March 9, 2010

The Brookfield Renewable Power FixedReset, 5.25%+262, announced February 18, commences trading tomorrow with the symbol BRF.PR.A.

Brookfield’s dalliance with General Growth Properties got a boost:

General Growth Properties Inc. said its biggest debt and equity holders offered to jointly invest $3.93 billion in the company, bolstering a plan with Brookfield Asset Management Inc. to bring the mall owner out of bankruptcy.

The investments from Bruce Berkowitz’s Fairholme Capital Management LLC and William Ackman’s Pershing Square Capital Management LP would allow unsecured creditors to be paid in full with cash, General Growth said in a statement last night. Their funds are in addition to $2.63 billion pledged by Brookfield.

Royal Bank may make US acquisitions, but only if they’re big enough to generate fawning press commentary:

Royal Bank of Canada is interested in U.S. banks with $10 billion in assets or more to add to its consumer lending business, said James Westlake, an executive who oversees the international unit.

“Most of the deals we are seeing are 12 branches or 25 branches and they don’t really move the needle,” Westlake said. “But I wouldn’t detect anything that suggests we aren’t welcome.”

The recent Federal Budget had a paragraph I missed (on page 104):

One of the lessons of the global financial crisis is that financial institutions need to have access to a variety of funding sources. The Government will help federally regulated financial institutions diversify their funding sources by introducing legislation setting out a framework for covered bonds. Covered bonds are debt instruments that are secured by high quality assets, such as residential mortgages. The legislation will increase legal certainty for investors in these debt instruments, thereby making it easier for Canadian financial institutions to access this low-cost source of funding.

RBC recently issued CAD 850-million five-years at 3.188%. As stated by RBC’s Hiren Lalloo in the ECBC 2009 Handbook:

There is no dedicated legal framework for the issuance of Covered Bonds in Canada. As such, Canadian Covered Bonds are based on contractual agreements structured within the general legislation.

The lack of specific legislation has been referred to as a risk factor for buyers of Canadian originated covered bonds, most recently in the DBRS assessment of the new RBC issue:

Despite the above strengths, the Covered Bonds have the following challenges. … And lastly, there is no specific covered bond legislative framework in Canada. This is mitigated by the contractual obligations of the transaction parties, supported by the opinions provided by legal counsel to RBC and a generally creditor-friendly legal environment in Canada.

Good volume on the Canadian preferred share market today, with PerpetualDiscounts off again, down 9bp this time, while FixedResets gained 3bp, bringing them closer to the 3.50% yield barrier. The market was again well-behaved, with only three issues gaining or losing more than 1% … two of them were Floating Rate gainers!

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 2.66 % 2.72 % 41,466 20.69 1 1.9212 % 2,076.2
FixedFloater 5.08 % 3.19 % 42,017 19.95 1 3.3816 % 3,111.2
Floater 1.91 % 1.66 % 44,951 23.46 4 0.2917 % 2,408.4
OpRet 4.88 % 2.39 % 107,904 0.22 13 0.0089 % 2,309.5
SplitShare 6.38 % 6.25 % 123,898 3.71 2 0.1984 % 2,139.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0089 % 2,111.8
Perpetual-Premium 5.90 % 5.90 % 130,403 6.88 7 -0.1873 % 1,886.3
Perpetual-Discount 5.89 % 5.93 % 176,990 13.97 71 -0.0899 % 1,792.1
FixedReset 5.40 % 3.53 % 320,204 3.71 42 0.0313 % 2,194.9
Performance Highlights
Issue Index Change Notes
IAG.PR.A Perpetual-Discount -1.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-09
Maturity Price : 19.16
Evaluated at bid price : 19.16
Bid-YTW : 6.02 %
BAM.PR.E Ratchet 1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-09
Maturity Price : 21.72
Evaluated at bid price : 21.22
Bid-YTW : 2.72 %
BAM.PR.G FixedFloater 3.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-09
Maturity Price : 25.00
Evaluated at bid price : 21.40
Bid-YTW : 3.19 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.K FixedReset 133,900 Nesbitt bought 18,300 from National at 28.00, then crossed blocks of 75,000 and 17,000, then bought another 17,100 from National, all at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 28.01
Bid-YTW : 3.53 %
TD.PR.Q Perpetual-Discount 117,200 TD crossed 100,000 at 24.63; RBC crossed 13,600 at 24.52.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-09
Maturity Price : 24.29
Evaluated at bid price : 24.51
Bid-YTW : 5.78 %
TD.PR.E FixedReset 110,010 TD crossed 45,000 at 28.00; then Nesbitt bought blocks of 17,500 and 17,800 from National at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 28.00
Bid-YTW : 3.41 %
TD.PR.N OpRet 107,900 Desjardins crossed 10,000 at 26.05, then TD crossed blocks of 45,000 and 50,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-05-30
Maturity Price : 25.75
Evaluated at bid price : 26.07
Bid-YTW : 1.01 %
RY.PR.P FixedReset 98,751 TD crossed blocks of 39,600 and 45,000 at 27.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 27.72
Bid-YTW : 3.46 %
CU.PR.B Perpetual-Premium 59,350 RBC crossed 56,800 at 25.10.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-09
Maturity Price : 24.70
Evaluated at bid price : 25.03
Bid-YTW : 6.03 %
There were 53 other index-included issues trading in excess of 10,000 shares.

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