PrefBlog

Well, that’s a long headline, but I want to make sure nobody misses it!

In a press release issued today, BCE stated:

BCE also announced today that it will not move forward with the planned conversion into an income trust announced by the company on October 11, 2006. However, the company is continuing with previously announced plans to simplify its corporate structure and eliminate BCE’s holding company operations. As part of this process, BCE intends, at its next annual shareholders meeting, to change its name to Bell Canada Inc. and will have two operating businesses: Bell and Bell Aliant Regional Communications. Bell Canada also intends to change its name to Bell Inc. at the same time.

Under a plan of arrangement, and as part of the corporate simplification process, holders of Bell Canada preferred shares will be asked to exchange their shares for BCE preferred shares with the same series rights. The arrangement will also provide for a one-time special dividend of $0.20 per Bell Canada preferred share outstanding immediately prior to the exchange. The arrangement must be approved by the holders of common and preferred shares of Bell Canada, each voting as a class, at a special meeting to be held on January 23, 2007.

The previously announced offer is therefore cancelled. The market hadn’t been taking it too seriously anyway.

To summarize:

• There is no longer an offer for: BCE.PR.R, BCE.PR.S, BCE.PR.Y, BCE.PR.Z, BCE.PR.A, BCE.PR.C.
• There is no longer a cash offer for: BC.PR.B, BC.PR.C, BC.PR.E (or for the Series 15, BC.PR.A; or for the Series 16, BC.PR.D; which are not tracked by HIMIPref™)
• There is now an exchange offer with a special dividend sweetener for: BC.PR.B, BC.PR.C, BC.PR.E (and for the Series 15, BC.PR.A; and for the Series 16, BC.PR.D; which are not tracked by HIMIPref™)

Update: DBRS has confirmed the ratings of Bell Canada at Pfd-2, and of BCE at Pfd-2(low), removing them from review. They had been placed under review October 11.

Faircourt has announced that they propose to merge several of their public investment vehicles:

Faircourt Asset Management Inc. has announced that it will hold securityholder meetings on January 9, 2007 for Faircourt Income Split Trust, Faircourt Split Five Trust, Faircourt Split Seven Trust and Income & Growth Split Trust (the “Funds”). At the meetings, holders of units (“Unitholders”) and holders of preferred securities (“Preferred Securityholders”) of each of the Funds will be asked to consider the proposed merger (the “Merger”) of Income Split, Split Five and Split Seven into Income & Growth Split, to create a single trust (the “Continuing Trust”). Preferred Securityholders of the Funds will also be asked to consider the proposed exchange of preferred securities of each of Income Split, Split Five and Split Seven for preferred securities of Income & Growth Split (which will be the Continuing Trust) which, if approved, is expected to occur shortly following approval. Unitholders and Preferred Securityholders will also be asked to consider various amendments to the trust agreements and trust indentures of the Funds.

There is no indication that I can find, either on the company website or on SEDAR as to just what these “various amendments” might be.

Let’s hope the amendments include a declining premium on the preferred calls! I’ll keep everybody posted.

Yet another fine old preferred security will shortly be leaving us.

In a press release dated November 22, Transalta announced:

TransAlta Corporation (TSX: TA; NYSE: TAC) today announced it will redeem all of its 7.75% Preferred Securities (the “7.75% Preferred Securities”), which have an aggregate principal amount of $175,000,000, on Jan. 2, 2007 (the “Redemption Date”).  The redemption will be funded with short-term debt and is expected to reduce interest costs.

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I’ll just bet that’s the expectation! By more than 3% absolute, I’d guess or $5-million-plus annually!

It has been a long time since this paper was investment-grade … DBRS downgraded it from Pfd-2(low)y (the “y” meaning “hybrid”) to Pfd-3(high)y on December 12, 2002, but for a little while it was a fine trader. It will be missed, and it will be a long time before investment grade paper pays 7.75% again!

In a press release, Brascan Soundvest Rising Distribution Split Trust…

…announced that following the annual redemption of Capital Units (TSX: BSD.UN) by holders of such units, the Trust purchased in the market a sufficient number of its Preferred Securities (TSX: BSD.PR.A) to ensure that the number of Preferred Securities that remain outstanding is equal to the number of Capital Units outstanding. As a result, the Trust will not exercise its Call Right, as described in the prospectus of the Trust dated February 25, 2005, to call any Preferred Securities for redemption in connection with the annual redemption of Capital Units.

And that was it! There is no indication of just how many Capital Units were retracted.

This is the way it should work. BSD.PR.A has a declining call premium feature: according to the prospectus:

Preferred Securities may be called by the Trust and purchased prior to the Maturity Date (the “Call Right”) if, as a result of the redemption of Capital Units, the aggregate number of outstanding Preferred Securities would exceed the aggregate number of outstanding Capital Units. In such case, Preferred Securities will be redeemed at a price per Preferred Security which until March 31, 2006 will be equal to $11.00 and which will decline by $0.10 each year thereafter to $10.10 after March, 31, 2014, plus any accrued and unpaid interest. Notice of the exercise of the Call Right will be given by the Trust to Securityholders whose Preferred Securities will be redeemed.

So those who wanted to keep their prefs, kept them, and those who wanted to sell, sold.

The capital units market price crept up to the NAV just prior to the redemption deadline, but are now reported to have fallen out of bed:

BSD.PR.A is rated Pfd-2 by DBRS. For some reason it was left off the list of income-trust backed prefs put under review after the Hallowe’en Massacre.