Archive for November, 2011

November 23, 2011

Thursday, November 24th, 2011

Remember Iceland? The first domino? It’s through the worst of it, according to S&P:

Iceland had its credit rating outlook revised to stable from negative by Standard & Poor’s Ratings Services, which cited economic growth in the country after two years of “severe contraction.”

“Significant headway has been made in restructuring the private-sector balance sheet and we expect the process to be mostly completed by mid-2012,” S&P said. The BBB-/A-3 sovereign ratings were affirmed.

But other dominoes are toppling:

Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, propelling borrowing costs in Europe higher and the euro lower on concern the region’s debt crisis is driving away investors.

The yield on Germany’s 2.25 percent securities maturing in September 2021 climbed 15 basis points to 2.06 percent at 4:46 p.m. London time.

Belgian 10-year yields surged 41 basis points to 5.48 percent, after reaching 5.53 percent, the highest since November 2000. French 10-year bond yields climbed 16 basis points to 3.69 percent. The yield on Greek two-year notes jumped to more than 120 percent for the first time, before slipping back to 116.59 percent.

Total bids at the auction of securities due in January 2022 amounted to 3.889 billion euros, out of a maximum target for the sale of 6 billion euros, according to Bundesbank data.

Six of the last eight bond sales by Germany have been “technically uncovered,” with fewer bids than the maximum amount on offer, Norbert Aul, a rates strategist at RBC Capital Markets in London, said in an e-mailed note.

Under the German auction system, the central bank retains securities at sales for the secondary market. In today’s offering, the debt agency allotted 3.644 billion euros of the securities, leaving the Bundesbank to retain 2.356 billion euros, or 39 percent of the supply. That’s the highest proportion of unsold debt at a 10-year sale since 1995, according to Bloomberg data. The securities were sold at an average yield of 1.98 percent. In the secondary market, the rate rose to 2.13 percent.

DBRS confirmed Westcoast at Pfd-2(low):

DBRS has today confirmed the Unsecured Debentures, First Preferred Shares and Commercial Paper ratings of Westcoast Energy Inc. (Westcoast or the Company) at A (low), Pfd-2 (low) and R-1 (low), respectively, all with Stable trends.

On a consolidated basis (excluding the intercompany transaction), the Company’s external debt-to-capital ratio (52% at September 30, 2011; 54% at year-end 2008) and cash flow-to-external debt (19% for both the 12 months ending September 30, 2011, and in 2008) were relatively unchanged, while external fixed charges coverage (2.8 times, up from 2.5 times) improved marginally, partly due to contributions from expansions placed in service as noted above.

On a non-consolidated basis, Westcoast’s direct ownership of BCPFS fully supports its ability to meet its direct debt obligations. Its credit metrics are enhanced by cash dividends from several sources, the largest of which is Union Gas, which generate approximately 50% of the Company’s non-consolidated cash flow. Excluding the intercompany transaction, Westcoast’s non-consolidated external debt-to-capital ratio increased to 36% in 2010 from 32% in 2008, while cash flow-to-external debt (25%, up from 16%) and external fixed charges coverage (3.2 times, up from 2.2 times) improved significantly, mainly as a result of contributions from expansions noted above.

TMX DataLinx has collywobbles yet again, so this report is being prepared with Yahoo! data.

It was a rough day for the Canadian preferred share market, with PerpetualDiscounts down 9bp, FixedResets off 12bp and DeemedRetractibles losing 14bp. All five entries in the Performance Highlights table were losers. Volume was average.

PerpetualDiscounts now yield 5.15% (this figure is somewhat distorted by the fact that five of the seventeen issues are actually at a premium now and another two are bang-on par; the index is only rebalanced monthly), equivalent to 6.70% interest at the standard equivalency factor of 1.3x. Long Corporates are now at about 4.75%, so the pre-tax interest-equivalent spread is now about 195bp, tightening a bit (perhaps spuriously) from the 205bp reported November 16.

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 0.00 % 0.00 % 0 0.00 0 -0.4795 % 2,133.1
FixedFloater 4.91 % 4.65 % 29,609 17.08 1 0.2592 % 3,137.2
Floater 3.37 % 3.39 % 155,972 18.71 2 -0.4795 % 2,303.2
OpRet 4.97 % 2.45 % 52,068 1.48 7 0.0220 % 2,476.5
SplitShare 5.80 % 6.42 % 57,570 5.17 3 0.0988 % 2,530.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0220 % 2,264.5
Perpetual-Premium 5.58 % 0.85 % 103,037 0.13 13 -0.2247 % 2,153.3
Perpetual-Discount 5.31 % 5.15 % 100,427 14.78 17 -0.0917 % 2,297.2
FixedReset 5.10 % 2.97 % 222,055 2.48 64 -0.1184 % 2,346.7
Deemed-Retractible 5.05 % 4.44 % 201,901 3.86 46 -0.1418 % 2,218.0
Performance Highlights
Issue Index Change Notes
SLF.PR.H FixedReset -1.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 4.43 %
ELF.PR.F Perpetual-Discount -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 22.62
Evaluated at bid price : 22.90
Bid-YTW : 5.85 %
TCA.PR.X Perpetual-Premium -1.17 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 52.30
Bid-YTW : 3.29 %
CIU.PR.A Perpetual-Discount -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 23.86
Evaluated at bid price : 24.35
Bid-YTW : 4.71 %
GWO.PR.L Deemed-Retractible -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 5.51 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.D FixedReset 1,353,175 New issue settled today.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 23.13
Evaluated at bid price : 25.10
Bid-YTW : 3.67 %
CM.PR.G Perpetual-Discount 117,120 RBC crossed 50,000 at 24.94; Scotia crossed 30,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 24.57
Evaluated at bid price : 24.90
Bid-YTW : 5.46 %
SLF.PR.F FixedReset 101,400 RBC crossed 100,000 at 26.07.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 4.06 %
ENB.PR.B FixedReset 59,560 Nesbitt crossed 25,000 at 25.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 23.26
Evaluated at bid price : 25.42
Bid-YTW : 3.65 %
CM.PR.D Perpetual-Premium 42,067 Scotia crossed 30,000 at 25.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : 3.20 %
RY.PR.L FixedReset 41,588 Nesbitt crossed 40,000 at 25.51.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.46
Bid-YTW : 2.92 %
There were 33 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.M Deemed-Retractible Quote: 26.00 – 26.44
Spot Rate : 0.4400
Average : 0.2887

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 5.43 %

BAM.PR.G FixedFloater Quote: 19.34 – 20.12
Spot Rate : 0.7800
Average : 0.6480

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 25.00
Evaluated at bid price : 19.34
Bid-YTW : 4.65 %

CIU.PR.A Perpetual-Discount Quote: 24.35 – 24.84
Spot Rate : 0.4900
Average : 0.3595

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 23.86
Evaluated at bid price : 24.35
Bid-YTW : 4.71 %

HSB.PR.C Deemed-Retractible Quote: 25.20 – 25.75
Spot Rate : 0.5500
Average : 0.4263

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : 5.12 %

TCA.PR.X Perpetual-Premium Quote: 52.30 – 52.60
Spot Rate : 0.3000
Average : 0.2185

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 52.30
Bid-YTW : 3.29 %

PWF.PR.L Perpetual-Discount Quote: 24.65 – 24.99
Spot Rate : 0.3400
Average : 0.2609

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 24.19
Evaluated at bid price : 24.65
Bid-YTW : 5.20 %

ENB.PR.D Reaches Premium on Huge Volume

Thursday, November 24th, 2011

Enbridge Inc. has announced:

it has closed its previously announced public offering of cumulative redeemable preferred shares, Series D (the “Series D Preferred Shares”) by a syndicate of underwriters co-led by TD Securities Inc, RBC Capital Markets and Scotia Capital Inc. Enbridge issued 18 million Series D Preferred Shares for gross proceeds of $450 million. The Series D Preferred Shares will begin trading on the TSX today under the symbol ENB.PR.D. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.

ENB.PR.D is a FixedReset, 4.00%+237, announced November 14. The issue traded 1,353,175 shares today in a range of 25.05-20 before closing at 25.10-13, 12×5.

For those interested in market trivia, this is the 88th highest daily share volume in the HIMIPref™ database of 632,706 entries.

ENB.PR.D will be tracked by HIMIPref™ and is assigned to the FixedReset index. Vital statistics are:

ENB.PR.D FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-23
Maturity Price : 23.13
Evaluated at bid price : 25.10
Bid-YTW : 3.67 %

November 22, 2011

Tuesday, November 22nd, 2011

The SEC’s campaign to create a society of paid informers is proving remarkably successful:

Bounty-hunting corporate tipsters are filing reports of potential wrongdoing with the U.S. Securities and Exchange Commission at a rate of about seven per day, according to the first progress report from the agency’s new whistle-blower program.

The public snapshot released last week counted 334 tips in the first 50 days after the program — revamped under the Dodd- Frank Act — became fully operational on Aug. 12.

The program gives whistle-blowers a share of proceeds if their tips lead to more than $1 million in penalties. So far, the top three categories of tips are those alleging market manipulation, problems with public disclosure or fraud in offerings.

I hope they’re managing it all right. I’m sure there’s still lots of ex-officers around from the East German STASI – perhaps they can be recruited as case managers.

The Fed’s stress test is … stressful:

The Federal Reserve told the 31 largest U.S. banks to test their loan portfolios and trading books against a deep recession and a European market shock to ensure they have enough capital to withstand losses.

The most severe test scenarios outlined by the Fed today include an unemployment rate of as much as 13 percent, an 8 percent drop in gross domestic product and a 21 percent plunge in home prices.

The Fed will also publish the results of the tests for the 19 largest bank holding companies. Six institutions with large trading operations will have to estimate potential losses from a hypothetical “global market shock,” the Fed said. That shock will be based on market price movements seen during the second half of 2008, it said, and include a scenario involving “sharp market price movements in European sovereign and financial sectors.”

The Fed said it would publish the results of the market shock scenario of the six institutions: Bank of America Corp., Citigroup Inc., Goldman Sachs Group, Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Company.

The Fed said it would approve dividend increases and other capital distributions “only for companies whose capital plans are approved by supervisors and are able to demonstrate sufficient financial strength to operate as successful financial intermediaries under stressed macroeconomic and financial market scenarios.”

It was a mild day for the Canadian preferred share market, with PerpetualDiscounts up 2bp, FixedResets gaining 2bp and DeemedRetractibles winning 4bp. The Performance Highlights table was very short, with only three entries. Volume was average.

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 0.00 % 0.00 % 0 0.00 0 0.9032 % 2,143.4
FixedFloater 4.92 % 4.66 % 29,980 17.07 1 0.2078 % 3,129.1
Floater 3.36 % 3.37 % 155,697 18.76 2 0.9032 % 2,314.3
OpRet 4.97 % 2.74 % 51,772 1.48 7 0.0330 % 2,475.9
SplitShare 5.81 % 6.47 % 58,198 5.17 3 -0.0141 % 2,528.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0330 % 2,264.0
Perpetual-Premium 5.57 % -0.80 % 101,968 0.12 13 0.1110 % 2,158.1
Perpetual-Discount 5.30 % 5.18 % 101,128 14.76 17 0.0169 % 2,299.3
FixedReset 5.10 % 2.87 % 224,828 2.48 63 0.0218 % 2,349.5
Deemed-Retractible 5.04 % 4.40 % 204,779 3.87 46 0.0401 % 2,221.2
Performance Highlights
Issue Index Change Notes
SLF.PR.G FixedReset -1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.22
Bid-YTW : 3.70 %
POW.PR.D Perpetual-Discount -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-22
Maturity Price : 23.99
Evaluated at bid price : 24.45
Bid-YTW : 5.15 %
BAM.PR.I OpRet 1.23 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-12-22
Maturity Price : 25.25
Evaluated at bid price : 25.58
Bid-YTW : -0.84 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.A OpRet 114,737 Anonymous crossed 21,400 at 25.15. Nesbitt crossed 80,000 at the same price.
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 25.16
Bid-YTW : 3.87 %
BNS.PR.Y FixedReset 109,491 Scotia crossed 20,000 at 25.20; Nesbitt crossed 80,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.17
Bid-YTW : 2.86 %
SLF.PR.I FixedReset 103,025 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 4.42 %
RY.PR.X FixedReset 93,549 Nesbitt sold 31,000 to anonymous at 27.41, then crossed 60,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 27.34
Bid-YTW : 2.71 %
BAM.PR.Z FixedReset 73,950 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-22
Maturity Price : 23.14
Evaluated at bid price : 25.11
Bid-YTW : 4.36 %
TRP.PR.B FixedReset 69,202 Desjardins bought 15,300 from Nesbitt at 25.32, then crossed 30,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-22
Maturity Price : 23.40
Evaluated at bid price : 25.33
Bid-YTW : 2.69 %
There were 33 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
NA.PR.N FixedReset Quote: 26.10 – 26.50
Spot Rate : 0.4000
Average : 0.3012

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-15
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 2.84 %

BAM.PR.M Perpetual-Discount Quote: 23.20 – 23.59
Spot Rate : 0.3900
Average : 0.2929

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-22
Maturity Price : 22.79
Evaluated at bid price : 23.20
Bid-YTW : 5.18 %

POW.PR.D Perpetual-Discount Quote: 24.45 – 24.85
Spot Rate : 0.4000
Average : 0.3037

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-22
Maturity Price : 23.99
Evaluated at bid price : 24.45
Bid-YTW : 5.15 %

CIU.PR.A Perpetual-Discount Quote: 24.60 – 24.90
Spot Rate : 0.3000
Average : 0.2164

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-22
Maturity Price : 24.10
Evaluated at bid price : 24.60
Bid-YTW : 4.66 %

BAM.PR.G FixedFloater Quote: 19.29 – 19.85
Spot Rate : 0.5600
Average : 0.5033

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-22
Maturity Price : 25.00
Evaluated at bid price : 19.29
Bid-YTW : 4.66 %

BNA.PR.E SplitShare Quote: 23.00 – 23.25
Spot Rate : 0.2500
Average : 0.1952

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 23.00
Bid-YTW : 6.47 %

New Issue: TA FixedReset 4.60%+310

Tuesday, November 22nd, 2011

TransAlta Corporation has announced:

that it has agreed to issue to a syndicate of underwriters led by CIBC, RBC Capital Markets and Scotia Capital Inc. for distribution to the public 8,000,000 Cumulative Rate Reset First Preferred Shares, Series C (the “Series C Shares”). The Series C Shares will be issued at a price of $25.00 per Series C Share, for aggregate gross proceeds of $200 million. Holders of the Series C Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.60% annually for the initial period ending June 30, 2017. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 3.10%.

Holders of Series C Shares will have the right, at their option, to convert their shares into Cumulative Floating Rate Reset First Preferred Shares, Series D (the “Series D Shares”), subject to certain conditions, on June 30, 2017 and on June 30 every five years thereafter. Holders of the Series D Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.10%.

TransAlta Corporation has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase up to an additional 2,000,000 Series C Shares at the same offering price. The Series C Shares will be offered by way of prospectus supplement under the short form base shelf prospectus of TransAlta Corporation dated November 15, 2011. The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.

The net proceeds of the Offering will be used to partially fund capital projects, for other general corporate purposes and to reduce short term indebtedness of the Corporation and its affiliates. The offering is expected to close on or about November 30, 2011.

They announced shortly afterwards that they:

increased its previously announced bought deal financing to $275 million. TransAlta Corporation has agreed to issue to a syndicate of underwriters led by CIBC, RBC Capital Markets and Scotia Capital Inc. for distribution to the public 11,000,000 Cumulative Rate Reset First Preferred Shares, Series C (the “Series C Shares”). The Series C Shares will be issued at a price of $25.00 per Series C Share, for aggregate gross proceeds of $275 million.

Update 2011-11-24: Rated Pfd-3 by DBRS

November 21, 2011

Tuesday, November 22nd, 2011

More evidence that the EU should be insisting on a Greek referendum, not forbidding one:

The world’s leading financiers are betting they can prevent bankruptcy in Greece with a bailout deal that will force strict austerity on its citizens, but that plan does not account for stubborn people like Olga Katimertzis.

The 58-year-old has served as a deputy mayor in the Athens suburb of Nea Ionia for more than three decades, and she embodies the way this country has started to fight itself. Wearing an old leather jacket in her chilly office, and chain-smoking cigarettes, she proudly describes how her municipality is offering free legal advice to anybody who refuses to pay new taxes imposed by the central government. Her offices are even organizing human barricades to prevent the electrical utility from disconnecting people who fall behind on their bills.

The MF Global receivership is heating up a little:

MF Global Inc.’s shortfall in U.S. segregated customer accounts may exceed $1.2 billion, more than double what was previously expected, said the trustee overseeing a liquidation of the failed brokerage run by former New Jersey Governor Jon Corzine.

That would mean customer accounts are missing about 22 percent of their total of $5.4 billion. A shortfall of 11 percent had been previously estimated by a person with knowledge of probes into the firm’s collapse. James Giddens, the trustee, said today that forensic accountants and investigators are working “around the clock,” and the estimate may change.

The CFTC and the Securities and Exchange Commission are also investigating cash movements at the firm before the bankruptcy filing. Regulators haven’t located the money.

The estimated amount of the shortfall has fluctuated. Examiners from CME Group Inc., the world’s largest futures exchange, found unexplained wire transfers at MF Global Inc. and a $900 million shortfall in client funds during the weekend the failing broker was talking with possible buyers, a person briefed on the matter said.

I’m still having a hard time taking this seriously. The first thing a liquidator does after being appointed by regulators is vilify ex-management – this not only makes him a hero when he announces he’s got all the money, but keeps him on good terms with the regulator who appointed him, so he’ll be in line for the next appointment as well. I note that the phrases “unexplained wire transfers” and “$900 million shortfall” are indeed in the same sentence in the quoted report, but are not directly connected. Ah, well, we will see!

The US is still not serious about deficit reduction:

A special debt-reduction committee in the U.S. Congress failed to reach agreement, extending partisan gridlock into the 2012 election year and setting the stage for $1.2 trillion in automatic spending cuts.

President Barack Obama blamed Republicans, saying in remarks at the White House they “refused to listen to the voices of reason and compromise.” The president said he would veto any move to avoid the automatic spending cuts that are supposed to start in 2013 as a result of panel’s failure.

Committee co-chairmen Representative Jeb Hensarling of Texas, a Republican, and Senator Patty Murray of Washington, a Democrat, said in an e-mailed statement that “after months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline.”

As we’ve seen in Europe (and as we saw in Canada in 1994) nobody takes deficit reduction seriously until the market starts giving them major problems.

The Star had a good article on milkfare on Sunday, with a link to a restaurant industry website advocating reform, which contained a further link to a Facebook page advocating reform. The comments on the page are dominated by milkfare recipients and their fellow travellers – which only makes sense, considering that the benefits to the few are charged to the many – but I’m engaged in an interesting debate on one of the posts, anyway. Eventually, I hope, all participants on that thread will agree to the rough equation:

Canadian Milk Price = Free Market Price + Cost of Quota + Unearned Rents

… which, since they will insist that Unearned Rents = 0, will resolve to

Canadian Milk Price = Free Market Price + Cost of Quota

at which point maybe we can start getting somewhere. Milkfare was an appalling policy blunder which has only gotten worse since inception: it’s time for the politicians to ‘fess up to the fact that it ain’t working and move to a free market with compensation to farmers for loss of quota value.

Spread the word! What is really needed is a non-partisan campaign during the next election, urging all voters to ask the candidates what they will do to end milkfare. If Ontario gets eightteen more urban seats in the coming redistribution, that can only help the effort!

Wow, man … Cooler-ado is a happenin’ place, you know?:

There are currently 16 states that allow some form of legalized medical marijuana, Bloomberg Businessweek reports in its Nov. 21 edition. Only Colorado allows marijuana businesses to operate as such. It’s the first, and for the moment, only, for-profit marijuana marketplace in the U.S.

Predictably, Colorado is in the midst of a marijuana boom. From 2000, when Colorado voters legalized marijuana for medicinal purposes with Amendment 20, to 2008, Colorado issued roughly 2,000 medical marijuana cards to patients living in the state. By 2011 that number had jumped to over 127,000 paying customers, according to the Colorado Medical Marijuana Registry, and at least 25,000 more have applications pending.

Assiduous Reader BG sends me an interesting article titled Will WiFi Kill Us All, which discusses the long-term health risks associated with heavy exposure to cell ‘phones and WiFi electromagnetic radiation. I don’t buy it myself – I think the author has just experienced a placebo effect – but who knows? Something is behind the explosion in autism, peanut allergies, senile dementia (which may just be because we’re living longer, I don’t know) and alien abductions, but we don’t know what. I subscribe to the “soup theory” myself – simply that we now live in an environment where there’s lots of interesting chemicals and influences which have never existed before. A one-in-a-million chance is pretty minor, but if you take a million of ’em, you’re likely to get burnt.

DBRS confirmed TDS.PR.C at Pfd-2(low).

Today’s report is being made with Yahoo! prices because TMX DataLinx has colly-wobbles again.

It was a down day for the Canadian preferred share market, with PerpetualDiscounts down 1bp, FixedResets off 9bp and DeemedRetractibles losing 12bp. All entries on the Performance Highlights table were losers. Volume was light.

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 0.00 % 0.00 % 0 0.00 0 -0.3215 % 2,124.2
FixedFloater 4.94 % 4.67 % 29,925 17.05 1 -2.5316 % 3,122.6
Floater 3.39 % 3.41 % 155,025 18.69 2 -0.3215 % 2,293.6
OpRet 4.97 % 3.54 % 51,412 1.48 7 -0.5801 % 2,475.1
SplitShare 5.80 % 6.42 % 57,363 5.17 3 -0.3376 % 2,528.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.5801 % 2,263.2
Perpetual-Premium 5.57 % 0.45 % 101,347 0.13 13 -0.0854 % 2,155.7
Perpetual-Discount 5.30 % 5.30 % 102,115 14.76 17 -0.0072 % 2,298.9
FixedReset 5.10 % 2.96 % 225,125 2.48 63 -0.0929 % 2,349.0
Deemed-Retractible 5.04 % 4.37 % 207,206 3.87 46 -0.1230 % 2,220.3
Performance Highlights
Issue Index Change Notes
BAM.PR.G FixedFloater -2.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-21
Maturity Price : 25.00
Evaluated at bid price : 19.25
Bid-YTW : 4.67 %
BAM.PR.I OpRet -1.52 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.27
Bid-YTW : 5.04 %
GWO.PR.M Deemed-Retractible -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 5.43 %
HSB.PR.C Deemed-Retractible -1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.27
Bid-YTW : 5.09 %
PWF.PR.L Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-21
Maturity Price : 24.21
Evaluated at bid price : 24.67
Bid-YTW : 5.19 %
BAM.PR.O OpRet -1.03 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.82
Bid-YTW : 3.37 %
CU.PR.C FixedReset -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-21
Maturity Price : 23.24
Evaluated at bid price : 25.34
Bid-YTW : 3.63 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.R FixedReset 46,926 Nesbitt crossed 43,000 at 26.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-26
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.14 %
SLF.PR.I FixedReset 39,650 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 4.44 %
TD.PR.G FixedReset 35,875 RBC crossed 23,000 at 27.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.24
Bid-YTW : 2.59 %
BNS.PR.P FixedReset 35,609 Desjardins crossed 10,000 at 25.79; TD crossed 10,000 at 25.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.74
Bid-YTW : 3.07 %
RY.PR.B Deemed-Retractible 32,561 TD crossed 25,000 at 25.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-08-24
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 4.31 %
TD.PR.K FixedReset 29,275 Nesbitt crossed 25,000 at 27.49.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.43
Bid-YTW : 2.64 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.E Perpetual-Discount Quote: 25.22 – 25.85
Spot Rate : 0.6300
Average : 0.3988

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.22
Bid-YTW : 5.02 %

SLF.PR.H FixedReset Quote: 23.90 – 24.40
Spot Rate : 0.5000
Average : 0.2913

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 4.22 %

CM.PR.K FixedReset Quote: 26.70 – 27.20
Spot Rate : 0.5000
Average : 0.3124

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 2.85 %

TCA.PR.Y Perpetual-Premium Quote: 52.64 – 53.28
Spot Rate : 0.6400
Average : 0.4776

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-05
Maturity Price : 50.00
Evaluated at bid price : 52.64
Bid-YTW : 3.34 %

IAG.PR.F Deemed-Retractible Quote: 25.86 – 26.40
Spot Rate : 0.5400
Average : 0.3857

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.86
Bid-YTW : 5.60 %

BAM.PR.I OpRet Quote: 25.27 – 25.75
Spot Rate : 0.4800
Average : 0.3392

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.27
Bid-YTW : 5.04 %

New Issue: BAF FixedReset 4.55%+309

Monday, November 21st, 2011

Bell Aliant has announced:

that its subsidiary Bell Aliant Preferred Equity Inc. (the “Company”) will be issuing 4,000,000 Cumulative Rate Reset Preferred Shares, Series C (the “Series C Preferred Shares”), at a price of $25.00 per Series C Preferred Share, for aggregate gross proceeds of $100 million on a bought-deal basis to a syndicate of underwriters led by RBC Capital Markets, Scotia Capital and BMO Capital Markets.

The underwriters have been granted an over-allotment option to purchase an additional 600,000 Series C Preferred Shares at the offering price. Should the over-allotment option be fully exercised, the total gross proceeds of the Series C Preferred Share offering will be $115 million.

The Series C Preferred Shares will pay cumulative dividends of $1.1375 per share per annum, yielding 4.55 per cent, payable quarterly if, as and when declared by the Company’s board of directors (with the first quarterly dividend to be paid on March 31, 2012), for the initial five-year period ending March 31, 2017. The dividend rate will be reset on March 31, 2017 and every five years thereafter at a rate equal to the five-year Government of Canada bond yield plus 3.09 per cent. The Series C Preferred Shares will be redeemable by the issuer on or after March 31, 2017, in accordance with their terms.

Holders of the Series C Preferred Shares will have the right, at their option, to convert their shares into Cumulative Floating Rate Preferred Shares, Series D, (the “Series D Preferred Shares”) subject to certain conditions, on March 31, 2017 and on March 31 every five years thereafter. Holders of the Series D Preferred Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.09 per cent, if, as and when declared by the Company’s board of directors.

The Series C Preferred Shares will be offered for sale to the public in each of the provinces and territories of Canada pursuant to a short form prospectus to be filed with Canadian securities regulatory authorities in all Canadian provinces and territories. The offering is scheduled to close on or about December 7, 2011, subject to certain conditions, including obtaining all necessary regulatory approvals.

The net proceeds of this offering will be used to make a lump-sum voluntary contribution to certain of Bell Aliant’s pension plans and for general corporate purposes.

The ‘use of funds ‘ is fascinating, especially since their 11Q3 press release notes that they made a $200-million contribution in 11Q1. The 11Q3 report notes:

Net benefit plans cost included in operating costs (pension expense) in 2011 will be $60–$65 million based on a discount rate of 5.3 per cent and a long-term rate of return on plan assets of 6.1 per cent, up from a comparable 2010 IFRS-based pension expense of $53 million;

The Statement of Comprehensive Income includes $150.2-million “Actuarial losses on defined benefit pension (DB) and other post-employment benefits (OPEB) plans”; the year-to-date figure is $176.4-million. Note 5 of the 11Q3 report is kind of horrific …they have a “Net benefit obligation as at September 30, 2011” of a little over $1-billion. Maybe we’ll see some more preferred share issues from these guys!

The issue is rated Pfd-3(high) by DBRS.

YLO 11Q3 Conference Call Transcript

Saturday, November 19th, 2011

For those interested, I commissioned a transcript of the YLO 11Q3 conference call. Hymas Investment Management makes no representation or warranties regarding the accuracy or completeness of this transcript – use it at your own risk.

The company has made the call available only as a webcast. The Thomson-Reuters transcript is selling for $54 at time of writing – it was offered earlier for $106.

YLO has four preferred share issues trading on the Toronto Stock Exchange: YLO.PR.A & YLO.PR.B (OperatingRetractible) and YLO.PR.C & YLO.PR.C (FixedReset). All are tracked by HIMIPref™, all are relegated to the Scraps index on credit concerns. The first three issues listed were removed from the TXPR index in October. DBRS downgraded all the issues by four notches in September.

November 18, 2011

Friday, November 18th, 2011

There has been an interesting paper published by John (Xuefeng) Jiang, Mary Harris Stanford and Yuan Xie titled Does it Matter Who Pays for Bond Ratings? Historical Evidence:

We test whether Standard and Poor’s (S&P) assigns higher bond ratings after it switches from investor-pay to issuer-pay fees in 1974. Using Moody’s rating for the same bond as a benchmark, we find that when S&P charges investors and Moody’s charges issuers, S&P’s ratings are lower than Moody’s. Once S&P adopts issuer-pay, its ratings increase and no longer differ from Moody’s. More importantly, S&P only assigns higher ratings for bonds that are subject to greater conflicts of interest, measured by higher expected rating fees or lower credit quality. These findings suggest that the issuer-pay model leads to higher ratings.

It was a mildly good day for the Canadian preferred share market, with PerpetualDiscounts up 2bp, FixedResets gaining 4bp and DeemedRetractibles winning 10bp. There were only four entries on the Performance Highlights table, but they were all winners. Volume was extremely low.

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 0.00 % 0.00 % 0 0.00 0 -0.0643 % 2,131.1
FixedFloater 4.81 % 4.52 % 28,695 17.25 1 0.0000 % 3,203.7
Floater 3.38 % 3.39 % 156,508 18.72 2 -0.0643 % 2,301.0
OpRet 4.94 % 1.98 % 51,820 1.49 7 0.0493 % 2,489.5
SplitShare 5.78 % 6.33 % 55,707 5.18 3 0.6955 % 2,537.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0493 % 2,276.4
Perpetual-Premium 5.57 % -0.61 % 102,124 0.13 13 0.0225 % 2,157.6
Perpetual-Discount 5.30 % 5.31 % 101,968 14.77 17 0.0169 % 2,299.1
FixedReset 5.10 % 2.96 % 225,466 2.49 63 0.0375 % 2,351.1
Deemed-Retractible 5.03 % 4.40 % 206,159 3.65 46 0.1035 % 2,223.0
Performance Highlights
Issue Index Change Notes
ELF.PR.F Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-18
Maturity Price : 22.80
Evaluated at bid price : 23.09
Bid-YTW : 5.80 %
HSB.PR.C Deemed-Retractible 1.11 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-30
Maturity Price : 25.25
Evaluated at bid price : 25.55
Bid-YTW : 4.75 %
BNA.PR.C SplitShare 1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 21.59
Bid-YTW : 6.79 %
SLF.PR.E Deemed-Retractible 1.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.46
Bid-YTW : 6.54 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.I FixedReset 54,750 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.63
Bid-YTW : 4.39 %
RY.PR.R FixedReset 53,400 Scotia crossed 50,000 at 27.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 27.00
Bid-YTW : 2.57 %
ENB.PR.B FixedReset 40,059 RBC crossed 12,000 at 25.40.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-18
Maturity Price : 23.26
Evaluated at bid price : 25.40
Bid-YTW : 3.68 %
CM.PR.E Perpetual-Discount 32,876 TD crossed 10,000 at 25.05.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-18
Maturity Price : 24.73
Evaluated at bid price : 25.04
Bid-YTW : 5.63 %
CM.PR.G Perpetual-Discount 32,725 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-18
Maturity Price : 24.52
Evaluated at bid price : 24.85
Bid-YTW : 5.47 %
RY.PR.Y FixedReset 31,621 Scotia crossed 25,000 at 27.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-24
Maturity Price : 25.00
Evaluated at bid price : 27.45
Bid-YTW : 2.68 %
There were 15 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BMO.PR.P FixedReset Quote: 26.87 – 27.18
Spot Rate : 0.3100
Average : 0.1843

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-02-25
Maturity Price : 25.00
Evaluated at bid price : 26.87
Bid-YTW : 2.97 %

BAM.PR.K Floater Quote: 15.50 – 15.94
Spot Rate : 0.4400
Average : 0.3345

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-18
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 3.42 %

ELF.PR.F Perpetual-Discount Quote: 23.09 – 23.43
Spot Rate : 0.3400
Average : 0.2540

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-18
Maturity Price : 22.80
Evaluated at bid price : 23.09
Bid-YTW : 5.80 %

POW.PR.D Perpetual-Discount Quote: 24.70 – 24.97
Spot Rate : 0.2700
Average : 0.1849

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-18
Maturity Price : 24.40
Evaluated at bid price : 24.70
Bid-YTW : 5.11 %

IAG.PR.F Deemed-Retractible Quote: 26.05 – 26.35
Spot Rate : 0.3000
Average : 0.2164

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 5.50 %

FTS.PR.G FixedReset Quote: 25.70 – 25.97
Spot Rate : 0.2700
Average : 0.2111

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-18
Maturity Price : 23.88
Evaluated at bid price : 25.70
Bid-YTW : 3.44 %

November 17, 2011

Friday, November 18th, 2011

Another synthetic ETF has closed:

Scotia Managed Companies Administration Inc. is pleased to announce that Moneda LatAm Corporate Bond Fund (the “Fund”) has completed an initial public offering (the “Offering”) of 4,559,824 Class A Units and 440,890 Class U Units (collectively, the “Units”) of the Fund at a price of Cdn.$10.00 per Class A Unit and U.S.$10.00 per Class U Unit for gross proceeds of Cdn.$45,598,240 and U.S.$4,408,900, respectively. The Class A Units of the Fund are listed and posted for trading on the Toronto Stock Exchange under the symbol “MLD.UN.” The Class U Units will not be listed on a stock exchange but may be converted into Class A Units on a weekly basis for liquidity purposes.

The Fund is a closed-end investment fund established as a trust under the laws of the Province of Ontario. The Fund has been established to provide holders of Units (the ‘‘Unitholders’’) with investment exposure to a diversified portfolio of fixed income securities of companies located in, or with significant operations in, Latin America, primarily denominated in U.S. dollars. The Fund’s investment objectives are to: (i) preserve and enhance the net asset value of the Fund; and (ii) provide Unitholders with quarterly tax-advantaged distributions consisting primarily of returns of capital, in each case through exposure to the total return performance of the Moneda Deuda Latinoamericana Fondo de Inversion, a U.S.$856 million (as at June 30, 2011) Chilean listed investment fund established in 2000 which is actively managed by Moneda S.A. Administradora de Fondos de Inversion (the “Portfolio Manager”). Moneda Asset Management S.A., the parent company of the Portfolio Manager, was established in 1993 and is a leading independent asset manager headquartered in Santiago, Chile.

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 0.00 % 0.00 % 0 0.00 0 1.2691 % 2,132.4
FixedFloater 4.81 % 4.52 % 29,108 17.25 1 -1.2994 % 3,203.7
Floater 3.37 % 3.38 % 157,770 18.75 2 1.2691 % 2,302.5
OpRet 4.94 % 0.71 % 52,656 1.49 7 -0.1531 % 2,488.3
SplitShare 5.74 % 6.37 % 55,862 5.12 3 0.0838 % 2,519.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1531 % 2,275.3
Perpetual-Premium 5.57 % -0.81 % 102,833 0.13 13 -0.1542 % 2,157.1
Perpetual-Discount 5.30 % 5.32 % 102,763 14.81 17 0.0894 % 2,298.7
FixedReset 5.10 % 2.93 % 228,313 2.49 63 -0.0599 % 2,350.3
Deemed-Retractible 5.03 % 4.39 % 208,359 3.79 46 -0.1485 % 2,220.7
Performance Highlights
Issue Index Change Notes
BAM.PR.J OpRet -1.44 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-31
Maturity Price : 26.00
Evaluated at bid price : 27.36
Bid-YTW : 3.21 %
GWO.PR.N FixedReset -1.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 3.43 %
IAG.PR.F Deemed-Retractible -1.34 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 5.60 %
BAM.PR.G FixedFloater -1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-17
Maturity Price : 25.00
Evaluated at bid price : 19.75
Bid-YTW : 4.52 %
GWO.PR.G Deemed-Retractible -1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.69
Bid-YTW : 5.48 %
BAM.PR.N Perpetual-Discount 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-17
Maturity Price : 22.81
Evaluated at bid price : 23.21
Bid-YTW : 5.17 %
BAM.PR.K Floater 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-17
Maturity Price : 15.47
Evaluated at bid price : 15.47
Bid-YTW : 3.42 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.C FixedReset 204,511 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-17
Maturity Price : 23.45
Evaluated at bid price : 25.73
Bid-YTW : 2.96 %
BNS.PR.N Deemed-Retractible 97,325 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.35
Bid-YTW : 4.10 %
MFC.PR.B Deemed-Retractible 60,962 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.19
Bid-YTW : 6.13 %
MFC.PR.C Deemed-Retractible 54,511 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.31
Bid-YTW : 6.48 %
CM.PR.K FixedReset 49,503 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.71
Bid-YTW : 2.82 %
RY.PR.E Deemed-Retractible 45,442 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.06
Bid-YTW : 4.44 %
There were 21 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.J OpRet Quote: 27.36 – 27.90
Spot Rate : 0.5400
Average : 0.3962

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-31
Maturity Price : 26.00
Evaluated at bid price : 27.36
Bid-YTW : 3.21 %

HSE.PR.A FixedReset Quote: 25.79 – 26.18
Spot Rate : 0.3900
Average : 0.2539

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-17
Maturity Price : 23.45
Evaluated at bid price : 25.79
Bid-YTW : 3.15 %

SLF.PR.E Deemed-Retractible Quote: 21.16 – 21.53
Spot Rate : 0.3700
Average : 0.2416

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.16
Bid-YTW : 6.72 %

IAG.PR.C FixedReset Quote: 26.51 – 26.88
Spot Rate : 0.3700
Average : 0.2480

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 3.64 %

BAM.PR.X FixedReset Quote: 24.51 – 24.90
Spot Rate : 0.3900
Average : 0.2734

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-17
Maturity Price : 22.95
Evaluated at bid price : 24.51
Bid-YTW : 3.58 %

RY.PR.N FixedReset Quote: 26.94 – 27.29
Spot Rate : 0.3500
Average : 0.2411

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.94
Bid-YTW : 2.67 %

New Issue: REI FixedReset Interest-Bearing 4.70%+318

Friday, November 18th, 2011

RioCan Real Estate Investment Trust has announced:

that it has reached an agreement to issue to the public on a bought deal basis, subject to regulatory approval, 5.2 million Cumulative Rate Reset Preferred Trust Units, Series C (the “Series C Units”) at a price of $25 per unit for aggregate gross proceeds of $130 million.

The Series C Units are being issued by a syndicate of underwriters co-led by RBC Capital Markets, CIBC and TD Securities Inc. The Series C Units will pay fixed cumulative distributions of $1.1750 per unit per annum, yielding 4.70% per annum, payable on the last day of March, June, September and December of each year, as and when declared by the board of trustees of RioCan, for the initial approximately five and a half-year period ending June 30, 2017. The first quarterly distribution, if declared, shall be payable on December 31, 2011 and shall be $0.0998 per unit, based on the anticipated closing of the offering of Series C Units of November 30, 2011. The distribution rate will be reset on June 30, 2017 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 3.18%. The Series C Units are redeemable by RioCan, at its option, on June 30, 2017 and on June 30 of every fifth year thereafter.

Holders of Series C Units will have the right to reclassify all or any part of their units as Cumulative Floating Rate Preferred Trust Units, Series D (the “Series D Units”), subject to certain conditions, on June 30, 2017 and on June 30 of every fifth year thereafter. Such reclassification privilege may be subject to certain tax considerations (to be disclosed in the prospectus supplement). Holders of Series D Units will be entitled to receive a cumulative quarterly floating distribution at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus 3.18%, as and when declared by the board of trustees of RioCan.

The Series C Units and the Series D Units will rank equally with each other and with the outstanding Series A Preferred Trust Units and the Series B Preferred Trust Units into which they may be reclassified.

DBRS Limited (“DBRS”) has assigned a preliminary rating of Pfd-3 (High) for the Series C Units. It is a condition of closing that Standard & Poor’s, a division of the McGraw Hill Companies, Inc. (“S&P”) assign a rating of P-3 (High) for the Series C Units.

RioCan has also granted the underwriters an option, exercisable at any time up to 48 hours prior to the closing of the offering, to purchase a further 780,000 Series C Units at the issue price which, if fully exercised, would result in additional gross proceeds of $19.5 million.

RioCan will use a portion of the proceeds from this offering to redeem its $120 million 5.70% Series K senior unsecured debentures due September 11, 2012 and the balance to repay certain indebtedness, for property acquisitions, to fund development and for general trust purposes.

The offering is being made under RioCan’s amended and restated base shelf short form prospectus dated December 21, 2010 amending and restating the base shelf short form prospectus dated July 6, 2010. The terms of the offering will be described in a prospectus supplement to be filed with Canadian securities regulators. The offering is expected to close on or about November 30, 2011.

DBRS Rates Pfd-3(high):

DBRS has today assigned a rating of Pfd-3 (high) with a Stable trend to the new 5.2 million cumulative five-year rate-reset preferred trust units, Series C (the Preferred Units) issued by RioCan Real Estate Investment Trust (RioCan or the Trust) for total proceeds of $130 million.

The Preferred Units will rank pari passu with every other series and will rank prior to RioCan’s trust units as to the payment of distributions and return of capital in the event of the liquidation, dissolution or winding up of the Trust.

RioCan will use a portion of the proceeds from this offering to redeem its $120 million 5.70% Series K senior unsecured debentures due September 11, 2012, and the balance to repay certain indebtedness, for property acquisitions, to fund development and for general trust purposes.

S&P rates P-3H:

  • We assigned our ‘BB+’ global scale rating and our ‘P-3 (High)’ Canadian national scale rating to RioCan’s series C cumulative rate reset preferred trust units.
  • The company plans to use net proceeds for general corporate purposes, including debt repayment, and to fund acquisitions and development.
  • Our ratings on RioCan reflect the company’s leading market position as a retail landlord in Canada, the stability of its cash flow, and its adequate liquidity profile.
  • The outlook is stable as the company’s well-leased portfolio should generate cash flow growth which, along with recent refinancing activity, supports our expectation for modest improvement to debt coverage measures over the next year.