We’ll begin with a condensed version of ‘The Old Order Passeth’:
RDA Holding Co., publisher of the 91-year-old Reader’s Digest magazine, filed for bankruptcy to cut $465 million in debt and focus on North American operations as consumers shift from print to electronic media.
The company is the latest in a line of iconic businesses to have recently sought court protection from creditors, after Hostess Brands Inc., maker of Twinkies and Wonder Bread, and Eastman Kodak Co., inventor of Kodachrome and the Instamatic camera.
Reader’s Digest, founded by DeWitt and Lila Wallace, went public in 1990. An investor group led by private-equity firm Ripplewood Holdings LLC bought it in 2007 for $1.6 billion and the assumption of about $800 million in debt. The company also filed for bankruptcy in August 2009, citing a drop in advertising spending and the debt load incurred in its acquisition.
The company listed assets and debt of more than $1 billion each in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in White Plains, New York. Under a restructuring agreement supported by Wells Fargo & Co., $465 million of remaining senior notes will all convert to equity. The company expects to have about $100 million in debt when it exits Chapter 11, about an 80 percent reduction.
GWO is buying in Ireland:
Great-West Lifeco Inc. is buying Ireland’s largest life, pensions and investment manager in a $1.75-billion deal.
Winnipeg-based Great-West says it has reached a deal with the government of Ireland to acquire, through subsidiary Canada Life Ltd., all of the shares of Irish Life Group Ltd.
Irish Life – which the government took over last year as part of its €4-billion ($5.4-billion Canadian) bailout of parent Irish Life & Permanent, has about $50-billion of assets under management and more than one million customers.
…
Great-West’s Irish subsidiary, Canada Life (Ireland), will be combined with
Irish Life over an 18 month period.The merged businesses should deliver about €40-million per year in cost savings, Great-West said in a news release Tuesday.
As previously reported, PWF is issuing a Straight Perpetual, 4.80%, $300-million to fund a purchase of GWO subscription receipts.
RBC today demonstrated the Acquire and Dismantle Model of Canadian Banking:
On February 1, 2013, Royal Bank of Canada announced it completed the acquisition of Ally Financial Inc.’s Canadian auto finance business (Ally Credit Canada Limited) and Canadian deposit business (ResMor Trust Company).
As a result of the acquisition, RBC Royal Bank has performed a comprehensive review of Ally’s‡ product portfolio, and implemented some changes that may impact your account(s):
- Effective February 15, 2013, you will not be able to open new accounts with Ally.
- You can continue to manage your existing Ally account(s) through Ally’s call centre and website.
As a part of the product consolidation, all Ally High Interest Savings Accounts (HISA) will be closed on April 30, 2013.
Be sure to write your MP, copy to OSFI, and thank him for protecting Canada from the evils of competition.
Justine Hunter of the Globe writes a piece about the intellectual poverty of the political-media establishment:
To move to surplus from what is now expected to be a $1.2-billion deficit in the current fiscal year, the government is relying on tax hikes, $800-million worth of asset sales, and stringent – perhaps optimistic – containment of spending growth.
In the wake of the Irish Life deal discussed above, DBRS confirmed GWO, although the last line of the press release may provoke some hollow laughs:
DBRS has today confirmed the ratings on Great-West Lifeco Inc. (GWO or the Company) and its affiliates following the announcement of the acquisition from the Government of Ireland of Irish Life Group (Irish Life) by the U.K. operation of GWO’s Canada Life Assurance Company (Canada Life) subsidiary for EUR 1.3 billion. All trends remain Stable.
…
With a relatively low acquisition cost estimated at just 72% of Irish Life reported embedded value of EUR 1.8 billion and obvious expense synergies generated from merging Canada Life’s operation, accounting for 5% of the market, with that of Irish Life, representing 25% of the Irish life insurance market, the value proposition for GWO is compelling. Expected expense synergies between the acquired operations of Irish Life and the existing Irish operations of Canada Life will more than offset the increased financing expenses so that the acquisition is expected to be accretive to GWO before restructuring and acquisition-related costs. In addition, GWO could potentially benefit from revenue enhancements as it introduces different management approaches related to investment strategies and the use of reinsurance, which could enhance margins in the future.The potential for adverse development post-acquisition is relatively small as there are limited guaranteed policy liabilities. Close to 80% of assets are unit-linked for the strict account of the policyholder. Combined with the Irish Life investment management operation, a substantial proportion of the Irish Life revenues take the form of investment management and administrative fees. The remaining assets are largely sovereign government bonds and, therefore, not likely to be a source of adverse credit experience.
Additionally, DBRS confirmed PWF:
DBRS has today confirmed its ratings on Power Financial Corporation (PWF or the Company) following the confirmation of Great-West Lifeco Inc.’s (GWO) ratings in the wake of its announced acquisition of Irish Life Group (Irish Life) from the Government of Ireland for EUR 1.3 billion. The trends remain Stable.
To partially fund this acquisition, GWO will be raising $1.25 billion in common equity, for which PWF will subscribe for $550 million, which will reduce its direct ownership stake in GWO to an estimated 67.0% from the current level of 68.2%. The Company in turn will raise up to $250 million in perpetual preferred shares, with the balance of funds to be provided from cash on hand, which is estimated at close to $1 billion as of year-end 2012.
The increase in financial leverage is manageable, with the expected earnings accretion largely offsetting the additional financial costs and foregone investment income. In any event, the Company’s total debt ratio (including preferred shares) remains close to 17%, which is well within tolerance for financial leverage at a financial services holding company according to the DBRS holding company methodology, especially given the high quality of financial leverage used by the Company. Pro forma fixed-charge coverage ratios are expected to be in excess of 13 times, which is very strong.
The Irish Life transaction is consistent with the stated intention of PWF to facilitate strategic acquisitions by its subsidiaries of major properties that are in line with broader strategic goals of expanding in existing markets while achieving meaningful market shares and expense efficiencies.
And to round out the day, DBRS confirmed FTS:
DBRS has today confirmed the Issuer Rating and ratings of the Unsecured Debentures and Preferred Shares of Fortis Inc. (Fortis or the Company) at A (low), A (low) and Pdf-2 (low), respectively, with Stable trends. The confirmation reflects the Company’s strong mix of earnings generated from regulated utilities and reasonable financing strategies for the acquisition of CH Energy Group Inc. (CHG) (the Acquisition; approximately US$1.5 billion, including US$500 million assumed debt) and the Waneta hydropower project, of which Fortis has 51% ownership.
Upon completion of the Acquisition and Waneta project, Fortis’ non-consolidated leverage is expected to increase modestly, but should be maintained within the 20% range as a result of a prudent funding mix.
…
Fortis’ business risk profile is expected to improve moderately with the Acquisition, as approximately 97% of CHG’s earnings are generated from its regulated electric and gas businesses. This regulated earnings mix is higher than the Company’s consolidated mix of approximately 90% (remainder generated from higher-risk hotel properties and non-regulated generation businesses).
It was a mildly negative day for the Canadian preferred share market, with PerpetualPremiums losing 6bp, FixedResets down 2bp and DeemedRetractibles off 1bp. Volatility was good, but almost all in the low-volume Floater sector, so it’s not clear whether it means a row of beans. Volume was very high.
| 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 | 0.4216 % | 2,593.5 |
| FixedFloater | 4.10 % | 3.43 % | 26,748 | 18.45 | 1 | 0.8711 % | 3,964.8 |
| Floater | 2.56 % | 2.86 % | 79,069 | 20.05 | 5 | 0.4216 % | 2,800.3 |
| OpRet | 4.77 % | 1.59 % | 44,312 | 0.35 | 5 | 0.1462 % | 2,611.2 |
| SplitShare | 4.54 % | 4.22 % | 39,252 | 4.24 | 2 | 0.0000 % | 2,930.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1462 % | 2,387.7 |
| Perpetual-Premium | 5.24 % | 0.02 % | 83,348 | 0.10 | 29 | -0.0639 % | 2,356.7 |
| Perpetual-Discount | 4.84 % | 4.90 % | 130,471 | 15.61 | 4 | 0.1320 % | 2,649.3 |
| FixedReset | 4.89 % | 2.75 % | 273,764 | 3.06 | 78 | -0.0168 % | 2,501.0 |
| Deemed-Retractible | 4.86 % | 1.67 % | 145,806 | 0.26 | 45 | -0.0060 % | 2,440.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRI.PR.B | Floater | -1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-19 Maturity Price : 23.75 Evaluated at bid price : 24.06 Bid-YTW : 2.16 % |
| MFC.PR.G | FixedReset | -1.21 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 26.12 Bid-YTW : 3.07 % |
| PWF.PR.A | Floater | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-19 Maturity Price : 22.72 Evaluated at bid price : 23.01 Bid-YTW : 2.26 % |
| BAM.PR.K | Floater | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-19 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 2.88 % |
| BAM.PR.C | Floater | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-19 Maturity Price : 18.45 Evaluated at bid price : 18.45 Bid-YTW : 2.87 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| PWF.PR.R | Perpetual-Premium | 636,787 | Nesbitt crossed five blocks: 250,000 shares, 200,000 shares, 50,000 shares, 25,000 and 100,000, all at 26.67. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.66 Bid-YTW : 4.59 % |
| TRP.PR.B | FixedReset | 143,846 | Scotia crossed 100,000 at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-19 Maturity Price : 23.43 Evaluated at bid price : 24.80 Bid-YTW : 2.77 % |
| BNS.PR.Y | FixedReset | 68,765 | RBC crossed 10,000 at 24.75; National crossed 26,700 at 24.81 and 12,400 at 24.83. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 2.96 % |
| ENB.PR.D | FixedReset | 63,517 | TD crossed 50,900 at 25.82. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.64 Bid-YTW : 3.43 % |
| BMO.PR.Q | FixedReset | 54,142 | TD crossed 44,800 at 25.44. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 2.94 % |
| BNS.PR.P | FixedReset | 53,400 | TD bought 22,200 from anonymous at 25.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : 3.46 % |
| There were 53 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRI.PR.B | Floater | Quote: 24.06 – 24.59 Spot Rate : 0.5300 Average : 0.3235 YTW SCENARIO |
| ENB.PR.N | FixedReset | Quote: 25.62 – 25.88 Spot Rate : 0.2600 Average : 0.1706 YTW SCENARIO |
| MFC.PR.G | FixedReset | Quote: 26.12 – 26.39 Spot Rate : 0.2700 Average : 0.1866 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 26.51 – 26.69 Spot Rate : 0.1800 Average : 0.1160 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 24.54 – 24.75 Spot Rate : 0.2100 Average : 0.1498 YTW SCENARIO |
| RY.PR.H | Deemed-Retractible | Quote: 26.51 – 26.67 Spot Rate : 0.1600 Average : 0.1021 YTW SCENARIO |