PrefBlog

Artis Real Estate Investment Trust has announced:

that it has delivered formal notice to the holder(s) of its Preferred Units, Series G (the “Series G Units”) that, on July 31, 2019, the REIT will redeem all of the 3,140,300 outstanding Series G Units at a price of $25.3125 (the “Redemption Price”) for each Series G Unit, being $25.00 plus $0.3125 in accrued and unpaid distributions thereon up to but excluding July 31, 2019.

The Redemption Price will be payable upon presentation and surrender of the Series G Units called for redemption at the corporate trust offices of AST Trust Company (Canada) at 1 Toronto Street, Suite 1200, Toronto, Ontario, M5C 2V6, Attention: Corporate Actions.

That was a nice surprise for holders of the issue, as AX.PR.G closed at 25.25, up $4.52 (+21.80%!) on volume of 234,839.

AX.PR.G is a FixedReset, 5.00%+313, that commenced trading 2013-7-29 after being announced 2013-7-18. Note that it is not strictly a “preferred share”, it is a trust unit, and that it pays interest and return of capital (see comments), not dividends. The issue has been tracked by HIMIPref™ but relegated to the Scraps – FixedReset (Discount) subindex on credit concerns.

A hint as to why they did this may be found in a June 3 press release:

Artis Real Estate Investment Trust (TSX: AX.UN) (“Artis” or the “REIT”) provided an update today on its normal course issuer bid (“NCIB”) activity in May 2019.

During the month of May, Artis has acquired the following number of units through its NCIB:
• 1,590,993 trust units at a weighted-average price of $11.24;
• 6,800 Series A preferred units at a weighted-average price of $21.96;
• 9,800 Series E preferred units at a weighted-average price of $20.56; and
• 13,100 Series G units at a weighted-average price of $21.99.

From November 1, 2018, when the REIT announced its intention to purchase units through its NCIB, to May 31, 2019, Artis has bought back 12,650,364 trust units at a weighted-average price of $10.46, 51,900 Series A preferred units at a weighted-average price of $21.53, 59,600 Series E preferred units at a weighted-average price of $20.09, and 55,000 Series G preferred units at a weightedaverage price of $21.37.

As of the date hereof, there are 141,283,025 trust units, 3,400,200 Series A preferred units, 3,944,100 Series E preferred units, 3,150,300 Series G preferred units and 5,000,000 Series I preferred units outstanding.

The REIT has an automatic purchase plan in place which allows for the continuous purchase of units and preferred units under its NCIB, including during normal blackout periods.

Their 2018 Financial Report discloses:

The REIT’s weighted-average effective rate at December 31, 2018, on mortgages and other loans secured by properties, inclusive of properties held in joint ty5frgtenture arrangements, was 4.30%, compared to 3.96% at December 31, 2017. The weighted-average nominal interest rate on mortgages and other loans secured by properties, inclusive of properties held in joint venture arrangements, at December 31, 2018, was 4.09%, compared to 3.79% at December 31, 2017.

So in terms of cash, they’re not really saving too much by redeeming AX.PR.G at par, given that it would have reset to about 4.50%. But they’re saving a little bit, and 50bp was enough for RioCan to redeem REI.PR.A and later, REI.PR.C.

Still, holders of AX.PR.G have just been handed a windfall profit of over $14-million, which is about $0.10 per trust unit outstanding, which compares to a reported profit of $158-million in 2018. If I owned the trust units, I’d be ticked off. Why is there such an emphasis on big dramatic moves? What’s wrong with continuing to purchase on the open market at a $4 discount to par, given that the excess financing cost is only about $0.10 – $0.15 per annum? What’s the risk? If you get it wrong, you have another chance to redeem in five years – that’s the beauty of the FixedReset structure – at least, from the issuers’ perspective.

Sure, it’s slow. So what? Slow and steady wins the race!

The Toronto-Dominion Bank has announced (on July 25 June 25, so they say, but it wasn’t on their website yesterday evening!):

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 3 (Non-Viability Contingent Capital (NVCC)) (the “Series 3 Shares”) of TD on July 31, 2019. As a result and subject to certain conditions set out in the prospectus supplement dated July 24, 2014 relating to the issuance of the Series 3 Shares, the holders of the Series 3 Shares have the right to convert all or part of their Series 3 Shares, on a one-for-one basis, into Non-Cumulative Floating Rate Preferred Shares, Series 4 (NVCC) (the “Series 4 Shares”) of TD on July 31, 2019. Holders who do not exercise their right to convert their Series 3 Shares into Series 4 Shares on such date will continue to hold their Series 3 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 4 Shares outstanding after taking into account all shares tendered for conversion on July 31, 2019, then holders of Series 3 Shares will not be entitled to convert their shares into Series 4 Shares, and (ii) alternatively, if TD determines that there would remain outstanding less than 1,000,000 Series 3 Shares after taking into account all shares tendered for conversion on July 31, 2019, then all remaining Series 3 Shares will automatically be converted into Series 4 Shares on a one-for-one basis on July 31, 2019. In either case, TD will give written notice to that effect to holders of Series 3 Shares no later than July 24, 2019.

The dividend rate applicable to the Series 3 Shares for the 5-year period from and including July 31, 2019 to but excluding July 31, 2024, and the dividend rate applicable to the Series 4 Shares for the 3-month period from and including July 31, 2019 to but excluding October 31, 2019, will be determined and announced by way of a press release on July 2, 2019.

Beneficial owners of Series 3 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 July 2, 2019 until 5:00 p.m. (Toronto time) on July 16, 2019.

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.B is a FixedReset 3.80%+227, NVCC-compliant, issue that commenced trading 2014-7-31 after being announced 2014-7-22. It is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

I will have more to say when the reset rate is announced on July 2.

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

that it does not intend to exercise its right to redeem all or any part of its currently outstanding 16,000,000 Non-cumulative Rate Reset Class A Preferred Shares Series 39 (Non-Viability Contingent Capital (NVCC)) (the “Series 39 Shares”) on July 31, 2019.

Subject to certain conditions set out in the prospectus supplement dated June 2, 2014 relating to the issuance of the Series 39 Shares, the holders of Series 39 Shares have the right to convert all or any of their Series 39 Shares, on a one-for-one basis, into Non-cumulative Floating Rate Class A Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) of CIBC (the “Series 40 Shares”) on July 31, 2019.

On such date, holders who do not exercise their right to convert their Series 39 Shares into Series 40 Shares, will continue to hold their Series 39 Shares. The foregoing conversion rights are subject to the following:

• if CIBC determines that there would remain outstanding less than 1,000,000 Series 40 Shares, after having taken into account all Series 39 Shares tendered for conversion on July 31, 2019, then holders of Series 39 Shares will not be entitled to convert their shares into Series 40 Shares, and
• alternatively, if CIBC determines that there would remain outstanding less than 1,000,000 Series 39 Shares, after having taken into account all Series 39 Shares tendered for conversion on July 31, 2019, then all, but not part, of the remaining outstanding Series 39 Shares will automatically be converted into Series 40 Shares on a one-for-one basis on July 31, 2019.

In either case, CIBC will give written notice to that effect to the registered holder of Series 39 Shares no later than July 24, 2019.

The dividend rate applicable to the Series 39 Shares, should any remain outstanding after July 31, 2019, for the five-year period from and including July 31, 2019 to but excluding July 31, 2024 , and the dividend rate applicable to the Series 40 Shares, should any be issued, for the three-month period from and including July 31, 2019 to but excluding October 31, 2019, as and when declared by the Board of Directors of CIBC, will be calculated and announced on June 28, 2019. CIBC has designated the Series 40 Shares as eligible to participate in the CIBC Shareholder Investment Plan.

Beneficial owners of Series 39 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 July 1, 2019 until 5:00 p.m. (Eastern Daylight Time) on July 16, 2019. 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.O is a FixedReset, 3.90%+232, NVCC-compliant, that commenced trading 2014-6-11 after being announced 2014-6-2. It is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

I will have more to say when the reset rate is announced on June 28.

Element Fleet Management has announced:

that none of its outstanding Cumulative 5-Year Rate Reset Preferred Shares, Series C (the “Series C shares”) will be converted into Cumulative Floating Rate Preferred Shares, Series D (the “Series D shares”) on June 30, 2019.

During the conversion notice period, which commenced on May 31, 2019 and ended at 5:00 p.m. (Toronto time) on June 17, 2019, 145,926 Series C shares were tendered for conversion into Series D shares. In accordance with Section 6.03(a)(iii) of the rights, privileges, restrictions and conditions attaching to the Series C shares, as provided in the Corporation’s restated articles of incorporation dated October 4, 2016, since there would be outstanding on June 30, 2019 less than 500,000 Series D shares, after having taken into account all Series C shares tendered for conversion into Series D shares, holders of Series C shares who elected to tender their shares for conversion will not have their Series C shares converted into Series D shares on June 30, 2019.

As a result, no Series D shares will be issued in connection with the current conversion privilege.

EFN.PR.C was announced 2014-2-26 as a FixedReset, 6.50%+481, but was not added to HIMIPref™ at that time as the company did not have a credit rating. The company received an initial rating from DBRS on 2015-9-24 and HIMIPref™ commenced tracking its four issues then outstanding shortly thereafter. The extension of the issue was announced 2019-5-22 and it was later announced that EFN.PR.C will reset At 6.210% effective June 30, 2019. I recommended against conversion. The issue continues to be tracked by HIMIPref™ but is relegated to the Scraps – FixedReset (Discount) subindex on credit concerns.