment or interest reinvestment options of the Plan. The first dividends for which this discount will be effective are the dividends on the Bank’s common and preferred shares declared by the Board of Directors on August 26, 2008 for the quarter ending October 31, 2008. These dividends will be payable on October 29, 2008 to holders of record at the close of business on October 7, 2008. Prior to this announcement, common shares issued under the Plan have been issued with no discount to the Average Market Price (as defined in the Plan).

The two per cent discount for common shares issuable under the dividend reinvestment and stock dividend components of the Plan will continue until further notice.

Market Action

February 26, 2009

Whoosh! The seminar was a lot of fun but it took a lot out of me!

There’s an amusing story in the Financial Times:

A whistleblower contacted US regulators more than five years ago with allegations that Sir Allen Stanford’s businesses were involved in an “illegal Ponzi scheme”, the Financial Times has learnt, raising new questions about why authorities waited until last week to shut down the alleged $8bn fraud.

Leyla Basagoitia, a former Stanford employee, raised a series of red flags about the tycoon’s empire in a 2003 employment dispute with her company at a tribunal run by the finance industry’s self-regulatory body. Ms Basagoitia also alerted the US Securities and Exchange Commission at about the same time, her lawyer said, echoing criticisms the agency ignored early warnings about the alleged $50bn Ponzi scheme run by Bernard Madoff.

I think we’re going to see stories like this regarding every fraud for the next five-odd years. It’s hard to know how seriously take them … it’s like the “US was warned of Pearl Harbour” stories one sees … yes, I’m sure the US was warned about Pearl Harbour. I’m equally certain they were warned about Japanese alliances with Mexico (a la Zimmerman) and little green men in Idaho. What was the backup?

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 5.34 % 3.64 % 23,786 18.09 2 -1.2897 % 840.7
FixedFloater 7.39 % 6.94 % 76,976 14.05 7 -0.4457 % 1,359.2
Floater 5.00 % 4.06 % 24,990 17.31 4 0.5509 % 1,050.0
OpRet 5.26 % 4.92 % 141,406 3.96 15 -0.1158 % 2,045.4
SplitShare 6.75 % 11.65 % 72,006 4.00 15 1.0742 % 1,665.5
Interest-Bearing 7.24 % 10.00 % 38,736 0.80 2 0.3561 % 1,952.7
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 -0.0445 % 1,512.5
Perpetual-Discount 7.13 % 7.26 % 178,609 12.26 71 -0.0445 % 1,393.0
FixedReset 6.14 % 5.74 % 543,196 13.89 27 -0.4579 % 1,794.3
Performance Highlights
Issue Index Change Notes
BNS.PR.R FixedReset -3.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 4.89 %
BCE.PR.Y Ratchet -3.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 25.00
Evaluated at bid price : 13.26
Bid-YTW : 7.63 %
BNS.PR.O Perpetual-Discount -3.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 20.44
Evaluated at bid price : 20.44
Bid-YTW : 6.95 %
BCE.PR.F FixedFloater -3.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 25.00
Evaluated at bid price : 14.50
Bid-YTW : 7.08 %
BAM.PR.B Floater -2.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 7.78
Evaluated at bid price : 7.78
Bid-YTW : 6.88 %
TD.PR.Y FixedReset -2.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 21.22
Evaluated at bid price : 21.22
Bid-YTW : 4.71 %
HSB.PR.D Perpetual-Discount -2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 17.15
Evaluated at bid price : 17.15
Bid-YTW : 7.45 %
CM.PR.K FixedReset -2.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 21.62
Evaluated at bid price : 22.00
Bid-YTW : 5.11 %
PWF.PR.F Perpetual-Discount -2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 17.66
Evaluated at bid price : 17.66
Bid-YTW : 7.55 %
PWF.PR.L Perpetual-Discount -2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 16.87
Evaluated at bid price : 16.87
Bid-YTW : 7.68 %
CM.PR.P Perpetual-Discount -2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 18.37
Evaluated at bid price : 18.37
Bid-YTW : 7.61 %
BMO.PR.L Perpetual-Discount -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 7.40 %
LFE.PR.A SplitShare -1.67 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2012-12-01
Maturity Price : 10.00
Evaluated at bid price : 7.65
Bid-YTW : 13.50 %
NA.PR.M Perpetual-Discount -1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 20.67
Evaluated at bid price : 20.67
Bid-YTW : 7.34 %
CM.PR.A OpRet -1.38 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2009-03-28
Maturity Price : 25.50
Evaluated at bid price : 25.76
Bid-YTW : -2.16 %
PWF.PR.I Perpetual-Discount -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 20.82
Evaluated at bid price : 20.82
Bid-YTW : 7.31 %
CL.PR.B Perpetual-Discount -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 21.12
Evaluated at bid price : 21.12
Bid-YTW : 7.57 %
BAM.PR.K Floater -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 7.70
Evaluated at bid price : 7.70
Bid-YTW : 6.95 %
CM.PR.H Perpetual-Discount -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 16.30
Evaluated at bid price : 16.30
Bid-YTW : 7.48 %
BNA.PR.A SplitShare -1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2010-09-30
Maturity Price : 25.00
Evaluated at bid price : 23.80
Bid-YTW : 9.53 %
PWF.PR.K Perpetual-Discount -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 7.83 %
CM.PR.E Perpetual-Discount -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 18.82
Evaluated at bid price : 18.82
Bid-YTW : 7.56 %
SBC.PR.A SplitShare -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2012-11-30
Maturity Price : 10.00
Evaluated at bid price : 7.50
Bid-YTW : 14.40 %
BMO.PR.M FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 4.59 %
TD.PR.C FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 23.71
Evaluated at bid price : 23.75
Bid-YTW : 5.21 %
PWF.PR.M FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 24.35
Evaluated at bid price : 24.40
Bid-YTW : 5.63 %
BAM.PR.J OpRet 1.05 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 18.30
Bid-YTW : 10.21 %
WFS.PR.A SplitShare 1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2011-06-30
Maturity Price : 10.00
Evaluated at bid price : 7.75
Bid-YTW : 18.03 %
RY.PR.C Perpetual-Discount 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 16.71
Evaluated at bid price : 16.71
Bid-YTW : 6.95 %
ALB.PR.A SplitShare 1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2011-02-28
Maturity Price : 25.00
Evaluated at bid price : 19.65
Bid-YTW : 17.45 %
SLF.PR.A Perpetual-Discount 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 15.65
Evaluated at bid price : 15.65
Bid-YTW : 7.60 %
BMO.PR.J Perpetual-Discount 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 16.11
Evaluated at bid price : 16.11
Bid-YTW : 7.05 %
BMO.PR.K Perpetual-Discount 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 18.31
Evaluated at bid price : 18.31
Bid-YTW : 7.24 %
CIU.PR.A Perpetual-Discount 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 16.76
Evaluated at bid price : 16.76
Bid-YTW : 6.91 %
POW.PR.A Perpetual-Discount 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 19.25
Evaluated at bid price : 19.25
Bid-YTW : 7.41 %
GWO.PR.H Perpetual-Discount 1.86 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 16.41
Evaluated at bid price : 16.41
Bid-YTW : 7.56 %
FBS.PR.B SplitShare 1.87 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2011-12-15
Maturity Price : 10.00
Evaluated at bid price : 6.55
Bid-YTW : 21.90 %
FIG.PR.A Interest-Bearing 2.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2014-12-31
Maturity Price : 10.00
Evaluated at bid price : 7.15
Bid-YTW : 13.89 %
BNA.PR.C SplitShare 2.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 11.25
Bid-YTW : 15.45 %
BNA.PR.B SplitShare 2.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2016-03-25
Maturity Price : 25.00
Evaluated at bid price : 21.06
Bid-YTW : 7.93 %
GWO.PR.I Perpetual-Discount 2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 15.53
Evaluated at bid price : 15.53
Bid-YTW : 7.41 %
LBS.PR.A SplitShare 2.90 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2013-11-29
Maturity Price : 10.00
Evaluated at bid price : 7.80
Bid-YTW : 11.65 %
MFC.PR.C Perpetual-Discount 2.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 15.48
Evaluated at bid price : 15.48
Bid-YTW : 7.30 %
PWF.PR.A Floater 4.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-02-26
Maturity Price : 13.00
Evaluated at bid price : 13.00
Bid-YTW : 4.06 %
PPL.PR.A SplitShare 4.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2012-12-01
Maturity Price : 10.00
Evaluated at bid price : 8.57
Bid-YTW : 9.59 %
FFN.PR.A SplitShare 5.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2014-12-01
Maturity Price : 10.00
Evaluated at bid price : 6.03
Bid-YTW : 16.24 %
Volume Highlights
Issue Index Shares
Traded		 Notes
PPL.PR.A SplitShare 383,449 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2012-12-01
Maturity Price : 10.00
Evaluated at bid price : 8.57
Bid-YTW : 9.59 %
CM.PR.R OpRet 137,000 YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2013-04-29
Maturity Price : 25.15
Evaluated at bid price : 25.51
Bid-YTW : 4.68 %
TD.PR.N OpRet 132,601 YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 4.24 %
MFC.PR.A OpRet 110,356 YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 24.40
Bid-YTW : 4.49 %
RY.PR.R FixedReset 105,775 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : 6.27 %
TD.PR.M OpRet 94,500 YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2013-10-30
Maturity Price : 25.00
Evaluated at bid price : 25.41
Bid-YTW : 4.42 %
There were 41 other index-included issues trading in excess of 10,000 shares.
Issue Comments

EN.PR.A Revised Capital Unit Dividend Policy

Energy Split Corp II has announced:

it has revised its Capital Yield Share distribution policy and starting with the next distribution date on June 16, 2009, has determined that it will not pay a distribution on the Capital Yield Shares if the Net Asset Value at the time of declaration, after giving effect to the distribution, would be less than or equal to the original issue price of the ROC Preferred Shares. In such circumstances, any excess distributions received on the royalty trust portfolio minus the distributions payable on the ROC Preferred Shares and all administrative and operating expenses will be reinvested in short-term debt securities or used to purchase ROC Preferred Shares in the market for cancellation under a normal course issuer bid.

However, as long as Net Asset Value at the date of declaration exceeds the original issue price of the ROC Preferred Shares, the Company intends to pay a distribution on the Capital Yield Shares equal to the excess of the distributions received on the royalty trust portfolio minus the ROC Preferred Share distributions and all administrative and operating expenses.

The Company’s ongoing dividend policy entitles holders of ROC Preferred Shares to receive quarterly fixed cumulative distributions equal to $0.1718 per ROC Preferred Share. The Capital Yield Shareholders are provided with a leveraged play on the yield and price performance from a fixed portfolio consisting of 16 oil and gas royalty trusts listed on the Toronto Stock Exchange.

Capital Yield Shares and ROC Preferred Shares of Energy Split Corp. II Inc. are listed for trading on The Toronto Stock Exchange under the symbols EN and EN.PR.A respectively.

The previous policy was:

Holders of Capital Yield Shares will be entitled to receive distributions that the board of directors of the Company may declare from time to time subject to the prior rights of the Holders of the ROC Preferred Shares. Under the distribution policy adopted by the board of directors, it is expected that Holders of Capital Yield Shares will receive quarterly tax efficient distributions to be paid by the Company on or before the 16th day of March, June, September and December of each year in an amount equal to the distributions paid on the units of Royalty Fund II after payment of the fixed distribution payable on the ROC Preferred Shares and operating expenses of the Company.

EN.PR.A was last mentioned on PrefBlog when it was downgraded to Pfd-3 by DBRS. It is tracked by HIMIPref™ and is a member of the “Scraps” sub-index.

DRIPs

RY Amends DRIP: Preferred Dividends into Discounted Common Stock

Royal Bank has announced:

amendments to its dividend reinvestment plan (the “plan”).

Under the plan, the bank may now offer a discount from the average market price (as defined in the plan) on the reinvestment of dividends in additional common shares issued by the bank from treasury and will provide the preferred shareholders of the bank with the opportunity to participate in the plan by electing to have the dividends paid on their preferred shares reinvested in common shares of the bank.

Under the plan, common and preferred shareholders who reside in Canada and common shareholders in the United States may elect to have dividends paid on their shares reinvested in common shares of the bank.
…
At this time, the bank has decided to issue shares from treasury at a three per cent discount from the average market price until such time as the bank elects otherwise. Most recently the common shares purchased under the plan have been issued from treasury with no discount to the average market price. These changes will be effective starting with the dividend, payable on May 22, 2009 to common and preferred shareholders of record on April 23, 2009.

Under the old plan (not yet modified on RY’s website), preferred shareholders could not participate.

I can see nothing in the 2008 Annual Report to indicate to what degree shareholders are participating in this. In the great scheme of things, I will assume “not much”, since with no discount there has been little or no reason for institutional shareholders to participate.

A 3% discount though – with preferred share eligibility – could make things more interesting.

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

New Issues

New Issue: CM Fixed-Reset 6.50%+433

CIBC (aka CM) has announced:

that it had entered into an agreement with a group of underwriters led by CIBC World Markets Inc. for an issue of 8 million non-cumulative Rate Reset Class A Preferred Shares, Series 37 (the “Series 37 Shares”) priced at $25.00 per Series 37 Share to raise gross proceeds of $200 million.

CIBC has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase an additional 3 million Series 37 Shares at the same offering price. Should the underwriters’ option be fully exercised, the total gross proceeds of the financing will be $275 million.

The Series 37 Shares will yield 6.50% per annum, payable quarterly, as and when declared by the Board of Directors of CIBC, for an initial period ending July 31, 2014. On July 31, 2014 and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 4.33%.

Holders of the Series 37 Shares will have the right to convert their shares into non-cumulative Floating Rate Class A Preferred Shares, Series 38 (the “Series 38 Shares”), subject to certain conditions, on July 31, 2014 and on July 31 every five years thereafter. Holders of the Series 38 Shares will be entitled to receive a quarterly floating rate dividend, as and when declared by the Board of Directors of CIBC, equal to the three-month Government of Canada Treasury Bill yield plus 4.33%.

Holders of the Series 38 Shares may convert their Series 38 Shares into Series 37 Shares, subject to certain conditions, on July 31, 2019 and on July 31 every five years thereafter.

The expected closing date is March 6, 2009. The net proceeds of this offering will be used for general purposes of CIBC.

The first dividend is payable July 31, for $0.65445 … long and fat! There may be dividend capture opportunities around the ex-Date!

New Issues

New Issue: RY Fixed-Reset 6.25%+406

Royal Bank has announced:

a domestic public offering of $200 million of Non-Cumulative, 5 year rate reset Preferred Shares Series AT.

The bank will issue 8.0 million Preferred Shares Series AT priced at $25 per share and holders will be entitled to receive non-cumulative quarterly fixed dividend for the initial period ending August 24, 2014 in the amount of $1.5625 per share, to yield 6.25 per cent annually. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 3.0 million Preferred Shares at the same offering price.

Subject to regulatory approval, on or after August 24, 2014, the bank may redeem the Preferred Shares Series AT in whole or in part at par. Thereafter, the dividend rate will reset every five years at a rate equal to 4.06 per cent over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series AT 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 AU (the “Preferred Shares Series AU”) on August 24, 2014 and on August 24 every five years thereafter.

Holders of the Preferred Shares Series AU 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 4.06 per cent. Holders of Preferred Shares Series AU will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series AT on August 24, 2019 and on August 24 every five years thereafter.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is March 9, 2009.

The first dividend will be payable August 24, for $0.71918. That’s a long, fat first dividend! Mark your calendars – there could be some interesting dividend capture opportunities!