Brother, can you spare a few million dollars for an investment banker down on his luck?
Royal Bank of Scotland is expected to announce its withdrawal from many investment banking activities as well as much of its international business in a move that is expected to reduce staff numbers by at least 30,000 over the next three to five years, the Financial Times reported on Thursday.
TransAlta bit the bullet:
TransAlta Corporation (“TransAlta”) (TSX: TA; NYSE: TAC) today reported its fourth quarter 2013 and full year 2013 financial results, its outlook for 2014 and two significant initiatives to enhance the Corporation’s financial strength to grow, provide a solid and sustainable dividend, and to ensure a strong balance sheet throughout the commodity cycle.
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TransAlta also announced today two key initiatives: the sale of our 50 per cent interest in CE Generation, Blackrock development and Wailuku to our partner in these holdings, MidAmerican Renewables for U.S.$193.5 million and the resizing of our dividend to an annualized amount of $0.72 per common share to align with our growth and financial objectives.
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With the revised dividend, our expected dividend is 57 per cent to 67 per cent of Free Cash Flow.
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On Feb. 20, 2014, our Board of Directors declared a quarterly dividend of $0.18 per common share (or $0.72 per common share on an annualized basis).
The dividend used to be $0.29 per common share per quarter, or $1.16 annualized, so the reduction is 38%. DBRS comments:
As noted on the rating report dated March 12, 2013, TAC’s leverage remained high for the current business risk level and DBRS expects the Company to reduce its leverage to below 50% by the end of 2014. In addition, the report noted that TAC has an unsustainable payout ratio that negatively affects its leverage. The Transactions announced today mitigate the two primary concerns noted above. Proceeds from the divestiture are expected to be used to reduce debt and the dividend reduction will likely result in approximately $90 million in incremental cash flow, net of the dividend reinvestment program proceeds. Pro forma the Transactions, the Company’s adjusted debt-to-capital ratio is expected to be near 50% and the other two key credit metrics, cash flow-to-debt and EBITDA interest coverage, are expected to be in line with the BBB rating. DBRS expects TAC to continue to fund any significant unforeseen costs, cash shortfalls and/or acquisitions in a prudent manner to maintain key credit metrics in line with the current rating range. Should key credit metrics no longer be commensurate with the current BBB rating, a negative rating action could result.
They had some harsh words for Bombardier:
DBRS today notes that Bombardier Inc. (Bombardier or the Company) has recently released new information including a delay in entry-into-service (EIS) for the C-Series until late 2015, weaker-than-expected full-year 2013 results and a worse-than-expected outlook for full-year 2014. The newly released information is consistent with the risks that were already incorporated when DBRS downgraded the Company to BB (low) in November 2013 following placing the Company’s rating under review in August, 2013. The trend currently remains Stable, also noting that Bombardier’s business risk profile continues to support the current rating. Nonetheless, most of Bombardier’s key credit metrics are below the current rating level and the Company’s financial profile remains a risk. DBRS could take further negative rating action should the Company announce further material program cost increases, further C-Series EIS delays, profitability challenges or incur greater than expected additional indebtedness.
It was another positive day for the Canadian preferred share market, with PerpetualDiscounts winning 10bp, FixedResets gaining 1bp and DeemedRetractibles up 6bp. Volatility was minimal. Volume was on the low side of average, despite RBC’s monster crosses in MFC.PR.D.
| 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 | -0.8763 % | 2,378.2 |
| FixedFloater | 4.75 % | 4.34 % | 30,604 | 17.74 | 1 | 0.0500 % | 3,574.5 |
| Floater | 3.04 % | 3.14 % | 54,702 | 19.34 | 4 | -0.8763 % | 2,567.8 |
| OpRet | 4.61 % | -1.86 % | 68,365 | 0.11 | 3 | 0.0897 % | 2,690.2 |
| SplitShare | 4.88 % | 4.70 % | 61,709 | 4.37 | 5 | 0.1212 % | 3,028.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0897 % | 2,459.9 |
| Perpetual-Premium | 5.66 % | 1.90 % | 99,527 | 0.08 | 12 | 0.0760 % | 2,337.1 |
| Perpetual-Discount | 5.54 % | 5.61 % | 149,618 | 14.44 | 26 | 0.1050 % | 2,395.0 |
| FixedReset | 4.85 % | 3.70 % | 212,113 | 6.41 | 80 | 0.0066 % | 2,492.3 |
| Deemed-Retractible | 5.10 % | 3.92 % | 163,599 | 1.38 | 42 | 0.0612 % | 2,431.6 |
| FloatingReset | 2.66 % | 2.66 % | 161,503 | 7.14 | 6 | -0.1675 % | 2,436.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IFC.PR.A | FixedReset | -2.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.35 Bid-YTW : 4.56 % |
| BAM.PR.K | Floater | -1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-20 Maturity Price : 16.56 Evaluated at bid price : 16.56 Bid-YTW : 3.20 % |
| CIU.PR.C | FixedReset | 1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-20 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.80 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.D | FixedReset | 804,992 | RBC crossed blocks of 299,900 and 250,000 at 25.65; and another 250,000 at 25.63. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 2.16 % |
| MFC.PR.B | Deemed-Retractible | 104,680 | Scotia crossed blocks of 35,000 and 25,000 at 21.77; Nesbitt crossed blocks of 19,000 and 15,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.77 Bid-YTW : 6.46 % |
| RY.PR.Z | FixedReset | 60,795 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-20 Maturity Price : 23.22 Evaluated at bid price : 25.23 Bid-YTW : 3.74 % |
| RY.PR.B | Deemed-Retractible | 56,801 | Nesbitt crossed two blocks of 25,000 each, both at 25.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.25 Evaluated at bid price : 25.52 Bid-YTW : 2.49 % |
| NA.PR.S | FixedReset | 56,128 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-20 Maturity Price : 23.19 Evaluated at bid price : 25.14 Bid-YTW : 3.93 % |
| BNS.PR.O | Deemed-Retractible | 54,951 | Nesbitt crossed two blocks of 25,000 each, both at 26.08. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-28 Maturity Price : 25.75 Evaluated at bid price : 26.08 Bid-YTW : -0.01 % |
| There were 25 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IFC.PR.A | FixedReset | Quote: 23.35 – 23.78 Spot Rate : 0.4300 Average : 0.2872 YTW SCENARIO |
| BAM.PR.K | Floater | Quote: 16.56 – 16.86 Spot Rate : 0.3000 Average : 0.2129 YTW SCENARIO |
| BAM.PR.C | Floater | Quote: 16.80 – 17.10 Spot Rate : 0.3000 Average : 0.2153 YTW SCENARIO |
| MFC.PR.I | FixedReset | Quote: 25.97 – 26.18 Spot Rate : 0.2100 Average : 0.1277 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 22.62 – 22.82 Spot Rate : 0.2000 Average : 0.1325 YTW SCENARIO |
| BNS.PR.K | Deemed-Retractible | Quote: 25.22 – 25.42 Spot Rate : 0.2000 Average : 0.1419 YTW SCENARIO |