PrefBlog

Brookfield Investment Management Inc. has announced:

Global Resource Champions Split Corp. (the “Company”) (TSX: GRP.PR.A) announced today that it has completed its initial public offering of Class A Preferred Shares, Series 1 (the “Series 1 Shares”). The offering raised gross proceeds of $45.0 million, and was offered by a syndicate of agents led by Scotiabank, National Bank Financial Inc., CIBC, RBC Capital Markets, TD Securities Inc. and includes BMO Capital Markets, Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc. and Laurentian Bank Securities Inc. (the “Agents”). A total of 1,800,000 Series 1 Shares were issued at a price of $25.00 per Series 1 Share. The Company also announced today that it has completed the issuance of 1,800,000 capital shares of the Company to Partners Value Investments Inc.

The Series 1 Shares have been rated Pfd-2 (low) by DBRS Limited. The Series 1 Shares will commence trading today on the Toronto Stock Exchange under the symbol “GRP.PR.A”.

The Company’s investment objectives with respect to the Series 1 Shares are (i) to provide holders of Series 1 Shares with fixed cumulative preferential quarterly cash distributions in the amount of $0.390625 per Series 1 Share to yield 6.25% per annum on the original issue price of the Series 1 Shares and (ii) on or about May 25, 2023, to pay the holders of Series 1 Shares the original issue price of $25.00 of those shares, through the redemption of each Series 1 Share held on May 25, 2023. Such quarterly distributions are expected to be paid by the Company to holders of record on the last Business Day of March, June, September and December in each year with payments being made on or before the 15th day of the following month. The initial distribution will be prorated from today’s date until September 30, 2016 and is expected to be payable on or before October 15, 2016 to holders of record on September 30, 2016. The final prospectus is available on SEDAR at www.sedar.com.

Initially, the Portfolio will consist of 15 large capitalization resource companies and will be approximately equally weighted on a U.S. dollar equivalent basis.

The prospectus may be found on SEDAR at “Global Resource Champions Split Corp. Apr 27 2016 23:01:16 ET Final long form prospectus – English PDF 883 K”. The regulators will not permit me to link directly to this public document since I and my readers are all disgusting investor scum, most of whom don’t even have government jobs. Brookfield hasn’t put it up on their site because they’re lazy.

Marketting for this issue commenced on April 5, 2016.

Interesting snippets from the Top Secret Prospectus include the following:

The Series 1 Shares and the Capital Shares are being offered separately but will be issued only on the basis that an equal number of Series 1 Shares and Capital Shares will be outstanding. Partners Value Investments Inc. (formerly Partners Value Fund Inc.) (“Partners Value Investments”) will acquire all of the Capital Shares to be issued in connection with the Offering of the Series 1 Shares under this prospectus.
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Investment Objectives:
The Company’s investment objectives with respect to the Series 1 Shares are:
(a) to provide holders of Series 1 Shares with fixed cumulative preferential quarterly cash distributions in the amount of $0.390625 per Series 1 Share to yield 6.25% per annum on the original issue price of the Series 1 Shares; and
(b) on or about May 25, 2023 (the “Final Series 1 Redemption Date”), to pay the holders of Series 1 Shares the original issue price of $25.00 per share, through the redemption of each Series 1 Share held on the Final Series 1 Redemption Date.
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Holders of Series 1 Shares will be entitled to receive quarterly fixed cumulative preferential distributions equal to $0.390625 per Series 1 Share to yield 6.25% per annum on the original issue price of the Series 1 Shares. Such quarterly distributions are expected to be paid by the Company to holders of record on the last Business Day of March, June, September and December in each year with payments being made on or before the 15th day of the following month. The initial distribution will be prorated from the Closing Date until September 30, 2016 and is expected to be payable on or about October 15, 2016 to holders of record on September 30, 2016. See “Details of the Offering — Series 1 Shares — Dividends”.

The dividends on the Preferred Shares are expected to be funded from the dividends received on the Portfolio Securities. If, for any reason, the dividends received by the Company on the Portfolio Securities are insufficient to fully fund the Preferred Share dividends, the Company may sell Portfolio Securities, borrow under the Revolving Credit Facility or Margin Facility, as applicable, or write covered call options on such shares to the extent necessary to fund any shortfall. Any portion of the dividends on the Preferred Shares which is derived from the proceeds of sale of the Portfolio Securities will consist of Ordinary Dividends or a combination of a Capital Gains Dividend and Ordinary Dividends. Any option premium received in a year (other than in respect of options outstanding at year end or options that are subject to the DFA Rules (as defined below)) will be distributed as a Capital Gains Dividend in the year on the Preferred Shares. There can be no assurance that the Company will be able to pay dividends to the holders of Preferred Shares. See “Dividend Policy”.
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If the Company is not permitted to issue Debentures at any time pursuant to the terms of the Indenture and a purchaser cannot be found pursuant to the terms of the Remarketing Agreement or the retracting holder has withheld its consent, holders who surrender Series 1 Shares for retraction will receive cash in an amount equal to the Series 1 Share Retraction Price. See “Details of the Offering – Series 1 Shares – Retraction.” The Series 1 Share Retraction Price will be equal to the least of (i) 95% of the Net Asset Value per Unit on the Retraction Valuation Date, (ii) 95% of the VWAP of the Series 1 Shares for the three Business Days ending on the Deposit Date and (iii) $23.75.
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Series 1 Shares may be redeemed by the Company at any time at a price (the “Series 1 Share Redemption Price”) equal to (i) $25.00 per share plus accrued and unpaid dividends if the date specified for redemption is prior to the Final Series 1 Redemption Date; and (ii) the lesser of (x) $25.00 plus accrued and unpaid dividends and (y) the Net Asset Value per Unit on the Final Series 1 Redemption Date if the date specified for redemption is the Final Series 1 Redemption Date. See “Details of the Offering — Series 1 Shares — Redemption”.
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The Series 1 Shares have been provisionally rated Pfd-2 (low) by DBRS Limited. See “Details of the Offering — Series 1 Shares — Ratings”.
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No distributions will be paid on the Capital Shares if (i) the distributions payable on the Series 1 Shares or the payment of interest on any Debentures issued by the Company are in arrears, or (ii) after the payment of the distribution by the Company, the NAV per Unit would be less than $36.00. See “Calculation of Net Asset Value”.
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In the case of a holder that is an individual, Ordinary Dividends will be subject to the gross-up and dividend tax credit rules under the Tax Act normally applicable to taxable dividends received from a taxable Canadian corporation. Such Ordinary Dividends will be eligible for the enhanced gross-up and dividend tax credit if the Company designates the Ordinary Dividends as “eligible dividends”. There may be limitations on the Company’s ability to designate Ordinary Dividends as eligible dividends.

GRP.PR.A will be tracked by HIMIPref™ and has been assigned to the SplitShare subindex.

The issue traded 49,135 shares today in a range of 24.76-94 before closing at 24.76-80, 3×5. Vital statistics are:

Update, 2016-5-9: DBRS finalizes Pfd-2(low) rating:

The initial downside protection available to the holders of the Preferred Shares is expected to be greater than 54% (after offering expenses). Downside protection available to the Pre¬ferred Shares consists of the NAV of the Capital Shares. Upon maturity, the holders of the Preferred Shares will be en¬titled to the value of the Portfolio Securities, up to the face value of the Preferred Shares, in priority to the holders of the Capital Shares (but behind any secured creditors and other senior indebtedness). The holders of the Capital Shares will be entitled to the distribu¬tion in the excess of dividend income on the Portfolio Securities beyond what is required to pay the holders of the Preferred Shares, as well as all capital appreciation.

The Pfd-2 (low) rating of the Preferred Shares is primarily based on the expected level of downside protection and dividend coverage available to holders of the Preferred Shares, as well as the credit quality and consistency of dividend distributions of the Portfolio holdings.

CU Inc. has announced:

that it has notified the registered shareholder of its Cumulative Redeemable Preferred Shares Series 4 (“Series 4 Preferred Shares”) of a conversion privilege and applicable dividend rates. As a result, subject to certain conditions, the holders of Series 4 Preferred Shares will have the right to choose one of the following options with regard to their shares:
1. To retain any or all of their Series 4 Preferred Shares and continue to receive a fixed rate quarterly dividend; or
2. To convert, on a one-for-one basis, any or all of their Series 4 Preferred Shares into Cumulative Redeemable Preferred Shares Series 5 (“Series 5 Preferred Shares”) of CU Inc. and receive a floating rate quarterly dividend.

Effective June 1, 2016, the annual dividend rate for the Series 4 Preferred Shares is set at 2.24% for the next five-year period and the dividend rate for the Series 5 Preferred Shares is set at an annual rate of 1.90% for the three-month period commencing June 1, 2016 to but excluding September 1, 2016. The dividend rate for the Series 5 Preferred Shares will be reset each quarter. Both rates were calculated according to the terms described in the short form prospectus of CU Inc. dated November 24, 2010.

Beneficial owners of Series 4 Preferred 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 3 p.m. (Calgary time) / 5 p.m. (Toronto time) on May 17, 2016. 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 intermediary with time to complete the necessary steps. The foregoing conversions are subject to the conditions that: (i) if CU Inc. determines that there would be less than 1,000,000 Series 4 Preferred Shares outstanding on June 1, 2016, then all remaining Series 4 Preferred Shares will automatically be converted into Series 5 Preferred Shares on June 1, 2016, and (ii) alternatively, if CU Inc. determines that there would be less than 1,000,000 Series 5 Preferred Shares outstanding on June 1, 2016 after giving effect to conversion notices received, no Series 4 Preferred Shares will be converted into Series 5 Preferred Shares. If either of these scenarios occurs, CU Inc. will issue a news release to that effect on or before May 24, 2016.

Holders of the Series 4 Preferred Shares and the Series 5 Preferred Shares will have the opportunity to convert their shares again on June 1, 2021, 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 4 Preferred Shares and the Series 5 Preferred Shares, please see CU Inc.’s short form prospectus dated November 24, 2010, which can be found under CU Inc.’s profile on SEDAR at www.sedar.com.

CIU.PR.C is a FixedReset, 3.80%+136, that commenced trading 2010-12-2 after being announced 2010-11-16.

The new rate therefore represents a 41% cut in dividends. Ouch!

As noted, the deadline to notify the company is 5 p.m. (Toronto time) on May 17, 2016.; brokers will have internal deadlines a day or two in advance.

I will post a recommendation regarding whether or not to convert closer to the deadline.

BCE Inc. has announced:

that 5,884,470 of its 10,841,056 fixed-rate Cumulative Redeemable First Preferred Shares, Series AG (“Series AG Preferred Shares”) have been tendered for conversion on May 1, 2016, on a one-for-one basis, into floating-rate Cumulative Redeemable First Preferred Shares, Series AH (“Series AH Preferred Shares”). In addition, 28,765 of its 3,158,944 Series AH Preferred Shares have been tendered for conversion on May 1, 2016, on a one-for-one basis, into Series AG Preferred Shares. Consequently, on May 1, 2016, BCE will have 4,985,351 Series AG Preferred Shares and 9,014,649 Series AH Preferred Shares issued and outstanding. The Series AG Preferred Shares and the Series AH Preferred Shares will continue to be listed on the Toronto Stock Exchange under the symbols BCE.PR.G and BCE.PR.H, respectively.

The Series AG Preferred Shares will pay on a quarterly basis, for the five-year period beginning on May 1, 2016, as and when declared by the Board of Directors of BCE, a fixed cash dividend based on an annual fixed dividend rate of 2.80%.

The Series AH Preferred Shares will continue to pay a monthly floating adjustable cash dividend for the five-year period beginning on May 1, 2016, as and when declared by the Board of Directors of BCE. The monthly floating adjustable dividend for any particular month will continue to be calculated based on the prime rate for such month and using the Designated Percentage for such month representing the sum of an adjustment factor (based on the market price of the Series AH Preferred Shares in the preceding month) and the Designated Percentage for the preceding month.

Readers will remember that BCE.PR.G reset to 2.80%, a cut of about 38% in the dividend. BCE.PR.H, the RatchetRate preferred that currently pays 100% of Prime (which can be reduced as low as 50%, but this is dependent upon the issue trading above par for an extended period, which seems unlikely in the current environment), has suffered much less over the past five years, as Prime was 3.00% on May 1, 2011 and is now 2.70%.

As for the future:

Today’s bid prices of 13.52 for BCE.PR.G and 14.20 for BCE.PR.H imply that Prime must average 3.48% over the next five years for the two issues to realize equal total returns, which is not unreasonable and is in line with other pairs.

BCE Inc. has announced:

• Transaction enterprise value of approximately $3.9 billion: BCE to acquire all issued and outstanding common shares of MTS for approximately $3.1 billion and assume outstanding net debt of approximately $0.8 billion
• $40 per common share value represents a significant premium for MTS shareholders; transaction unanimously recommended by the MTS Board of Directors
• Bell MTS team will serve customers across Manitoba, Winnipeg head office will become Bell’s Western Canada headquarters
• $1-billion, 5-year capital investment commitment to expand broadband wireless and wireline networks in urban and rural locations throughout Manitoba
• Free cash flow accretion supports Bell’s broadband leadership strategy, dividend growth objective

MONTRÉAL and WINNIPEG, May 2, 2016 /CNW Telbec/ – BCE Inc. (Bell) (TSX: BCE) (NYSE: BCE) today announced that it will acquire all of the issued and outstanding common shares of Manitoba Telecom Services Inc. (MTS) (TSX: MBT) in a transaction valued at approximately $3.9 billion.
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Bell plans to invest $1 billion in capital over 5 years after the transaction closes to expand its broadband networks and services throughout Manitoba, including:

• Gigabit Fibe Internet availability, delivering Internet speeds on average up to 20 times faster than those currently offered to MTS customers, within 12 months after the transaction closes.
• the rollout of Fibe TV, Bell’s innovative broadband television service.
• accelerated expansion of the company’s award-winning LTE wireless network throughout the province, with average data speeds twice as fast as those now available to MTS customers.
• integration of MTS’s Winnipeg data centre with Bell’s existing national network of 27 data and cloud computing centres, Canada’s largest, and the country’s most extensive broadband fibre network footprint.

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BCE will fund the cash component of the transaction from available sources of liquidity and will issue approximately 28 million common shares for the equity portion of the transaction, which offers MTS shareholders access to BCE’s dividend growth potential. The BCE dividend has been increased 12 times, representing an aggregate increase of 87%, since Q4 2008 and currently delivers an attractive 4.6% yield. When the transaction is completed, MTS shareholders will own approximately 3% of pro forma BCE common equity.

They later announced:

that it will divest one-third of the postpaid wireless subscribers of Manitoba Telecom Services Inc. (MTS) (TSX: MBT) to TELUS Corp. (TSX: T, NYSE: TU) following the completion of Bell’s acquisition of MTS announced earlier today. As part of the transaction, Bell will also assign one-third of MTS dealer locations in Manitoba to TELUS.

“This transaction with TELUS enhances wireless competition to the benefit of Manitobans while reducing the cost of our acquisition of MTS,” said George Cope, President and CEO of BCE and Bell Canada.

The Bell-TELUS transaction is subject to regulatory approvals and customary closing conditions. The Bell-MTS transaction is not conditional on completion of the Bell-TELUS transaction.

DBRS currently has BCE’s preferred shares at Pfd-3(high) and says that it:

has today placed all ratings of Bell Canada (the Company) and its parent company BCE Inc. (BCE) Under Review with Negative Implications, following the Company’s announcement that it has entered into a definitive arrangement agreement to acquire all of the issued and outstanding shares of Manitoba Telecom Services Inc. (MTS; rated BBB with a Stable trend by DBRS).
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DBRS forecasts that pro forma debt should peak at $22.3 billion upon closing of the Transaction, compared to $20.4 billion at the end of Q1 2016. As such, gross debt-to-EBITDA is expected to increase moderately to between 2.4x and 2.5x, from 2.36x in LTM Q1 2016. While this Transaction, in and of itself, is not viewed as materially negative to the Company’s financial risk profile, DBRS believes that the Company’s prolonged period of elevated financial leverage, coupled with continually mounting risks within the communications industry, has gradually eroded flexibility in the current rating levels. DBRS notes that the Company has completed several largely debt-financed acquisitions since in recent years, including: CTVglobemedia Inc. in 2011, Maple Leafs Sports and Entertainment Ltd. in 2012, Astral Media Inc. in 2013 and the minority interest in Bell Aliant in 2014, as well as over $1 billion in spectrum acquisitions in 2014 and 2015. This contributed to Bell Canada remaining above its internal financial leverage target (net debt-to-EBITDA of 1.75x to 2.25x) and a range suitable for the A (low) rating category.

DBRS had chosen to see through elevated leverage associated with previous acquisitions, based on the combination of benefits to the Company’s business profile and expectations of deleveraging to levels appropriate for an A (low) category within a reasonable time frame. In its most recent confirmation and following the Bell Aliant transaction, DBRS stated that it expected the Company to reduce gross debt-to-EBITDA toward 2.0x by mid-2017, and that failure to do so could result in a negative rating action. DBRS estimates that this previously understood schedule for deleveraging could be delayed by 12 to 18 months as a result of the MTS acquisition.

DBRS is reluctant to extend the deleveraging time frame once again due to the protracted period of elevated financial leverage, combined with intensifying competition in the wireless market, and increased risks in the media business, including structural (cord shaving/cord cutting and over-the-top video streaming) and regulatory changes (pick and pay) affecting television broadcasting, coupled with weakness in advertising. Furthermore, DBRS estimates that the Company’s pro forma free cash flow (after dividends) to total debt will remain below 5% over the near to medium term, which could limit management’s ability to deleverage by an adequate degree.

Meanwhile S&P states:

that BCE Inc.’s announcement that it would acquire Manitoba Telecom Services Inc. (MTS) does not affect its rating or outlook on BCE (BBB+/Stable/–). We expect that the C$3.9 billion acquisition, which is about 45% equity funded, would preserve BCE’s debt leverage below our key 3.0x adjusted debt to EBITDA threshold for rating pressure.
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We estimate that the proposed transaction would be modestly leveraging under our base-case forecasts for BCE and MTS, holding BCE’s pro forma adjusted debt to EBITDA at about 2.8x in 2016 before improving slowly to about 2.7x in 2017. Moreover, we estimate that funds from operations to debt would remain below 30% until 2018, which is weak for the rating. That said, our adjusted leverage estimate is only 0.1x higher because of this transaction, which accounts for less than 5% of BCE’s enterprise value.

S&P Global Ratings believes that the acquisition has limited potential to improve BCE’s profitability and returns, despite MTS’ higher EBITDA margins, given the multiple paid, reflecting MTS’ unique wireline and wireless franchise in Manitoba, as well as the modest geographic or operational overlap with BCE’s assets.

S&P rates the BCE preferreds at P-2(low).

Affected issues are: BCE.PR.A, BCE.PR.B, BCE.PR.C, BCE.PR.D, BCE.PR.E, BCE.PR.F, BCE.PR.G, BCE.PR.H, BCE.PR.I, BCE.PR.J, BCE.PR.K, BCE.PR.M, BCE.PR.N, BCE.PR.O, BCE.PR.Q, BCE.PR.R, BCE.PR.S, BCE.PR.T, BCE.PR.Y and BCE.PR.Z.