S&P revised the outlook on RON from stable to negative:
- We are revising our outlook on RONA Inc. to negative from stable because weak earnings amid difficult market conditions have contributed to higher debt leverage.
- At the same time, we are affirming our ‘BBB-‘ long-term corporate credit rating on the company.
- Fully adjusted last 12 months debt to EBITDA has jumped to 3.8x, which we consider very high for the rating, although reported debt to EBITDA is low at 1.5x and liquidity is strong.
- The negative outlook stems from our view that weak market conditions will make it difficult for RONA to return leverage to below our key 3x threshold in the near term.
- We could lower the rating on RONA if the company’s profitability remains weak enough to keep leverage at about 3.5x through the critical second and third quarters of 2012.
The European Central Bank is taking on a lot of credit risk:
The European Central Bank spent a record amount on government bonds last week as it began buying Italian and Spanish securities to contain the debt crisis.
The Frankfurt-based ECB said today it settled purchases worth 22 billion euros ($31.7 billion) in the week through Aug. 12, more than the 15 billion-euro median estimate in a Bloomberg News survey of 19 economists and strategists. That also surpasses the 16.5 billion euros the ECB spent during the first week of its initial foray into Greek markets in May last year.
Giulio Tremonti has the best line on the crisis so far:
After unveiling tougher austerity plans in return for ECB help, Italian Economy Minister Giulio Tremonti said a common euro zone bond would stop markets forcing high-debt economies in the bloc to the brink. “We would not have arrived where we are if we had had the euro bond,” he said at the weekend.
Think about it. OK, so there wouldn’t be a crisis now, so you wouldn’t have to commence austerity now. Great! Then what happens?
The explanations for the SocGen share price collapse are starting to get silly:
But did a British malentendu over another French summer staple — a fictional series of articles in Le Monde — contribute to a mysterious sell-off in French bank stocks last week?
…
The series, “End of the Line for the Euro,” looked at how a collapse of the single currency might play out, against the backdrop of French presidential elections next year. While the 12-part story was clearly labeled as fiction, it named real banks, like Société Générale, whose shares plunged 15 percent last Wednesday, prompting the bank to deny speculation that it was in financial trouble.As market participants and journalists searched for possible reasons, the trail seemed to lead to London. There, The Mail on Sunday, a tabloid newspaper, had published an article in which it said Société Générale was “on the brink of disaster.” Société Générale and an Italian bank, UniCredit, were in a “perilous” state, the paper added, citing “a senior government source.”
The Sino-Forest saga will continue for a few more chapters:
Sino-Forest Corp. (TRE), the tree- plantation operator accused by short-seller Carson Block of overstating its timberland holdings, said an independent investigation into the allegations will take longer than previously expected.
The independent committee set up by the company to conduct the probe presented an interim report to the board on Aug. 11 and expects to complete its review by the year-end, Hong Kong- and Mississauga, Ontario-based Sino-Forest said yesterday in a statement. Sino-Forest, which has denied the allegations, hired PricewaterhouseCoopers LLP to assist the review and said June 14 the process would take two to three months.
It was a mixed day in the Canadian preferred share market, with PerpetualDiscounts down 5bp, FixedResets gaining 10bp and DeemedRetractibles winning 40bp. There was plenty of volatility, but not much volume.
| 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 | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3980 % | 2,184.6 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3980 % | 3,285.7 |
| Floater | 2.78 % | 2.55 % | 30,833 | 20.88 | 4 | 0.3980 % | 2,358.8 |
| OpRet | 4.88 % | 3.18 % | 57,960 | 0.12 | 9 | 0.1378 % | 2,443.5 |
| SplitShare | 5.31 % | 1.24 % | 58,942 | 0.54 | 4 | 0.8814 % | 2,497.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1378 % | 2,234.3 |
| Perpetual-Premium | 5.69 % | 5.15 % | 135,658 | 2.36 | 14 | 0.2325 % | 2,098.1 |
| Perpetual-Discount | 5.43 % | 5.51 % | 113,751 | 14.57 | 16 | -0.0504 % | 2,198.9 |
| FixedReset | 5.18 % | 3.22 % | 217,930 | 2.71 | 59 | 0.0992 % | 2,307.4 |
| Deemed-Retractible | 5.08 % | 4.71 % | 265,867 | 7.95 | 46 | 0.3997 % | 2,170.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.C | FixedReset | -13.64 % | Not real. The issue traded 400 shares today, all at 25.00, and the issue closed at 20.51-25.00, 30×6. Remember as well that these are actually “last” quotes, not “closing” quotes and there’s a difference … maybe. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-15 Maturity Price : 20.51 Evaluated at bid price : 20.51 Bid-YTW : 3.66 % |
| GWO.PR.M | Deemed-Retractible | -1.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 5.67 % |
| BAM.PR.N | Perpetual-Discount | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-15 Maturity Price : 21.48 Evaluated at bid price : 21.78 Bid-YTW : 5.52 % |
| BNS.PR.L | Deemed-Retractible | 1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.57 % |
| BNA.PR.E | SplitShare | 1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 23.76 Bid-YTW : 6.01 % |
| HSB.PR.E | FixedReset | 1.03 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 27.50 Bid-YTW : 3.26 % |
| TD.PR.P | Deemed-Retractible | 1.13 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-11-01 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 4.54 % |
| SLF.PR.B | Deemed-Retractible | 1.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.21 Bid-YTW : 5.84 % |
| GWO.PR.G | Deemed-Retractible | 1.19 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.66 Bid-YTW : 5.49 % |
| BAM.PR.X | FixedReset | 1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-15 Maturity Price : 22.69 Evaluated at bid price : 23.91 Bid-YTW : 3.71 % |
| PWF.PR.A | Floater | 1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-15 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 2.55 % |
| ELF.PR.G | Perpetual-Discount | 1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-15 Maturity Price : 20.52 Evaluated at bid price : 20.52 Bid-YTW : 5.86 % |
| IAG.PR.E | Deemed-Retractible | 1.55 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 5.55 % |
| BNA.PR.D | SplitShare | 1.73 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2011-09-14 Maturity Price : 26.00 Evaluated at bid price : 26.49 Bid-YTW : -0.10 % |
| BAM.PR.T | FixedReset | 2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-15 Maturity Price : 22.95 Evaluated at bid price : 24.50 Bid-YTW : 3.95 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| SLF.PR.H | FixedReset | 89,200 | Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 3.90 % |
| RY.PR.G | Deemed-Retractible | 39,487 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.60 Bid-YTW : 4.71 % |
| TD.PR.C | FixedReset | 32,278 | Desjardins crossed 25,000 at 26.57. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.59 Bid-YTW : 3.01 % |
| SLF.PR.G | FixedReset | 26,849 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.47 % |
| RY.PR.N | FixedReset | 26,540 | RBC crossed 25,000 at 26.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.90 Bid-YTW : 3.06 % |
| CM.PR.J | Deemed-Retractible | 24,630 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 4.62 % |
| There were 19 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CIU.PR.C | FixedReset | Quote: 20.51 – 25.00 Spot Rate : 4.4900 Average : 2.9034 YTW SCENARIO |
| BAM.PR.O | OpRet | Quote: 25.50 – 26.00 Spot Rate : 0.5000 Average : 0.3812 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 22.91 – 23.50 Spot Rate : 0.5900 Average : 0.4727 YTW SCENARIO |
| TRI.PR.B | Floater | Quote: 22.86 – 23.25 Spot Rate : 0.3900 Average : 0.2854 YTW SCENARIO |
| BMO.PR.H | Deemed-Retractible | Quote: 25.63 – 25.98 Spot Rate : 0.3500 Average : 0.2701 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 25.51 – 25.80 Spot Rate : 0.2900 Average : 0.2111 YTW SCENARIO |