PrefBlog

DBRS has announced:

DBRS Limited (DBRS Morningstar) confirmed the ratings of Laurentian Bank of Canada (LBC or the Bank), including the Bank’s Long-Term Issuer Rating at A (low) and its Short-Term Issuer Rating at R-1 (low). DBRS Morningstar changed the trends for all long-term ratings to Negative from Stable. All short-term ratings have a Stable trend. The Bank’s Intrinsic Assessment of A (low) and Support Assessment (SA) of SA3 are unchanged. The SA3 designation, which reflects no expectation of timely external support, results in the final rating being equivalent to the Intrinsic Assessment.

KEY RATING CONSIDERATIONS
The Negative trend reflects the wide and growing scale of the economic disruption resulting from the Coronavirus Disease (COVID-19) pandemic, which pressured LBC’s Q2 2020 earnings and will negatively affect earnings and asset quality in future quarters. Nevertheless, unprecedented support measures have been put in place through monetary and fiscal stimuli, which in DBRS Morningstar’s view, could help to mitigate some of the negative impact of the crisis. However, should the crisis be prolonged, or if the recovery is muted, additional ratings pressure may occur.

The rating confirmations reflect LBC’s solid regional retail franchise in Québec and its growing national reach through B2B Bank, its commercial Business Services segment, and its online platform LBC Digital. Furthermore, the ratings are supported by LBC’s conservative credit culture and sound balance sheet fundamentals. The ratings also consider LBC’s relatively higher proportion of brokered deposits; its increasing, albeit temporary, operating expenses; as well as its weaker capital position relative to peers.

RATING DRIVERS
Given the Negative trend, an upgrade is unlikely. The trend would revert to Stable if the economic fallout from the coronavirus pandemic is not prolonged and outsized credit losses do not materialize.

Conversely, a material deterioration in loan performance, which results in a significant increase in loan losses because of longer-than-expected adverse coronavirus-related impacts, would lead to a ratings downgrade. Additionally, a reduction in capitalization to levels closer to regulatory minimums would pressure the ratings.
…
LBC’s earnings were affected from significantly higher provisions for credit losses (PCL) because of the economic impact of the coronavirus pandemic. As a result, the Bank reported Q2 2020 net income of $8.9 million, a year-over-year decline of 79% as it took provisions of $54.9 million, which was a significantly higher amount than the $9.2 million PCL recorded in Q2 2019. The majority of the increase comprised PCL on performing loans reflecting changes in forward-looking macroeconomic indicators relating to the impact of the pandemic; however, LBC’s income before provisions and taxes remained flat from the previous year at $56 million in Q2 2020. DBRS Morningstar notes that, as a result of the Bank’s various transformation initiatives, LBC’s efficiency ratio remains one of the weakest among peers at 76% for Q2 2020. Management expects operating efficiency to improve over the next three years as it begins phasing out older systems and as the Bank begins to benefit from other investments in the franchise.

Affected issues are LB.PR.H and LB.PR.J.

Laurentian Bank recently slashed its common dividend, as reported on May 29.

TC Energy Corporation has announced:

that it does not intend to exercise its right to redeem its Cumulative Redeemable First Preferred Shares, Series 3 (Series 3 Shares) and Cumulative Redeemable First Preferred Shares, Series 4 (Series 4 Shares) on June 30, 2020. As a result, subject to certain conditions:

(a) the holders of Series 3 Shares have the right to choose one of the following options with regard to their shares:

to retain any or all of their Series 3 Shares and continue to receive a fixed rate quarterly dividend; or

to convert, on a one-for-one basis, any or all of their Series 3 Shares into Series 4 Shares and receive a floating rate quarterly dividend, and
(b) the holders of Series 4 Shares have the right to choose one of the following options with regard to their shares:

to retain any or all of their Series 4 Shares and continue to receive a floating rate quarterly dividend; or

to convert, on a one-for-one basis, any or all of their Series 4 Shares into Series 3 Shares and receive fixed rate quarterly dividend.
Should a holder of Series 3 Shares choose to retain their shares, such shareholders will receive the new annual fixed dividend rate applicable to Series 3 Shares of 1.694% for the five-year period commencing June 30, 2020 to, but excluding, June 30, 2025. Should a holder of Series 3 Shares choose to convert their shares to Series 4 Shares, holders of Series 4 Shares will receive the floating quarterly dividend rate applicable to the Series 4 Shares of 1.535% for the three-month period commencing June 30, 2020 to, but excluding, September 30, 2020. The floating dividend rate will be reset every quarter.

Should a holder of Series 4 Shares choose to retain their shares, such shareholders will receive the floating quarterly dividend rate applicable to Series 4 Shares of 1.535% for the three-month period commencing June 30, 2020 to, but excluding, September 30, 2020. The floating dividend rate will be reset every quarter. Should a holder of Series 4 Shares choose to convert their shares to Series 3 Shares, holders of Series 3 Shares will receive the new fixed quarterly dividend rate applicable to the Series 3 Shares of 1.694% for the five-year period commencing June 30, 2020 to, but excluding, June 30, 2025.

Beneficial owners of Series 3 Shares and Series 4 Shares who want to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is 5 p.m. (EDT) on June 15, 2020. Any notices received after this deadline will not be valid. As such, it is recommended that this be done well in advance of the deadline in order to provide the broker or other nominee with time to complete the necessary steps.

Beneficial owners of Series 3 or Series 4 Shares who do not provide notice or communicate with their broker or other nominee by the deadline will retain their respective Series 3 Shares or Series 4 Shares, as applicable, and receive the new dividend rate applicable to such shares, subject to the conditions stated below.

The foregoing conversions are subject to the conditions that: (i) if TC Energy determines that there would be less than one million Series 3 Shares outstanding after June 30, 2020, then all remaining Series 3 Shares will automatically be converted into Series 4 Shares on a one-for-one basis on June 30, 2020, and (ii) if TC Energy determines that there would be less than one million Series 4 Shares outstanding after June 30, 2020, then all of the remaining outstanding Series 4 Shares will automatically be converted into Series 3 Shares on a one-for-one basis on June 30, 2020. In either case, TC Energy will issue a news release to that effect no later than June 22, 2020.

Holders of Series 3 Shares and Series 4 Shares will have the opportunity to convert their shares again on June 30, 2025 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 3 Shares and the Series 4 Shares, please see the prospectus supplement dated March 4, 2010 which is available on sedar.com or on our website.

TRP.PR.B is a FixedReset 4.00%+128 that commenced trading 2010-3-11 after being announced 2010-3-4. It reset to 2.152% effective 2015-6-30, which triggered a 39% conversion to the FloatingReset TRP.PR.H despite my recommendation not to convert.

TRP.PR.H is a FloatingReset, Bills+128, that arose from a 39% conversion from the FixedReset TRP.PR.B in 2015.

Sun Life Financial Inc. has announced:

the applicable dividend rates for its Class A Non-Cumulative Rate Reset Preferred Shares Series 8R (the “Series 8R Shares”) and Class A Non-Cumulative Floating Rate Preferred Shares Series 9QR (the “Series 9QR Shares”).

With respect to any Series 8R Shares that remain outstanding after June 30, 2020, commencing as of such date, holders thereof will be entitled to receive non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Sun Life and subject to the Insurance Companies Act (Canada). The dividend rate for the five-year period commencing on June 30, 2020 to but excluding June 30, 2025 will be 1.825% per annum or $0.114063 per share per quarter, being equal to the sum of the Government of Canada Yield, as defined in the terms of the Series 8R Shares, on Monday, June 1, 2020 plus 1.41%, as determined in accordance with the terms of the Series 8R Shares.

With respect to any Series 9QR Shares that remain outstanding after June 30, 2020, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Sun Life and subject to the Insurance Companies Act (Canada), based on a dividend rate equal to the sum of the T-Bill Rate, as defined in the terms of the Series 9QR Shares, plus 1.41% (calculated on the basis of the actual number of days elapsed in such Quarterly Floating Rate Period divided by 365 days), subject to certain adjustments in accordance with the terms of the Series 9QR Shares. The dividend rate for the period commencing on June 30, 2020 to but excluding September 30, 2020 will be equal to 1.665% per annum or $0.104918 per share, as determined in accordance with the terms of the Series 9QR Shares.

Beneficial owners of Series 8R Shares and Series 9QR Shares who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is 5:00 p.m. (ET) on Monday, June 15, 2020.

SLF.PR.G was issued as a FixedReset, 4.35%+141, announced 2010-5-13 and commenced trading 2010-5-25. It reset to 2.275% effective 2015-6-30, which triggered a 50% conversion to the FloatingReset SLF.PR.J. I recommended against conversion. The issue is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

SLF.PR.J is a FloatingReset, Bills+141, that arose from a 50% conversion from the FixedReset SLF.PR.G. It commenced trading 2015-6-30.

Pembina Pipeline Corporation has announced:

that it does not intend to exercise its right to redeem the currently outstanding Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 19 (“Series 19 Shares”) (TSX: PPL.PR.S) on June 30, 2020 (the “Conversion Date”).

As a result, subject to certain terms of the Series 19 Shares, the holders of the Series 19 Shares will have the right to convert all or part of their Series 19 Shares on a one-for-one basis into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 20 of Pembina (“Series 20 Shares”) on the Conversion Date. Holders who do not exercise their right to convert their Series 19 Shares into Series 20 Shares will retain their Series 19 Shares.

As provided in the terms of the Series 19 Shares: (i) if Pembina determines that there would remain outstanding immediately following the conversion less than 1,000,000 Series 19 Shares, then all remaining Series 19 Shares will be automatically converted into Series 20 Shares on a one-for-one basis effective June 30, 2020; or (ii) if Pembina determines that there would be less than 1,000,000 Series 20 Shares after June 30, 2020, no Series 19 Shares will be converted into Series 20 Shares on the Conversion Date. There are currently 8,000,000 Series 19 Shares outstanding.

With respect to any Series 19 Shares that remain outstanding after June 30, 2020, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate for the Series 19 Shares for the five-year period from and including June 30, 2020 to, but excluding, June 30, 2025 will be 4.684 percent, being equal to the five-year Government of Canada bond yield of 0.414 percent determined as of today plus 4.27 percent, in accordance with the terms of the Series 19 Shares.

With respect to any Series 20 Shares that may be issued on June 30, 2020, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate applicable to Series 20 Shares for the three-month floating rate period from and including June 30, 2020 to, but excluding, September 1, 2020 will be 4.525 percent, being equal to the annual rate of interest for the most recent auction of 90-day Government of Canada treasury bills of 0.255 percent plus 4.27 percent, in accordance with the terms of the Series 20 Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial holders of Series 19 Shares who wish to exercise their right of conversion during the conversion period, which runs from June 1, 2020 until 3:00 (MT) / 5:00 pm (ET) on June 15, 2020, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with the time to complete the necessary steps. Any notices received after this deadline will not be valid.

As previously announced, the dividend payable on June 30, 2020 to holders of the Series 19 Shares of record on June 15, 2020 will be $0.312500 per Series 19 Share, consistent with the dividend rate in effect since issuance of the Series 19 Shares. For more information on the terms of the Series 19 Shares and the Series 20 Shares, please see the prospectus supplement dated March 25, 2015 which can be found on SEDAR, under the profile of Veresen Inc., at www.sedar.com.

PPL.PR.S is a FixedReset, 5.00%+427, that commenced trading 2015-4-1 as VSN.PR.E after being announced 2015-03-23. The ticker change became effective 2017-10-5 after the closing of a merger between the companies. The issue is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Husky Energy has announced:

that the Company does not intend to exercise its right to redeem its Cumulative Redeemable Preferred Shares, Series 7 (Series 7 Shares) on June 30, 2020. As a result, subject to certain conditions, the holders of Series 7 Shares have the right to choose one of the following options with regard to their shares:

retain any or all of their Series 7 Shares and continue to receive an annual fixed-rate dividend paid quarterly; or

convert, on a one-for-one basis, any or all of their Series 7 Shares into Cumulative Redeemable Preferred Shares, Series 8 (Series 8 Shares) of Husky and receive a floating rate quarterly dividend.
Conversion to Series 8 Shares is subject to the conditions that: (i) if Husky determines that there would be less than one million Series 7 Shares outstanding after June 30, 2020, then all remaining Series 7 Shares will automatically be converted to Series 8 Shares on a one-for-one basis on June 30, 2020, and (ii) if Husky determines that there would be less than one million Series 8 Shares outstanding after June 30, 2020, no Series 7 Shares will be converted into Series 8 Shares. In either case, Husky will issue a news release to that effect no later than June 23, 2020.

Holders of Series 7 Shares who choose to retain any or all of their shares will receive the new fixed-rate quarterly dividend applicable to the Series 7 Shares for the five-year period commencing June 30, 2020 to, but excluding, June 30, 2025 of 3.935%, being equal to the sum of the Government of Canada five-year bond yield of 0.415% plus 3.52% in accordance with the terms of the Series 7 Shares, subject to the conditions described above.

Holders of Series 7 Shares who choose to convert their shares to Series 8 Shares will receive a new floating-rate quarterly dividend applicable to the Series 8 Shares. The dividend rate applicable to the Series 8 Shares for the three-month period commencing June 30, 2020 to, but excluding, September 30, 2020 will be 3.775%, being equal to the annual rate for the most recent auction of 90-day Government of Canada Treasury Bills of 0.255% plus 3.52%, in accordance with the terms of the Series 8 Shares (the Floating Quarterly Dividend Rate), subject to the conditions described above. The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial owners of Series 7 Shares who wish to exercise the right of conversion should communicate as soon as possible with their brokers or other nominees in order to meet the deadline for registered holders to exercise such right, which is 5 p.m. ET on June 15, 2020. It is recommended this communication be had well in advance of the deadline in order to provide the brokers or other intermediaries with time to complete the necessary steps. Holders of Series 7 Shares who do not exercise the right of conversion by this deadline will continue to hold Series 7 Shares with the new annual fixed-rate dividend, subject to the conditions described above.

Holders of the Series 7 Shares and the Series 8 Shares will have the opportunity to convert their shares again on June 30, 2025 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 7 Shares and the Series 8 Shares, please see the Company’s prospectus supplement dated June 10, 2015 on www.sedar.com

HSE.PR.G is a FixedReset, 4.60%+352, that commenced trading 2015-6-17 after being announced 2015-6-9. It is tracked by HIMIPref™ and is assigned to the FixedReset subindex.

Brookfield Infrastructure Partners L.P. has announced:

that it has determined the fixed distribution rate on its Cumulative Class A Preferred Limited Partnership Units, Series 1 (“Series 1 Units”) (TSX: BIP.PR.A) for the five years commencing July 1, 2020 and ending June 30, 2025.

Series 1 Units and Series 2 Units

If declared, the fixed quarterly distributions on the Series 1 Units during the five years commencing July 1, 2020 will be paid at an annual rate of 3.974% ($0.248375 per unit per quarter).

Holders of Series 1 Units have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on June 15, 2020, to reclassify all or part of their Series 1 Units, on a one-for-one basis, into Cumulative Class A Preferred Limited Partnership Units, Series 2 (the “Series 2 Units”), effective June 30, 2020.

The quarterly floating rate distributions on the Series 2 Units will be paid at an annual rate, calculated for each quarter, of 3.56% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly distribution rate in respect of the July 1, 2020 to September 30, 2020 distribution period for the Series 2 Units will be 0.96159% (3.815% on an annualized basis) and the distribution, if declared, for such distribution period will be $0.2403975 per unit, payable on September 30, 2020.

Holders of Series 1 Units are not required to elect to reclassify all or any part of their Series 1 Units into Series 2 Units.

As provided in the unit conditions of the Series 1 Units, (i) if Brookfield Infrastructure determines that there would be fewer than 1,000,000 Series 1 Units outstanding after June 30, 2020, all remaining Series 1 Units will be automatically reclassified into Series 2 Units on a one-for-one basis effective June 30, 2020; or (ii) if Brookfield Infrastructure determines that there would be fewer than 1,000,000 Series 2 Units outstanding after June 30, 2020, no Series 1 Units will be permitted to be reclassified into Series 2 Units. There are currently 4,989,265 Series 1 Units outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 2 Units effective upon reclassification. Listing of the Series 2 Units is subject to Brookfield Infrastructure fulfilling all the listing requirements of the TSX and, upon approval, the Series 2 Units will be listed on the TSX under the trading symbol “BIP.PR.G”.

BIP.PR.A is a FixedReset, 4.50%+356, that commenced trading 2015-3-12 after being announced 2015-3-4. It is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

Note that the tax treatment of distributions on BIP.PR.A are complex and change annually.

Brookfield Asset Management Inc. has announced:

that it has determined the fixed dividend rate on its Cumulative Class A Preference Shares, Series 42 (“Series 42 Shares”) (TSX: BAM.PF.G) for the five years commencing July 1, 2020 and ending June 30, 2025, and also determined the quarterly dividend on its floating rate Cumulative Class A Preference Shares, Series 25 (“Series 25 Shares”) (TSX: BAM.PR.S).

Series 42 Shares and Series 43 Shares

If declared, the fixed quarterly dividends on the Series 42 Shares during the five years commencing July 1, 2020 will be paid at an annual rate of 3.254% ($0.203375 per share per quarter).

Holders of Series 42 Shares have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on June 15, 2020, to convert all or part of their Series 42 Shares, on a one-for-one basis, into Cumulative Class A Preference Shares, Series 43 (the “Series 43 Shares”), effective June 30, 2020.

The quarterly floating rate dividends on the Series 43 Shares will be paid at an annual rate, calculated for each quarter, of 2.84% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly dividend rate in respect of the July 1, 2020 to September 30, 2020 dividend period for the Series 43 Shares will be 0.78011% (3.095% on an annualized basis) and the dividend, if declared, for such dividend period will be $0.1950275 per share, payable on September 30, 2020.

Holders of Series 42 Shares are not required to elect to convert all or any part of their Series 42 Shares into Series 43 Shares.

As provided in the share conditions of the Series 42 Shares, (i) if Brookfield determines that there would be fewer than 1,000,000 Series 42 Shares outstanding after June 30, 2020, all remaining Series 42 Shares will be automatically converted into Series 43 Shares on a one-for-one basis effective June 30, 2020; or (ii) if Brookfield determines that there would be fewer than 1,000,000 Series 43 Shares outstanding after June 30, 2020, no Series 42 Shares will be permitted to be converted into Series 43 Shares. There are currently 11,887,500 Series 42 Shares outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 43 Shares effective upon conversion. Listing of the Series 43 Shares is subject to Brookfield fulfilling all the listing requirements of the TSX and, upon approval, the Series 43 Shares will be listed on the TSX under the trading symbol “BAM.PF.K”.

BAM.PF.G is a FixedReset, 4.50%+284, that commenced trading 2014-10-8 after being announced 2014-10-1. It is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.