In today’s cheerful European news, Italy got whacked at a bill auction:
Italy had to pay almost 7 percent to sell six-month bills at an auction today, fanning investor concern that the world’s fourth-biggest borrower may struggle to finance its debt. The euro fell to a seven-week low.
The Italian Treasury paid 6.504 percent to auction 8 billion euros ($10.6 billion) of the debt, almost twice the 3.535 percent a month ago and the highest since August 1997. Italy’s two-year bonds yielded a euro-era record 7.83 percent, almost 50 basis points more than 10-year notes.
The euro extended declines, shedding 0.9 percent to $1.3213, the lowest since Oct. 3. Italy’s FTSE MIB index was the biggest decliner among European benchmarks, shedding 1.3 percent at 3 p.m. in Rome. Banks tumbled with Banca Monte Paschi di Siena SpA (BMPS) dropping 3.9 percent.
Belgium’s credit rating was cut one step to AA by Standard & Poor’s, which said bank guarantees, lack of policy consensus and slowing growth will make it difficult to reduce the euro region’s fifth-highest debt load.
The rating was lowered from AA+, with a negative outlook, London-based S&P said yesterday in a statement. The action by S&P is the first downgrade for Belgium in almost 13 years and puts its credit ranking on a par with the S&P local-currency ratings of the Czech Republic, Kuwait and Chile.
Belgium’s borrowing costs have surged to the highest level in 11 years in the past two months after the nation’s government agreed to buy Dexia SA’s Belgian bank unit and guarantee part of the crisis-hit lender’s liabilities for 10 years. Investors continued a selloff in Belgian bonds after six-party coalition talks ran aground this week as Liberals and Socialists clashed over how to cut the budget deficit.
TransCanada Corporation and its subsidiary TransCanada Pipelines Ltd., issuers of TRP.PR.A, TRP.PR.B, TRP.PR.C, TCA.PR.X and TCA.PR.Y were confirmed at Pfd-2(low) by DBRS:
DBRS has confirmed the ratings of TransCanada PipeLines Limited (TCPL or the Company) as listed below. DBRS has also confirmed the rating of the Preferred Shares of TransCanada Corporation (TCC) at Pfd-2 (low). The rating of TCC, which owns 100% of TCPL and holds no other material assets, is based on the credit strength of TCPL.
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The confirmation reflects the Company’s continued predictable cash flow from its regulated pipelines, which accounted for over 70% of consolidated EBITDA (for the first nine months (9M) of 2011). Pipeline EBITDA is supported by stable earnings that are mostly on a cost-of-service basis and/or contracted, and by incremental earnings contributed by newly constructed pipelines The remaining 30% of EBITDA is mostly contributed by power generation assets (60% in Canada and 40% in the United States). Although EBITDA from power generation is less predictable than the pipeline business, a sizable share of the power output is protected by long-term contracts with creditworthy parties.
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Capex over the next two years (excluding the Keystone XL project) is likely to be much lower than the $3.6 billion level of the 12 months ending September 30, 2011. DBRS expects free cash flow to be relatively neutral until the significant capex on Keystone XL or another large project is well underway. As a result, debt levels are expected to remain stable or decrease slightly over the medium term. Combined with higher cash flow expected from newly completed pipeline projects, DBRS expects TCPL’s credit metrics to improve modestly and remain well within the current rating category.
EMA.PR.A was confirmed at Pfd-3(high) by DBRS:
DBRS has today confirmed the Medium-Term Notes and Preferred Shares – Cumulative ratings of Emera Inc. (Emera or the Company) at BBB (high) and Pfd-3 (high), respectively, with Stable trends, based on the strong earnings and cash flows generated by its regulated operations and on Emera’s, reasonable non-consolidated financial profile. The ratings also reflect increasing diversification through the ownership of regulated utilities in different jurisdictions, which reduces dependence on earnings and cash flows from any one entity and reduces volatility of earnings. However, Nova Scotia Power Inc. (NSPI) continues to account for the majority (approximately 70%) of Emera’s consolidated EBIT.
NSI.PR.D was confirmed at Pfd-2(low) by DBRS:
DBRS has today confirmed the ratings of the Unsecured Debentures & Medium-Term Notes, Commercial Paper and Cumulative Preferred Shares of Nova Scotia Power Inc. (NSPI or the Company) at A (low), R-1 (low) and Pfd-2 (low), respectively, all with Stable trends. The ratings reflect stable and predictable regulated cash flows generated by the Company’s regulated monopolistic operations, diverse customer base and a supportive regulatory environment.
INE.PR.A was confirmed at Pfd-3(low) by DBRS:
DBRS has today confirmed the Issuer Rating of BBB (low) and the Preferred Shares rating of Pfd-3 (low) of Innergex Renewable Energy Inc. (Innergex or the Company). Both ratings have Stable trends. The ratings reflect the strength of the Company’s high-quality, low-cost renewable power generating assets, operating under long-term off-take contracts with highly-rated counterparties, and its consistent execution in developing and constructing new generating assets.
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Consolidated credit metrics are expected to remain weak for the rating category through the medium term, with EBITDA-to-interest in the 2.3 times (x) to 2.5x range and cash flow-to-debt in the 5% to 8% range. DBRS expects future modest improvement in coverage metrics as assets under construction are completed and enter service. Consolidated debt-to-capital, currently 63%, is expected to increase modestly over the next several years and peak in 2013 to 2014 until new construction assets begin to operate. Most of the consolidated debt (82%) is project-level debt and non-recourse to the Company.
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Business risk factors are low for the rating category. Innergex’s competitive position, asset composition and contractual position are all strong for the BBB (low) rating. Asset diversification and operational expertise also support the investment-grade quality assessment. In addition, the focus on renewable assets minimizes exposure to environmental regulation and is positive for the rating. The Company’s low business risk profile mitigates weaker financial credit metrics. Renewable resources are variable, reducing energy production stability and related cash flows. However, this risk is mainly offset by the geographic diversity of the generating portfolio. Also, the Company has cash-funded reserves at the project level (typically six months of debt service) to smooth variability in cash flows from wind/hydrology resources.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| 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 | -1.2862 % | 2,103.6 |
| FixedFloater | 4.83 % | 4.55 % | 28,554 | 17.19 | 1 | -0.7576 % | 3,187.5 |
| Floater | 3.42 % | 3.44 % | 153,962 | 18.60 | 2 | -1.2862 % | 2,271.4 |
| OpRet | 4.96 % | 3.06 % | 51,452 | 1.47 | 7 | 0.1376 % | 2,479.2 |
| SplitShare | 5.80 % | 6.48 % | 56,945 | 5.16 | 3 | 0.1696 % | 2,529.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1376 % | 2,267.0 |
| Perpetual-Premium | 5.59 % | 3.15 % | 98,283 | 0.27 | 13 | -0.0572 % | 2,148.7 |
| Perpetual-Discount | 5.31 % | 5.19 % | 105,139 | 14.68 | 17 | 0.0775 % | 2,293.5 |
| FixedReset | 5.11 % | 3.02 % | 217,792 | 2.47 | 64 | -0.0718 % | 2,342.0 |
| Deemed-Retractible | 5.05 % | 4.40 % | 199,515 | 3.85 | 46 | -0.0262 % | 2,215.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.F | Deemed-Retractible | -1.92 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 5.51 % |
| BAM.PR.K | Floater | -1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-25 Maturity Price : 15.29 Evaluated at bid price : 15.29 Bid-YTW : 3.47 % |
| RY.PR.R | FixedReset | -1.66 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.65 Bid-YTW : 3.22 % |
| CM.PR.P | Deemed-Retractible | -1.23 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-29 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 3.23 % |
| TD.PR.P | Deemed-Retractible | -1.21 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-01 Maturity Price : 25.50 Evaluated at bid price : 26.13 Bid-YTW : 4.39 % |
| GWO.PR.N | FixedReset | -1.03 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 3.59 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.D | FixedReset | 122,050 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-25 Maturity Price : 23.13 Evaluated at bid price : 25.10 Bid-YTW : 3.67 % |
| TD.PR.K | FixedReset | 38,630 | RBC crossed 30,000 at 27.44. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.42 Bid-YTW : 2.67 % |
| CM.PR.E | Perpetual-Discount | 32,581 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-25 Maturity Price : 24.70 Evaluated at bid price : 25.00 Bid-YTW : 5.65 % |
| CM.PR.G | Perpetual-Discount | 27,615 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-25 Maturity Price : 24.58 Evaluated at bid price : 24.91 Bid-YTW : 5.46 % |
| ENB.PR.B | FixedReset | 21,897 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-25 Maturity Price : 23.26 Evaluated at bid price : 25.41 Bid-YTW : 3.65 % |
| BNS.PR.Z | FixedReset | 21,893 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 3.20 % |
| There were 21 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| RY.PR.R | FixedReset | Quote: 26.65 – 27.10 Spot Rate : 0.4500 Average : 0.2711 YTW SCENARIO |
| CM.PR.P | Deemed-Retractible | Quote: 25.61 – 26.14 Spot Rate : 0.5300 Average : 0.3621 YTW SCENARIO |
| BMO.PR.L | Deemed-Retractible | Quote: 26.93 – 27.20 Spot Rate : 0.2700 Average : 0.1760 YTW SCENARIO |
| TD.PR.P | Deemed-Retractible | Quote: 26.13 – 26.39 Spot Rate : 0.2600 Average : 0.1717 YTW SCENARIO |
| BAM.PR.K | Floater | Quote: 15.29 – 15.52 Spot Rate : 0.2300 Average : 0.1658 YTW SCENARIO |
| POW.PR.A | Perpetual-Discount | Quote: 25.11 – 25.41 Spot Rate : 0.3000 Average : 0.2372 YTW SCENARIO |