PrefBlog

Commerce Split has announced:

When the fund was launched on February 16, 2007 the price of CIBC common shares was $102.15. As of June 12, 2008 the price of CIBC commons shares has declined to $62.54 or a drop of 38% since the inception of the fund.

This sharp decline has resulted in the fund’s net asset value being reduced significantly and has required the Company to implement the Priority Equity Protection Plan in accordance with the prospectus. This plan was implemented to maintain a preferred share coverage ratio of 125% as defined in the prospectus. The Company has executed trades to remain in compliance with the Protection Plan by purchasing permitted repayment securities.

Currently, the portfolio has over $2.45 in notional value of permitted repayment securities per unit (a unit being 1 Priority Equity Share plus 1 Class A Share) thereby reducing the risk to Priority Equity shareholders to any further declines in the price of CIBC common shares.

The Company’s investment portfolio also has approximately $10.57 in CIBC exposure per unit ($9.49 per unit in CIBC common shares and the equivalent of $1.08 per unit in exposure through long CIBC call options) which provides exposure to any potential upside in the value of CIBC common shares. The Company has call options written on a portion of these positions at higher levels.

The Company’s portfolio is continually rebalanced and adjusted based on market conditions to provide both security for Priority Equity shareholders and upside potential for Class A shareholders. The Company may buy or sell additional shares of CIBC, the permitted repayment securities, and or option positions based on market conditions and provided that the Company remains in compliance with the Priority Equity Protection Plan.

The company is a little shy about providing details on its website regarding historical NAVs and precise dates of Protection Plan enforcement. The last instance of PEPP invocation was reported on PrefBlog and appears to have lasted only a week. CM shares closed today at $63.45, a loss of over 9% month-to-date. The unit NAV on May 31 was $12.62, and it was 92% invested … call it $11.60-worth of CM. A nine percent loss on that is worth $1.04 … so it seems reasonable to assume that the XCM unit value is now about $11.60.

XCM.PR.A is not rated by any rating agency and is not tracked by HIMIPref™.

NewGrowth Corp. has announced:

it has called 2,960 Preferred Shares for cash redemption on June 26, 2008 (in accordance with the Company’s Articles) representing approximately 0.127% of the outstanding Preferred Shares as a result of the special annual retraction of 62,860 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on June 25, 2008 will have approximately 0.127% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $18.25 per share.

Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including June 26, 2008.

Payment of the amount due to holders of Preferred Shares will be made by the Company on June 26, 2008. From and after June 26, 2008 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.

NEW.PR.B is not tracked by HIMIPref™.

Not, perhaps, unequivocally a preferred share, but Kingsway Linked Return of Capital Trust is managed by Scotia Managed Companies and is rated by both S&P and DBRS using their “preferred share scale” … and we all know how dreadfully important the ratings scales are, don’t we? Critically important! Crucially important!

So anyway, DBRS says:

DBRS has today downgraded the LROC Preferred Units (the Units) issued by Kingsway Linked Return of Capital Trust to Pfd-3 from Pfd-3 (high), with a Negative trend. The rating had been placed Under Review with Negative Implications on December 21, 2007.

The Units are supported by an exposure to a note guaranteed by Kingsway Financial Services Inc. and Kingsway America Inc. (collectively, Kingsway) through a forward purchase agreement. The downgrade of the Units is a result of DBRS downgrading the long-term debt ratings of Kingsway on June 6, 2008, to BBB (low) from BBB, with a Negative trend.

The redemption date for the Units will be June 30, 2015.

The issue continues to be rated P-3 by S&P (which rates Kingsway Financial at BB (negative trend) and issues of Kingsway America at BB.

KSP.UN is not tracked by HIMIPref™.

DBRS has announced it:

has today upgraded the Deposits & Senior Debt rating of Laurentian Bank of Canada (Laurentian, LB or the Bank) to BBB (high), the Subordinated Debt to BBB and the Short-Term Instruments to R-1 (low) from BBB, BBB (low) and R-2 (high), respectively; all the trends are Stable.

The rating upgrades reflect the progress LB has made in improving its sustainable internal capital generation through improvement in its earnings profile. DBRS believes LB’s strategy to focus on its three core segments (Retail & SME Québec, B2B Trust and Real Estate & Commercial) and its improved operating efficiency have been instrumental in increasing the quality of earnings over the last several years. A more clearly defined target market, investment in technology, strengthened relations with its unionized workforce and incentive compensation programs contributed to this improvement.

The core strategy is expected to deliver further improvements in return on equity (ROE) and internal capital generation in the intermediate term, although these improvements will likely be hampered in the near term by the slowing regional economy and difficult operating environment for banks in general.

Over the longer term, material improvements in efficiency are required to eliminate the Bank’s competitive disadvantage in its cost structure. Further efficiency improvements are targeted by increasing revenues while holding expense growth to lower levels, which DBRS views as an appropriate strategy. Working with the unionized workforce and improving the sales culture of the organization are integral to this goal.

B2B Trust has been (and is expected to continue to be) a positive factor in Laurentian’s credit profile in terms of its contribution to profitability, as well as the beneficial effect it has on both business line and geographic diversification.

Under DBRS’s global rating methodology for banks, Laurentian’s long-term Deposits & Senior Debt rating has an Intrinsic Assessment of BBB (high) and a Support Assessment of SA3. The SA3 rating, which reflects the expectation of no timely external support, results in the final rating being equivalent to the Intrinsic Assessment.

Laurentian reported adjusted ROE and internal capital generation in the first half of 2008 of 10.9% and 7.1%, respectively. While still comparatively low and assisted by an outsized securitization gain, these results are the highest in the past six years. Relative to other Canadian banks, LB has benefited from its higher proportion of retail deposit funding over the past nine months of credit market instability. Asset quality has remained strong.

While not mentioned in the text of the press release, the summary shows the preferreds being upgraded to Pfd-3(high).

This is a welcome change in direction for the bank’s ratings:

Update: The preferreds continue to be rated P-3(high) by S&P, while the credit rating is BBB with a positive trend.

Update: See also previous commentary for LB.PR.D and LB.PR.E