To my surprise, an adult was quoted regarding the role of underwriters in capital markets:
In both cases, banks that profited by bringing the securities to market were later accused of misrepresenting the risks and contributing to losses. Their defense was that they were serving clients who wanted to buy the securities, as well as helping finance entrepreneurs and homeowners. They said they attracted undue criticism for essentially playing the role of middlemen and that they shouldn’t be held responsible for investors’ decisions to buy the securities.
“They’re intermediaries, and they’re not supposed to make up their minds for their customers as to what’s good for them, they’re supposed to supply them with what they want,” said Roy Smith, a finance professor at New York University’s Stern School of Business and a former Goldman Sachs partner.
Smith said bond prospectuses “point out repeatedly that just because the market price goes down, that’s not something we can be responsible for.”
However, I have no doubt but that a few lawyers and boxtickers at the SEC are excitedly preparing indictments against the salesmen who sell their clients things “they know are about to fall”.
Canadian Western Bank has announced an issuer bid for CWB.PR.A:
Canadian Western Bank (the “Bank”) today announced the Toronto Stock Exchange (TSX) and the Office of the Superintendent of Financial Institutions Canada (OSFI) have approved the Bank’s normal course issuer bid (NCIB) to purchase, for cancelation, up to 826,120 Non-Cumulative 5-Year Rate Reset Preferred Shares Series 3 (“preferred shares”). The number of preferred shares to be purchased under the NCIB represents approximately 10% of the 8,390,000 preferred shares issued and outstanding as at February 27, 2013.
Purchases under the NCIB may begin on March 1, 2013 and will end no later than February 28, 2014. The price paid for any preferred shares purchased will be the market price of such shares on the TSX at the time of acquisition. Purchases will be effected through the facilities of the TSX and all preferred shares purchased pursuant to the NCIB will be canceled. Apart from block purchase exceptions, the maximum number of preferred shares that may purchased per trading day is 1,538, an amount equal to 25% of the average daily trading volume of the preferred shares on the TSX for the six month period ended January 31, 2013.
Management believes the purchase of preferred shares below a certain price threshold represents an appropriate use of available funds and is also consistent with strategies to enhance shareholder value while ensuring the Bank maintains its solid regulatory capital position.
Since CWB has no history of following up on issuer bids, this announcement doesn’t get its own post – it has to slum it in the daily commentary. I don’t see any reason why they might follow this up with actual cash dollars anyway – at today’s closing bid of 26.65, the issue yields only 1.98% until the 2014-4-30 call date.
ALB.PR.B was confirmed at Pfd-2(low) by DBRS:
Current downside protection available to holders of the Class B Preferred Shares is 56.3% as of February 14, 2013.
The Pfd-2 (low) rating of the Class B Preferred Shares is based primarily on the downside protection and dividend coverage available, as well as on the strong credit quality and consistency of dividend distributions of the Portfolio holdings.
The main constraints to the rating are the following:
(1) The downside protection provided to holders of the Class B Preferred Shares is dependent on the value of the shares in the Portfolio.
(2) Volatility of price and changes in the dividend policies of the Canadian banks may result in significant reductions in downside protection from time to time.
(3) The entire Portfolio is concentrated in the Canadian financial services industry.
The Class B Preferred Shares will be redeemed by the Company on February 28, 2016.
It was another mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 5bp, FixedResets off 5bp and DeemedRetractibles up 15bp. Volatility was low. Volume was well above average.
PerpetualDiscounts now yield 4.91%, equivalent to about 6.38% interest at the standard conversion rate of 1.3x. Long corporates now yield about 4.3%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 210bp, a significant widening from the 200bp reported February 20.
| 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 | -0.7163 % | 2,597.1 |
| FixedFloater | 4.08 % | 3.41 % | 24,456 | 18.48 | 1 | 0.5611 % | 3,988.8 |
| Floater | 2.56 % | 2.86 % | 81,400 | 20.03 | 5 | -0.7163 % | 2,804.2 |
| OpRet | 4.80 % | 2.69 % | 45,287 | 0.33 | 5 | 0.1859 % | 2,595.9 |
| SplitShare | 4.59 % | 4.43 % | 44,326 | 4.26 | 2 | 0.0799 % | 2,934.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1859 % | 2,373.7 |
| Perpetual-Premium | 5.25 % | -1.78 % | 92,307 | 0.17 | 29 | 0.0474 % | 2,353.0 |
| Perpetual-Discount | 4.84 % | 4.91 % | 129,892 | 15.59 | 4 | 0.1623 % | 2,653.6 |
| FixedReset | 4.91 % | 2.86 % | 281,602 | 3.52 | 78 | -0.0457 % | 2,495.4 |
| Deemed-Retractible | 4.87 % | 2.14 % | 141,924 | 0.24 | 44 | 0.1485 % | 2,440.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.C | Floater | -2.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-27 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 2.94 % |
| BAM.PR.K | Floater | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-27 Maturity Price : 18.24 Evaluated at bid price : 18.24 Bid-YTW : 2.90 % |
| FTS.PR.H | FixedReset | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-27 Maturity Price : 23.73 Evaluated at bid price : 25.64 Bid-YTW : 2.73 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.E | Perpetual-Premium | 72,380 | Desjardins crossed 32,000 at 25.75; Nesbitt crossed 21,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-03-29 Maturity Price : 25.00 Evaluated at bid price : 25.73 Bid-YTW : -22.85 % |
| BAM.PR.B | Floater | 63,461 | RBC crossed 48,900 at 18.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-27 Maturity Price : 18.52 Evaluated at bid price : 18.52 Bid-YTW : 2.86 % |
| ENB.PR.T | FixedReset | 57,540 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-27 Maturity Price : 23.21 Evaluated at bid price : 25.36 Bid-YTW : 3.71 % |
| TD.PR.E | FixedReset | 57,025 | TD crossed 50,000 at 26.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.36 Bid-YTW : 1.93 % |
| TD.PR.S | FixedReset | 41,117 | Desjardins bought 19,000 from Scotia at 25.10. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 3.06 % |
| BMO.PR.N | FixedReset | 41,040 | Scotia crossed 30,000 at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 2.47 % |
| There were 41 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.C | Floater | Quote: 18.00 – 18.59 Spot Rate : 0.5900 Average : 0.3303 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 26.50 – 27.12 Spot Rate : 0.6200 Average : 0.4699 YTW SCENARIO |
| BAM.PR.K | Floater | Quote: 18.24 – 18.63 Spot Rate : 0.3900 Average : 0.2849 YTW SCENARIO |
| RY.PR.L | FixedReset | Quote: 25.59 – 25.85 Spot Rate : 0.2600 Average : 0.1785 YTW SCENARIO |
| ENB.PR.N | FixedReset | Quote: 25.52 – 25.77 Spot Rate : 0.2500 Average : 0.1714 YTW SCENARIO |
| RY.PR.X | FixedReset | Quote: 26.46 – 26.70 Spot Rate : 0.2400 Average : 0.1633 YTW SCENARIO |