PrefBlog

Atlantic Power Corporation has announced:

that the Toronto Stock Exchange (“TSX”) has approved Atlantic Power’s renewal of its normal course issuer bid (“NCIB”) for the following series of the Company’s convertible unsecured subordinated debentures and its common shares and APPEL’s renewal of its NCIB for each of the following series of its preferred shares (collectively, the “Public Securities”):

a) the 6.0% Series E Convertible Unsecured Subordinated Debentures due January 31, 2025 (the “6.0% Cdn$115.0 Million Debentures”) (TSX: ATP.DB.E).

b) the common shares (the “Common Shares”) (TSX:ATP);

c) the 4.85% Cumulative Redeemable Preferred Shares, Series 1 (the “Series 1 Preferred Shares”) (TSX: AZP.PR.A);

d) the Cumulative Rate Reset Preferred Shares, Series 2 (the “Series 2 Preferred Shares”) (TSX: AZP.PR.B); and

e) the Cumulative Floating Rate Preferred Shares, Series 3 (the “Series 3 Preferred Shares”) (TSX: AZP.PR.C).

Atlantic Power and APPEL intend to commence their NCIBs on December 31, 2020. The NCIBs will expire on December 30, 2021 or such earlier date as the Company and/or APPEL complete their respective purchases pursuant to the NCIBs or terminate them at their option. Under its current NCIB which expires December 30, 2020, Atlantic Power has purchased 7,476,213 of its common shares at an average price of Cdn$2.85. There were no purchases of its 6.0% Series E Convertible Unsecured Subordinated Debentures. APPEL has purchased 381,794 of its Series 1 Preferred Shares at an average price of Cdn$15.17; 62,365 of its Series 2 Preferred Shares at an average price of Cdn$15.20; and 120,000 of its Series 3 Preferred Shares at an average price of Cdn$17.90.

So to put those 2020 numbers into tabular form:

So a total of about $8.9-million was spent on preferreds, about 45% of the amount spent on common. Certainly not enough to cause a scarcity, but every little bit helps!

DBRS has announced that it:

placed Artis Real Estate Investment Trust’s (Artis or the REIT) Issuer Rating and Senior Unsecured Debentures rating of BBB (low) and Preferred Trust Units rating of Pfd-3 (low) Under Review with Negative Implications. These rating actions reflect DBRS Morningstar’s expectation that the announcement of Artis’ current management team leaving the REIT may have a negative impact on its credit risk profile and may impair its ability to reduce leverage in a timely manner.

Artis announced an agreement through which certain members of the management team, including the chief executive officer (CEO) and the chief financial officer (CFO), are stepping down as a result of activist unitholder (the Sandpiper Group) pressure. Sandpiper has been advocating against Artis for the spinoff of its retail portfolio, cutting costs, and increasing distributions to unitholders as well as other initiatives. The REIT also announced the reconstitution of its board and a new interim CEO, who is also the CEO of Sandpiper. DBRS Morningstar notes that Artis had been engaged in a strategic debt reduction initiative, including the retail portfolio spinoff, that had the potential to stabilize Artis’ credit profile within an acceptable time frame (see DBRS Morningstar’s commentary “Artis REIT’s Proposed Spin-Off and Debt Reduction Could Stabilize Rating Trend,” dated September 9, 2020).

As a result of the uncertainty created by the change in management, DBRS Morningstar is placing Artis’ ratings Under Review with Negative implications. As part of its review, DBRS Morningstar will determine the new management team’s commitment to and updated plans for lowering leverage. Should DBRS Morningstar determine that the REIT’s successful reduction of leverage is likely, DBRS Morningstar would likely change the trend for Artis’ ratings to Stable upon completion of the review. Conversely, DBRS Morningstar would likely take a negative rating action on Artis’ ratings should it determine that management is unlikely to reduce total debt-to-EBITDA ratio below 9.8 times (x) or increase EBITDA interest coverage above 2.70x.

Affected issues are AX.PR.A, AX.PR.E and AX.PR.I.

Standard & Poor’s has announced:

• On Dec. 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating (ICR) on Innergex Renewable Energy Inc. to ‘BB+’ from ‘BBB-‘.
• We also lowered our global scale rating and Canada scale rating on Innergex’s preferred shares by two notches to ‘B+’ and ‘P-4(High)’, respectively, from ‘BB’ and ‘P-3’.
• The downgrade reflects credit metrics that continue to show weakness in light of the company’s aggressive expansion, moderate distribution growth, negative free cash flow, and reliance on corporate debt to fund acquisitions and development.
• The stable outlook reflects our expectation that the company’s cash flow quality will continue to benefit from its portfolio of contracted assets, which will generate sufficient cash flows to support debt obligations at the holdco level. Under our base-case scenario, we forecast that funds from operations (FFO)-to-debt will be around 19% through 2022.

…
Although Innergex has added considerable generation capacity to its portfolio, its capital and investment spending has exceeded cash flow growth. The downgrade essentially reflects credit metrics that continue to reflect weakness in light of the company’s aggressive expansion, moderate distribution growth, negative free cash flow, and heavy reliance on corporate debt to fund acquisitions and development projects. Since the beginning of 2017, Innergex has brought into operation more than 1.8 gigawatts of net capacity, either through developments, or via opportunistic acquisitions across different markets. Although this has helped increase scale, as well as improve asset and geographical diversity, the growth in distributable cash at the holdco level has lagged our expectations, and, combined with an increasing dividend and ongoing capital spending requirements, has left the company with limited, or no room for debt reduction.
…
We view Innergex’s financial risk profile as aggressive based on projected FFO-to-debt of about 19% and debt-to-EBITDA of 4.0x-4.5x through our two-year outlook period. Our analysis excludes both nonrecourse project debt (and associated debt service) from corporate debt and adjusted interest expense.

The stable outlook reflects our expectation that Innergex’s cash flow quality will continue to benefit from its portfolio of contracted assets, which will generate sufficient cash flows to support debt obligations at the holdco level. We also expect that the company’s future investments and developments will remain backed by commercial certainty via contracts or PPAs. Finally, under our base-case scenario, we forecast that FFO-to-debt will remain around 19% through 2022.

We could lower the rating if we forecast FFO-to-debt will remain below 16% on a consistent basis. This could occur if the company’s reliance on corporate-level debt financing to support growth or expansion plans is higher than expected, or if its financial performance falls short of our base-case forecast.

We could consider a positive rating action if Innergex achieves and maintains FFO-to-debt ratio of at least 23% on a sustained basis. This could be achieved if the company experiences better-than-expected financial performance, or if it reduces debt at the holdco level.

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

Great-West Lifeco Inc. has announced:

that holders of 59,830 Lifeco Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) have elected to convert their shares into Non-Cumulative Floating Rate First Preferred Shares, Series O (the “Series O Shares”) and that holders of 547,303 Series O Shares have elected to convert their shares into Series N Shares.

Lifeco currently has 8,524,422 Series N Shares and 1,475,578 Series O Shares outstanding. After taking into account all shares tendered for conversion, there would be less than one million Series O Shares outstanding on December 31, 2020. As a result and in accordance with the terms and conditions attached to the shares, no Series N Shares may be converted into Series O Shares and all remaining Series O Shares will automatically be converted into Series N Shares on a one-for-one basis on December 31, 2020. Lifeco will give written notice to that effect to any registered holder on or before Thursday, December 24, 2020.

Following the automatic conversion, Lifeco will have 10,000,000 Series N Shares and no Series O Shares issued and outstanding. The Series N Shares and Series O Shares are currently listed on the Toronto Stock Exchange under the symbols GWO.PR.N and GWO.PR.O, respectively.

GWO.PR.N was issued as a FixedReset, 3.65%+130, that commenced trading 2010-11-23 after being announced 2010-11-15. The issue was met with disfavour and there was an inventory clearance sale closing 2010-12-3. After a notice of extension the issue issue reset to 2.176% in 2015. I recommended against conversion; there was a 15% conversion to the FloatingReset GWO.PR.O anyway. The company provided another notice of extension in November, 2020. The issue will reset to 1.749% effective 2020-12-31. It is tracked by HIMIPref™ and is assigned to the FixedReset (Insurance) subindex.

GWO.PR.O is a FloatingReset, Bills+130, that arose in 2015 via a partial conversion from GWO.PR.N. GWO.PR.O is tracked by HIMIPref™ but has been relegated to the Scraps – FloatingReset subindex on volume concerns.