Archive for February, 2016

February 25, 2016

Friday, February 26th, 2016

Just the bare bones today, I’m afraid!

Liquidity in the FX market

Rules for lightweight drones

Towards a formal theory of bank interconnectedness

The bond market hates energy

Financial analysis jobs being automated.

HSBC confirmed

DC.PR.E post updated with Dundee’s estimate of the warrant value.

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 5.59 % 6.78 % 14,283 15.77 1 1.3542 % 1,401.2
FixedFloater 7.85 % 6.87 % 22,828 15.31 1 0.0000 % 2,532.2
Floater 4.95 % 5.21 % 77,306 15.07 4 -0.8052 % 1,549.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.2703 % 2,743.4
SplitShare 4.86 % 5.72 % 74,780 2.68 6 0.2703 % 3,210.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2703 % 2,504.8
Perpetual-Premium 5.86 % 5.85 % 81,656 13.92 6 -0.2795 % 2,517.1
Perpetual-Discount 5.83 % 5.85 % 97,422 14.07 33 -0.2051 % 2,482.7
FixedReset 5.86 % 5.29 % 204,483 13.90 85 -0.6471 % 1,734.5
Deemed-Retractible 5.37 % 6.11 % 121,339 5.15 34 0.2333 % 2,518.8
FloatingReset 3.18 % 5.40 % 49,140 5.48 16 0.1795 % 1,924.8
Performance Highlights
Issue Index Change Notes
TRP.PR.A FixedReset -4.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 12.25
Evaluated at bid price : 12.25
Bid-YTW : 5.49 %
SLF.PR.H FixedReset -4.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.20
Bid-YTW : 10.59 %
MFC.PR.L FixedReset -3.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.82
Bid-YTW : 10.39 %
MFC.PR.M FixedReset -3.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.70
Bid-YTW : 9.79 %
IAG.PR.A Deemed-Retractible -3.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.97
Bid-YTW : 7.94 %
MFC.PR.K FixedReset -2.99 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.28
Bid-YTW : 10.77 %
BAM.PF.D Perpetual-Discount -2.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.54 %
TRP.PR.B FixedReset -2.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 9.50
Evaluated at bid price : 9.50
Bid-YTW : 5.14 %
IFC.PR.C FixedReset -2.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.30
Bid-YTW : 10.20 %
PWF.PR.P FixedReset -2.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 11.22
Evaluated at bid price : 11.22
Bid-YTW : 5.04 %
MFC.PR.J FixedReset -2.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.70
Bid-YTW : 9.78 %
CU.PR.C FixedReset -2.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 14.92
Evaluated at bid price : 14.92
Bid-YTW : 5.18 %
HSE.PR.G FixedReset -2.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 14.66
Evaluated at bid price : 14.66
Bid-YTW : 7.45 %
BAM.PR.B Floater -2.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 9.19
Evaluated at bid price : 9.19
Bid-YTW : 5.22 %
CM.PR.Q FixedReset -2.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 17.33
Evaluated at bid price : 17.33
Bid-YTW : 5.03 %
BAM.PF.F FixedReset -1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 5.70 %
BAM.PF.C Perpetual-Discount -1.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 19.20
Evaluated at bid price : 19.20
Bid-YTW : 6.44 %
BAM.PF.A FixedReset -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 16.26
Evaluated at bid price : 16.26
Bid-YTW : 5.75 %
BAM.PR.N Perpetual-Discount -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 18.90
Evaluated at bid price : 18.90
Bid-YTW : 6.41 %
BAM.PF.E FixedReset -1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 15.81
Evaluated at bid price : 15.81
Bid-YTW : 5.57 %
BNS.PR.E FixedReset -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 23.16
Evaluated at bid price : 25.02
Bid-YTW : 5.22 %
TD.PF.E FixedReset -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 18.09
Evaluated at bid price : 18.09
Bid-YTW : 4.94 %
MFC.PR.I FixedReset -1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.30
Bid-YTW : 9.54 %
BMO.PR.Y FixedReset -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 17.82
Evaluated at bid price : 17.82
Bid-YTW : 4.85 %
FTS.PR.M FixedReset -1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 15.80
Evaluated at bid price : 15.80
Bid-YTW : 5.26 %
TD.PF.A FixedReset -1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 16.15
Evaluated at bid price : 16.15
Bid-YTW : 4.79 %
MFC.PR.H FixedReset -1.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.27
Bid-YTW : 8.15 %
RY.PR.H FixedReset -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 16.27
Evaluated at bid price : 16.27
Bid-YTW : 4.74 %
MFC.PR.F FixedReset -1.45 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.22
Bid-YTW : 11.27 %
BIP.PR.B FixedReset -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 22.63
Evaluated at bid price : 23.66
Bid-YTW : 5.89 %
MFC.PR.C Deemed-Retractible -1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.50
Bid-YTW : 7.99 %
PWF.PR.O Perpetual-Premium -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 24.36
Evaluated at bid price : 24.68
Bid-YTW : 5.93 %
BMO.PR.S FixedReset -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 16.55
Evaluated at bid price : 16.55
Bid-YTW : 4.75 %
MFC.PR.N FixedReset -1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.81
Bid-YTW : 9.61 %
TRP.PR.D FixedReset -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 15.05
Evaluated at bid price : 15.05
Bid-YTW : 5.34 %
TRP.PR.E FixedReset -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 5.10 %
SLF.PR.I FixedReset -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.55
Bid-YTW : 9.21 %
NA.PR.W FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 14.54
Evaluated at bid price : 14.54
Bid-YTW : 5.37 %
PWF.PR.L Perpetual-Discount -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 21.54
Evaluated at bid price : 21.80
Bid-YTW : 5.91 %
BAM.PF.B FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 15.04
Evaluated at bid price : 15.04
Bid-YTW : 5.80 %
BMO.PR.W FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 16.15
Evaluated at bid price : 16.15
Bid-YTW : 4.72 %
BMO.PR.T FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 16.37
Evaluated at bid price : 16.37
Bid-YTW : 4.69 %
RY.PR.Q FixedReset -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 23.17
Evaluated at bid price : 25.08
Bid-YTW : 5.22 %
SLF.PR.G FixedReset -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.01
Bid-YTW : 10.74 %
CU.PR.H Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 22.44
Evaluated at bid price : 22.76
Bid-YTW : 5.78 %
RY.PR.B Deemed-Retractible 1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.72
Bid-YTW : 4.95 %
PVS.PR.E SplitShare 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 23.30
Bid-YTW : 6.80 %
TD.PR.Y FixedReset 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.06
Bid-YTW : 4.46 %
BNS.PR.M Deemed-Retractible 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.91
Bid-YTW : 5.46 %
RY.PR.A Deemed-Retractible 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.80
Bid-YTW : 5.44 %
RY.PR.F Deemed-Retractible 1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.72
Bid-YTW : 5.51 %
BIP.PR.A FixedReset 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 17.11
Evaluated at bid price : 17.11
Bid-YTW : 6.22 %
BNS.PR.Z FixedReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.67
Bid-YTW : 7.46 %
RY.PR.E Deemed-Retractible 1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 5.41 %
PWF.PR.T FixedReset 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 4.24 %
CU.PR.I FixedReset 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 23.16
Evaluated at bid price : 24.96
Bid-YTW : 4.41 %
BAM.PR.E Ratchet 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 25.00
Evaluated at bid price : 12.10
Bid-YTW : 6.78 %
HSE.PR.A FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 8.20
Evaluated at bid price : 8.20
Bid-YTW : 7.30 %
BMO.PR.Q FixedReset 1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.75
Bid-YTW : 8.22 %
NA.PR.Q FixedReset 1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.60
Bid-YTW : 5.22 %
BAM.PR.R FixedReset 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 12.78
Evaluated at bid price : 12.78
Bid-YTW : 5.89 %
BAM.PR.T FixedReset 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 13.43
Evaluated at bid price : 13.43
Bid-YTW : 5.74 %
RY.PR.D Deemed-Retractible 1.48 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 5.36 %
GWO.PR.N FixedReset 1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.51
Bid-YTW : 11.14 %
BNS.PR.Y FixedReset 1.67 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.84
Bid-YTW : 6.94 %
BNS.PR.D FloatingReset 1.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.75
Bid-YTW : 7.59 %
HSE.PR.C FixedReset 2.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 13.45
Evaluated at bid price : 13.45
Bid-YTW : 7.50 %
TRP.PR.F FloatingReset 3.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 10.17
Evaluated at bid price : 10.17
Bid-YTW : 5.79 %
BAM.PR.X FixedReset 4.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 12.01
Evaluated at bid price : 12.01
Bid-YTW : 5.49 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.Q FixedReset 860,432 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 23.17
Evaluated at bid price : 25.08
Bid-YTW : 5.22 %
MFC.PR.O FixedReset 753,902 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 5.71 %
TD.PF.G FixedReset 359,845 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 23.18
Evaluated at bid price : 25.09
Bid-YTW : 5.29 %
BNS.PR.E FixedReset 194,018 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 23.16
Evaluated at bid price : 25.02
Bid-YTW : 5.22 %
FTS.PR.M FixedReset 109,370 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 15.80
Evaluated at bid price : 15.80
Bid-YTW : 5.26 %
BNS.PR.O Deemed-Retractible 101,800 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-04-26
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 4.70 %
NA.PR.X FixedReset 100,160 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 23.15
Evaluated at bid price : 25.01
Bid-YTW : 5.51 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.B FixedReset Quote: 9.50 – 10.42
Spot Rate : 0.9200
Average : 0.5842

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 9.50
Evaluated at bid price : 9.50
Bid-YTW : 5.14 %

IAG.PR.A Deemed-Retractible Quote: 19.97 – 21.08
Spot Rate : 1.1100
Average : 0.8337

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.97
Bid-YTW : 7.94 %

SLF.PR.H FixedReset Quote: 14.20 – 15.00
Spot Rate : 0.8000
Average : 0.5335

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.20
Bid-YTW : 10.59 %

HSE.PR.G FixedReset Quote: 14.66 – 15.50
Spot Rate : 0.8400
Average : 0.6108

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 14.66
Evaluated at bid price : 14.66
Bid-YTW : 7.45 %

TD.PR.T FloatingReset Quote: 20.97 – 21.78
Spot Rate : 0.8100
Average : 0.5812

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.97
Bid-YTW : 5.20 %

TRP.PR.A FixedReset Quote: 12.25 – 12.88
Spot Rate : 0.6300
Average : 0.4309

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-25
Maturity Price : 12.25
Evaluated at bid price : 12.25
Bid-YTW : 5.49 %

New Issue: RY FixedReset, 5.50%+480

Friday, February 26th, 2016

Royal Bank of Canada has announced:

a domestic public offering of Non-Cumulative, 5-Year Rate Reset Preferred Shares Series BM.

Royal Bank of Canada will issue 12 million Preferred Shares Series BM priced at $25 per share to raise gross proceeds of $300 million. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 2 million Preferred Shares Series BM at the same offering price.

The Preferred Shares Series BM will yield 5.50 per cent annually, payable quarterly, as and when declared by the Board of Directors of Royal Bank of Canada, for the initial period ending August 24, 2021. Thereafter, the dividend rate will reset every five years at a rate equal to 4.80 per cent over the 5-year Government of Canada bond yield.

Subject to regulatory approval, on or after August 24, 2021, the bank may redeem the Preferred Shares Series BM in whole or in part at par. Holders of Preferred Shares Series BM will, subject to certain conditions, have the right to convert all or any part of their shares to Non-Cumulative Floating Rate Preferred Shares Series BN on August 24, 2021 and on August 24 every five years thereafter.

Holders of the Preferred Shares Series BN will be entitled to receive a non-cumulative quarterly floating dividend, as and when declared by the Board of Directors of Royal Bank of Canada, at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 4.80 per cent. Holders of Preferred Shares Series BN will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series BM on August 24, 2026 and on August 24 every five years thereafter.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is March 7, 2016.

We routinely undertake funding transactions to maintain strong capital ratios and a cost effective capital structure. Net proceeds from this transaction will be used for general business purposes.

They later announced:

that as a result of strong investor demand for its previously announced domestic public offering of Non-Cumulative, 5-Year Rate Reset Preferred Shares Series BM, the size of the offering has been increased to 30 million shares. The gross proceeds of the offering will now be $750 million. The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is March 7, 2016.

We routinely undertake funding transactions to maintain strong capital ratios and a cost effective capital structure. Net proceeds from this transaction will be used for general business purposes.

$750-million! Wow! That’s bigger than TD.PF.G, a shrimpy little issue of only $700-million.

Implied Volatility analysis yields the following chart:

impVol_RY_160225
Click for Big

Interpretation of this chart using the standard assumptions that everything will remain the same forever leads us to believe that the new issue is reasonably priced – fair value is $25.22 when compared to the indicated theoretical values.

However, the standard assumptions are even more shaky than they usually are. Some will say that the derived value of Implied Volatility, at 21%, is far too high and may be expected to decline in the future. This will cause the theoretical curve to flatten, which implies that the higher-spread issues will outperform the lower spread issues. Some will say, however, that the fundamental assumption of non-directionality in the Black-Scholes theory is wrong; that spreads in general are far too high, will narrow, and therefore the lower-spread issues will outperform the higher-spread issues. Some, like myself, will say that both criticisms are correct but that on balance the lower-spread issues are preferable. If, for instance, you plug in a 250bp spread and 10% Implied Volatility – numbers I would consider more reflective of a normal market – you find that the four lower spread issues increase in price by over 40%, compared to the higher-spread issues, which may well go substantially above the $25 call price, but not 40% worth. Mind you, the critical part of the above analysis is “normal” … i.e., with five year Canadas yielding more than inflation and that’s just for starters! There will be some who believe that current conditions represent the new normal; these players will probably prefer the higher-spread issues.

The Break Even Rate Shock for this issue is a mere 1bp. What a difference a few years make!

MFC.PR.O Soft on Heavy Volume

Friday, February 26th, 2016

Manulife Financial Corporation has announced:

that it has completed its offering of 16 million Non-cumulative Rate Reset Class 1 Shares Series 21 (the “Series 21 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $400 million.

The offering was underwritten by a syndicate of investment dealers co-led by RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc. The Series 21 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.O.

Manulife has granted the underwriters’ an option, exercisable in whole or in part, to purchase up to an additional 1 million Series 21 Preferred shares at the same offering price. The underwriters have 30 days from the closing of the preferred share offering to exercise the option.

The Series 21 Preferred Shares were issued under a prospectus supplement dated February 18, 2016 to Manulife’s short form base shelf prospectus dated December 17, 2015.

MFC.PR.O is a FixedReset, 5.60%+497, announced 2016-2-16. The issue will be tracked by HIMIPref™ and assigned to the FixedReset subindex.

As this issue is from an insurer and there is no provision for conversion into common shares at the option of the issuer, I consider this to be subject to my Deemed Retraction policy; accordingly I have placed a maturity entry dated 2025-1-31 at par in the call schedule of this instrument for analytical purposes. Note that this approach is due to analysis and there is no contractual provision in the terms of issue for any such maturity.

The issue traded 753,902 shares today (consolidated exchanges) in a range of 24.80-92 before closing at 24.86-89, 82×36. Since announcement date, the TXPL total return index has increased by 43bp since the announcement date, so ‘a little soft’ is an appropriate appraisal of its performance.

Vital statistics are:

MFC.PR.O FixedReset YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 5.71 %

Implied volatility analysis indicates the issue is expensive at its current level:

impVol_MFC_160225
Click for Big

According to this, the fair value for MFC.PR.O is 23.74 – and even at that, the slope of the theoretical line is clearly flattened by the influence of this issue. The issue is clearly well off the line defined by the lower-spread MFC issues.

OSP.PR.A Seeks To Reassure Investors

Friday, February 26th, 2016

Brompton Funds has announced:

Investors and investment advisors are invited to listen to a February 2016 recorded update hosted by Portfolio Managers Laura Lau and Michael Clare on Brompton Oil Split Corp. (the “Company”). The Portfolio Managers discuss the Company’s portfolio and the Energy Sector. A link to the presentation recorded on February 23, 2016 has been posted to the Brompton Funds website.
Class A Shares and Preferred Shares of the Company are available for purchase on the Toronto Stock Exchange under the ticker symbols OSP & OSP.PR.A, respectively.
The Company invests in a portfolio (the “Portfolio”) of equity securities of at least 15 large capitalization North American oil and gas issuers selected by the manager from the S&P 500 Index and the S&P/TSX Composite Index, giving consideration to, among other metrics, attractive valuation, growth prospects, profitability, liquidity, sustainability of dividends and a strong balance sheet. The Portfolio is focused primarily on oil and gas issuers that have significant exposure to oil, and includes equities of the following oil and gas issuers:

Apache Corp. Cimarex Energy Co. Pioneer Natural Resources Co.
ARC Resources Ltd. EOG Resources Inc. PrairieSky Royalty Ltd.
Cenovus Energy Inc. Imperial Oil Ltd. Suncor Energy Inc.
ConocoPhillips Keyera Corp. Vermilion Energy Inc.
Crescent Point Energy Corp. Occidental Petroleum Corporation Exxon Mobil Corporation
Chevron Corporation  

Clearly, when you’ve got a name like “Oil Split Corp.” in this market, your investors are going to want a lot of reassurance!

The presentation slides are available, as is an audio-visual presentation using the same slides, which is pretty cool.

I also note that Brompton has produced a Preferred Shares Primer, which includes the following chart:

bromptonRelPerf_160225
Click for Big

OSP / OSP.PR.A had a NAVPU of 16.14 as of 2016-2-24; OSP closed at $6.25; OSP.PR.A closed at 9.37.

OSP.PR.A was recently downgraded to Pfd-3 by DBRS. The issue has been tracked by HIMIPref™ since it commenced trading 2015-2-24, but is relegated to the Scraps index on credit concerns.

February 24, 2016

Thursday, February 25th, 2016

Assiduous Reader prefobsessed sent me a link to another Barry Critchley column titled Preferred shareholders, but in name only; he is incensed by the voting rights on the proposed takeover of Capstone. I have updated the post titled CSE.PR.A Ownership to Change?.

As reported by the Globe, Bank of Canada Deputy Governor Lawrence Schembri has given a speech titled Connecting the Dots: Elevated Household Debt and the Risk to Financial Stability. It’s really a reiteration of the same old song – Central Planning Now! – and there is one leap of logic that is rather conspicuous:

A broad-based decline in house prices would, in turn, have large direct effects on Canadian lenders and mortgage insurers. Results from stress tests show, however, that there are sufficient buffers in the financial system to withstand such a scenario.19 For example, the six largest Canadian banks, which hold roughly 70 per cent of outstanding mortgages, have increased the quantity and quality of their capital in recent years and are well diversified across regions and sectors. In addition, most of the mortgages they hold are supported by government-backed mortgage insurance programs or by high homeowner equity.

Nonetheless, if such a decline in house prices occurred, the impact on the broader Canadian economy and the financial system would be large.

Despite this, he does not call for a simple reduction the amount of CMHC insurance outstanding; preferring instead a politicized exercise in winner-picking:

Adopting macroprudential measures. In the immediate aftermath of the crisis, household debt and house prices resumed growing faster than disposable income in response to the lower interest rates and the recovering Canadian economy. The federal government and a number of agencies worked together to mitigate this growing systemic vulnerability. The Bank’s analysis of these vulnerabilities helped to inform these decisions.
For example, the federal government tightened rules for government-supported mortgage insurance four times over five years, starting in 2008. In December 2015, the federal government made a fifth change, increasing the minimum down payment for houses valued at from $500,000 to $1 million.

For its part, the Office of the Superintendent of Financial Institutions (OSFI) released new guidance on mortgage underwriting and mortgage insurance that implemented enhanced global standards.24 In December, OSFI announced that it would issue for public consultation proposed rules for how much capital the banks and mortgage insurers must hold against vulnerable insured mortgages.

These measures help to limit access to borrowing to the most creditworthy households, for example, those with higher credit scores, and thus complement the accommodative monetary policy of the Bank of Canada by better targeting the stimulus to those households with the capacity to borrow.

The CMHC is the issue. As he emphasizes, the Feds have a considerable amount of wrong-way risk on their books … a decline in housing will lead to an increase in federal debt (via bail-out of the CMHC) at the same time as a recession (or worse!) demands running a deficit. Clearly, the CHMC insurance outstanding should be cut back.

But it’s more fun to pick winners, obviously.

The head of EnCana gives us an idea of how bad the oil & gas situation really is:

“The job reductions not only at Encana but across the industry have been as severe as I’ve ever seen in 33 years,” CEO Doug Suttles said in a conference call with investors after the company released its fourth quarter results.

Last year, as oil prices took a nosedive, the company laid off 19 per cent of its workers. It began 2015 with 3,129 employees, meaning it ended the year with about 2,500 staff.

Encana did not say how many jobs would be affected by the latest round of layoffs. But based on last year’s figures, it’s expected another 500 people would lose their jobs this year.

“This will bring us to about 55 per cent reduction from just over two years ago,” Suttles said.

And it’s not just the producers who are scrambling to assure funding:

Enbridge Inc. plans to raise C$2 billion ($1.5 billion) in a share sale to shore up its finances in the midst of an oil price rout.

The Canadian pipeline company agreed with a group of lenders to issue 49.14 million common shares from treasury in a so-called bought deal, according to a statement. The funds will be used to pay short-term debt, the company said.

Canadian energy companies face a wave of debt maturities over the next five years that could make it challenging for them to access financing as investors drive up borrowing costs and shun commodities-related debt. Oil has plunged about 70 percent since mid-2014, sapping revenue.

Enbridge’s sale follows to other bought deals in the past week. Whitecap Resources Inc. and Raging River Exploration Inc. both raised C$95 million in the past week through equity raises of their own to pay down debt and fund capital expenditures.

So perhaps we should be grateful that Pembina Pipeline Corporation, proud issuer of PPL.PR.A, PPL.PR.C, PPL.PR.E, PPL.PR.G, PPL.PR.I and PPL.PR.K, was confirmed at Pfd-3 by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Notes rating of Pembina Pipeline Corporation (Pembina or the Company) at BBB, and the Company’s Preferred Shares at Pfd-3. The trends remain Stable. The confirmations largely reflect DBRS’s view that Pembina continues to maintain solid credit metrics and liquidity in the current significantly lower energy price environment, and has executed most of its major capital projects within budget and on schedule.

Pembina is currently pursuing a number of large capital projects in 2016 and 2017, mainly on its conventional pipelines, and natural gas and natural gas liquids (NGL) processing plants. Most projects are supported by ToP or FFS commitments from the producers for a significant portion of the designed capacity. Capex in 2016 and 2017 is estimated to be approximately $2.1 and $1.0 billion, respectively. As a result, substantial free cash flow deficits are expected to be incurred over the next two years. During this period, Pembina faces several challenges, such as (1) significant project execution risk relating to potential cost overruns and project delays, and (2) financing free cash flow deficits in a prudent manner as to maintain credit metrics at or close to current levels to be consistent with the current rating. DBRS expects Pembina to maintain the debt-to-capital ratio at around 40% and the cash flow-to-debt ratio at 25% on a sustainable basis. DBRS recognizes that during this period of large capital projects, Pembina’s credit metrics are expected to decline modestly but should improve once the major projects are completed. However, should Pembina’s credit metrics deteriorate significantly from current levels, a negative rating action could occur.

It was another poor day for the Canadian preferred share market, with PerpetualDiscounts losing 49bp, FixedResets down 31bp and DeemedRetractibles off 21bp. The Performance Highlights table was produced. Volume was above average.

PerpetualDiscounts now yield 5.86%, equivalent to 7.62% interest at the standard equivalency factor of 1.3x. Long corporates continue to yield about 4.2%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 340bp, a slight (and perhaps spurious) widening from the 335bp reported February 18.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_160224
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 16.20 to be $1.29 rich, while TRP.PR.C, resetting 2021-1-30 at +296, is $0.87 cheap at its bid price of 10.29.

impVol_MFC_160224
Click for Big

This analysis includes the new issue with a deemed price of 25.00.

Most expensive is the new issue, resetting at +497bp on 2021-6-19, deemed at 25.00 to be 1.27 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 16.25 to be 1.62 cheap.

impVol_BAM_160224
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 12.60 to be $1.35 cheap. BAM.PF.H, resetting at +417M500 on 2020-12-31 is bid at 24.96 and appears to be $1.24 rich.

impVol_FTS_160224
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 14.60, looks $0.58 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 14.00 and is $0.42 cheap.

pairs_FR_160224
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.77%, with two outliers above 0.00% and one below -2.00%. Note that the range of the y-axis has changed today. There are three junk outlier above 0.00% and one below -2.00%.

pairs_FF_160224
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 5.64 % 6.87 % 14,091 15.60 1 -0.9083 % 1,382.5
FixedFloater 7.85 % 6.87 % 22,856 15.31 1 -0.9009 % 2,532.2
Floater 4.91 % 5.10 % 77,577 15.26 4 1.2625 % 1,561.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2558 % 2,736.0
SplitShare 4.88 % 5.98 % 74,648 2.68 6 -0.2558 % 3,201.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2558 % 2,498.0
Perpetual-Premium 5.85 % 5.84 % 81,978 13.88 6 -0.0864 % 2,524.1
Perpetual-Discount 5.81 % 5.86 % 98,294 14.10 33 -0.4942 % 2,487.8
FixedReset 5.82 % 5.22 % 205,683 14.04 84 -0.3073 % 1,745.8
Deemed-Retractible 5.38 % 6.03 % 125,534 6.87 34 -0.2148 % 2,513.0
FloatingReset 3.18 % 5.33 % 49,452 5.48 16 -0.3879 % 1,921.3
Performance Highlights
Issue Index Change Notes
TRP.PR.F FloatingReset -7.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 9.96
Evaluated at bid price : 9.96
Bid-YTW : 6.02 %
BNS.PR.F FloatingReset -2.78 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.51
Bid-YTW : 8.33 %
TRP.PR.D FixedReset -2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 15.24
Evaluated at bid price : 15.24
Bid-YTW : 5.27 %
FTS.PR.I FloatingReset -2.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 9.00
Evaluated at bid price : 9.00
Bid-YTW : 5.26 %
CIU.PR.C FixedReset -2.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 10.33
Evaluated at bid price : 10.33
Bid-YTW : 4.81 %
MFC.PR.M FixedReset -2.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.25
Bid-YTW : 9.29 %
TRP.PR.E FixedReset -2.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 5.03 %
TRP.PR.G FixedReset -2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 16.65
Evaluated at bid price : 16.65
Bid-YTW : 5.49 %
BAM.PF.B FixedReset -2.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 15.21
Evaluated at bid price : 15.21
Bid-YTW : 5.73 %
MFC.PR.K FixedReset -2.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.72
Bid-YTW : 10.33 %
RY.PR.J FixedReset -1.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 17.17
Evaluated at bid price : 17.17
Bid-YTW : 5.00 %
MFC.PR.N FixedReset -1.90 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.01
Bid-YTW : 9.43 %
TD.PF.C FixedReset -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 4.76 %
FTS.PR.H FixedReset -1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 10.85
Evaluated at bid price : 10.85
Bid-YTW : 5.01 %
CU.PR.C FixedReset -1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 15.28
Evaluated at bid price : 15.28
Bid-YTW : 5.06 %
TD.PF.D FixedReset -1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 17.71
Evaluated at bid price : 17.71
Bid-YTW : 4.92 %
TD.PR.S FixedReset -1.68 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.86
Bid-YTW : 4.43 %
RY.PR.M FixedReset -1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 4.92 %
IAG.PR.A Deemed-Retractible -1.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.62
Bid-YTW : 7.47 %
HSE.PR.C FixedReset -1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 13.11
Evaluated at bid price : 13.11
Bid-YTW : 7.70 %
PWF.PR.F Perpetual-Discount -1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 22.07
Evaluated at bid price : 22.30
Bid-YTW : 5.94 %
RY.PR.P Perpetual-Discount -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 23.76
Evaluated at bid price : 24.10
Bid-YTW : 5.46 %
PWF.PR.K Perpetual-Discount -1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 21.34
Evaluated at bid price : 21.34
Bid-YTW : 5.87 %
CU.PR.I FixedReset -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 23.05
Evaluated at bid price : 24.64
Bid-YTW : 4.48 %
BNS.PR.D FloatingReset -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.45
Bid-YTW : 7.90 %
BMO.PR.S FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 16.76
Evaluated at bid price : 16.76
Bid-YTW : 4.69 %
BAM.PF.E FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 16.10
Evaluated at bid price : 16.10
Bid-YTW : 5.47 %
BAM.PR.Z FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 16.32
Evaluated at bid price : 16.32
Bid-YTW : 5.79 %
SLF.PR.A Deemed-Retractible -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 7.37 %
NA.PR.W FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 14.71
Evaluated at bid price : 14.71
Bid-YTW : 5.30 %
POW.PR.D Perpetual-Discount -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 21.44
Evaluated at bid price : 21.44
Bid-YTW : 5.92 %
TD.PR.Z FloatingReset 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.97
Bid-YTW : 5.28 %
PWF.PR.P FixedReset 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 11.50
Evaluated at bid price : 11.50
Bid-YTW : 4.91 %
IFC.PR.C FixedReset 1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.70
Bid-YTW : 9.83 %
TD.PF.E FixedReset 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 4.85 %
TRP.PR.B FixedReset 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 9.90
Evaluated at bid price : 9.90
Bid-YTW : 5.01 %
FTS.PR.K FixedReset 1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 14.60
Evaluated at bid price : 14.60
Bid-YTW : 4.96 %
BMO.PR.Q FixedReset 1.80 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.51
Bid-YTW : 8.47 %
GWO.PR.O FloatingReset 2.73 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.30
Bid-YTW : 11.95 %
SLF.PR.H FixedReset 2.76 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.90
Bid-YTW : 9.90 %
BAM.PR.B Floater 3.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 9.40
Evaluated at bid price : 9.40
Bid-YTW : 5.10 %
HSE.PR.G FixedReset 3.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 7.27 %
HSE.PR.E FixedReset 4.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 15.15
Evaluated at bid price : 15.15
Bid-YTW : 7.04 %
TD.PR.T FloatingReset 4.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.00
Bid-YTW : 5.17 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.G FixedReset 190,574 Nesbitt crossed blocks of 120,000 and 36,500, both at 25.33.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 23.26
Evaluated at bid price : 25.33
Bid-YTW : 5.22 %
PWF.PR.P FixedReset 163,503 TD crossed blocks of 10,600 and 100,000 at 11.40, then another 50,000 at 11.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 11.50
Evaluated at bid price : 11.50
Bid-YTW : 4.91 %
BAM.PR.K Floater 79,400 Scotia crossed 74,300 at 9.40.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 9.16
Evaluated at bid price : 9.16
Bid-YTW : 5.23 %
MFC.PR.C Deemed-Retractible 73,005 RBC crossed 50,000 at 19.75.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.76
Bid-YTW : 7.80 %
NA.PR.X FixedReset 69,984 TD crossed 25,000 at 25.11.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 23.20
Evaluated at bid price : 25.15
Bid-YTW : 5.47 %
PWF.PR.L Perpetual-Discount 59,850 Desjardins crossed 50,000 at 22.11.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 21.81
Evaluated at bid price : 22.05
Bid-YTW : 5.84 %
There were 43 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.Q FloatingReset Quote: 10.00 – 13.14
Spot Rate : 3.1400
Average : 2.1228

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 10.00
Evaluated at bid price : 10.00
Bid-YTW : 5.15 %

TRP.PR.F FloatingReset Quote: 9.96 – 10.75
Spot Rate : 0.7900
Average : 0.4949

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 9.96
Evaluated at bid price : 9.96
Bid-YTW : 6.02 %

RY.PR.C Deemed-Retractible Quote: 24.05 – 24.64
Spot Rate : 0.5900
Average : 0.3761

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 5.39 %

GWO.PR.I Deemed-Retractible Quote: 20.25 – 20.88
Spot Rate : 0.6300
Average : 0.4308

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.25
Bid-YTW : 7.62 %

POW.PR.B Perpetual-Discount Quote: 23.06 – 23.60
Spot Rate : 0.5400
Average : 0.3493

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 22.78
Evaluated at bid price : 23.06
Bid-YTW : 5.87 %

HSE.PR.C FixedReset Quote: 13.11 – 13.69
Spot Rate : 0.5800
Average : 0.3992

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-24
Maturity Price : 13.11
Evaluated at bid price : 13.11
Bid-YTW : 7.70 %

FN.PR.A To Be Extended

Wednesday, February 24th, 2016

First National Financial Corporation has announced:

that it does not intend to exercise its right to redeem the currently outstanding 4,000,000 cumulative 5-year rate reset Class A Preference Shares, Series 1 of First National (“Series 1 Preference Shares”) on March 31, 2016.

As a result, subject to certain conditions, the holders of Series 1 Preference Shares have the right to convert all or part of their Series 1 Preference Shares on a one-for-one basis into cumulative floating rate Class A Preference Shares, Series 2 of First National (“Series 2 Preference Shares”) on March 31, 2016. Holders who do not exercise their right to convert their Series 1 Preference Shares into Series 2 Preference Shares on such date will retain their Series 1 Preference Shares.
The foregoing conversions are subject to the conditions that: (i) if First National determines that there would be less than 1,000,000 Series 1 Preference Shares outstanding on March 31, 2016, then all remaining Series 1 Preference Shares will automatically be converted into Series 2 Preference Shares on a one-for-one basis on March 31, 2016, and (ii) alternatively, if First National determines that there would be less than 1,000,000 Series 2 Preference Shares outstanding on March 31, 2016, no Series 1 Preference Shares will be converted into Series 2 Preference Shares. In either case, First National shall give a written notice to that effect to holders of Series 1 Preference Shares no later than March 24, 2016.

The dividend rate applicable to the Series 1 Preference Shares for the five-year period commencing on April 1, 2016, and ending on March 31, 2021, and the dividend rate applicable to the Series 2 Preference Shares for the three-month period commencing on April 1, 2016, and ending on June 30, 2016, will be determined in accordance with the terms of the respective classes of preference shares and announced by way of a news release on March 2, 2016.

Beneficial owners of Series 1 Preference 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 ensure that they meet the deadline to exercise such right, which is 5:00 p.m. (Toronto time) on March 16, 2016.

This is not a big surprise. FN.PR.A is a FixedReset, 4.65%+207, that commenced trading 2011-1-25 after being announced 2011-1-17.

The issue is tracked by HIMIPref™ but relegated to the scraps index on credit concerns.

I will post information regarding the reset rate when it is available March 2 and intend to post a recommendation regarding conversion on March 11.

February 23, 2016

Wednesday, February 24th, 2016

A horrible day for equities is continuing overnight:

Appetite for equities continued to sour in Asia as oil’s drop and a revival in demand for low-risk assets saw stocks from Japan to Australia decline with emerging-market currencies.

Asian shares fell the most in a week as a resurgent yen weighed on Japan’s Topix index, while mining and energy shares drove a 2.1 percent retreat in Australia’s benchmark. Crude fell toward $31 a barrel in New York after sliding last session as Iran’s oil minister ridiculed a plan forged by Saudi Arabia and Russia to lock production at January levels. Gold built on Tuesday’s advance, while yields on 10-year Japanese government debt fell back below zero. The pound slipped below $1.40 for the first time since 2009 as Malaysia’s ringgit dropped by the most in a week.

Futures on the Standard & Poor’s 500 index declined 0.1 percent, following a 1.3 percent retreat in the U.S. benchmark.

Meanwhile, Federal Reserve Bank of St. Louis President James Bullard made a presentation:

Bullard explained that modern theory suggests inflation expectations are a more important determinant of actual inflation than traditional “Phillips curve” effects (whereby further gains in labor markets put upward pressure on inflation).

He noted that the decline in market-based measures of inflation expectations in the U.S. since the summer of 2014 has been highly correlated with the decline in oil prices. “I suggested during 2015 that inflation expectations would return to previous levels once oil prices stabilized,” Bullard added. “Since then, inflation expectations have declined too far for comfort, the oil price correlation notwithstanding.”

Turning again to the FOMC’s normalization strategy being predicated on an environment of stable inflation expectations, Bullard said that renewed downward pressure on market-based measures of inflation expectations during 2016 has called this assumption into question. “I regard it as unwise to continue a normalization strategy in an environment of declining market-based inflation expectations,” he stated.

His presentation slides included a handy chart:

inflationExpectationsAndOil
Click for Big

Interestingly, however, Alejandro Badel and Joseph McGillicuddy of the St. Louis Fed, have examined What Future Oil Price Is Consistent with Current Inflation Expectations? and come up with a surprising answer:

We calculated the future path of the CPI over the next 10 years (starting in January 2016) that would be consistent with breakeven inflation expectations at horizons of one year through 10 years.2 Then, using an annual growth rate of 2.87 percent for the “all items less energy” component and using 0.46 for the elasticity of the energy component with respect to oil prices, we backed out the future path of oil prices that would produce this future path of the CPI.3 The figure below displays the implied oil price series and compares it to the future oil prices implied by West Texas Intermediate crude oil futures.

According to our calculations, oil prices would need to fall to $0 per barrel by mid-2019 in order to validate current inflation expectations. After that, there is no oil price that would allow our model to predict a CPI path consistent with December 2015 breakeven inflation expectations. This implied path of oil prices is very different from the path of oil prices implied by futures contracts, which rises to more than $50 per barrel by mid-2019.

We state some potential explanations for our results:

  • •Expectations for the future growth of the other CPI components besides energy may be lower than the annual rate of 2.87 percent we assumed in our model.
  • •The recent movements in breakeven inflation expectations may have been caused by something other than the decline in oil prices. It is even possible that a third variable is driving the decline in both.
  • •Investors may expect the relationship between oil price and the CPI energy component to change in the future. (This would be despite the strong relationship seen over the past 20 years, shown in the second figure in our previous blog post.)
  • •Changes in the inflation risk premium for bonds that are not inflation-protected and/or changes in the liquidity premium for TIPS may be distorting breakeven inflation expectations in the last few months.
BlogImage_FuturePathOilPrices_021516
Click for Big

And Michael D. Bauer and Erin McCarthy of the San Francisco Fed ask Can We Rely on Market-Based Inflation Forecasts?:

Market-based measures of inflation expectations are calculated from the prices of financial securities. Their advantage is that they are readily available at high frequency and therefore are widely monitored. However, they reflect not only the public’s inflation expectations but also other idiosyncratic factors that affect market prices, which are difficult to quantify. For example, they include a risk premium to compensate investors for inflation uncertainty and are affected by changes in liquidity, unusual demand flows, and, more broadly, “animal spirits” that change prices but are unrelated to expectations (see Bauer and Rudebusch 2015). Hence it is unclear how much useful information they provide, and how much one should pay attention to these rates when forecasting inflation.

If market-based inflation expectations provided accurate inflation forecasts, then one surely would want to pay close attention to their evolution. In this Economic Letter, we evaluate their performance in comparison with a variety of alternative forecasts for CPI inflation.

For the one-year-ahead forecasts, the results indicate that market-based forecasts and the no-change forecast perform worst. Survey forecasts deliver the best performance. The constant forecast performs surprisingly well, with only slightly lower accuracy than the surveys.

For the two-year forecasts, Figure 2 shows that while the differences in forecast performance are smaller, market-based forecasts again are among the least accurate. Here, inflation swaps and the SPF perform about the same, both somewhat worse than the simple constant and no-change forecasts.

We find that market-based inflation expectations are not as accurate in predicting future inflation as one might expect. They can exhibit somewhat lower accuracy than forecasts constructed from survey expectations of future inflation, which incorporate all the information used by professional forecasters, or simple forecast rules. Interestingly, a simple constant inflation rate corresponding to the Federal Reserve’s 2% inflation target performs quite well. Our results should be viewed as only tentative as they are based on a short sample that displays a lot of volatility during the Great Recession, and because the differences in forecast accuracy are generally small. What we confidently conclude, however, is that market-based forecasts cannot improve upon some of the most common methods for predicting inflation.

Meanwhile, we will soon start seeing the effects of a grand experiment in bank funding:

Investors are poised to pull as much as $400 billion from U.S. money-market funds that buy such debt, known as commercial paper, JPMorgan Chase & Co. predicts. The looming exodus, a consequence of steps to make money markets safer after the financial crisis, is set to accelerate before October. That’s when Securities and Exchange Commission rules take effect mandating that so-called institutional prime funds, among the main buyers of commercial paper, report prices that fluctuate. Traditionally, those funds have stuck to $1 per share.

Wall Street strategists say investors may already be shifting from prime funds to those focused on government debt, which will keep a fixed share price. The diminished appetite for commercial paper is a potential headache for banks and other issuers, which saw the cost of the IOUs climb to an almost four-year high in recent weeks. The companies use the instruments for everything from loans to payrolls.

Financial firms’ short-term debts, including commercial paper, certificates of deposit and time deposits, make up U.S. prime funds’ biggest holdings. Bank of Tokyo-Mitsubishi UFJ Ltd., Credit Agricole SA, Sumitomo Mitsui Bank Corp., Royal Bank of Canada and DNB Bank ASA comprise the top five issuers of this debt held by the funds, according to Crane Data LLC.

With fund companies converting or closing prime offerings, the industry’s holdings of government securities have swelled. Taxable money-funds’ investments in government obligations rose to $1.47 trillion as of the end of January, from $1.18 billion in February 2015, according to Crane.

And there’s a new deputy in town:

The Bank of Canada plucked a researcher from the Federal Reserve Bank of San Francisco to help it navigate record-low interest rates and the lingering effects of a commodity shock.

Sylvain Leduc, currently a vice president at the San Francisco Fed, becomes the Canadian central bank’s newest policy maker starting May 2. The Montreal-born economist, 46, has published a string of papers in the last decade on subjects including the benefits of infrastructure spending, the links between exchange-rate swings and inflation, and extraordinary monetary policy.

And guess who visited the Canadian preferred share market today?

Apocalypse_vasnetsov
Click for Big

It was a grim day for the Canadian preferred share market, with PerpetualDiscounts off 26bp, FixedResets losing 183bp and DeemedRetractibles down 63bp. The Performance Highlights table is suitably enormous. Volume was very high.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_160223
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 16.55 to be $1.41 rich, while TRP.PR.G, resetting 2020=11-30 at +296, is $0.85 cheap at its bid price of 17.00.

impVol_MFC_160223
Click for Big

This analysis includes the new issue with a deemed price of 25.00.

Most expensive is the new issue, resetting at +497bp on 2021-6-19, deemed at 25.00 to be 1.44 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 16.24 to be 1.73 cheap.

impVol_BAM_160223
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 12.57 to be $1.40 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 16.28 and appears to be $1.11 rich.

impVol_FTS_160223
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 14.35, looks $0.31 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 13.95 and is $0.49 cheap.

pairs_FR_160223
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.83%, with one outlier above 0.50% and two below -1.50%. Note that the range of the y-axis has changed today. There is one junk outlier above 0.50% and two below -1.50%.

pairs_FF_160223
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 5.59 % 6.81 % 14,719 15.67 1 -5.1684 % 1,395.2
FixedFloater 7.78 % 6.81 % 23,090 15.38 1 -0.1635 % 2,555.2
Floater 4.97 % 5.23 % 78,533 15.04 4 0.0000 % 1,542.4
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2726 % 2,743.0
SplitShare 4.87 % 5.69 % 75,047 2.68 6 -0.2726 % 3,209.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2726 % 2,504.4
Perpetual-Premium 5.84 % 5.84 % 82,758 13.85 6 -0.1593 % 2,526.3
Perpetual-Discount 5.79 % 5.82 % 98,814 14.18 33 -0.2617 % 2,500.1
FixedReset 5.81 % 5.21 % 207,589 14.08 84 -1.8337 % 1,751.2
Deemed-Retractible 5.37 % 5.98 % 124,877 6.87 34 -0.6288 % 2,518.4
FloatingReset 3.17 % 5.47 % 49,891 5.47 16 -1.6229 % 1,928.8
Performance Highlights
Issue Index Change Notes
BAM.PR.X FixedReset -6.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 11.45
Evaluated at bid price : 11.45
Bid-YTW : 5.77 %
BAM.PR.R FixedReset -6.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 12.57
Evaluated at bid price : 12.57
Bid-YTW : 5.99 %
FTS.PR.K FixedReset -5.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 5.05 %
BAM.PF.A FixedReset -5.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.60
Evaluated at bid price : 16.60
Bid-YTW : 5.62 %
HSE.PR.E FixedReset -5.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 14.56
Evaluated at bid price : 14.56
Bid-YTW : 7.33 %
TD.PR.T FloatingReset -5.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.17
Bid-YTW : 5.91 %
BAM.PR.E Ratchet -5.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 25.00
Evaluated at bid price : 12.11
Bid-YTW : 6.81 %
BAM.PF.G FixedReset -5.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.79
Evaluated at bid price : 16.79
Bid-YTW : 5.64 %
BMO.PR.Q FixedReset -5.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.20
Bid-YTW : 8.80 %
HSE.PR.G FixedReset -5.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 14.51
Evaluated at bid price : 14.51
Bid-YTW : 7.52 %
BAM.PF.B FixedReset -4.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 15.52
Evaluated at bid price : 15.52
Bid-YTW : 5.61 %
BAM.PF.E FixedReset -4.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.28
Evaluated at bid price : 16.28
Bid-YTW : 5.40 %
TRP.PR.G FixedReset -4.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.37 %
TRP.PR.I FloatingReset -4.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 10.76
Evaluated at bid price : 10.76
Bid-YTW : 4.64 %
BNS.PR.Z FixedReset -4.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.33
Bid-YTW : 7.79 %
PWF.PR.T FixedReset -4.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 18.77
Evaluated at bid price : 18.77
Bid-YTW : 4.26 %
PWF.PR.Q FloatingReset -4.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 10.06
Evaluated at bid price : 10.06
Bid-YTW : 5.12 %
TRP.PR.H FloatingReset -4.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 8.50
Evaluated at bid price : 8.50
Bid-YTW : 5.13 %
HSE.PR.C FixedReset -4.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 13.30
Evaluated at bid price : 13.30
Bid-YTW : 7.58 %
FTS.PR.H FixedReset -3.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 11.05
Evaluated at bid price : 11.05
Bid-YTW : 4.92 %
MFC.PR.G FixedReset -3.91 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.24
Bid-YTW : 9.49 %
FTS.PR.G FixedReset -3.86 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 13.95
Evaluated at bid price : 13.95
Bid-YTW : 5.23 %
BNS.PR.Y FixedReset -3.78 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.57
Bid-YTW : 7.21 %
HSE.PR.A FixedReset -3.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 8.03
Evaluated at bid price : 8.03
Bid-YTW : 7.45 %
MFC.PR.J FixedReset -3.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.14
Bid-YTW : 9.38 %
NA.PR.S FixedReset -3.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 15.90
Evaluated at bid price : 15.90
Bid-YTW : 5.08 %
MFC.PR.I FixedReset -3.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.70
Bid-YTW : 9.18 %
MFC.PR.K FixedReset -3.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.02
Bid-YTW : 10.04 %
BMO.PR.Y FixedReset -3.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 18.12
Evaluated at bid price : 18.12
Bid-YTW : 4.77 %
TRP.PR.F FloatingReset -3.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 10.76
Evaluated at bid price : 10.76
Bid-YTW : 5.57 %
NA.PR.W FixedReset -3.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 14.87
Evaluated at bid price : 14.87
Bid-YTW : 5.24 %
TRP.PR.D FixedReset -3.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 15.65
Evaluated at bid price : 15.65
Bid-YTW : 5.12 %
BMO.PR.M FixedReset -2.99 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.75
Bid-YTW : 4.51 %
MFC.PR.N FixedReset -2.80 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.32
Bid-YTW : 9.15 %
BAM.PR.T FixedReset -2.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 13.37
Evaluated at bid price : 13.37
Bid-YTW : 5.76 %
MFC.PR.L FixedReset -2.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.40
Bid-YTW : 9.83 %
CM.PR.Q FixedReset -2.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 17.70
Evaluated at bid price : 17.70
Bid-YTW : 4.93 %
TRP.PR.C FixedReset -2.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 10.37
Evaluated at bid price : 10.37
Bid-YTW : 5.32 %
NA.PR.Q FixedReset -2.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.45
Bid-YTW : 5.34 %
BAM.PR.Z FixedReset -2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 5.73 %
RY.PR.H FixedReset -2.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.51
Evaluated at bid price : 16.51
Bid-YTW : 4.67 %
SLF.PR.J FloatingReset -2.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.25
Bid-YTW : 12.19 %
CU.PR.C FixedReset -2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 15.56
Evaluated at bid price : 15.56
Bid-YTW : 4.96 %
MFC.PR.M FixedReset -1.95 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.62
Bid-YTW : 8.96 %
BNS.PR.D FloatingReset -1.94 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.65
Bid-YTW : 7.68 %
MFC.PR.H FixedReset -1.92 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.40
Bid-YTW : 8.04 %
BNS.PR.P FixedReset -1.83 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.55
Bid-YTW : 4.09 %
RY.PR.Z FixedReset -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.61
Evaluated at bid price : 16.61
Bid-YTW : 4.58 %
FTS.PR.M FixedReset -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 5.12 %
FTS.PR.I FloatingReset -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 9.23
Evaluated at bid price : 9.23
Bid-YTW : 5.13 %
RY.PR.I FixedReset -1.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.64
Bid-YTW : 4.93 %
PWF.PR.P FixedReset -1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 11.36
Evaluated at bid price : 11.36
Bid-YTW : 4.97 %
SLF.PR.H FixedReset -1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.50
Bid-YTW : 10.28 %
BAM.PR.B Floater -1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 9.10
Evaluated at bid price : 9.10
Bid-YTW : 5.27 %
TRP.PR.B FixedReset -1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 9.75
Evaluated at bid price : 9.75
Bid-YTW : 5.09 %
IFC.PR.C FixedReset -1.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.50
Bid-YTW : 10.01 %
TD.PF.B FixedReset -1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 4.68 %
CM.PR.P FixedReset -1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 4.82 %
BNS.PR.C FloatingReset -1.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 5.46 %
BNS.PR.B FloatingReset -1.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.65
Bid-YTW : 5.59 %
TD.PR.Y FixedReset -1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.81
Bid-YTW : 4.67 %
IAG.PR.G FixedReset -1.34 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.97
Bid-YTW : 9.07 %
BMO.PR.W FixedReset -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.35
Evaluated at bid price : 16.35
Bid-YTW : 4.65 %
BMO.PR.R FloatingReset -1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.97
Bid-YTW : 5.24 %
CM.PR.O FixedReset -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.53
Evaluated at bid price : 16.53
Bid-YTW : 4.78 %
RY.PR.L FixedReset -1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.53
Bid-YTW : 4.17 %
PVS.PR.D SplitShare -1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 22.86
Bid-YTW : 6.33 %
BNS.PR.R FixedReset -1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.97
Bid-YTW : 4.85 %
ELF.PR.H Perpetual-Discount -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 22.33
Evaluated at bid price : 22.62
Bid-YTW : 6.15 %
TD.PF.A FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.51
Evaluated at bid price : 16.51
Bid-YTW : 4.68 %
TD.PR.Z FloatingReset -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.76
Bid-YTW : 5.47 %
BNS.PR.M Deemed-Retractible -1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.68
Bid-YTW : 5.65 %
PWF.PR.K Perpetual-Discount -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 21.35
Evaluated at bid price : 21.62
Bid-YTW : 5.77 %
TRP.PR.A FixedReset -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 13.00
Evaluated at bid price : 13.00
Bid-YTW : 5.27 %
BNS.PR.L Deemed-Retractible -1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.65
Bid-YTW : 5.67 %
BAM.PR.K Floater -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 9.15
Evaluated at bid price : 9.15
Bid-YTW : 5.24 %
GWO.PR.M Deemed-Retractible -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 5.94 %
SLF.PR.B Deemed-Retractible -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.39
Bid-YTW : 7.17 %
BMO.PR.S FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 16.95
Evaluated at bid price : 16.95
Bid-YTW : 4.64 %
RY.PR.E Deemed-Retractible -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.66
Bid-YTW : 5.60 %
ELF.PR.F Perpetual-Discount -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 21.75
Evaluated at bid price : 22.00
Bid-YTW : 6.10 %
SLF.PR.A Deemed-Retractible -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.24
Bid-YTW : 7.21 %
RY.PR.G Deemed-Retractible -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.57
Bid-YTW : 5.68 %
BNS.PR.F FloatingReset 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.01
Bid-YTW : 7.80 %
TD.PF.D FixedReset 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 18.02
Evaluated at bid price : 18.02
Bid-YTW : 4.83 %
GWO.PR.N FixedReset 1.58 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.20
Bid-YTW : 11.48 %
MFC.PR.F FixedReset 1.65 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.30
Bid-YTW : 11.17 %
RY.PR.M FixedReset 1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 17.28
Evaluated at bid price : 17.28
Bid-YTW : 4.84 %
PWF.PR.A Floater 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 10.61
Evaluated at bid price : 10.61
Bid-YTW : 4.48 %
GWO.PR.O FloatingReset 1.85 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.00
Bid-YTW : 12.31 %
CIU.PR.C FixedReset 7.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 10.57
Evaluated at bid price : 10.57
Bid-YTW : 4.70 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.G FixedReset 143,934 TD crossed 100,000 at 25.36.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 23.27
Evaluated at bid price : 25.37
Bid-YTW : 5.21 %
BNS.PR.E FixedReset 83,554 RBC crossed 38,400 at 25.47.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 23.29
Evaluated at bid price : 25.43
Bid-YTW : 5.12 %
RY.PR.Q FixedReset 73,287 RBC crossed 25,000 at 25.43.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 23.24
Evaluated at bid price : 25.30
Bid-YTW : 5.17 %
SLF.PR.E Deemed-Retractible 61,414 RBC crossed 50,000 at 20.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.00
Bid-YTW : 7.79 %
NA.PR.X FixedReset 55,631 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 23.19
Evaluated at bid price : 25.14
Bid-YTW : 5.47 %
SLF.PR.I FixedReset 49,348 Desjardins crossed 25,000 at 16.75.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.75
Bid-YTW : 9.03 %
There were 57 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PR.Z FloatingReset Quote: 20.76 – 21.94
Spot Rate : 1.1800
Average : 0.7330

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.76
Bid-YTW : 5.47 %

TD.PR.T FloatingReset Quote: 20.17 – 21.15
Spot Rate : 0.9800
Average : 0.5827

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.17
Bid-YTW : 5.91 %

BAM.PR.E Ratchet Quote: 12.11 – 12.86
Spot Rate : 0.7500
Average : 0.5357

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-23
Maturity Price : 25.00
Evaluated at bid price : 12.11
Bid-YTW : 6.81 %

GWO.PR.M Deemed-Retractible Quote: 25.05 – 25.70
Spot Rate : 0.6500
Average : 0.4749

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 5.94 %

MFC.PR.I FixedReset Quote: 16.70 – 17.23
Spot Rate : 0.5300
Average : 0.3792

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.70
Bid-YTW : 9.18 %

BMO.PR.Q FixedReset Quote: 17.20 – 17.60
Spot Rate : 0.4000
Average : 0.2651

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.20
Bid-YTW : 8.80 %

CSE.PR.A Ownership to Change?

Wednesday, February 24th, 2016

On 2016-1-20, Capstone Infrastructure Corporation announced:

that it has entered into a definitive arrangement agreement (the “Arrangement Agreement”) with Irving Infrastructure Corp., a subsidiary of iCON Infrastructure Partners III, L.P. (“iCON III”), a fund advised by London, UK-based iCON Infrastructure LLP (“iCON Infrastructure”), that provides for the acquisition of all issued and outstanding common shares of Capstone and Class B exchangeable units of Capstone’s subsidiary MPT LTC Holding LP for $4.90 cash per share or unit, as applicable. The acquisition will be completed by way of a plan of arrangement (the “Arrangement”) under the British Columbia Business Corporations Act (“BCBCA”). The total equity value of the transaction is approximately $480 million.

Under the Arrangement, it is proposed that Capstone’s 6.50% convertible unsecured subordinated debentures due December 31, 2016 will be redeemed for 101% of their principal amount and Capstone Power Corp.’s 6.75% extendible convertible unsecured subordinated debentures due December 31, 2017 will be converted into common shares of Capstone in accordance with the cash change of control provisions of the debenture indenture governing such debentures and then immediately acquired by Irving Infrastructure Corp. at a price of $4.90 per share, in each case plus accrued and unpaid interest on the debenture until the Effective Date. Pursuant to the Arrangement Agreement, holders of the debentures will be asked to vote on the Arrangement, with each series of debentures voting as a separate class. However, completion of the Arrangement is not conditional on receipt of either of such approvals. If the requisite debenture holder approval is not obtained, such debentures will be excluded from the Arrangement and dealt with in accordance with their terms. For a series of debentures to be part of the Arrangement, the resolution approving the Arrangement must be approved by holders of not less than a majority in number and not less than 75% of the principal amount of such debentures present in person or by proxy at the special meeting of securityholders.

Capstone’s previously announced fourth quarter 2015 dividend will be paid to common and preferred shareholders on January 29, 2016, but no further dividends will be declared to common shareholders in anticipation of the consummation of the transaction. Quarterly dividends are expected to be declared to preferred shareholders on a continuing basis and those shares will continue to be listed and trade on the Toronto Stock Exchange following closing of the Arrangement.

Capstone expects to hold a meeting of securityholders to consider the resolution approving the Arrangement in mid-March 2016, and if approved, to complete the transaction in April 2016 following receipt of regulatory approvals.

They have now announced:

that Glass, Lewis & Co., LLC (“Glass Lewis”) and Institutional Shareholder Services, Inc. (“ISS”), two leading independent proxy advisory firms, have both recommended that Capstone shareholders vote FOR the previously announced arrangement (the “Arrangement”) that provides for Irving Infrastructure Corp., a subsidiary of iCON Infrastructure Partners III, L.P. (“iCON III”), a fund advised by London, UK-based iCON Infrastructure LLP (“iCON Infrastructure”), to acquire all issued and outstanding common shares of Capstone (“common shares”) and Class B exchangeable units of Capstone’s subsidiary MPT LTC Holding LP (“Class B units”) for $4.90 cash per share or unit, as applicable.

CSE.PR.A is a FixedReset, 5.00%+271, that commenced trading 2011-6-30 after being announced 2011-6-13. The issue dived in late 2011 when the company announced a review of the common dividend and the issue was downgraded to P-4(high) by S&P in April 2012.

There has been no indication as yet from S&P regarding the credit implications of a successful takeover.

Update, 2016-2-24: Barry Critchley is incensed by the voting terms:

Judging by some recent actions, it seems that preferred shareholders are preferred in name only.

Holders of the rate-reset preferreds would have liked to have been invited. Given their recent trading price — during the past year the prefs have traded in the range of $9.50 to $15.30 and closed Tuesday at $12.46 – they would have gladly accepted a small premium and voted to support the offer.

The non-invite to the meeting and the decision to leave the prefs outstanding has upset some holders.

ICON said, “the rights of preferred shareholders will not be affected by the transaction, since the preferred shares will remain outstanding on their current terms. The maintenance of a public listing leaves open the potential for future capital raisings of the public entity.”

GMP.PR.B To Be Extended

Wednesday, February 24th, 2016

GMP Capital Inc. has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Cumulative 5-Year Rate Reset Preferred Shares, Series B of the Corporation (the Series B Shares) on March 31, 2016 (the Conversion Date). There are currently 4,600,000 Series B Shares outstanding.

As a result and subject to certain conditions set out in the short form prospectus dated February 14, 2011 relating to the issuance of the Series B Shares, the holders of the Series B Shares have the right, at their option, to convert all or any of their Series B Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series C of the Corporation (the Series C Shares) on the Conversion Date (the Conversion Privilege). A formal notice of the Conversion Privilege will be sent to the registered holder of the Series B Shares.

Holders who do not exercise their right to convert their Series B Shares into Series C Shares will continue to hold their Series B Shares and will have the opportunity to convert their shares again on March 31, 2021, and every five years thereafter as long as the shares remain outstanding.

The foregoing Conversion Privilege is subject to the following conditions: (i) if the Corporation determines that there would remain outstanding on the Conversion Date less than 1,000,000 Series C Shares, after taking into account all Series B Shares tendered for conversion into Series C Shares and all Series C Shares tendered for conversion into Series B Shares, then the holders of the Series B Shares will not be entitled to convert their shares into Series C Shares; and (ii) alternatively, if the Corporation determines that there would remain outstanding on the Conversion Date less than 1,000,000 Series B Shares, after taking into account all Series B Shares tendered for conversion into Series C Shares and all Series C Shares tendered for conversion into Series B Shares, then all, but not part, of the remaining outstanding Series B Shares will automatically be converted into Series C Shares on a one-for-one basis on the Conversion Date. In either case, the Corporation will give written notice to that effect to any registered holders affected by the preceding conditions of the Series B Shares no later than March 24, 2016.

The dividend rate applicable to the Series B Shares for the five-year period commencing on April 1, 2016 and ending on and including March 31, 2021, and the dividend rate applicable to the Series C Shares for the three-month period commencing on April 1, 2016 and ending on and including June 30, 2016, will be determined and announced by way of a press release on March 1, 2016.

Beneficial owners of Series B Shares who wish to exercise their Conversion Privilege should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from March 1, 2016 until 5:00 p.m. (Toronto time) on March 16, 2016.

This is not a big surprise. GMP.PR.B is a FixedReset, 5.50%+289, that commenced trading 2011-2-22 after being announced 2011-2-1. The company is experiencing difficulties and is on Review-Negative by DBRS.

The issue is tracked by HIMIPref™ but relegated to the scraps index on credit concerns.

I will post information regarding the reset rate when it is available March 1 and intend to post a recommendation regarding conversion on March 11.

Live.com’s Spam Filters Out of Control!

Tuesday, February 23rd, 2016

It has become apparent that Microsoft has completely lost control over its servers.

I’ve been getting more than a few eMails bounced back recently, of the form:

Recipient: [SMTP: [eMail address redacted]]
Reason: 550 SC-001 (SNT004-MC2F3) Unfortunately, messages from 184.172.98.210 weren’t sent. Please contact your Internet service provider since part of their network is on our block list. You can also refer your provider to http://mail.live.com/mail/troubleshooting.aspx#errors.

This appears to affect eMails directed to @live.com and @Hotmail.com. There may be more, but I haven’t seen any bounce-backs from other domains yet.

I don’t know quite what to make of this. I have contacted my Server Wizard and hope that the situation will be resolved shortly.

In the interim, however, I cannot respond to eMails originating from these domains. All my eMail from each of my domains (including automatically generated eMail from PrefBlog and PrefLetter) is routed through the server at 184.172.98.210.

I apologize for the inconvenience and hope to have this situation resolved promptly.