PrefBlog

National Bank of Canada has announced (on 2021-6-15):

its intention, subject to the approval of the Office of the Superintendent of Financial Institutions, to redeem all of its 16,000,000 issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series 36 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 36”) on August 15, 2021, for cash at a redemption price of $25.00 per share, together with all declared and unpaid dividends.

On May 28, 2021, National Bank announced that the quarterly dividend of $0.3375 per Preferred Shares Series 36 had been declared. This will be the final dividend on the Preferred Shares Series 36, and will be payable in the usual manner on August 15, 2021 to shareholders of record on July 6, 2021, as previously announced.

Since August 15, 2021 is not a business day, amounts due to holders of Preferred Shares 36 on that date will be paid on the first business day following that date, being Monday, August 16, 2021.

Formal notice will be given to holders of Preferred Shares Series 36 in accordance with the terms thereof.

The redemption of the Preferred Shares Series 36 is part of National Bank’s ongoing management of its regulatory capital.

NA.PR.A was a FixedReset, 5.40%+466, NVCC issue that commenced trading 2016-6-13 after announced 2016-6-2.

DBRS has announced that it:

has placed the ratings of ECN Capital Corp. (ECN or the Company), including the Company’s Long-Term Issuer Rating of BBB (low) and Preferred Shares Rating of Pfd-3, Under Review with Negative Implications. The ratings action follows the Company’s August 10, 2021 announcement that it has entered into a definitive agreement to sell its Service Finance Company, LLC (Service Finance) business to Truist Bank, the wholly owned bank subsidiary of Truist Financial Corporation. The sale is subject to standard licensing and regulatory approvals and the satisfaction of customary closing conditions. The transaction is expected to close in 4Q21.

KEY RATING CONSIDERATIONS
The Under Review with Negative Implications considers the impact of the sale of ECN’s Service Finance business on its credit fundamentals, including a reduction in earnings generation capacity and growth potential. Partially offsetting, is the continuing solid contributions to ECN’s bottom line from its Triad Financial Services, Inc. (Triad) and Kessler Financial Services LLC (Kessler) businesses, despite ongoing headwinds related to the Coronavirus Disease (COVID -19) pandemic.

Upon the close of the transaction, ECN’s franchise will reflect a more moderate scale of operations, including a narrower product offering. Moreover, growth will be impacted, given that Service Finance represents the majority of the Company’s originations. That said, Triad’s growth rate is strong and will continue to contribute to scaling the business going forward. Importantly, Triad and Kessler maintain solid market positions within their respective niches.

Although the sale of Service Finance will pressure ECN’s earnings generation, we expect earnings performance metrics to be solid. Additionally, we view Triad’s strong originations and expanding product offering as enhancing its top line contributions, benefiting future portfolio origination services and portfolio management services revenues. Finally, as its client base activity gains momentum as coronavirus pressures recede, we anticipate Kessler’s marketing services income to improve and positively impact ECN’s bottom line.

After the closing of the transaction, we anticipate the Company’s risk profile to remain sound and well managed.
Credit risk will remain limited, primarily to Triad’s moderately sized floorplan business, as well as Kessler’s support of customer marketing campaigns. Additionally, asset risk related to its legacy asset portfolio, should be moderate, especially after the significant valuation reserves taken over the last few years. Finally, we view the Company’s operational risk to remain a key risk for the Company, given that its consumer businesses have considerable compliance and regulatory oversight, and many of its Funding Partners are FDIC-insured institutions.

We expect that the Company’s funding position to remain acceptable, especially as Triad’s originations are funded on a flow basis with Funding Partners. Overall, Triad’s Funding Partners total 61 including 11 new bank and credit union partners added since the beginning of the year, demonstrating the desirability of the high quality assets originated by Triad. Overall, Triad is entirely funded for 2021and 2022. Additionally, ECN’s liquidity profile is expected to remain solid, including its recently renegotiated $700 million credit line by its bank group. Meanwhile, capital will contract with the sale of Service Finance, and the Company expects to continue paying dividends and buying back shares. We would expect ECN to maintain appropriate capital levels to match their risk profile.
The Under Review with Negative Implications status is generally resolved with a rating action within three months. DBRS Morningstar expects to conclude the review once the sale of Service Finance closes in 4Q21. During its review, DBRS Morningstar will assess the ultimate impact of the divesture on ECN’s franchise, the expected earnings generation of the Company, and capitalization.

RATING DRIVERS
Assuming no material changes upon the closing of the transaction, the ratings would be downgraded by one notch from the current ratings. If the transaction does not close as expected, its funding partners remain committed to the Service Finance business, and other credit fundamentals remain sound, ECN’s ratings would revert back to a Stable trend.

Affected issues are ECN.PR.A and ECN.PR.C.