Month: November 2024

Fairfax Financial Holdings Limited has announced:

its intention to redeem all of its 7,515,642 outstanding Cumulative 5-Year Rate Reset Preferred Shares, Series C (the “Series C Shares”) and all of its 2,484,358 outstanding Cumulative Floating Rate Preferred Shares, Series D (the “Series D Shares” and, together with the Series C Shares, the “Preferred Shares”) on December 31, 2024 (the “Redemption Date”) at a redemption price equal to C$25.00 per share, for an aggregate total amount of approximately C$250 million, together with all accrued and unpaid dividends up to but excluding the Redemption Date (the “Redemption Price”), less any tax required to be deducted and withheld by Fairfax.

Formal notice will be delivered to the sole registered holder of the Preferred Shares in accordance with the terms of the Preferred Shares of the applicable series as set out in Fairfax’s articles.

Separately from the Redemption Price, (i) the final quarterly dividend of C$0.294313 per Series C Share will be paid in the usual manner to holders of Series C Shares on December 31, 2024, and (ii) the final quarterly dividend of C$0.47858 per Series D Share will be paid in the usual manner to holders of Series D Shares December 30, 2024, in each case to shareholders of record on December 13, 2024.

Fairfax intends to use a portion of the net proceeds from the previously announced public offering of C$700 million aggregate principal amount of its Senior Notes to redeem the outstanding Preferred Shares.

Non-registered holders of Preferred Shares should contact their broker or other intermediary for information regarding the redemption process for the series of Preferred Shares in which they hold a beneficial interest. Fairfax’s transfer agent for the Preferred Shares is Computershare Trust Company of Canada (“Computershare”). Questions regarding the redemption process may be directed to Computershare at 1-800-564-6253 or by email to corporateactions@computershare.com.

Following the redemption on December 31, 2024, the Series C Shares and the Series D Shares will be delisted from and no longer trade on the Toronto Stock Exchange (“TSX”).

Fairfax is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and the associated investment management.

For further information contact: John Varnell, Vice President, Corporate Development at (416) 367-4941

FFH.PR.C was issued as a cumulative FixedReset issue, 5.75%+315 that commenced trading 2009-10-5 after being announced 2009-9-29. It reset to 4.578% in 2014. I recommended in favour of conversion to FloatingResets. The conversion rate was about 40%. FFH.PR.C reset at 4.709% effective 2020-1-1. I recommended against conversion.

FFH.PR.D resulted from 40% conversion from FFH.PR.C in 2014 and commenced trading 2014-12-31.

As noted in the press release, this redemption was foreshadowed by the issuance of senior debt, with the potential redemption of preferreds being mentioned as a possible (probable?) use of proceeds.

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

DBRS has announced (on 2022-12-19 … boy, I really missed this one! My only solace is that I have it right in the HIMIPref™ database) 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.

Cenovus Energy Inc. has announced:

it will exercise its right to redeem the Company’s 4.689% Series 3 Preferred Shares (the “Series 3 Preferred Shares”) on December 31, 2024 (the “Redemption”). All 10 million Series 3 Preferred Shares outstanding will be redeemed at the price of $25.00 per share, for an aggregate amount payable to holders of $250 million, less required withholdings, if any, funded primarily from cash on hand.

As previously announced, the Company’s Board of Directors has declared a quarterly dividend of $0.29306 per Series 3 Preferred Share payable on December 31, 2024, to shareholders of record as of December 13, 2024. This will be the final dividend paid on the Series 3 Preferred Shares.

Inquiries from registered holders of Series 3 Preferred Shares should be directed to our Registrar and Transfer Agent, Computershare Investor Services Inc. at 1-866-332-8898 or (514) 982-8717 outside North America. Beneficial holders, who are not directly registered holders of Series 3 Preferred Shares, should contact the financial institution, broker, or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds.

CVE.PR.C was issued as HSE.PR.C, a FixedReset, 4.50%+313, that commenced trading 2014-12-9 after being announced 2014-12-1. The initial reset rate announcement was quickly determined to be anomalous and eventually corrected. HSE.PR.C reset at 4.689% effective December 31, 2019 and there was no conversion. The ticker changed in January, 2021; the credit rating had shortly prior been downgraded in connection with the takeover; it was upgraded to Pfd-3(high) about a year later. The issue is tracked by HIMIPref™ and has been assigned to the Scraps – FixedResets-Discount subindex since the 2021 downgrade.

Thanks to Assiduous Readers niagara and CanSiamCyp for bringing this to my attention!