PrefBlog

DREAM Unlimited Corp announced (on November 13):

that it will redeem all of its outstanding First Preference Shares, Series 1 (“Series 1 Shares”) on December 20, 2019 (the “Redemption Date”), in accordance with their terms. The Series 1 Shares will be redeemed at a price of $7.16 per share, plus all accrued and unpaid dividends from September 30, 2019 up to but excluding the Redemption Date. There are currently 4,005,729 Series 1 Shares issued and outstanding. Following the Redemption Date, the Series 1 Shares are expected to be delisted from the Toronto Stock Exchange.

The formal notice of redemption will be delivered to registered holders of the Series 1 Shares on behalf of the Corporation by Computershare Trust Company of Canada, the transfer agent and registrar for the Series 1 Shares.

From and after the Redemption Date, holders of the Series 1 Shares will cease to be entitled to dividends or to exercise any rights of shareholders in respect of the Series 1 Shares, except for the right to receive the Redemption Price for their Series 1 Shares.

Payment of the redemption amount for the Series 1 Shares will be made to registered holders of such securities on or after the Redemption Date. Beneficial holders of the Series 1 Shares should contact their financial institution, broker or other intermediary through which they hold the Series 1 Shares to confirm how they will receive their redemption proceeds.

They further announced (on December 20):

that it has redeemed all of its outstanding First Preference Shares, Series 1 (“Series 1 Shares”), in accordance with their terms. The cash redemption price for the Series 1 Shares was $7.16 per share, plus all accrued and unpaid dividends from September 30, 2019 up to and including the Redemption Date, for aggregate proceeds of $29.1 million. The Series 1 Shares have been delisted from the Toronto Stock Exchange.

DRM.PR.A came into existence as partial consideration on the exchange of DC.PR.A (the other consideration was DC.PR.C, which has had an interesting series of transitions of its own) following approval by shareholders despite my urging that exchange offer was coercive. The original ticker symbol for the issue was DBC.PR.A.

Last year Standard & Poor’s announced (on 2018-12-27):

• On Dec. 27, 2019, S&P Global Ratings revised its outlook on Innergex Renewable Energy Inc. to negative from stable, and affirmed its ratings, including its ‘BBB-‘ long-term issuer credit rating, on Innergex.
• We expect Innergex to have weak financial metrics in 2018 due to the timing and financing of acquisitions, although it expects these to improve in 2019.
• Innergex is issuing nonrecourse debt at the asset level and intends to sell its HS Orka geothermal assets in Iceland, using proceeds to reduce parent-level debt; however, this introduces incremental execution risk.
• If the debt reduction strategy is delayed or the amount is lower than expected, financial metrics might not recover to the 24%-26% range, which could result in a downgrade.

…
S&P Global Ratings today took the rating actions listed above. Innergex has completed a number of acquisitions in 2018 that have increased leverage both through acquired debt and development financing at the corporate level. Although the company expects to de-lever in 2019 through asset level financing and asset sales, we believe that there is execution risk with this strategy. Our financial forecasts
project Innergex moving back into the stable range of 24%-26% funds from operations (FFO)-to-debt in 2019. However, they are predicated on completing asset sales, which raises significant execution risk and reflects our outlook revision to negative from stable.

The negative outlook reflects significantly lower FFO-to-debt ratios of about 18% in 2018, compared with expectations of 23% at the ‘BBB-‘ level. S&P Global Ratings’ expects Innergex to face execution risk with its strategy of improving forecast financial metrics through asset level financing and asset sales, and the outlook reflects the deteriorating financial performance. S&P Global Ratings expects FFO-to-debt to recover to the 24%-26% range in 2019 and 2020.

A downgrade could happen if the FFO-to-debt ratio does not recover and remains above 23% over our two-year outlook period. This could result from Innergex’s inability to execute on its asset sale plan that it would use to reduce nonrecourse debt. In addition, given the limited cushion in financial metrics above the 23% FFO-to-debt downgrade trigger, lower-than-expected distributions from its subsidiary assets or an increase in nonrecourse debt used to finance development or acquisition opportunities could lead to a downgrade.

An outlook revision to stable could occur if Innergex deleverages, by paying down bridge and revolving credit facility with asset sales, such that FFO-to-debt metrics return to, and stay in, the 24%-26% range.

S&P has now announced:

• On Dec. 23, 2019, S&P Global Ratings placed its ‘BBB-‘ issuer credit rating on Innergex Renewable Energy Inc. (Innergex) and its ‘BB’ issue-level ratings on the company’s preferred shares on CreditWatch with negative implications.
• The CreditWatch placement reflects notable weakness in Innergex’s credit metrics from last year.
• We intend to resolve the CreditWatch in the next 90 days.

…
S&P Global Ratings today took the rating actions listed above. The company has been on an aggressive growth path and, since the beginning of 2018, has either acquired or developed 1.5 gigawatts of cumulative incremental capacity. While a considerable portion of these capacity additions have ultimately been financed with project-level debt, Innergex’s corporate debt includes the equity contributions from both previous transactions, as well as for projects that are in development or under construction. The company sold its Icelandic asset in 2019 and used the proceeds to reduce holdco debt; however, its debt levels have nevertheless remained elevated due to continued investments in newer projects. We believe that if Innergex does not take credit-positive actions to address the continuing amount of heightened leverage, there would be negative implications for the rating.

The CreditWatch placement reflects continuing amounts of heightened leverage at the holdco level. If Innergex does not take steps to reduce debt, we would lower the rating. We intend to resolve the CreditWatch in the next 90 days.

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

TC Energy Corporation has announced:

that 173,954 of its 9,498,423 fixed rate Cumulative Redeemable First Preferred Shares, Series 1 (Series 1 Shares) have been elected for conversion on December 31, 2019, on a one-for-one basis, into floating rate Cumulative Redeemable First Preferred Shares, Series 2 (Series 2 Shares); and 5,252,715 of its 12,501,577 Series 2 Shares have been elected for conversion, on a one-for-one basis, into Series 1 Shares. As a result of the conversions, TC Energy will have 14,577,184 Series 1 Shares and 7,422,816 Series 2 Shares issued and outstanding. The Series 1 Shares and Series 2 Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbols TRP.PR.A and TRP.PR.F respectively.

The Series 1 Shares will pay on a quarterly basis, for the five-year period beginning on December 31, 2019, as and when declared by the Board of Directors of TC Energy, a fixed dividend at an annualized rate of 3.479 per cent.

The Series 2 Shares will pay a floating rate quarterly dividend for the five-year period beginning on December 31, 2019, as and when declared by the Board of Directors of TC Energy. The dividend rate for the Series 2 Shares for the first quarterly floating rate period commencing December 31, 2019 to, but excluding March 30, 2020, is 3.572 per cent, and will be reset every quarter.

Holders of Series 1 Shares and Series 2 Shares will have the opportunity to convert their shares again on December 31, 2024 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 1 Shares and the Series 2 Shares, please see the prospectus supplement dated September 22, 2009 which is available on sedar.com or on our website.

TRP.PR.A commenced trading 2009-9-30 after being announced 2009-9-22. It commenced life as a FixedReset, 4.60%+192, that reset to 3.266% effective 2014-12-31. Assiduous Readers may recall that I have blamed the 2014 reset of TRP.PR.A for what we might now call ‘the first half’ of the current bear market. I recommended conversion to TRP.PR.F in 2014 and there was a conversion rate of about 62%. The company announced the extension to 2024 on 2019-11-21. TRP.PR.A will reset at 3.479% effective December 31, 2019. I recommended holding, or converting to, TRP.PR.A.

TRP.PR.F commenced trading 2014-12-31 after a partial conversion from TRP.PR.A.

Pembina Pipeline Corporation has announced (on December 16):

it has completed its previously announced acquisition of Kinder Morgan Canada Limited (“KML”) (the “Corporate Acquisition”) and the U.S. portion of the Cochin Pipeline system (the “Cochin US Acquisition” and together with the Corporate Acquisition, the “Kinder Morgan Transaction”). The Company is further pleased to affirm its previously announced dividend increase, announce its 2020 financial guidance and provide an end-of-year business update.

Closing of the Kinder Morgan Transaction

“We are pleased to have closed the highly strategic Kinder Morgan Transaction earlier than originally expected, which will allow us to realize a full year of contribution from these assets in 2020. The newly acquired assets provide enhanced integration within our existing franchise, entrance into exciting new businesses and clear visibility to creating long-term value for our shareholders,” said Mick Dilger, Pembina’s President and Chief Executive Officer. “Our teams will now focus on completing the integration activities and pursuing the $100 million of additional run-rate adjusted EBITDA we expect to realize over the coming years,” added Mr. Dilger.

The Corporate Acquisition was completed pursuant to a plan of arrangement under Section 193 of the Business Corporations Act (Alberta) (the “Arrangement”) pursuant to which KML acquired all of the issued and outstanding class B limited partnership units of Kinder Morgan Canada Limited Partnership (“Class B Units”), Pembina acquired all of the issued and outstanding special voting shares of KML (“KML Special Voting Shares”) and PKM Canada Limited (“Pembina SubCo”), a wholly-owned subsidiary of Pembina, amalgamated with KML and continued under the name “PKM Canada Limited” (“Amalco”). Pursuant to such amalgamation, each restricted voting share of KML (“KML Restricted Voting Shares”) was cancelled, each cumulative redeemable minimum rate reset preferred share, series 1 of KML (“KML Series 1 Shares”) was cancelled, each cumulative redeemable minimum rate reset preferred share, series 3 of KML (“KML Series 3 Shares”) was cancelled, each KML Special Voting Share was cancelled and each common share of Pembina SubCo was converted into one common share of Amalco. Pursuant to the Arrangement:

(a) holders of KML Restricted Voting Shares, for each KML Restricted Voting Share held, received 0.3068 of a common share of Pembina (a “Pembina Common Share”);

(b) holders of KML Special Voting Shares, and associated Class B Units received: (i) for each KML Special Voting Share held, a cash payment of $0.000001; and (ii) for each associated Class B Unit held, 0.3068 of a Pembina Common Share;

(c) holders of KML Series 1 Shares, for each KML Series 1 Share held, received one cumulative redeemable rate reset class A preferred share, series 23 of Pembina (PPL.PF.C) (“PPL Series 23 Shares”) with substantially the same terms and conditions as the KML Series 1 Shares; and

(d) holders of KML Series 3 Shares, for each KML Series 3 Share held, received one cumulative redeemable rate reset class A preferred share, series 25 of Pembina (PPL.PF.E) (“PPL Series 25 Shares”) with substantially the same terms and conditions as the KML Series 3 Shares.

Following completion of the Arrangement, Pembina is the owner of all of the issued and outstanding securities of Amalco. The Arrangement was approved by the holders of KML Restricted Voting Shares and KML Special Voting Shares, voting together as a single class, and the holders of KML Series 1 Shares and KML Series 3 Shares, voting together as a single class, at special meetings held on December 10, 2019 and by the Court of Queen’s Bench of Alberta on December 10, 2019. Immediately before the Arrangement, Pembina did not own or control any KML Restricted Voting Shares, KML Special Voting Shares, Class B Units, KML Series 1 Shares, KML Series 3 Shares or common shares of Amalco.

Dividends on the PPL Series 23 Shares and the PPL Series 25 Shares will continue to be paid on the 15th day of February, May, August and November in each year if, as and when declared by the board of directors of Pembina. Former holders of KML Series 1 Shares receiving PPL Series 23 Shares will receive a full quarterly dividend of $0.328125 on February 15, 2020, when declared, and former holders of KML Series 3 Shares receiving PPL Series 25 Shares will receive a full quarterly dividend of $0.3250 on February 15, 2020, when declared. The KML Restricted Voting Shares, the KML Series 1 Shares and the KML Series 3 Shares will be delisted from the TSX within a few trading days following closing of the Kinder Morgan Transaction.

…

KML.PR.A is now PPL.PF.C.

KML.PR.C is now PPL.PF.E

KML.PR.A is a FixedReset 5.25%+365M525, that commenced trading 2017-8-15 after being announced 2019-8-3. A Plan of Arrangement was announced in August 2019 and a vote by preferred shareholders was made explicit in September 2019

KML.PR.C is a FixedReset, 5.20%+351M520, that commenced trading 2017-12-15 after being announced 2017-12-6. A Plan of Arrangement was announced in August 2019 and a vote by preferred shareholders was made explicit in September 2019

PPL now has a series of FixedResets that dwarfs many much larger companies, Implied Volatility analysis yields the following chart:

Click for Big

There is the familar extreme richness for three issues that have a floor: PPL.PF.A (+326bp, Min 4.90%) is $5.16 rich; PPL.PF.C (+365bp, Min 5.25%) is $3.95 rich; and PPL.PF.E (+351bp, Min 5.20%) is $4.12 rich. However, the two issues with a floor that are trading at a premium are actually fairly priced: PPL.PR.K (+500bp, Min 5.75%) is $0.03 rich; and PPL.PR.M (+496bp, Min 5.75%) is $0.21 rich. It is very common, however, for the calculated value of the floor guarantee to drop when the issue trades at a premium, as people start assuming redemption at the next opportunity is assured.

The Toronto-Dominion Bank has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding 20 million Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 5 (Non-Viability Contingent Capital (NVCC)) (the “Series 5 Shares”) of TD on January 31, 2020. As a result and subject to certain conditions set out in the prospectus supplement dated December 9, 2014 relating to the issuance of the Series 5 Shares, the holders of the Series 5 Shares have the right to convert all or part of their Series 5 Shares, on a one-for-one basis, into Non-Cumulative Floating Rate Preferred Shares, Series 6 (NVCC) (the “Series 6 Shares”) of TD on January 31, 2020. Holders who do not exercise their right to convert their Series 5 Shares into Series 6 Shares on such date will continue to hold their Series 5 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 6 Shares outstanding after taking into account all shares tendered for conversion on January 31, 2020, then holders of Series 5 Shares will not be entitled to convert their shares into Series 6 Shares, and (ii) alternatively, if TD determines that there would remain outstanding less than 1,000,000 Series 5 Shares after taking into account all shares tendered for conversion on January 31, 2020, then all remaining Series 5 Shares will automatically be converted into Series 6 Shares on a one-for-one basis on January 31, 2020. In either case, TD will give written notice to that effect to holders of Series 5 Shares no later than January 24, 2020.

The dividend rate applicable to the Series 5 Shares for the 5-year period from and including January 31, 2020 to but excluding January 31, 2025, and the dividend rate applicable to the Series 6 Shares for the 3-month period from and including January 31, 2020 to but excluding April 30, 2020, will be determined and announced by way of a press release on January 2, 2020.

Beneficial owners of Series 5 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 January 2, 2020 until 5:00 p.m. (Toronto time) on January 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.C is a FixedReset, 3.75%+225, that commenced trading 2014-12-16 after being announced 2014-12-5. It is tracked by HIMIPref™ and is assigned to the FixedReset-Discount subindex.

Canadian Imperial Bank of Commerce has announced (on December 12):

that it does not intend to exercise its right to redeem all or any part of its currently outstanding 12,000,000 Non-cumulative Rate Reset Class A Preferred Shares Series 41 (Non-Viability Contingent Capital (NVCC)) (the “Series 41 Shares”) on January 31, 2020.

Subject to certain conditions set out in the prospectus supplement dated December 8, 2014 relating to the issuance of the Series 41 Shares, the holders of Series 41 Shares have the right to convert all or any of their Series 41 Shares, on a one-for-one basis, into Non-cumulative Floating Rate Class A Preferred Shares Series 42 (Non-Viability Contingent Capital (NVCC)) of CIBC (the “Series 42 Shares”) on January 31, 2020.

On such date, holders who do not exercise their right to convert their Series 41 Shares into Series 42 Shares, will continue to hold their Series 41 Shares. The foregoing conversion rights are subject to the following:

if CIBC determines that there would remain outstanding less than 1,000,000 Series 42 Shares, after having taken into account all Series 41 Shares tendered for conversion on January 31, 2020, then holders of Series 41 Shares will not be entitled to convert their shares into Series 42 Shares, and

alternatively, if CIBC determines that there would remain outstanding less than 1,000,000 Series 41 Shares, after having taken into account all Series 41 Shares tendered for conversion on January 31, 2020, then all, but not part, of the remaining outstanding Series 41 Shares will automatically be converted into Series 42 Shares on a one-for-one basis on January 31, 2020.
In either case, CIBC will give written notice to that effect to the registered holder of Series 41 Shares no later than January 24, 2020.

The dividend rate applicable to the Series 41 Shares, should any remain outstanding after January 31, 2020, for the five-year period from and including January 31, 2020 to but excluding January 31, 2025, and the dividend rate applicable to the Series 42 Shares, should any be issued, for the three-month period from and including January 31, 2020 to but excluding April 30, 2020, as and when declared by the Board of Directors of CIBC, will be calculated and announced on December 31, 2019. CIBC has designated the Series 42 Shares as eligible to participate in the CIBC Shareholder Investment Plan.

Beneficial owners of Series 41 Shares who wish to excise their conversion right should instruct their broker or other nominee to exercise such right during the conversion period, which runs from January 1, 2020 until 5:00 p.m. (Eastern Standard Time) on January 16, 2020. 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.P is a FixedReset, 3.75%+224, that commenced trading 2014-12-16 after being announced 2014-12-8. It is tracked by HIMIPref™ and is assigned to the FixedReset-Discount subindex.

Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P., has announced:

that after having taken into account all election notices received by the December 16, 2019 deadline for the conversion of the Class AAA Preference Shares, Series AA (the “Series AA Shares”) (TSX: BPO.PR.A) into Class AAA Preference Shares, Series BB (the “Series BB Shares”), the holders of Series AA Shares are not entitled to convert their Series AA Shares into Series BB Shares. There were 167,613 Series AA Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series BB Shares.

The Series AA Shares will pay on a quarterly basis, for the five-year period beginning on January 1, 2020, as and when declared by the board of directors of Brookfield, a fixed dividend based on an annual dividend rate of 4.709% (C$0.294313 per share per quarter).

BPO.PR.A is a FixedReset, 4.75%+315, that commenced trading 2014-10-23 after being announced 2014-10-7. BPO.PR.A will reset at 4.709% effective January 1, 2020. The issue is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Husky Energy has announced (on December 18):

that 71,606 Cumulative Redeemable Preferred Shares, Series 3 (Series 3 Shares) were tendered for conversion, which is less than the one million shares required to give effect to conversion into Cumulative Redeemable Preferred Shares, Series 4 (Series 4 Shares).

As a result, none of the Series 3 Shares will be converted into Series 4 Shares on December 31, 2019.

HSE.PR.C is 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 will reset at 4.689% effective December 31, 2019. The issue is tracked by HIMIPref™ and is been assigned to the FixedResets-Discount subindex.