PrefBlog

DBRS Limited (DBRS Morningstar) has announced that it:

upgraded Cenovus Energy Inc.’s (Cenovus or the Company) Issuer Rating and Senior Unsecured Debt rating to BBB (high) from BBB and the Company’s Preferred Shares rating to Pfd-3 (high) from Pfd-3. All trends are Stable. The upgrades follow the significant reduction in gross debt ($4.3 billion in 2022), which has improved the Company’s credit metrics and financial risk profile. The Stable trends reflect DBRS Morningstar’s expectation that the reduction in gross debt will allow the Company to maintain its lease-adjusted debt-to-cash flow ratio at around 1.50 times (x) under DBRS Morningstar’s base-case commodity price assumptions (see “DBRS Morningstar Updates Oil and Natural Gas Price Forecasts: Midcycle Pricing Band Widened and Oil Price Forecast Raised” dated September 26, 2022).

Stronger commodity prices, noncore asset sales, and a focus on reducing debt have allowed Cenovus to deleverage materially and well ahead of DBRS Morningstar’s expectation at the close of the acquisition of Husky Energy Inc (Husky Acquisition). Cenovus continues to prioritize deleveraging and expects to direct approximately 50% of the expected excess free funds flow (cash flow less capex, base dividends on common and preferred shares, decommissioning liabilities, and principal repayment of leases, plus proceeds from asset divestitures) surplus toward the balance sheet until it achieves its revised net debt (debt excluding operating leases and netting out of cash) target of $4.0 billion (Q3 2022: $5.28 billion). Based on its base-case commodity price assumptions, DBRS Morningstar expects Cenovus to reach its net debt target in Q1 2023. The rating upgrade is driven by DBRS Morningstar’s assessment that the reduction in gross debt in 2022 and achievement of its net debt target should allow the Company to maintain its financial risk profile commensurate with the rating through commodity price cycles. DBRS Morningstar also believes that the improvement in balance sheet strength provides the Company the flexibility to address challenges and costs associated with meeting voluntary and regulatory mandated greenhouse gas (GHG) emission reduction targets.

Cenovus’ business risk profile is strong and is underpinned by its (1) significant size (production of 777.9 thousand barrels of oil equivalent per day (Mboe/d) and upgrader/refinery throughput of 533.5 thousand barrels (bbl) per day in Q3 2022); (2) integrated upstream and downstream operations; and (3) long-life, low-cost oil sands assets at Foster Creek and Christina Lake and contracted production in Asia-Pacific. DBRS Morningstar expects the Company to maintain its business risk profile with a modest increase in near-term production driven by the Sunrise acquisition and optimization/debottlenecking projects at the Company’s oil sands assets and medium term growth through further optimization of oil sands assets and the West White Rose (WWR) project. Cenovus’ downstream integration is also expected to improve with the acquisition of the remaining stake in the Toledo refinery (expected to close in 2023), startup of the Superior refinery in Q1 2023, and capital investments aimed at optimizing and reducing operating costs at its downstream operations. The Company’s business risk profile remains constrained by its exposure to lower margin heavy and thermal oil and high concentration of oil-producing assets in Western Canada.

Cenovus expects production in 2023 to average between 800 Mboe/d and 840 Mboe/d with a budgeted capex of $4.0 billion to $4.5 billion. While capex in 2023 is higher relative to 2022 because of cost inflation and committed capital spend on the WWR project, it also includes a growth/discretionary component of $0.5 billion to $1 billion (excluding the WWR project), which could be scaled back if required. DBRS Morningstar expects the Company to generate a material free cash flow (cash flow after capex and dividends) surplus in 2023 and 2024 despite DBRS Morningstar’s expectation that the WTI price of crude oil will decline to the middle of DBRS Morningstar’s midcycle pricing band of USD 50 to USD 70 per barrel (/bbl) over the period. DBRS Morningstar expects the Company’s liquidity position to remain strong with its committed credit facilities totalling $5.5 billion remaining largely unused.

A further upgrade would require the Company to reduce gross debt and improve its lease-adjusted debt-to-cash flow ratio to consistently around 1.00x. Conversely, should oil prices weaken materially (below USD $45/bbl) and credit metrics stay weak for an extended period, DBRS Morningstar may take a negative rating action.

Affected issues are CVE.PR.A, CVE.PR.B, CVE.PR.C, CVE.PR.E and CVE.PR.G.

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!

Intact Financial Corporation has announced:

that, after having taken into account all elections received before the December 16, 2022, 5:00 p.m. (ET) conversion deadline, with respect to the Non-cumulative Rate Reset Class A Shares Series 1 of IFC (the “Series 1 Preferred Shares”) tendered for conversion on December 31, 2022 into Non-cumulative Floating Rate Class A Shares Series 2 of IFC (the “Series 2 Preferred Shares”), the holders of Series 1 Preferred Shares are not entitled to convert their shares. There were 577,852 Series 1 Preferred Shares tendered for conversion, which is fewer than the 1,000,000 Series 1 Preferred Shares required for the ability to proceed with the conversion, in accordance with the terms of the Series 1 Preferred Shares.

There are 10,000,000 Series 1 Preferred Shares listed on the Toronto Stock Exchange (“TSX”) under the symbol IFC.PR.A. The annual dividend rate for the Series 1 Preferred Shares for the five-year period from and including December 31, 2022 to but excluding December 31, 2027, will be 4.841%, as determined in accordance with the terms of the Series 1 Preferred Shares.

Subject to certain conditions described in IFC’s prospectus dated July 5, 2011, IFC may redeem the Series 1 Preferred Shares, in whole or in part, on December 31, 2027 and on December 31 every five years thereafter.

For more information on the terms of, and risks associated with an investment in, the Series 1 Preferred Shares, see IFC’s prospectus dated July 5, 2011 which is available on www.sedar.com.

IFC.PR.A will reset at 4.841% effective 2022-12-31. IFC.PR.A was issued as a FixedReset, 4.20%+172, that commenced trading 2011-7-12 after being announced 2011-6-22. IFC.PR.A reset at 3.396% effective December 31, 2017, and I recommended against conversion. There was no conversion. In 2022 I recommended conversion.

Thanks to Assiduous Reader Peculiar_Investor for bringing this to my attention!

Canadian Imperial Bank of Commerce has announced:

that it does not intend to exercise its right to redeem all or any part of its currently outstanding 18,000,000 Non-cumulative Rate Reset Class A Preferred Shares Series 47 (Non-Viability Contingent Capital (NVCC)) (the “Series 47 Shares”) on January 31, 2023.

Subject to certain conditions set out in the prospectus supplement dated January 11, 2018 to the short form base shelf prospectus of CIBC dated March 16, 2016 relating to the issuance of the Series 47 Shares, the holders of Series 47 Shares have the right to convert all or any of their Series 47 Shares, on a one-for-one basis, into Non-cumulative Floating Rate Class A Preferred Shares Series 48 (Non-Viability Contingent Capital (NVCC)) of CIBC (the “Series 48 Shares”) on January 31, 2023.

On such date, holders who do not exercise their right to convert their Series 47 Shares into Series 48 Shares, will continue to hold their Series 47 Shares. The foregoing conversion rights are subject to the following:

• if CIBC determines that there would remain outstanding less than 1,000,000 Series 48 Shares, after having taken into account all Series 47 Shares tendered for conversion on January 31, 2023, then holders of Series 47 Shares will not be entitled to convert their shares into Series 48 Shares, and
• alternatively, if CIBC determines that there would remain outstanding less than 1,000,000 Series 47 Shares, after having taken into account all Series 47 Shares tendered for conversion on January 31, 2023, then all, but not part, of the remaining outstanding Series 47 Shares will automatically be converted into Series 48 Shares on a one-for-one basis on January 31, 2023.

In either case, CIBC will give written notice to that effect to the registered holder of Series 47 Shares no later than January 24, 2023.

The fixed dividend rate applicable to the Series 47 Shares, should any remain, for the five-year period from and including January 31, 2023 to but excluding January 31, 2028, as and when declared by the Board of Directors, and the floating dividend rate applicable to the Series 48 Shares, should any be issued, for the three-month period from and including January 31, 2023 to but excluding April 30, 2023, as and when declared by the Board of Directors of CIBC, will be determined and communicated on December 30, 2022. CIBC has designated the Series 48 Shares as eligible to participate in the CIBC Shareholder Investment Plan.

Beneficial owners of Series 47 Shares who wish to exercise their conversion right should instruct their broker or other nominee during the conversion period, which runs from January 1, 2023 until 5:00 p.m. (Eastern Standard Time) on January 16, 2023. 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.

CM.PR.S was issued as a FixedReset, 4.50%+245, NVCC-compliant, that commenced trading 2018-1-18 after being announced January 10. It will be tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!

Brookfield Corporation accomplished most of it latest reorg on December 9:

Brookfield Corporation (NYSE: BN, TSX: BN) (the “Corporation”) and Brookfield Asset Management Ltd. (NYSE: BAM, TSX: BAM) (the “Manager”) today jointly announced the completion of the public listing and distribution of a 25% interest in the Corporation’s asset management business, through the Manager, by way of a plan of arrangement (“Arrangement”).

The Corporation has changed its name from Brookfield Asset Management Inc. to Brookfield Corporation, with effect from today and at the open of markets on December 12, 2022, its shares will trade under the new ticker “BN” on both stock exchanges. The Manager takes the name Brookfield Asset Management Ltd. and has been successfully listed on the New York Stock Exchange and the Toronto Stock Exchange. At the open of markets on December 12, 2022, its shares will trade under the ticker “BAM” on both stock exchanges.

The preferred shares have nearly all tranformed from BAM.xx.x to BN.xx.x, retaining all but the ‘issuer’ part of their ticker symbols, but there are two exceptions: BAM.PR.E Transforms To BN.PF.K and BAM.PR.G Transforms To BN.PF.L

Brookfield has updated its Official Preferred Share Page.

Other transformations, painstakingly spelled out here in order to make the Issue Comments section of this blog searchable (to search for BAM.PR.G in “Issue Comments”, put https://prefblog.com/?cat=14&s=BAM.PR.G in your browser address bar).

Brookfield Corporation accomplished most of it latest reorg on December 9:

Brookfield Corporation (NYSE: BN, TSX: BN) (the “Corporation”) and Brookfield Asset Management Ltd. (NYSE: BAM, TSX: BAM) (the “Manager”) today jointly announced the completion of the public listing and distribution of a 25% interest in the Corporation’s asset management business, through the Manager, by way of a plan of arrangement (“Arrangement”).

The Corporation has changed its name from Brookfield Asset Management Inc. to Brookfield Corporation, with effect from today and at the open of markets on December 12, 2022, its shares will trade under the new ticker “BN” on both stock exchanges. The Manager takes the name Brookfield Asset Management Ltd. and has been successfully listed on the New York Stock Exchange and the Toronto Stock Exchange. At the open of markets on December 12, 2022, its shares will trade under the ticker “BAM” on both stock exchanges.

Accordingly, the BAM Series 9, BAM.PR.G, shares have transformeed into BN Series 52, BN.PF.L shares:

Dividends
The holders of the Series 52 Preferred Shares are entitled to receive fixed cumulative preferred cash dividends, as and when declared by the board of directors, payable quarterly on the first day of February, May, August and November in each year, in an amount per share per annum equal to the product of C$22.00 and a percentage (which shall not be less than 80%) of the yield on certain Government of Canada bonds, established for each five year period commencing November 1, 2001 (and each fifth anniversary of that date).

For the five-year period from November 1, 2021 until October 31, 2026, the Series 52 Preferred Shares will pay on a quarterly basis, as and when declared by the board of directors, a fixed cash dividend in an amount equal to 2.75% per annum applied to C$22.00 per share.

Redemption
Subject to applicable law and certain restrictions and to the rights, privileges, restrictions and conditions attaching to other shares of the Corporation, on November 1, 2026 and on November 1 in every fifth year thereafter, all, but not less than all, of the Series 52 Preferred Shares will be redeemable at the option of the Corporation at a redemption price of C$22.00 per share, together with all accrued and unpaid dividends thereon up to but excluding the date of redemption. Notice of any redemption must be given by the Corporation at least 45 days and not more than 60 days prior to the date fixed for redemption.

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Exchange
Subject to certain restrictions, the holders of the Series 52 Preferred Shares will have the right, on November 1, 2026,and on November 1 in every fifth year thereafter, to exchange any or all of the Series 52 Preferred Shares held by them for Series 51 Preferred Shares of the Corporation, on a one-for one basis. An exchange of Series 52 Preferred Shares for Series 51 Preferred Shares must be initiated not less than 14 days and not more than 45 days prior to an exchange date. Under certain circumstances, the Series 52 Preferred Shares automatically convert into Series 51 Preferred Shares, on a one-for-one basis.

Rights of Liquidation
In the event of the liquidation, dissolution or winding-up of the Corporation, the holders of the Series 52 Preferred Shares will be entitled to receive C$22.00 per share together with all dividends accrued and unpaid to the date of payment before any amount will be paid or any assets of the Corporation distributed to the holders of any shares ranking junior to the Series 52 Preferred Shares. The holders of the Series 52 Preferred Shares will not be entitled to share in any further distribution of the assets of the Corporation.
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