PrefBlog

Brompton Group has announced:

Brompton Split Banc Corp. (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively).

The sales period for this overnight offering will end at 9:00 a.m. (ET) on Wednesday, February 20, 2019. The offering is expected to close on or about March 1, 2019 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Class A Shares will be offered at a price of $13.55 per Class A Share for a distribution rate of 8.9% on the issue price, and the Preferred Shares will be offered at a price of $10.00 per Preferred Share for a yield to maturity of 5.25%.(1) The closing price on the TSX for each of the Class A and Preferred Shares on February 15, 2019 was $13.60 and $10.18, respectively. The Class A and Preferred Share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company (calculated as at February 14, 2019), as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The Company invests in a portfolio (the “Portfolio”) consisting of common shares of the six largest Canadian banks: currently The Bank of Nova Scotia, National Bank of Canada, The Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Bank of Montreal. In addition, the Company may hold up to 10% of the total assets of the Portfolio in investments in global financial companies for the purpose of enhanced diversification and return potential.
The investment objectives for the Class A Shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per Class A Share and to provide the opportunity for growth in the net asset value per Class A Share.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.12500 per Preferred Share, and to return the original issue price plus accrued dividends (if any) to holders of Preferred Shares on November 29, 2022.
The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank.
…

Brompton Split Banc Corp. Compound Annual NAV Returns to January 31, 2019.	1-Yr	3-Yr	5-Yr	10-Yr	S.I.
Class A Shares (TSX: SBC)	(23.1%)	13.0%	10.1%	25.1%	9.3%
S&P/TSX Capped Financials Index	(2.2%)	11.9%	9.4%	13.9%	7.9%
S&P/TSX Composite Index	0.5%	9.8%	5.6%	9.1%	5.9%
Preferred Shares (TSX: SBC.PR.A)	5.1%	4.8%	4.7%	5.0%	5.1%
S&P/TSX Preferred Share Index	(9.8%)	7.5%	0.1%	3.8%	1.7%
Brompton Split Banc Corp. – Unit	(12.8%)	9.4%	7.8%	13.5%	7.3%

SBC.PR.A was added to the HIMIPref™ universe in May 2008 as a SplitShare, paying 5.25% and maturing 2012-11-30. A five year extension to 2017-12-1 was approved in March 2012 at a dividend rate of 4.50%. A further extension to 2022-11-29 with a rate hike to 5.00% was announced in September 2017.

The NAV as of February 14 is now 12.54 for the Capital Units and 10.06 for the Preferreds for a total Unit Value of 22.60; the new units are being offered at a total of 23.55, so the premium on this offering is about 4.2%. Ah, what a great business it is when it works!

Those inclined to be particularly impressed by the performance table in the press release are reminded that SBC has been constrained to invest only in banks for most of its existence (the mandate was recently relaxed a little ), so the appropriate benchmark would be an equally weighted index of the Big Six banks, not the broader S&P/TSX Capped Financials Index. The BMO Equal Weight Banks Index ETF has an MER of 0.62% (on $1.4-billion, wow!) compared to 0.97% for SBC / SBC.PR.A in 2017.

Update, 2019-3-10: They raised about $20.5-million:

Brompton Split Banc Corp. (the “Company”) is pleased to announce that it has completed the previously announced treasury offering of class A shares and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively) for aggregate gross proceeds of approximately $20.5 million. The Class A Shares and Preferred Shares will continue to trade on the Toronto Stock Exchange under the existing symbols SBC (Class A Shares) and SBC.PR.A (Preferred Shares).

Enbridge Inc. has announced:

that none of Enbridge’s outstanding Cumulative Redeemable Preference Shares, Series 7 (Series 7 Shares) will be converted into Cumulative Redeemable Preference Shares, Series 8 of Enbridge (Series 8 Shares) on March 1, 2019.

After taking into account all conversion notices received from holders of its outstanding Series 7 Shares by the February 14, 2019 deadline for the conversion of the Series 7 Shares into Series 8 Shares, less than the 1,000,000 Series 7 Shares required to give effect to conversions into Series 8 Shares were tendered for conversion.

ENB.PR.J is a FixedReset, 4.40%+257, that commenced trading 2013-12-12 after being announced 2013-12-3. Notice of the reset to 4.449% was published 2019-1-30. I recommended against conversion. The issue is tracked by HIMIPref™ but relegated to the Scraps – FixedResets (Discount) subindex on credit concerns.

Enbridge Inc. has announced:

that none of Enbridge’s outstanding Cumulative Redeemable Preference Shares, Series P (Series P Shares) will be converted into Cumulative Redeemable Preference Shares, Series Q of Enbridge (Series Q Shares) on March 1, 2019.

After taking into account all conversion notices received from holders of its outstanding Series P Shares by the February 14, 2019 deadline for the conversion of the Series P Shares into Series Q Shares, less than the 1,000,000 Series P Shares required to give effect to conversions into Series Q Shares were tendered for conversion.

ENB.PR.P is a FixedReset, 4.00%+250, that commenced trading 2012-9-14 after being announced 2012-9-4. Notice of the reset to 4.379% was published 2019-1-30. I recommended against conversion. It is tracked by HIMIPref™ but is relegated to the Scraps FixedReset Discount index on credit concerns.

Pembina Pipeline Corporation has announced:

that none of Pembina’s Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 3 (“Series 3 Shares”) (TSX: PPL.PR.C) will be converted into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 4 of Pembina (“Series 4 Shares”) on March 1, 2019.

After taking into account all conversion notices received from holders of its outstanding Series 3 Shares by the February 14, 2019 deadline for the conversion of the Series 3 Shares into Series 4 Shares, less than the 1,000,000 Series 3 Shares required to give effect to conversions into Series 4 Shares were tendered for conversion.

PPL.PR.C was issued as a FixedReset, 4.70%+260, that commenced trading 2013-10-2 after being announced 2013-9-23. Notice of the reset to 4.478% was given 2019-1-30. I recommended against conversion. The issue is tracked by HIMIPref™ but is relegated to the Scraps – FixedReset (Discount) subindex on credit concerns.

Scotia Managed Companies has announced:

Preferred Shares for cash redemption on February 28, 2019 (in accordance with the Company’s Articles of Incorporation, as amended) representing approximately 6.646% of the outstanding Preferred Shares as a result of the special annual retraction of 69,816 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on February 26, 2019 will have approximately 6.646% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $25.67 per share.

In addition, holders of a further 36,100 Capital Shares and 18,050 Preferred Shares have deposited such shares concurrently for retraction on February 28, 2019. As a result, a total of 105,916 Capital Shares and 52,958 Preferred Shares, or approximately 9.748% of both classes of shares currently outstanding, will be redeemed.

Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including February 28, 2019.
Payment of the amount due to holders of Preferred Shares will be made by the Company on February 28, 2019. From and after February 28, 2019 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.

Allbanc Split Corp. II is a mutual fund corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. Capital Shares and Preferred Shares of Allbanc Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols ALB and ALB.PR.C respectively.

ALB.PR.C is a SplitShare, ~4.75%, maturing 2021-2-28, that commenced trading 2016-2-29. It is tracked by HIMIPref™ but relegated to the Scraps – SplitShare subindex on volume concerns.

Standard & Poor’s has announced:

• •S&P Global Ratings lowered its long-term issuer credit rating on Calgary, Alta.-based Husky Energy Inc. to ‘BBB’ from ‘BBB+’, based on the forecast deterioration of its cash flow metrics.
• •We have removed the ratings from CreditWatch Negative, where they were placed Oct. 1, 2018.
• •We are also lowering our senior unsecured debt rating to ‘BBB’ from ‘BBB+’.
• •We also lowered our global scale preferred stock rating to ‘BB+’ from ‘BBB-‘, and lowered our Canada scale preferred stock rating to ‘P-3(High)’ from ‘P-2(Low)’.
• •The stable outlook reflects our expectation that Husky should be able to maintain its cash flow and leverage metrics within the 35%-40% range throughout our 24-month outlook period. Cash flow metrics at these levels would adequately support the ‘BBB’ rating.

…
Our weakened Brent and West Texas Intermediate (WTI) price assumptions, compounded by our decreased Canadian heavy oil and natural gas prices, result in the company’s three-year weighted-average funds from operations (FFO)-to-debt ratio falling into the 35%-40% range. Cash flow metrics in this range, and our expectation of ongoing dividend payments, result in a deteriorated financial risk profile. Despite this deterioration, we believe the company’s overall credit profile, characterized by the scale and breadth of Husky’s upstream operations, and the integration benefits of its midstream assets, and downstream segment, continue to support an investment-grade rating.

Affected issues are HSE.PR.A, HSE.PR.B, HSE.PR.C, HSE.PR.E AND HSE.PR.G.

It will be recalled that I reported the Credit Watch Negative in October (which was concerned with the now-aborted MEG acquisition) and found the experience so enjoyable I reported it again in November.

DBRS confirmed its Pfd-2(low) rating in November and took no rating action when the MEG acquisition was aborted.