Archive for April, 2013

April 30, 2013

Tuesday, April 30th, 2013

Bureaucrats scored a huge win in Ontario today:

The legislation would also crack down on fraud by giving FSCO the right to oversee health clinics that invoice insurers.

It would also expand FSCO’s right to investigate fraudsters.

Ah, regulation! I’ve been following the chemotherapy drug scandal with keen interest – so keen, in fact, that I have written to the Ministry of Health for more information:

I understand that your response to the chemotherapy drug scandal is to demand an increase in employment of regulators.

I do not understand this. It appears that the supplies were used by the (regulated, hospital-based) pharmacies involved as a stock solution, even though there was no concentration listed on the label, that the contract with the supplier quite clearly indicated that concentration was irrelevant, and that – evidently – concentration of the supplied solutions was not checked irregardless of the label.

Please advise me how many individuals employed by London Health Sciences Centre, Windsor Regional Hospital, Lakeridge Health and Peterborough Regional Health Centre will be losing (or have already lost) their jobs over this gross incompetence.

Themis Trading was quoted today in the wake of the Symantec silliness:

Approximately 504,000 Symantec shares were traded in a three-second period that saw the stock dive from $24.40 to a low of $21.93 before it was halted.

Before the prevalence of high-frequency trading, “a series of market makers would have filled this mistake with substantially less carnage,” said Sal Arnuk, co-manager of trading at Themis Trading in Chatham, New Jersey.

“Today’s market structure is perfectly set up to take advantage of any and all missteps in the most efficient manner … if you were day-trading this, or had a stop-loss order in, then you got hit not because of your thesis, but because of a market structure issue.”

Shares of Symantec resumed trading five minutes after being halted, and bounced back above $24. They fell 1.3 per cent to $24.26 in midday trading.

I take issue with Mr. Arnuk’s comments. If you were day-trading this, then you were acting as a market-maker; and if you’re not very good at market making, you may well have lost some money. If you had a stop-loss order in, then you got hit because you’re an idiot.

Banking crises continue to nibble away at the margins of the EU:

Slovenia, the first former Communist nation in the euro zone, is facing a typically capitalist dilemma: whether to protect creditors of big banks.

Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.9 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output.

Even after a successful domestic debt sale two weeks ago, the country may need assistance from the European Union, and holders of bank bonds, including the most senior creditors, could be forced to take losses, according to Raoul Ruparel, head of research at London-based Open Europe. Such a bail-in, which would be the second in the euro zone, after Cyprus, risks deepening divergence in the monetary union by keeping borrowing costs higher in economically weak nations.

Don’t know why they’re worried. Ten billion isn’t even a big bond deal:

Apple Inc. wowed the debt markets on Tuesday with the largest non-bank bond deal in history, offering a whopping $17-billion (U.S.) for sale as the U.S. computer giant switches strategy to placate restless shareholders.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums off 3bp, FixedResets down 7bp and DeemedRetractibles gaining 2bp. Volatility fails to arouse interest. 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 0.2285 % 2,615.9
FixedFloater 4.01 % 3.25 % 33,983 18.65 1 -1.2917 % 4,097.1
Floater 2.66 % 2.86 % 83,890 20.08 4 0.2285 % 2,824.5
OpRet 4.79 % -2.98 % 59,255 0.14 5 0.0617 % 2,616.7
SplitShare 4.81 % 4.21 % 118,254 4.10 5 -0.1117 % 2,956.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0617 % 2,392.7
Perpetual-Premium 5.19 % 2.90 % 89,264 0.50 32 -0.0315 % 2,379.3
Perpetual-Discount 4.84 % 4.86 % 186,916 15.68 4 0.0710 % 2,686.7
FixedReset 4.89 % 2.77 % 250,483 3.74 81 -0.0669 % 2,509.7
Deemed-Retractible 4.88 % 3.27 % 133,845 0.66 44 0.0203 % 2,456.3
Performance Highlights
Issue Index Change Notes
BAM.PR.G FixedFloater -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-30
Maturity Price : 22.83
Evaluated at bid price : 23.69
Bid-YTW : 3.25 %
BAM.PF.B FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-30
Maturity Price : 23.30
Evaluated at bid price : 25.61
Bid-YTW : 3.65 %
SLF.PR.G FixedReset -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 2.99 %
BAM.PR.K Floater 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-30
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 2.89 %
Volume Highlights
Issue Index Shares
Traded
Notes
HSE.PR.A FixedReset 321,055 Desjardins crossed 306,200 at 25.50. Nice ticket!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-30
Maturity Price : 23.60
Evaluated at bid price : 25.65
Bid-YTW : 2.84 %
PWF.PR.R Perpetual-Premium 144,100 RBC crossed 138,300 at 26.84.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-30
Maturity Price : 25.50
Evaluated at bid price : 26.80
Bid-YTW : 4.44 %
TRP.PR.A FixedReset 59,351 TD crossed 37,900 at 25.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-30
Maturity Price : 23.82
Evaluated at bid price : 25.41
Bid-YTW : 3.00 %
TD.PR.Y FixedReset 57,307 RBC crossed 40,000 at 24.95.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.93
Bid-YTW : 3.00 %
CU.PR.F Perpetual-Premium 51,550 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : 4.49 %
MFC.PR.A OpRet 40,365 RBC sold blocks of 24,800 and 15,100 to anonymous, both at 25.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-19
Maturity Price : 25.50
Evaluated at bid price : 25.90
Bid-YTW : -3.97 %
There were 31 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.G FixedFloater Quote: 23.69 – 24.19
Spot Rate : 0.5000
Average : 0.3564

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-30
Maturity Price : 22.83
Evaluated at bid price : 23.69
Bid-YTW : 3.25 %

SLF.PR.G FixedReset Quote: 24.86 – 25.18
Spot Rate : 0.3200
Average : 0.2118

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 2.99 %

IAG.PR.G FixedReset Quote: 26.13 – 26.40
Spot Rate : 0.2700
Average : 0.1818

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.13
Bid-YTW : 3.24 %

TD.PR.P Deemed-Retractible Quote: 26.36 – 26.67
Spot Rate : 0.3100
Average : 0.2263

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-30
Maturity Price : 26.00
Evaluated at bid price : 26.36
Bid-YTW : -11.37 %

CU.PR.E Perpetual-Premium Quote: 26.36 – 26.60
Spot Rate : 0.2400
Average : 0.1626

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-09-01
Maturity Price : 25.00
Evaluated at bid price : 26.36
Bid-YTW : 4.26 %

RY.PR.I FixedReset Quote: 25.41 – 25.68
Spot Rate : 0.2700
Average : 0.1968

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.41
Bid-YTW : 2.56 %

New Issue: CU Straight Perpetual, 4.50%

Tuesday, April 30th, 2013

Canadian Utilities Limited has announced:

it has entered into an agreement with a syndicate of underwriters co-led by RBC Capital Markets and BMO Capital Markets, and including TD Securities Inc., Scotiabank, CIBC, Canaccord Genuity Corp., and GMP Securities L.P. The underwriters have agreed to buy 6,000,000 4.50% Cumulative Redeemable Second Preferred Shares Series DD at a price of $25.00 per share for aggregate gross proceeds of $150,000,000. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.

Canadian Utilities Limited has granted the underwriters an option to purchase at the offering price an additional
2,000,000 Series DD Preferred Shares exercisable in whole or in part at any time up to 7:00 AM (Calgary time) on the date that is two business days prior to closing. Should the option be fully exercised, the total gross proceeds of the Series DD Preferred Share offering will be $200,000,000.

The Series DD Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable quarterly as and when declared by the Board of Directors of the Corporation at an annual rate of $1.125 per share, to yield 4.50% annually. On or after September 1, 2018, the Corporation may redeem the Series DD Preferred Shares in whole or in part from time to time, at $26.00 per share if redeemed during the 12 months commencing September 1, 2018, at $25.75 per share if redeemed during the 12 months commencing September 1, 2019, at $25.50 per share if redeemed during the 12 months commencing September 1, 2020, at $25.25 per share if redeemed during the 12 months commencing September 1, 2021, and at $25.00 per share if redeemed on or after September 1, 2022.

The offering is being made only in the provinces of Canada by means of a prospectus supplement and the closing date of the issue is expected to be on or about May 15, 2013.

Update: Super-size me!:

Canadian Utilities Limited announced today that as a result of strong investor demand for its previously announced offering of Cumulative Redeemable Second Preferred Shares Series DD, the size of the offering has been increased to 9,000,000 shares. The aggregate gross proceeds will now be $225,000,000. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.

April 29, 2013

Monday, April 29th, 2013

Deutsche Bank is raising some capital:

Deutsche Bank AG (DBK), continental Europe’s biggest bank, will raise as much as 4.8 billion euros ($6.3 billion) to increase capital as first-quarter profit climbed.

The company will issue 2.8 billion euros in stock, or as many as 90 million new shares, with full dividend entitlement for 2012, as part of the plan, the Frankfurt-based bank said in a statement today. Deutsche Bank has already received enough orders for the sale, according to the term sheet.

The share sale will increase Deutsche Bank’s core Tier 1 capital adequacy ratio under Basel III rules, a key measure of financial strength, to about 9.5 percent from 8.8 percent at the end of March, it said.

Veresen, proud issuer of VSN.PR.A, was confirmed at Pfd-3(high) by DBRS:

The Preferred Shares are confirmed at Pfd-3 (high). All trends are Stable. The confirmation reflects (1) relatively stable cash distributions from the Company’s regulated Pipeline businesses, which accounted for approximately 49% of Veresen’s 2012 cash distributions received from its subsidiaries and investments; (2) improved cash flow diversification as result of the acquisition of the Hythe/Steeprock complex (the Acquisition) from Encana Corporation (rated BBB); and (3) solid cash flow-interest coverage and cash flow-to-debt metrics (non-consolidated). The confirmation is also based on DBRS’s expectation that the currently high debt leverage (as a result of the Acquisition) at the parent level will improve over the medium term.

As a result of the Acquisition ($920 million), the parent debt increased significantly in 2012. The non-consolidated debt-to-capital ratio increased to over 40% in 2012 from 35.7% in 2011, which is viewed as aggressive. DBRS recognizes that Veresen benefits from owning a large non-debt and diverse asset base, which allows the Veresen to carry more non-consolidated debt than a pure holding company.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 1bp, FixedResets off 2bp and DeemedRetractibles up 10bp. Volatility was minimal. 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 0.6389 % 2,610.0
FixedFloater 3.96 % 3.19 % 33,945 18.75 1 -0.4149 % 4,150.7
Floater 2.67 % 2.85 % 86,410 20.09 4 0.6389 % 2,818.1
OpRet 4.79 % -0.61 % 59,806 0.14 5 0.1854 % 2,615.1
SplitShare 4.80 % 4.24 % 117,228 4.10 5 -0.1966 % 2,959.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1854 % 2,391.2
Perpetual-Premium 5.19 % 2.93 % 90,424 0.50 32 0.0109 % 2,380.1
Perpetual-Discount 4.85 % 4.88 % 189,778 15.69 4 0.0609 % 2,684.8
FixedReset 4.88 % 2.71 % 258,700 3.75 81 -0.0230 % 2,511.4
Deemed-Retractible 4.88 % 3.38 % 135,054 0.66 44 0.0956 % 2,455.8
Performance Highlights
Issue Index Change Notes
CU.PR.C FixedReset 1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 26.94
Bid-YTW : 2.18 %
BAM.PR.C Floater 1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-29
Maturity Price : 18.30
Evaluated at bid price : 18.30
Bid-YTW : 2.89 %
Volume Highlights
Issue Index Shares
Traded
Notes
PWF.PR.R Perpetual-Premium 77,892 RBC crossed three blocks of 25,000 each, all at 26.84.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-30
Maturity Price : 25.50
Evaluated at bid price : 26.82
Bid-YTW : 4.43 %
BMO.PR.O FixedReset 47,321 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 26.18
Bid-YTW : 1.58 %
MFC.PR.A OpRet 40,545 Nesbitt crossed 15,000 at 25.75; TD crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-19
Maturity Price : 25.50
Evaluated at bid price : 25.78
Bid-YTW : -0.61 %
SLF.PR.D Deemed-Retractible 37,433 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.66
Bid-YTW : 4.67 %
RY.PR.A Deemed-Retractible 34,259 Scotia crossed 30,900 at 25.44.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 3.50 %
RY.PR.B Deemed-Retractible 26,501 TD crossed 24,500 at 25.55.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-24
Maturity Price : 25.50
Evaluated at bid price : 25.55
Bid-YTW : 3.01 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IGM.PR.B Perpetual-Premium Quote: 26.80 – 27.10
Spot Rate : 0.3000
Average : 0.1879

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 26.00
Evaluated at bid price : 26.80
Bid-YTW : 3.77 %

BMO.PR.K Deemed-Retractible Quote: 26.01 – 26.25
Spot Rate : 0.2400
Average : 0.1448

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-29
Maturity Price : 26.00
Evaluated at bid price : 26.01
Bid-YTW : 0.20 %

FTS.PR.F Perpetual-Premium Quote: 25.75 – 25.99
Spot Rate : 0.2400
Average : 0.1694

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-01
Maturity Price : 25.25
Evaluated at bid price : 25.75
Bid-YTW : 4.08 %

VNR.PR.A FixedReset Quote: 26.50 – 26.89
Spot Rate : 0.3900
Average : 0.3263

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-15
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 2.96 %

MFC.PR.H FixedReset Quote: 26.58 – 26.80
Spot Rate : 0.2200
Average : 0.1621

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-19
Maturity Price : 25.00
Evaluated at bid price : 26.58
Bid-YTW : 3.02 %

TD.PR.P Deemed-Retractible Quote: 26.43 – 26.62
Spot Rate : 0.1900
Average : 0.1346

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-29
Maturity Price : 26.00
Evaluated at bid price : 26.43
Bid-YTW : -14.54 %

BPP / BPO Share Exchange Approved; New Symbols Announced

Monday, April 29th, 2013

BPO Properties Limited has announced:

that its preferred shareholders have approved the previously announced proposal to exchange its existing preferred shares for new class AAA preference shares of Brookfield Office Properties Inc. (“Brookfield Office Properties”) with substantially the same terms and conditions. Preferred shareholders voted in favour of the proposal at a meeting today at Brookfield Place in Toronto by a margin of 99.04%. BPO Properties will now seek final court approval from the Ontario Superior Court of Justice. It is anticipated that the transaction will close on Monday, April 29.

On closing of the transaction, holders of preferred shares of BPO Properties will receive one class AAA preference share of Brookfield Office Properties for each preferred share of BPO Properties held. The class AAA preference shares of Brookfield Office Properties will have substantially the same terms and conditions as the preferred shares of BPO Properties that are exchanged. In particular, dividend rates will remain unchanged.

Currently, the series G, J and M preferred shares of BPO Properties are listed on the TSX Venture Exchange (“TSXV”). The class AAA preference shares, series V, W and Y of Brookfield Office Properties will replace the series G, J and M preferred shares and will begin trading on the Toronto Stock Exchange under the stock symbols “BPO.PR.X”, “BPO.PR.W” and “BPO.PR.Y”, respectively, on or about Wednesday, May 1. In the interim, from market open to market close on April 30, the series G, J and M preferred shares of BPO Properties will continue to trade on the TSXV under the symbols “BPP.PR.G”, “BPP.PR.J” and “BPP.PR.M”, respectively, as proxy shares – representing an entitlement to the series V, W and Y shares of Brookfield Office Properties, respectively.

The proposal to exchange these issues was reported on PrefBlog. All the issues have been, or will be, tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

New Issue: CGI Split Share, 3.75%, Ten-Year

Monday, April 29th, 2013

In addition to the redemption of CGI.PR.B, Morgan Meighen & Associates has announced:

The Company further announced today that it has entered into an agreement with a syndicate of investment dealers led by Scotia Capital Inc. pursuant to which the syndicate has agreed to purchase 3,000,000 3.75% Cumulative Redeemable Class A Preference Shares, Series 4 of the Company (the “Series 4 Shares”) for gross proceeds of $75,000,000. The net proceeds of the offering, which is expected to close on May 30, 2013, will be used, together with available cash, to repay the short-term loan entered into to fund the redemption of the Series 2 Shares.

I am advised that this issue is retractible on or after June 15, 2023, for $25.00 cash. The issue may be called at $26.00 commencing June 15, 2018; the redemption price declines by 0.25 every June 15 until June 15, 2022; redeemable at 25.00 thereafter.

Angry pedants are advised that I consider this issue to be a Split Share because all of it’s credit quality is derived from an underlying investment portfolio; CGI is not an operating company.

Update, 2016-4-14: Trades as CGI.PR.D

CGI.PR.B To Be Redeemed, Refunded

Monday, April 29th, 2013

Morgan Meighen & Associates has announced:

Canadian General Investments, Limited (the “Company”) announced today that it has provided notice to holders of its $75,000,000 4.65% Cumulative Redeemable Class A Preference Shares, Series 2 (the “Series 2 Shares”) that in accordance with the terms of the Series 2 Shares it will redeem all of the issued and outstanding Series 2 Shares on May 29, 2013, for a price of $25.00 per Series 2 Share plus all accrued and unpaid dividends (from and including the last scheduled dividend payment date, March 15, 2013, to, but excluding, the date of redemption, and being in the amount of $0.23887 per share). This redemption will initially be funded by a short-term loan from a Canadian chartered bank.

CGI.PR.B was last mentioned on PrefBlog when it was confirmed at Pfd-1(low) by DBRS. CGI.PR.B has been tracked by HIMIPref™ but has been relegated to the Scraps index on credit concerns.

BAM Reconfirmed at Pfd-2(low), Trend Negative, by DBRS

Saturday, April 27th, 2013

As reported on PrefBlog, DBRS confirmed BAM, but changed the trend to negative on March 5. Apparently, they found the experience so exciting that they have done it again:

DBRS has today confirmed the ratings of Brookfield Asset Management Inc. (BAM or the Company). The ratings pertain to BAM at the corporate level and remain on a Negative trend since the last trend change on March 5, 2013. The trend change followed the downgrade of the Issuer Rating of BAM’s subsidiary, Brookfield Office Properties Inc. (BOP), to BBB from BBB (high) and reflects that BAM’s ratings are under pressure because of BOP’s weaker credit quality, as well as the sustained high debt level at BAM’s corporate level. The downgrade of BOP’s rating reflects increased uncertainty due to material near-term maturing tenancy agreements, increased leverage and lower cash flow coverage metrics. As such, DBRS believes that the quality of cash flows remitted to BAM from this material subsidiary, which is available after BOP satisfied its own debt servicing and operating needs, is also weakened.

BAM’s corporate-level cash flow metrics for the full-year 2012 were close to the previously set targets for the ratings. Funds from operations (FFO)-to-total debt in 2012 was 28% compared to 30% in 2010 (23% and 26%, respectively, after adjusting in accordance with DBRS Criteria: Preferred Share and Hybrid Criteria for Corporate Issuers (Excluding Financial Institutions), published on November 5, 2012) while FFO interest coverage was 4.9x in 2012 compared to 5.1x in 2010 (4.4x and 5.0x, respectively, after adjusting for the same).

As consistent with the Negative trend, BAM will be challenged to improve the overall quality of its investments over time through increasing the proportion of investments with strong BBB or better credit quality and more conservative use of leverage at the operating-company level. With weaker quality of cash flow from BOP and increasing leverage (and therefore debt servicing requirements) in its key subsidiaries in recent years, DBRS also believes that the cash flow metrics at BAM’s corporate level will need to be raised in order to maintain the necessary cushion for the ratings. Specifically, DBRS expects BAM to further improve its corporate-level FFO-to-debt toward 35% (or about 30% on an adjusted basis) and FFO interest coverage toward 5.5x (or about 5.0x on an adjusted basis), and to maintain at these levels on a sustained basis.

DBRS will monitor the progress during the course of 2013 and could consider a one-notch downgrade of BAM’s ratings if it becomes evident that the Company will be unable to meet any of the above expectations and to remedy the shortfall within an acceptable timeframe.

The downgrade of Brookfield Office Properties was also reported on PrefBlog.

A downgrade of BAM would also have an immediate effect on the SplitShares issued by BAM Split Corp.: BNA.PR.B, BNA.PR.C, BNA.PR.D and BNA.PR.E.

It also seems likely that a BAM downgrade would involve collateral or related damage to the ratings of Brookfield Properties Corp (BPO.PR.F, BPO.PR.H, BPO.PR.J, BPO.PR.K, BPO.PR.L, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T), Brookfield Office Properties (BPP.PR.G, BPP.PR.J, BPP.PR.M), Brookfield Renewable Power Preferred Equity Inc (BRF.PR.A, BRF.PR.C, BRF.PR.E) and Brookfield Investments Corporation (BRN.PR.A).

Brookfield Asset Management is the proud issuer of:

FixedResets BAM.PF.A, BAM.PF.B, BAM.PR.P, BAM.PR.R, BAM.PR.T, BAM.PR.X, BAM.PR.Z
Floaters BAM.PR.B, BAM.PR.C, BAM.PR.K
RatchetRate BAM.PR.E
FixedFloater BAM.PR.G
OperatingRetractible BAM.PR.J, BAM.PR.O
Straight Perpetual BAM.PR.M, BAM.PR.N, BAM.PF.C

April 26, 2013

Saturday, April 27th, 2013

It has become easier (for some) to buy (some) foreign securities:

Offerings of securities in other jurisdictions are frequently extended to purchasers in Canada on a private placement basis. However, it is generally necessary to include with the foreign offering document a Canadian wrapper that contains disclosure required under the securities legislation of the various Canadian jurisdictions where the offering is made. Also, it may be necessary to obtain relief from certain Canadian securities regulators in order to permit specified disclosure contained in the foreign offering document, such as a listing representation, that is not permitted under local rules. Since most investors in such offerings are sophisticated institutional investors, the value of this additional disclosure and prohibition is questionable. Furthermore, the time and expense associated with preparing a Canadian wrapper has been cited as a significant deterrent to extending foreign offerings to Canadian purchasers.

The Ontario Securities Commission has (a) granted relief to a group of dealers and (b) proposed amendments to the applicable requirements in Ontario that would allow such offerings to be made available to sophisticated investors without a Canadian wrapper.

PROPOSED ONTARIO AMENDMENTS
The proposed amendments apply to the offering of “designated foreign securities”, which include:

  • • securities offered primarily in a foreign jurisdiction
  • • securities issued by an issuer that is
    • o created under the laws of a foreign jurisdiction
    • o not a reporting issuer in Canada, and
    • o has its head office or principal executive offices outside of Canada, or
  • • securities that are issued or guaranteed by the government of a foreign jurisdiction.

The proposed amendments are open for comment until July 24, 2013 and are available here.
The OSC decision document providing the above relief is available here.

Why is it that self-proclaimed “consumer advocates” are always the ones who oppose the flow of information?

U.S. Securities and Exchange Commission chairman Mary Jo White is pushing to adopt a rule allowing hedge funds to advertise in a move consumer advocates say could fail to protect unsophisticated investors, according to two people familiar with the matter.

White, who became SEC chairman on April 10, has suggested the commission pass the existing plan without major changes and add additional protections later, said the people, who declined to be identified because the deliberations are private. The approach would placate congressional Republicans who have complained the SEC has slow-walked the rule, which was required to be completed by July 2012.

Approving the regulation would allow White to make good on a promise she made in her Senate confirmation hearing to prioritize rules mandated by the Jumpstart Our Business Startups Act, which was designed to boost capital-raising and job creation. At the same time, it could anger advocates for small investors and at least one Democratic commissioner.

“It would be a very bad sign — a cause for grave concern about the substance of the issue and process of how investor protection concerns are addressed,” Barbara Roper, director investor protection at the Washington-based Consumer Federation of America, said in a phone interview. Roper said she discussed the rule with White and other SEC officials on April 23.

It was an uneven day for the Canadian preferred share market, with PerpetualPremiums gaining 1bp, FixedResets winning 23bp and DeemedRetractibles off 1bp. Volatility was minor. 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 -0.0511 % 2,593.4
FixedFloater 3.94 % 3.88 % 26,524 17.48 1 0.8368 % 4,168.0
Floater 2.68 % 2.86 % 55,135 20.07 4 -0.0511 % 2,800.2
OpRet 4.80 % 1.54 % 15,740 0.15 5 0.0232 % 2,610.2
SplitShare 4.79 % 4.17 % 39,984 4.11 5 0.1812 % 2,965.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0232 % 2,386.8
Perpetual-Premium 5.19 % 3.11 % 61,609 0.84 32 0.0133 % 2,379.8
Perpetual-Discount 4.85 % 4.87 % 160,773 15.67 4 -0.1015 % 2,683.2
FixedReset 4.88 % 2.83 % 198,232 3.75 81 0.2251 % 2,511.9
Deemed-Retractible 4.88 % 3.54 % 78,414 1.52 44 -0.0080 % 2,453.5
Performance Highlights
Issue Index Change Notes
BAM.PR.X FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-26
Maturity Price : 23.49
Evaluated at bid price : 25.87
Bid-YTW : 2.96 %
BAM.PF.A FixedReset 1.40 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-09-30
Maturity Price : 25.00
Evaluated at bid price : 26.87
Bid-YTW : 3.07 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.D FixedReset 293,886 TD crossed 75,000 at 26.34, then bought blocks of 20,000 and 10,000 at the same price from Desjardins. Desjardins also sold a block of 11,600 to Nesbitt and three blocks, 28,300 shares, 11,700 and 10,000 to RBC, all at the same price. RBC crossed blocks of 15,000 and 75,000 at the same price. YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.31
Bid-YTW : 2.57 %
POW.PR.B Perpetual-Premium 75,301 National crossed blocks of 50,000 shares, 10,000 and 11,500, all at 25.73.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-26
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : -24.67 %
TD.PR.G FixedReset 56,457 TD crossed 50,000 at 26.07.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 1.76 %
HSE.PR.A FixedReset 48,268 TD crossed 39,900 at 25.74.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-26
Maturity Price : 23.61
Evaluated at bid price : 25.67
Bid-YTW : 2.83 %
BNS.PR.A FixedReset 39,600 First day of trading.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-26
Maturity Price : 25.50
Evaluated at bid price : 25.65
Bid-YTW : -5.53 %
BNS.PR.Q FixedReset 38,365 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.96
Bid-YTW : 2.92 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
RY.PR.E Deemed-Retractible Quote: 25.56 – 25.60
Spot Rate : 0.0400
Average : 0.0400

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-02-24
Maturity Price : 25.25
Evaluated at bid price : 25.56
Bid-YTW : 3.58 %

BAM.PF.C Perpetual-Discount Quote: 24.82 – 24.91
Spot Rate : 0.0900
Average : 0.0900

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-26
Maturity Price : 24.43
Evaluated at bid price : 24.82
Bid-YTW : 4.91 %

TRP.PR.B FixedReset Quote: 24.71 – 24.76
Spot Rate : 0.0500
Average : 0.0500

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-26
Maturity Price : 23.43
Evaluated at bid price : 24.71
Bid-YTW : 2.48 %

PWF.PR.S Perpetual-Premium Quote: 25.32 – 25.37
Spot Rate : 0.0500
Average : 0.0500

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.32
Bid-YTW : 4.64 %

TRP.PR.D FixedReset Quote: 25.93 – 25.99
Spot Rate : 0.0600
Average : 0.0600

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.93
Bid-YTW : 3.32 %

TD.PR.G FixedReset Quote: 26.10 – 26.15
Spot Rate : 0.0500
Average : 0.0500

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 1.76 %

BNS.PR.A Rockets to Premium on Debut

Saturday, April 27th, 2013

BNS.PR.A is the new FloatingReset that resulted from a partial exchange of BNS.PR.P on the latter issue’s first Exchange Date.

BNS.PR.A is the first FloatingReset to exist, paying 205bp over 3-Month Canada Treasury Bills. It will be tracked by HIMIPref™ and will be assigned to the FixedReset index until there are ten Floating Resets (of investment grade and non-derisory volume), at which point a new FloatingReset index will be created.

Vital statistics are:

BNS.PR.A FixedReset YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-26
Maturity Price : 25.50
Evaluated at bid price : 25.65
Bid-YTW : -5.53 %

April 25, 2013

Thursday, April 25th, 2013

Assiduous Reader JP sends in a clipping detailing the interesting defence to the fraud charges against S&P:

Now, lawyers defending the company against the Justice Department’s recent civil lawsuit say that statements about independence and objectivity are “puffery” and were never meant to be taken at face value by investors.

In its formal defense filed Monday, S&P pointed to two earlier court decisions where judges ruled that such statements by the firm were puffery and therefore can’t form the basis for a fraud claim.

“Even if it’s a viable legal argument, it’s a pretty unattractive argument for S&P to be putting forward since they’re basically in the business of charging clients for their reputation,” said Samuel Buell, a law professor at Duke University and a former federal prosecutor. “What they’re saying here is, ‘When we’re talking to investors about our own reputation, we’re engaging in meaningless puffery.’ ”

“That’s the whole point of the rating agencies, their seal of approval,” Mr. Buell said.

I disagree with Mr. Buell’s characterization of ‘the whole point of the rating agencies’. They don’t provide a “seal of approval” to anything – they provide an opinion on the credit-worthiness of the firm, or instrument. Since the issuers use this opinion to help sell their product, it can be fairly characterized as puffery, although not entirely meaningless.

The CRAs do not do anything a competent analyst cannot do – except, of course, for using material non-public information in the course of their work, a provision of Canadian and US securities laws I despise. Their value is: at least it’s a reasonably consistent opinion across companies; their 100-year track record is excellent (they are being blamed for the credit crisis – that’s like blaming the weatherman for Hurricane Sandy); and they serve as a public flash-point for concerns about creditworthiness that may spur action when times are tough.

It was an inconsequential day on the Canadian preferred share market, with PerpetualPremiums down 5bp, FixedResets off 4bp and DeemedRetractibles gaining 2bp. Volatility was low. Volume was on the high side of 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 -0.1403 % 2,594.7
FixedFloater 3.97 % 3.20 % 33,820 18.73 1 -0.4167 % 4,133.4
Floater 2.68 % 2.87 % 86,876 20.07 4 -0.1403 % 2,801.6
OpRet 4.80 % 1.30 % 60,980 0.15 5 -0.0077 % 2,609.6
SplitShare 4.80 % 4.26 % 120,166 4.11 5 -0.0079 % 2,959.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0077 % 2,386.3
Perpetual-Premium 5.19 % 3.60 % 91,979 0.84 32 -0.0454 % 2,379.5
Perpetual-Discount 4.84 % 4.86 % 180,079 15.71 4 -0.1519 % 2,685.9
FixedReset 4.91 % 2.80 % 256,150 3.56 80 -0.0431 % 2,506.3
Deemed-Retractible 4.88 % 3.50 % 135,277 1.53 44 0.0203 % 2,453.7
Performance Highlights
Issue Index Change Notes
TRP.PR.B FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-25
Maturity Price : 23.45
Evaluated at bid price : 24.75
Bid-YTW : 2.47 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.D FixedReset 177,264 Nesbitt crossed 24,100 at 26.39. Scotia bought two blocks from Desjardins, of 25,000 and 16,900 shares, both at 26.34. Scotia crossed 15,000 at the same price. Finally Nesbitt bought 13,500 from Desjardins at 26.34.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.33
Bid-YTW : 2.49 %
CIU.PR.B FixedReset 64,400 Nesbitt crossed 50,000 at 26.56.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 26.55
Bid-YTW : 1.93 %
BNS.PR.T FixedReset 56,720 Nesbitt crossed 50,000 at 26.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 2.50 %
GWO.PR.P Deemed-Retractible 56,378 Nesbitt crossed 50,000 at 26.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-03-31
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 4.58 %
TD.PR.Y FixedReset 53,975 RBC bought 10,000 from CIBC at 25.00, then crossed 16,000 at 24.99.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.93
Bid-YTW : 2.99 %
CU.PR.F Perpetual-Premium 43,260 Scotia crossed 40,000 at 25.55.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 4.34 %
There were 36 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.A FixedReset Quote: 26.50 – 26.92
Spot Rate : 0.4200
Average : 0.2887

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-09-30
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 3.36 %

MFC.PR.F FixedReset Quote: 25.11 – 25.54
Spot Rate : 0.4300
Average : 0.3164

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : 3.02 %

HSE.PR.A FixedReset Quote: 25.76 – 26.33
Spot Rate : 0.5700
Average : 0.4612

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-25
Maturity Price : 23.63
Evaluated at bid price : 25.76
Bid-YTW : 2.81 %

BAM.PR.X FixedReset Quote: 25.61 – 25.91
Spot Rate : 0.3000
Average : 0.2112

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-25
Maturity Price : 23.42
Evaluated at bid price : 25.61
Bid-YTW : 3.01 %

BAM.PR.G FixedFloater Quote: 23.90 – 24.30
Spot Rate : 0.4000
Average : 0.3157

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-04-25
Maturity Price : 22.92
Evaluated at bid price : 23.90
Bid-YTW : 3.20 %

TD.PR.O Deemed-Retractible Quote: 25.75 – 26.02
Spot Rate : 0.2700
Average : 0.1915

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-25
Maturity Price : 25.50
Evaluated at bid price : 25.75
Bid-YTW : -7.77 %