PrefBlog

Standard & Poor’s has announced:

• •We are raising our long-term corporate credit and senior unsecured debt ratings on Brookfield Renewable Partners L.P. (BEP) to ‘BBB+’ from ‘BBB’.
• •The upgrade follows a revision of our assessment of the company’s relationship with parent Brookfield Asset Management Inc.
• •We revised our group assessment of BEP to moderately strategic from nonstrategic, resulting in a one-notch uplift from the ‘bbb’ stand-alone credit profile to the final ‘BBB+’ rating.
• •The stable outlook reflects our expectation that the company will continue to have fairly predictable cash flows due to its long-term contracts from its well-diversified portfolio of generation assets.

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S&P Global Ratings today raised its long-term corporate credit rating on Brookfield Renewable Partners L.P. (BEP) to ‘BBB+’ from ‘BBB’. The outlook is stable.

At the same time, S&P Global Ratings raised its senior unsecured debt rating on the company to ‘BBB+’ from ‘BBB’. S&P Global Ratings also raised its global scale preferred stock rating on BEP to ‘BBB-‘ from ‘BB+’, and its Canada scale preferred stock rating to ‘P-2(Low)’ from ‘P-3(High)’. Finally, S&P Global Ratings affirmed its ‘A-2’ short-term corporate credit rating on the company.

The upgrade follows our revision of the group status between BEP and parent Brookfield Asset Management Inc. (BAM), to moderately strategic from nonstrategic following our reassessment of BAM under different criteria (for more information, see the research update on BAM published Aug. 15, 2017, on RatingsDirect). BAM indirectly holds about 60% in BEP and we believe it exerts some level of control through its ownership interest; and exerts some influence as the service provider, where it charges BEP for management, administrative, and advisory services through the master service agreement. All these factors leads us to believe there will be some level of parental support, a key factor our group assessment.

Affected issues are:

BRF.PR.A, BRF.PR.B, BRF.PR.C, BRF.PR.E and BRF.PR.F (These are from Brookfield Renewable Power Preferred Equity Inc., a wholly owned subsidiary of BEP, and pay eligible dividends)

BEP.PR.E, BEP.PR.G, BEP.PR.I and BEP.PR.K (These are from Brookfield Renewable Partners L.P. itself, and pay distributions comprised of return of capital and ordinary income)

Kinder Morgan Canada Limited has announced:

that it has completed its previously announced offering of cumulative redeemable minimum rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”). The Company issued 12,000,000 Series 1 Preferred Shares for aggregate gross proceeds of $300 million through a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities. The transaction was upsized from a base size of 8,000,000 shares as a result of strong investor demand.

“This robust inaugural preferred offering is another testament to the attractiveness of KML’s integrated suite of assets,” said Dax Sanders, the Company’s Chief Financial Officer. “The transaction also represents another important step in financing the Trans Mountain Expansion Project.”

The Company intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership, which in turn, intends to use such proceeds to, directly or indirectly, finance the development, construction and completion of the Trans Mountain Expansion project and Base Line Terminal project as well as in connection with other potential future growth opportunities, to repay indebtedness and for general corporate purposes.

The Series 1 Preferred Shares will begin trading today on the TSX under the symbol KML.PR.A. S&P and DBRS have assigned this series a rating of P-3 (high) and Pfd-3 (high), respectively. The outstanding principal amount of the series is expected to receive 50 percent equity treatment from S&P and 100 percent equity treatment from DBRS.
Dividends on the Series 1 Preferred Shares are expected to be $1.3125 per share annually, payable quarterly on the 15th day of February, May, August and November, as and when declared by the Board of Directors of the Company, for the initial fixed rate period to but excluding November 15, 2022. The first dividend, if declared, will be payable November 15, 2017, in the amount of $0.3308 per share.

All of the Company’s dividends are designated “eligible dividends” for Canadian income tax purposes.

KML.PR.A is a FixedReset 5.25%+365M525 announced August 3. It will be tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

The issue traded 714,130 shares today in a range of 24.89-00 before closing at 24.98-00. Vital statistics are:

DBRS finalized its Pfd-3(high) rating of the issue.

Standard & Poor’s has announced:

• •We are lowering our long-term corporate credit rating on Montreal-based Aimia Inc. to ‘BB-‘ from ‘BB+’ based on our view that the company’s business and cash flow would be pressured following Air Canada’s notice that it will not renew its contract with Aimia in 2020.
• •At the same time, we are lowering our issue-level ratings on the company’s senior secured notes to ‘BB’ from ‘BBB-‘.
• •We are also lowering our global scale rating to ‘B-‘ from ‘B+’ and our Canada scale rating to ‘P-4(Low)’ from ‘P-4(High)’ on Aimia’s preferred shares.
• •At the same time, we are removing all our ratings on Aimia from CreditWatch, where they were placed with negative implications May 12, 2017.
• •The negative outlook reflects our view of the uncertainty associated with the timing and magnitude of reward redemption and potential for lower gross billings; limited visibility of member behavior toward the Aeroplan program; and execution risks associated with the company’s ability to sign-up new partners, sell noncore assets, and meaningfully improve its cost structure.

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S&P Global Ratings also lowered its issue-level ratings on the company’s senior secured notes to ‘BB’ from ‘BBB-‘(one notch above the corporate credit rating). The senior secured debt has a ‘2’ recovery rating, indicating our expectation of substantial (70%-90%, rounded estimate 75%) recovery in a default scenario.

At the same time, S&P Global Ratings lowered its global scale rating to ‘B-‘ from ‘B+’ and its Canada scale rating to ‘P-4(Low)’ from ‘P-4(High)’ on the company’s preferred shares.

Finally, S&P Global Ratings removed all of its ratings on Aimia from CreditWatch, where they were placed with negative implications May 12, 2017. The outlook is negative.

The downgrade and negative outlook reflect our view of the significant risks and uncertainty Aimia faces following Air Canada’s previous announcement not to renew the company’s contract with Aimia post-June 2020. We believe this development will likely affect Aimia’s value proposition and pressure the company’s business prospects in the next few years. In our view, the loss of a major anchor redemption partner for the points accumulated by Aimia’s Aeroplan loyalty members will likely reduce the appeal of the Aeroplan program to its financial card partners’ customers. As a result, there is the meaningful risk of reduced gross billings (a proxy for cash revenue) and higher-than-average reward redemption activity (expenses) that could affect the company’s EBITDA for the foreseeable future. Although the near-term results might not reflect these risks, without an attractive airline partner announcement the possibility of a surge in redemption activity through 2020 could reduce Aimia’s cash flow and weaken its liquidity. The company plans to mitigate the risks through Aeroplan-focused initiatives, corporate-level cost cutting, and disposal of unprofitable and noncore assets. However, execution risks associated with cost-cutting initiatives or delay in asset sales could limit Aimia’s ability to support its profitability and financial flexibility.

Our negative outlook on Aimia reflects our view that there is an increased risk on the company’s cash flow and financial flexibility due to the uncertainty associated with rising reward redemptions and reduced gross billings along with limited visibility on member behavior toward the Aeroplan program. Also, the execution risks associated with potential cost savings and asset sales could further weaken the credit measures compared with our forecast scenario.

Affected issues are AIM.PR.A, AIM.PR.B and AIM.PR.C.

This follows the DBRS downgrade to Pfd-5(high) and the previous suspension of dividends and S&P Downgrade to P-4(high).

Dividend 15 Split Corp. II has released its Annual Report to November 30, 2016, but it is no longer available on the company website and must be retrieved from the highly secretive SEDAR website; I am not permitted to link directly to the report, but the coordinates are “Dividend 15 Split Corp. II Feb 23 2017 12:42:52 ET Annual report – English PDF 683 K”.

Using the S&P TSX 60 index rather than “Dividend Aristocrats” seems a little odd to me – but we’ll let them choose their benchmark!

Figures of interest are:

MER: 1.06% of Whole Unit value, “excluding any one time offering expenses. Management expense ratio is based on total expenses for the stated year and is expressed as an annualized percentage of average net asset value during the year.”

Average Net Assets: No units were issued or redeemed during the year and price action was moderate, so it’s fair to take a straight average of the beginning and end of year figures: (221.6-million + 213.5-million) / 2 = 218-million

Underlying Portfolio Yield: Dividends received of 8,381,184 divided by average net assets of 218-million is 3.84%

Income Coverage: Net Investment Income of 6.062-million divided by Preferred Share Distributions of 7.425-million is 81.6%

Manulife Financial Corporation has announced (on July 27):

that it does not intend to exercise its right to redeem all or any of its currently outstanding 10,000,000 Non-cumulative Rate Reset Class 1 Shares Series 9 (the “Series 9 Preferred Shares”) (TSX: MFC.PR.I) on September 19, 2017. As a result, subject to certain conditions described in the prospectus supplement dated May 16, 2012 relating to the issuance of the Series 9 Preferred Shares (the “Prospectus”), the holders of the Series 9 Preferred Shares have the right, at their option, to convert all or part of their Series 9 Preferred Shares on a one-for-one basis into Non-cumulative Floating Rate Class 1 Shares Series 10 of Manulife (the “Series 10 Preferred Shares”) on September 19, 2017. A formal notice of the right to convert Series 9 Preferred Shares into Series 10 Preferred Shares will be sent to the registered holders of the Series 9 Preferred Shares in accordance with the share conditions of the Series 9 Preferred Shares. Holders of Series 9 Preferred Shares are not required to elect to convert all or any part of their Series 9 Preferred Shares into Series 10 Preferred Shares. Holders who do not exercise their right to convert their Series 9 Preferred Shares into Series 10 Preferred Shares on such date will retain their Series 9 Preferred Shares, unless automatically converted in accordance with the conditions below.

The foregoing conversion right is subject to the conditions that: (i) if, after September 5, 2017, Manulife determines that there would be less than 1,000,000 Series 9 Preferred Shares outstanding on September 19, 2017, then all remaining Series 9 Preferred Shares will automatically be converted into an equal number of Series 10 Preferred Shares on September 19, 2017, and (ii) alternatively, if, after September 5, 2017, Manulife determines that there would be less than 1,000,000 Series 10 Preferred Shares outstanding on September 19, 2017, then no Series 9 Preferred Shares will be converted into Series 10 Preferred Shares. In either case, Manulife will give written notice to that effect to any registered holders of Series 9 Preferred Shares affected by the preceding minimums on or before September 12, 2017.

The dividend rate applicable to the Series 9 Preferred Shares for the 5-year period commencing on September 20, 2017, and ending on September 19, 2022, and the dividend rate applicable to the Series 10 Preferred Shares for the 3-month period commencing on September 20, 2017, and ending on December 19, 2017, will be determined and announced by way of a news release on August 21, 2017. Manulife will also give written notice of these dividend rates to the registered holders of Series 9 Preferred Shares.

Beneficial owners of Series 9 Preferred Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (Toronto time) on September 5, 2017. Conversion inquiries should be directed to Manulife’s Registrar and Transfer Agent, CST Trust Company, at 1-800-387-0825.

Subject to certain conditions described in the Prospectus, Manulife may redeem the Series 9 Preferred Shares, in whole or in part, on September 19, 2022 and on September 19 every five years thereafter and may redeem the Series 10 Preferred Shares, in whole or in part, after September 19, 2017.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 10 Preferred Shares effective upon conversion. Listing of the Series 10 Preferred Shares is subject to Manulife fulfilling all the listing requirements of the TSX and, upon approval, the Series 10 Preferred Shares will be listed on the TSX under the trading symbol “MFC.PR.T”.

MFC.PR.I is a FixedReset, 4.40%+286, that commenced trading 2012-5-24 after being announced 2015-5-16.

I will have more on this when the reset rate is announced on August 21.