PrefBlog

The Toronto-Dominion Bank has announced (on June 18):

that it does not intend to exercise its right to redeem all or any part of the currently outstanding 14 million Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 7 (Non-Viability Contingent Capital (NVCC)) (the “Series 7 Shares”) of TD on July 31, 2020. As a result and subject to certain conditions set out in the prospectus supplement dated March 3, 2015 relating to the issuance of the Series 7 Shares, the holders of the Series 7 Shares have the right to convert all or part of their Series 7 Shares, on a one-for-one basis, into Non-Cumulative Floating Rate Preferred Shares, Series 8 (NVCC) (the “Series 8 Shares”) of TD on July 31, 2020. Holders who do not exercise their right to convert their Series 7 Shares into Series 8 Shares on such date will continue to hold their Series 7 Shares.

The foregoing conversion right is subject to the conditions that: (i) if TD determines that there would be less than 1,000,000 Series 8 Shares outstanding after taking into account all shares tendered for conversion on July 31, 2020, then holders of Series 7 Shares will not be entitled to convert their shares into Series 8 Shares, and (ii) alternatively, if TD determines that there would remain outstanding less than 1,000,000 Series 7 Shares after taking into account all shares tendered for conversion on July 31, 2020, then all remaining Series 7 Shares will automatically be converted into Series 8 Shares on a one-for-one basis on July 31, 2020. In either case, TD will give written notice to that effect to holders of Series 7 Shares no later than July 24, 2020.

The dividend rate applicable to the Series 7 Shares for the 5-year period from and including July 31, 2020 to but excluding July 31, 2025, and the dividend rate applicable to the Series 8 Shares for the 3-month period from and including July 31, 2020 to but excluding October 31, 2020, will be determined and announced by way of a press release on July 2, 2020.

Beneficial owners of Series 7 Shares who wish to exercise their conversion right 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 July 2, 2020 until 5:00 p.m. (Toronto time) on July 16, 2020.

Inquiries should be directed to TD’s Registrar and Transfer Agent, AST Trust Company (Canada), at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.D is a FixedReset, 3.60%+279, that commenced trading 2015-3-10 after being announced 2015-2-27. It is NVCC-compliant and is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

Canadian Imperial Bank of Commerce has announced:

the dividend rates applicable to its Non-cumulative Rate Reset Class A Preferred Shares Series 43 (Non-Viability Contingent Capital (NVCC)) (the “Series 43 Shares”) and Non-cumulative Floating Rate Class A Preferred Shares Series 44 (Non-Viability Contingent Capital (NVCC)) (the “Series 44 Shares”).

The fixed dividend rate applicable to the Series 43 Shares, should any remain outstanding after July 31, 2020, for the five-year period from and including July 31, 2020 to but excluding July 31, 2025 is 3.143%, payable quarterly as and when declared by the Board of Directors of CIBC.

The floating dividend rate applicable to the Series 44 Shares, should any be issued, for the three-month period from and including July 31, 2020 to but excluding October 31, 2020 is 3.003%, payable for the period as defined as and when declared by the Board of Directors of CIBC. CIBC has designated the Series 44 Shares as eligible to participate in the CIBC Shareholder Investment Plan.

Beneficial owners of Series 43 Shares who wish to exercise their conversion right should instruct their broker or other nominee to exercise such right during the conversion period, which runs from July 1, 2020 until 5:00 p.m. (Eastern Daylight Time) on July 16, 2020. Any notices received after this deadline will not be valid.

CM.PR.Q is a FixedReset, 3.60%+279, that commenced trading 2015-3-11 after being announced 2015-2-26. The issue is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

TC Energy Corporation has announced (on June 22):

that 401,590 of its 8,533,405 fixed rate Cumulative Redeemable First Preferred Shares, Series 3 (Series 3 Shares) have been elected for conversion on June 30, 2020, on a one-for-one basis, into floating rate Cumulative Redeemable First Preferred Shares, Series 4 (Series 4 Shares); and 1,865,362 of its 5,466,595 Series 4 Shares have been elected for conversion, on a one-for-one basis, into Series 3 Shares. As a result of the conversions, TC Energy will have 9,997,177 Series 3 Shares and 4,002,823 Series 4 Shares issued and outstanding. The Series 3 Shares and Series 4 Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbols TRP.PR.B and TRP.PR.H, respectively.

The Series 3 Shares will pay on a quarterly basis for the five-year period beginning on June 30, 2020, as and when declared by the Board of Directors of TC Energy, a fixed dividend at an annualized rate of 1.694%.

The Series 4 Shares will pay a floating rate quarterly dividend for the five-year period beginning on June 30, 2020, as and when declared by the Board of Directors of TC Energy. The dividend rate for the Series 4 Shares for the first quarterly floating rate period commencing June 30, 2020 to but excluding September 30, 2020 is 1.535% and will be reset every quarter.

Holders of Series 3 Shares and Series 4 Shares will have the opportunity to convert their shares again on June 30, 2025 and every five years thereafter as long as the shares remain outstanding. For more information on the terms of, and risks associated with an investment in the Series 3 Shares and the Series 4 Shares, please see the prospectus supplement dated March 4, 2010 which is available on sedar.com or on our website.

TRP.PR.B is a FixedReset 4.00%+128 that commenced trading 2010-3-11 after being announced 2010-3-4. It reset to 2.152% effective 2015-6-30, which triggered a 39% conversion to the FloatingReset TRP.PR.H despite my recommendation not to convert. The issue will reset to 1.694% effective 2020-6-30.

TRP.PR.H is a FloatingReset, Bills+128, that arose from a 39% conversion from the FixedReset TRP.PR.B in 2015.

Brookfield Asset Management Inc. has announced (on June 22):

that after having taken into account all election notices received by the June 15, 2020 deadline for the conversion of its Cumulative Class A Preference Shares, Series 42 (the “Series 42 Shares”) (TSX: BAM.PF.G) into Cumulative Class A Preference Shares, Series 43 (the “Series 43 Shares”), there were 132,682 Series 42 Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series 43 Shares. Accordingly, there will be no conversion of Series 42 Shares into Series 43 Shares, and holders of Series 42 Shares will retain their Series 42 Shares.

BAM.PF.G is a FixedReset, 4.50%+284, that commenced trading 2014-10-8 after being announced 2014-10-1. The issue will reset to 3.254% effective 2020-7-1. It is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

Sun Life Financial Inc. has announced (on June 19):

that 116,341 of its 5,192,686 Class A Non-cumulative Rate Reset Preferred Shares Series 8R (the “Series 8R Shares”) have been elected for conversion on June 30, 2020, on a one-for-one basis, into Class A Non-cumulative Floating Rate Preferred Shares Series 9QR (the “Series 9QR Shares”), and 1,140,986 of its 6,007,314 Series 9QR Shares have been elected for conversion on June 30, 2020 on a one-for-one basis, into Series 8R Shares. Consequently, on June 30, 2020, Sun Life will have 6,217,331 Series 8R Shares and 4,982,669 Series 9QR Shares issued and outstanding. The Series 8R Shares and Series 9QR Shares will be listed on the Toronto Stock Exchange under the symbols SLF.PR.G and SLF.PR.J, respectively.

Subject to regulatory approval, Sun Life may redeem all or any part of the outstanding Series 8R Shares, at Sun Life’s option, by the payment of an amount in cash for each share so redeemed of $25.00, together with all declared and unpaid dividends to the date fixed for redemption, on June 30, 2025 and on the 30th of June in every fifth year thereafter. Subject to regulatory approval, Sun Life may redeem all or any part of the then outstanding Series 9QR Shares, at Sun Life’s option, by the payment of an amount in cash for each share so redeemed of (i) $25.00, together with all declared and unpaid dividends to the date fixed for redemption in the case of redemptions on June 30, 2025 and on June 30 every five years thereafter, or (ii) $25.50, together with all declared and unpaid dividends to the date fixed for redemption in the case of redemptions on any other date.

SLF.PR.G was issued as a FixedReset, 4.35%+141, announced 2010-5-13 and commenced trading 2010-5-25. It reset to 2.275% effective 2015-6-30, which triggered a 50% conversion to the FloatingReset SLF.PR.J. I recommended against conversion. SLF.PR.G resets to 1.825% effective 2020-6-30. The issue is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

SLF.PR.J is a FloatingReset, Bills+141, that arose from a 50% conversion from the FixedReset SLF.PR.G. It commenced trading 2015-6-30.

DBRS has announced that it:

downgraded five ratings of preferred shares issued by various split-share companies as follows:

— the Preferred Shares issued by Dividend Growth Split Corp. to Pfd-4 (high) from Pfd-3
— the Preferred Shares issued by Brompton Lifeco Split Corp. to Pfd-4 (low) from Pfd-3 (low)
— the Preferred Shares issued by Life & Banc Split Corp to Pfd-3 (low) from Pfd-3
— the Preferred Shares issued by Prime Dividend Corp to Pfd-3 from Pfd-3 (high)
— the Preferred Shares issued by S Split Corp. to Pfd-4 from Pfd-3 (collectively, the Preferred Shares)

Each of these split-share companies invests in a portfolio of securities (the Portfolio) funded by issuing two classes of shares: dividend-yielding preferred shares or securities and capital shares or units (the Capital Shares). In such structure, preferred shares normally benefit from downside protection provided by the net asset value (NAV) of the Capital Shares.

On March 24, 2020, DBRS Morningstar placed the Preferred Shares Under Review with Negative Implications. Each of the Preferred Shares has experienced a considerable reduction in downside protection since February 2020 as a result of the rapid decline in the net asset value (NAV) of the respective portfolios in response to the stock market sell-off, which was triggered by the worldwide spread of Coronavirus Disease (COVID-19) and various geopolitical events.

DBRS Morningstar downgraded the ratings of the Preferred Shares based on longer-term trends being established for the NAVs of the affected split-share companies. Although the downside protection has experienced some recovery in all five Portfolios in the past three months, its current levels remain below the required levels for the corresponding ratings of the Preferred Shares, which they had had before they were placed Under Review with Negative Implications. Ratings assigned are also dependent on the credit quality and management of the Portfolios. For many of the split-share companies listed above, distributions to holders of the Capital Shares are now suspended due to the failure to pass the asset-coverage tests. This feature ensures greater excess income for the Company and decreases the reliance on other income-generating methods, such as option writing, when downside protection has been significantly reduced.

CORONAVIRUS-RELATED ANALYTICAL CONSIDERATIONS
Global macroeconomic forecasts have shifted dramatically amid the rapid spread of the coronavirus and associated responses from governments, corporations, and households. In the context of this highly uncertain environment, DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on June 1, 2020, and are reflecting the updated scenarios in DBRS Morningstar’s rating analysis. The updated scenarios can be found at https://www.dbrsmorningstar.com/document/361867.

To summarize in tabular form, the downgrades are as follows:

The mass review was announced by DBRS in March, 2020.