Month: November 2018

AltaGas Ltd. has announced (on November 28):

that it does not intend to exercise its right to redeem any or all of its currently outstanding Cumulative Redeemable Five-Year Rate Reset Preferred Shares, Series E (the “Series E Shares”) (TSX: ALA.PR.E) on December 31, 2018 (the “Conversion Date”).

As a result, subject to certain conditions, the holders of the Series E Shares have the right to convert all or part of their Series E Shares on a one-for-one basis into Cumulative Redeemable Floating Rate Preferred Shares, Series F (the “Series F Shares”) on the Conversion Date. Holders who do not exercise their right to convert their Series E Shares into Series F Shares will, subject to automatic conversion in the circumstances described below, retain their Series E Shares.

The foregoing conversion right is subject to the conditions that: (i) if AltaGas determines that after giving effect to all conversions there would be less than 1,000,000 Series E Shares outstanding after the Conversion Date, then all remaining Series E Shares will automatically be converted into Series F Shares on a one-for-one basis on the Conversion Date; and (ii) if AltaGas determines that after giving effect to all conversions there would be less than 1,000,000 Series F Shares outstanding after the Conversion Date, no Series E Shares will be converted into Series F Shares. There are currently 8,000,000 Series E Shares outstanding.

With respect to any Series E Shares that remain outstanding after the Conversion Date, holders shall be entitled to receive, as and when declared by the Board of Directors of AltaGas, fixed cumulative preferential cash dividends, payable quarterly. The new annual dividend rate applicable to the Series E Shares for the five-year period commencing on and including December 31, 2018 to, but excluding, December 31, 2023 will be set and announced on December 3, 2018, being equal to the sum of the five-year Government of Canada bond yield as of such date plus 3.17 percent.

With respect to any Series F Shares that may be issued on the Conversion Date, holders shall be entitled to receive, as and when declared by the Board of Directors of AltaGas, quarterly floating rate cumulative preferential cash dividends. The dividend rate applicable to the Series F Shares for the three-month floating rate period commencing on and including December 31, 2018 to, but excluding, March 31, 2019 will be set and announced on December 3, 2018, being equal to the sum of the annual rate of interest for the most recent auction of 90 day Government of Canada treasury bills plus 3.17 percent (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial holders of Series E Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right during the conversion period, which runs from December 1, 2018 until 5:00 p.m. (Toronto time) on December 17, 2018. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps. Any notices received after this deadline will not be valid.

Subject to the terms and conditions of the Series E Shares and Series F Shares and AltaGas’ right to redeem such shares, holders of the Series E Shares and the Series F Shares will have the opportunity to convert their shares again on December 31, 2023, and every five years thereafter as long as the Series E Shares and Series F Shares remain outstanding.

ALA.PR.E is a FixedReset, 5.00%+317, that commenced trading 2013-12-13 after being announced 2013-12-4. It is tracked by HIMIPref™ but is relegated to the Scraps – FixedReset Discount subindex due to credit concerns.

Algonquin Power & Utilities Corp. has announced (on November 28):

that it does not intend to exercise its right to redeem all or part of the currently outstanding 4,800,000 Cumulative 5-Year Rate Reset Preferred Shares, Series A (the “Series A Preferred Shares”) on December 31, 2018. As a result, subject to certain conditions, the holders of the Series A Preferred Shares have the right to convert all or part of their Series A Preferred Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series B (the “Series B Preferred Shares”) on December 31, 2018 (the “Conversion Date”) in accordance with the terms and conditions of the Series A Preferred Shares described in the short form prospectus of the Company dated November 2, 2012.

Holders of Series A Preferred Shares who do not exercise their right to convert their Series A Preferred Shares into Series B Preferred Shares on the Conversion Date will retain their Series A Preferred Shares.

The dividend rate applicable to the Series A Preferred Shares for the 5-year period from December 31, 2018 to but excluding December 31, 2023, and the dividend rate applicable to the Series B Preferred Shares for the 3-month period from December 31, 2018 to but excluding March 31, 2019, will be determined and announced by the Company by way of a news release on December 3, 2018.

Beneficial owners of Series A Preferred Shares who wish to exercise their conversion right during the conversion period, which runs from December 3, 2018 until December 17, 2018 at 5:00 p.m. (EST), should communicate as soon as possible with their broker or other nominee for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other nominee time to complete the necessary steps. Any notices received after this deadline will not be valid.

The foregoing conversion rights are subject to the conditions that: (i) if APUC determines that there would remain outstanding on the Conversion Date fewer than 1,000,000 Series B Preferred Shares, after having taken into account all Series A Preferred Shares tendered for conversion into Series B Preferred Shares, then holders of Series A Preferred Shares will not be entitled to convert their Series A Preferred Shares into Series B Preferred Shares, and (ii) alternatively, if APUC determines that there would remain outstanding on the Conversion Date fewer than 1,000,000 Series A Preferred Shares, after having taken into account all Series A Preferred Shares tendered for conversion into Series B Preferred Shares, then all remaining Series A Preferred Shares will automatically be converted into Series B Preferred Shares without the consent of the holders of Series A Preferred Shares, on a one-for-one basis, on the Conversion Date.

In either case, APUC will give written notice to that effect to the registered holder of Series A Preferred Shares no later than December 24, 2018.

AQN.PR.A is a FixedReset, 4.50%+294, that commenced trading 2012-11-9 after being announced 2012-10-25. The issue is tracked by HIMIPref™, but relegated to the Scraps – FixedReset Discount index on credit concerns.

Element Fleet Management Corp. has announced (on November 20):

that, pursuant to the rights, privileges, restrictions and conditions attaching to the Cumulative 5-Year Rate Reset Preferred Shares, Series A of the Corporation (the “Series A shares”), as provided in the Corporation’s restated articles of incorporation dated October 4, 2016, the holders of Series A shares have the right, at their option, on December 31, 2018 (the “Conversion Date”) to convert all, or any part, of the then outstanding Series A shares into Cumulative Floating Rate Preferred Shares, Series B of the Corporation (the “Series B shares”) on the basis of one Series B share for each Series A share converted (the “Conversion Privilege”).

The dividend rate applicable to the Series A shares for the period from and including December 31, 2018 up to, but excluding, December 31, 2023, and the dividend rate applicable to the Series B shares for the period from and including December 31, 2018 up to, but excluding, March 31, 2019, will be determined by the Corporation and announced by way of a news release on December 3, 2018.

Beneficial owners of Series A shares who wish to exercise their Conversion Privilege should communicate with their broker or other nominee to obtain instructions for exercising such Conversion Privilege during the notice period, which will run from December 3, 2018 until December 17, 2018 at 5:00 p.m. (EST).

The foregoing Conversion Privilege is subject to the following: (i) holders of Series A shares shall not be entitled to convert their Series A shares into Series B shares on the Conversion Date if the Corporation determines that there would remain outstanding on the Conversion Date less than 500,000 Series B shares, after taking into account all Series A shares tendered for conversion into Series B shares, and (ii) alternatively, if the Corporation determines that there would remain outstanding on the Conversion Date less than 500,000 Series A shares after taking into account all Series A shares tendered for conversion into Series B shares, then all, but not part, of the remaining Series A shares shall automatically be converted into Series B shares on the basis of one Series B share for each Series A share on the Conversion Date. In either case, the Corporation will give written notice to that effect to the sole registered holder of the Series A shares at least seven days prior to the Conversion Date.

EFN.PR.A is a FixedReset, 6.60%+471, that was announced 2013-12-9; HIMIPref™ commenced tracking the issue in September 2015 after it received a DBRS rating. It is relegated to the Scraps – FixedReset Discount subindex on credit concerns.

Partners Value Split Corp. has announced (although not yet on their website):

the completion of its previously announced issue of 6,000,000 Class AA Preferred Shares, Series 9 (the “Series 9 Preferred Shares”) at an offering price of $25.00 per Series 9 Preferred Share, raising gross proceeds of $150,000,000. The Series 9 Preferred Shares carry quarterly fixed cumulative preferential dividends representing a 4.90% annualized yield on the offering price and have a final maturity of February 28, 2026. The Series 9 Preferred Shares have been listed and posted for trading on the Toronto Stock Exchange under the symbol PVS.PR.G. The net proceeds of the offering will be used to redeem the Company’s outstanding Class AA Preferred Shares, Series 3 (the “Series 3 Preferred Shares”) on January 10, 2019 in accordance with the terms of the Series 3 Preferred Shares.

Prior to the closing of the offering, the Company subdivided the existing capital shares held by Partners Value Investments Inc. so that there are an equal number of preferred shares and capital shares outstanding.

The Company owns a portfolio consisting of 79,740,966 Class A Limited Voting Shares of Brookfield Asset Management Inc. (the “Brookfield Shares”) which is expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Shares.

PVS.PR.G is a Split Share, 7-year, 4.90% issue announced November 15. It will be tracked by HIMIPref™ and has been assigned to the SplitShare subindex.

DBRS rates the issue Pfd-2(low):

DBRS Limited (DBRS) finalized the provisional rating of Pfd-2 (low) on the Class AA Preferred Shares, Series 9 (the Series 9 Preferred Shares) issued by Partners Value Split Corp. (the Company) and confirmed the ratings of the previously issued Class AA Preferred Shares, Series 3 (the Series 3 Preferred Shares); Class AA Preferred Shares, Series 6 (the Series 6 Preferred Shares); Class AA Preferred Shares, Series 7 (the Series 7 Preferred Shares) and Class AA Preferred Shares, Series 8 (the Series 8 Preferred Shares; collectively, the Class AA Preferred Shares) at Pfd-2 (low).

Holders of the Series 9 Preferred Shares will be entitled to receive a quarterly, fixed, cumulative dividend in the amount of $0.30625 per share to yield 4.90% per annum on the issue price of $25. The Series 9 Preferred Shares rank on a pari passu basis with all other Class AA Preferred Shares. The maturity date for the new series is February 28, 2026.
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Following the redemption of the Series 3 Preferred Shares, the downside protection available to the Class AA Preferred Shares is expected to be approximately 85% (based on the closing price of the BAM Shares as of October 29, 2018) and the dividend coverage ratio is expected to be above 2.0 times (x; based on the Canadian dollar and U.S. dollar exchange rate as of October 29, 2018).
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The main constraints to the ratings are the following:

(1) The downside protection available to holders of the Class AA Preferred Shares depends solely on the market value of the BAM Shares held in the Portfolio, which will fluctuate over time.

(2) There is a lack of diversification, as the Portfolio is entirely made up of BAM Shares.

(3) Changes in the dividend policy of BAM may result in reductions in Class AA Preferred Shares dividend coverage.

(4) As BAM declares dividends in U.S. dollars, the Company is exposed to foreign currency risk relating to the Canadian-U.S. exchange rate, specifically the appreciation of the Canadian dollar versus the U.S. dollar. This may have a negative impact on the dividend coverage ratio of the Class AA Preferred Shares, as these dividends are paid in Canadian dollars.

(5) Downside protection available to the Class AA Preferred Shares may be negatively affected by the retraction of the Junior Preferred Shares.

I am surprised that they did not also list the credit quality of BAM itself as being a constraint on the rating.

The issue traded 217,100 shares today in a range of 24.50-90 before closing at 24.70-74. The performance appears horrible, but it should be noted that the close comparator PVS.PR.F closed at 25.10-20 on the November 15 announcement day and at 24.47-74 today. Vital statistics for PVS.PR.G are: