September 21, 2007

More Teachers’ / BCE news! I don’t think anybody will be surprised to learn that:

The arrangement was approved this morning at a Special Meeting of shareholders by more than 97% of the votes cast by holders of common and preferred shares, voting as a single class, greatly exceeding the required 66 2/3% approval. Of the total outstanding common and preferred shares, 62.5% were voted at the meeting either in person or by proxy.

In a sign that things are starting to return to normal, junk bond indices hit a two-month high amidst signs that deals are starting to move off the dealers’ balance sheets. I should stress here that by “normal” I do not mean “good”. What I mean is that we are returning to an environment in which investors are willing to take a look at possible trades and price them according to normal risk/return forecasts, rather than simply sitting on cash, petrified by fear.

In what must be taken as a good sign of this, it looks like the buy-out of Harman International Industries is dead:

Kohlberg Kravis Roberts & Co. and Goldman Sachs Group Inc. abandoned their $8 billion takeover of Harman International Industries Inc., maker of Infinity and JBL audio equipment, citing a decline in the firm’s performance. 

Issuance is, in fact, picking up a bit:

R.H. Donnelley, the biggest independent publisher of Yellow Pages telephone directories, led the biggest week for junk bond sales since July after the Federal Reserve’s rate cut spurred demand for high-yield, high-risk debt.

Speculative-grade borrowers issued $1.83 billion of fixed- income securities, according to data compiled by Bloomberg. Corporate bond sales totaled $28.2 billion, compared with $26.6 billion last week and the average this year of $23.4 billion. Cary, North Carolina-based R.H. Donnelley sold $1 billion of bonds to repay debt, increasing the offering from $650 million.

Junk-rated companies sold bonds for the first time in three weeks as the Fed’s half-percentage-point reduction in its benchmark rate on Sept. 18 helped lower the yield premium that companies pay to borrow over similar maturity Treasuries by the most in four years, Merrill Lynch & Co. index data show.

While in signs that nobody really expects a return to frenetic trading levels, RBC fired 40 US bond salesmen and HSBC is closing its sub-prime business, which will throw 750 out of work.

US equities rose, capping a fine week (send a thank-you not to Bernanke) as did those in Canada.

Treasuries managed a dead-cat bounce, as did Canadas

The pref market was unable to sustain yesterday’s volume increases, but put in a good solid performance. The perpetuals look a little uncertain – whether that’s worries over inflation or simply noise, I cannot begin to guess.

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.78% 4.73% 1,199,037 15.79 1 +0.0816% 1,044.5
Fixed-Floater 4.84% 4.76% 99,084 15.81 8 +0.1900% 1,033.2
Floater 4.48% 1.82% 84,779 10.76 3 +0.2204% 1,048.1
Op. Retract 4.83% 3.95% 75,683 3.95 15 +0.0518% 1,029.5
Split-Share 5.14% 4.85% 97,022 3.85 13 +0.1336% 1,044.7
Interest Bearing 6.33% 6.81% 65,781 4.24 3 -0.5426% 1,030.6
Perpetual-Premium 5.49% 5.11% 90,557 6.04 24 -0.0623% 1,030.0
Perpetual-Discount 5.05% 5.09% 244,031 15.34 38 -0.0404% 985.8
Major Price Changes
Issue Index Change Notes
BSD.PR.A InterestBearing -1.9868% Asset coverage of just under 1.8:1 as of September 14, according to the company. Now with a pre-tax bid-YTW of 8.10% (mostly as interest) based on a bid of 8.88 and a hardMaturity 2015-3-31 at 10.00.
BNA.PR.C SplitShare +2.3245% Asset coverage of just over 3.8:1 according to the company. Today’s performance almost wipes out yesterday’s losses. Now with a pre-tax bid-YTW of 5.86% based on a bid of 22.01 and a hardMaturity 2019-1-10 at 25.00.
Volume Highlights
Issue Index Volume Notes
BPO.PR.I Scraps (would be OpRet, but there are credit concerns) 299,105 Scotia crossed 297,900 at 25.50. Now with a pre-tax bid-YTW of 4.59% based on a bid of 25.46 and a softMaturity 2010-12-31 at 25.00.
BCE.PR.G FixFloat 110,800 RBC bought 68,200 from MacDougall at 24.65, then crossed 38,200 at the same price.
SLF.PR.C PerpetualDiscount 51,900 Nesbitt crossed 50,000 at 22.85. Now with a pre-tax bid-YTW of 4.89% based on a bid of 22.80 and a limitMaturity.
BAM.PR.H OpRet 51,000 Nesbitt crossed 50,000 at 26.25. Now with a pre-tax bid-YTW of 3.88% based on a bid of 26.20 and a call 2008-10-30 at 25.75.
PWF.PR.L PerpetualDiscount 28,694 Nesbitt crossed 25,000 at 24.50. Now with a pre-tax bid-YTW of 5.28% based on a bid of 24.47 and a limitMaturity.
GWO.PR.E OpRet 27,703 Now with a pre-tax bid-YTW of 3.62% based on a bid of 25.88 and a call 2009-4-30 at 25.50.

There were nine other $25-equivalent index-included issues trading over 10,000 shares today.

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