PrefBlog

TransCanada Corporation has announced:

that it has notified the registered shareholder of its Cumulative Redeemable First Preferred Shares, Series 3 (Series 3 Shares) of the Conversion Privilege and Dividend Rate Notice.

Beginning on June 1, 2015 and ending on June 15, 2015, holders of the Series 3 Shares will have the right to choose one of the following options with regard to their shares:
1.To retain any or all of their Series 3 Shares and continue to receive a fixed quarterly dividend; or
2.To convert, on a one-for-one basis, any or all of their Series 3 Shares into Cumulative Redeemable First Preferred Shares, Series 4 (Series 4 Shares) of TransCanada and receive a floating quarterly dividend.

Holders of the Series 3 Shares and the Series 4 Shares will have the opportunity to convert their shares again on June 30, 2020, and every five years thereafter as long as the shares remain outstanding.

Effective June 1, 2015, the Annual Fixed Dividend Rate for the Series 3 shares was set for the next five year period at 2.152%.

Effective June 1, 2015, the Floating Quarterly Dividend for the Series 4 Shares was set for the first Quarterly Floating Rate Period (being the period from and including June 30, 2015, to but excluding September 30, 2015) at 1.945%. The Floating Quarterly Dividend Rate will be reset every quarter.

The Series 3 Shares are issued in “book entry only” form and, as such, the sole registered holder of the Series 3 Shares is the Canadian Depositary for Securities Limited (CDS). All rights of beneficial holders of Series 3 Shares must be exercised through CDS or the CDS participant through which the Series 3 Shares are held. The deadline for the registered shareholder to provide notice of exercise of the right to convert Series 3 Shares into Series 4 Shares is 3 p.m. (MDT)/ 5 p.m. (EDT) on June 15, 2015. Any notices received after this deadline will not be valid. As such, holders of Series 3 Shares who wish to exercise their right to convert their shares should contact their broker or other intermediary for more information and it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

For more information on the terms of, and risks associated with an investment in, the Series 3 Shares and the Series 4 Shares, please see the Corporation’s prospectus supplement dated March 4, 2010 which is available on sedar.com or on the Corporation’s website.

TRP.PR.B has paid 4.00% over the past five years, so the change in dividend represents a cut of 46%. Ouch! +128 is a pretty skinny spread!

TRP.PR.B was announced 2010-3-4 and commenced trading 2010-3-11. It is tracked by HIMIPref™ and is assigned to the FixedReset subindex.

Note that holders of TRP.PR.B have the right, until 5:00 p.m. (ET) on Monday, June 15, 2015, to notify the company that they wish to convert to the new FloatingReset series – the two series will be interconvertible every five years for as long as they exist. Note that brokers will have earlier internal deadlines.

I will post regarding my opinion on whether to retain or convert TRP.PR.B closer to the deadline; until then, contemplate today’s graph of FixedReset/FloatingReset Strong Pairs:

Click for Big

The Investment Grade pairs are very well-behaved today, with implied break-even 3-Month T-Bill rates in a nice cluster between 0.31% and 0.63%, with an average of 0.48%.

So at this point, it appears that holders of TRP.PR.B who wish to own the FloatingReset issue would be better advised not to convert, but to swap on the market; this will result in a small cash take-out provided that the new pair trades in line with extant pairs, which is by no means guaranteed.

Sun Life Financial Inc. has announced:

the applicable dividend rates for its Class A Non-Cumulative Rate Reset Preferred Shares Series 8R (the “Series 8R Shares”) and Class A Non-Cumulative Floating Rate Preferred Shares Series 9QR (the “Series 9QR Shares”).

With respect to any Series 8R Shares that remain outstanding after June 30, 2015, commencing as of such date, holders thereof will be entitled to receive non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Sun Life Financial and subject to the Insurance Companies Act (Canada). The dividend rate for the five-year period commencing on June 30, 2015 to but excluding June 30, 2020 will be 2.275 % per annum or $0.142188 per share per quarter, being equal to the sum of the Government of Canada Yield, as defined in the terms of the Series 8R Shares, on Monday, June 1, 2015 plus 1.41%, as determined in accordance with the terms of the Series 8R Shares.

With respect to any Series 9QR Shares that may be issued on June 30, 2015, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Sun Life Financial and subject to the Insurance Companies Act (Canada), based on a dividend rate equal to the sum of the T-Bill Rate, as defined in the terms of the Series 9QR Shares, plus 1.41% (calculated on the basis of the actual number of days elapsed in such Quarterly Floating Rate Period divided by 365 days), subject to certain adjustments in accordance with the terms of the Series 9QR Shares. The dividend rate for the period commencing on June 30, 2015 to but excluding September 30, 2015 will be equal to 2.075 % per annum or $0.130753 per share, as determined in accordance with the terms of the Series 9QR Shares.

Beneficial owners of Series 8R Shares who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is 5:00 p.m. (ET) on Monday, June 15, 2015.

An application will be made to list the Series 9QR Shares on the Toronto Stock Exchange.

SLF.PR.G has paid 4.35% over the past five years, so the change in dividend represents a cut of 48%. Ouch!

SLF.PR.G was announced 2010-5-13 and commenced trading 2010-5-25. It is tracked by HIMIPref™ and is assigned to the FixedReset subindex. As it is an insurance issue, it is my opinion that OSFI will – eventually – apply the NVCC rules to it and as it is not NVCC-compliant, it is my further opinion that it will be redeemed on or before a certain date. For analytical purposes, I have currently set that date to be 2025-1-31; it will probably be pushed back a year or two as OSFI’s foot-dragging with respect to the Life Insurance Regulatory Framework continues. You may agree or disagree with me as you wish; at present, the performance of insurance issues suggests the market as a whole disagrees.

Note that holders of SLF.PR.G have the right, until 5:00 p.m. (ET) on Monday, June 15, 2015, to notify the company that they wish to convert to the new FloatingReset series – the two series will be interconvertible every five years for as long as they exist. Note that brokers will have earlier internal deadlines.

I will post regarding my opinion on whether to retain or convert SLF.PR.G closer to the deadline; until then, contemplate today’s graph of FixedReset/FloatingReset Strong Pairs:

Click for Big

The Investment Grade pairs are very well-behaved today, with implied break-even 3-Month T-Bill rates in a nice cluster between 0.31% and 0.63%, with an average of 0.48%.

So at this point, it appears that holders of SLF.PR.G who wish to own the FloatingReset issue would be better advised not to convert, but to swap on the market; this will result in a small cash take-out provided that the new pair trades in line with extant pairs, which is by no means guaranteed.

Loblaw Companies Limited has announced (as part of their new issue announcement):

that it intends to redeem all of its outstanding Second Preferred Shares, Series A (TSX:L.PR.A) (the “Preferred Shares Series A”) for cash on July 31, 2015 (“redemption date”). The redemption price for each Preferred Share Series A will be $25.00. Holders of Preferred Shares Series A will separately receive all accrued and unpaid dividends outstanding on the redemption date. Loblaw intends to use the net proceeds of the issue of Preferred Shares Series B to partially fund the redemption of its Preferred Shares Series A. The offering is expected to close on or about June 9, 2015.

This is not really the biggest surprise in the world – L.PR.A is an OperatingRetractible paying 5.95% which becomes redeemable at par on 2015-7-31 and also becomes retractible for shares on that date.

How times change! When this issue was announced 2008-6-11 I opined that it looked expensive and when it commenced trading 2008-6-20 it turned out that the market agreed with me.

Doubtless this will cause a certain amount of angst for some investors … given the imminent redemption of MFC.PR.A the ranks of OperatingRetractibles are dwindling quickly!