September 2, 2014

Auto dealers in Georgia are competing with new technology using tried and true methods:

Tesla Motors Inc. (TSLA), which has fought U.S. dealers over its direct sales of electric cars, faces a new challenge in Georgia where auto retailers want the Peach State to bar distribution of sedans from the company’s store.

Tesla sells vehicles in violation of the state’s rules limiting the annual volume of cars it can sell directly to the public, the Georgia Automobile Dealers Association said in a petition filed with the Georgia Department of Revenue.

The group, which represents 500 dealerships, asked that Tesla’s license be revoked and the agency block sales of Tesla’s Model S sedan at its shop in Marietta, near Atlanta.

The carmaker’s license in Georgia allows it only to sell vehicles made “in accordance with custom design specifications of the customer” and retail fewer than 150 a year, the group said in the petition. Tesla sold 173 sedans at its suburban Atlanta outlet, its only store in the state, from October to June, according to the petition, a copy of which was obtained by Bloomberg News from the revenue department.

It was a good day for economic news:

The dollar climbed 0.7 percent to 105.10 yen at 4 p.m. in New York and gained 0.8 percent to $1.6472 per British pound. Yields on 10-year Treasury notes increased seven basis points, the most in more than a month, to 2.42 percent. The Standard & Poor’s 500 Index lost less than 0.1 percent after the biggest monthly rally since February, as energy companies tumbled 1.3 percent. Gold slid 1.7 percent and Brent crude slumped to a 16-month low.

U.S. manufacturing expanded in August at the fastest pace in three years as orders grew by the most in a decade, bolstering the case for the Federal Reserve to raise interest rates sooner than anticipated. Gauges of factory output in Europe and China signal slower growth, boosting speculation that policy makers will need to boost stimulus measures. European money markets are pricing in about a 50 percent probability that the European Central Bank will cut interest rates by 10 basis points this week, according to BNP Paribas SA.

There’s about a 44 percent chance Fed policy makers will raise the benchmark interest-rate target by June 2015, futures data compiled by Bloomberg showed today. A 36 percent likelihood was seen on Aug. 18.

Bond yields across the euro area have tumbled, enhancing the appeal of payments available from Treasuries, since ECB President Mario Draghi said at the Federal Reserve Bank of Kansas City’s annual conference in Jackson Hole, Wyoming, on Aug. 22 that the central bank will use “all the available instruments needed to ensure price stability.”

And, with the 75th anniversary of Canada’s declaration of war on Germany almost upon us, we are getting a flavour of what it was like to live through the Munich Crisis:

[Outgoing president of the European commission, José Manuel] Barroso told the closed meeting that Putin had told him Kiev would be an easy conquest for Russia, according to the Italian newspaper, La Repubblica. According to the account, Barroso asked Putin about the presence of Russian troops in eastern Ukraine. Nato says there are at least 1,000 Russian forces on the wrong side of the border. The Ukrainians put the figure at 1,600.

“The problem is not this, but that if I want I’ll take Kiev in two weeks,” Putin said, according to La Repubblica.

The Kremlin did not deny Putin had spoken of taking Kiev, but instead complained about the leak of the Barroso remarks.

Petro Poroshenko, the Ukrainian president, attended the EU summit and painted an apocalyptic picture of the conflict, with EU leaders dropping their usual public poise in a heated debate.

Dalia Grybauskaite, the Lithuanian president, declared Russia was “at war with Europe”. The German chancellor, Angela Merkel, the main mediator with Putin, was said to be furious with the Russian leader, warning that he was “irrational and unpredictable”, while David Cameron was said to have raised the issue of Britain discussing policy options regarding Putin.

Cameron likened the west’s dilemma with Putin to relations between the then British prime minister, Neville Chamberlain, with Adolf Hitler in Munich in 1938, when Anglo-French appeasement encouraged the Nazi leader to launch the second world war the following year.

“We run the risk of repeating the mistakes made in Munich in 1938. We cannot know what will happen next,” Cameron was reported as saying. “This time we cannot meet Putin’s demands. He has already taken Crimea and we cannot allow him to take the whole country.”

DBRS confirmed Aimia, proud issuer of AIM.PR.A and AIM.PR.C:

DBRS has today confirmed Aimia Inc.’s (Aimia or the Company) Issuer Rating at BBB and the ratings of its Senior Secured Debt and Preferred Shares at BBB and Pfd-3, respectively, all with Stable trends. The confirmation of the ratings is based on the Company’s relatively stable operating performance and credit metrics through 2013 and progress made to date with the Aeroplan program transformation and financial cards agreement with TD Bank Group (TD; rated AA with a Stable trend by DBRS) and Canadian Imperial Bank of Commerce (CIBC; rated AA with a Stable trend by DBRS). The ratings continue to be based on the strength of Aimia’s brands and its strong relationship with key commercial partners. The ratings also reflect the Company’s high exposure to consumer spending and redemption patterns, as well as the significant but moderating degree of revenue concentration.

DBRS expects Aimia’s financial profile to remain commensurate with the current rating category, based on strong and stable free cash flow-generating capacity and steady leverage. DBRS believes free cash flow will decline modestly due to slightly higher capex requirements and continued growth in the Company’s dividend payments. Free cash flow is expected to continue to be applied primarily toward small tuck-in acquisitions, most likely in the data analytics business. DBRS anticipates that Aimia will use cash on hand to repay approximately $150 million of debt maturing in 2014. As such, when combined with the expected decline in adjusted EBITDA, key credit metrics should remain appropriate for the current rating category (i.e., gross debt-to-adjusted EBITDA before distributions of approximately 1.75x to 2.25x and adjusted EBITDA coverage around 7.0x).

The Canadian preferred share market opened the month on a sour note, with PerpetualDiscounts losing 17bp, FixedResets down 6bp and DeemedRetractibles off 2bp. Volatility was low. Volume was practically non-existent.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.1524 % 2,632.7
FixedFloater 4.15 % 3.40 % 26,891 18.57 1 0.1313 % 4,178.5
Floater 2.91 % 3.07 % 48,980 19.48 4 -0.1524 % 2,722.4
OpRet 4.05 % -0.65 % 95,144 0.08 1 -0.1184 % 2,726.0
SplitShare 4.29 % 3.95 % 117,934 3.95 5 -0.0997 % 3,148.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1184 % 2,492.7
Perpetual-Premium 5.46 % -1.10 % 81,960 0.08 20 0.0118 % 2,440.9
Perpetual-Discount 5.22 % 5.14 % 111,574 15.20 16 -0.1709 % 2,607.6
FixedReset 4.23 % 3.69 % 182,792 6.63 74 -0.0588 % 2,570.6
Deemed-Retractible 5.00 % 1.44 % 107,607 0.17 42 -0.0228 % 2,566.3
FloatingReset 2.63 % 2.05 % 79,920 3.71 6 -0.2289 % 2,525.7
Performance Highlights
Issue Index Change Notes
PWF.PR.P FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-09-02
Maturity Price : 22.57
Evaluated at bid price : 23.00
Bid-YTW : 3.54 %
CIU.PR.C FixedReset 2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-09-02
Maturity Price : 20.95
Evaluated at bid price : 20.95
Bid-YTW : 3.61 %
Volume Highlights
Issue Index Shares
MFC.PR.M FixedReset 84,340 Recent new issue.
Maturity Type : Call
Maturity Date : 2019-12-19
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : 3.87 %
RY.PR.B Deemed-Retractible 61,720 RBC crossed 50,000 at 25.51.
Maturity Type : Call
Maturity Date : 2014-10-02
Maturity Price : 25.25
Evaluated at bid price : 25.47
Bid-YTW : -4.48 %
MFC.PR.K FixedReset 52,050 Desjardins crossed 50,000 at 25.14.
Maturity Type : Call
Maturity Date : 2018-09-19
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 3.70 %
POW.PR.G Perpetual-Premium 31,307 Desjardins crossed 30,000 at 26.23.
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 26.18
Bid-YTW : 4.92 %
PWF.PR.T FixedReset 28,957 Desjardins crossed 26,200 at 26.05.
Maturity Type : Call
Maturity Date : 2019-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.99
Bid-YTW : 3.33 %
TD.PF.B FixedReset 23,244 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-09-02
Maturity Price : 23.22
Evaluated at bid price : 25.16
Bid-YTW : 3.71 %
There were 6 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.B Deemed-Retractible Quote: 23.22 – 23.48
Spot Rate : 0.2600
Average : 0.1704

Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.22
Bid-YTW : 5.56 %

BAM.PR.X FixedReset Quote: 22.43 – 22.70
Spot Rate : 0.2700
Average : 0.1880

Maturity Type : Limit Maturity
Maturity Date : 2044-09-02
Maturity Price : 22.08
Evaluated at bid price : 22.43
Bid-YTW : 4.00 %

PWF.PR.O Perpetual-Premium Quote: 26.21 – 26.48
Spot Rate : 0.2700
Average : 0.1926

Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 26.00
Evaluated at bid price : 26.21
Bid-YTW : 3.69 %

BAM.PR.M Perpetual-Discount Quote: 21.45 – 21.65
Spot Rate : 0.2000
Average : 0.1302

Maturity Type : Limit Maturity
Maturity Date : 2044-09-02
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 5.64 %

HSB.PR.C Deemed-Retractible Quote: 25.31 – 25.50
Spot Rate : 0.1900
Average : 0.1280

Maturity Type : Call
Maturity Date : 2014-10-02
Maturity Price : 25.00
Evaluated at bid price : 25.31
Bid-YTW : 0.76 %

BAM.PR.Z FixedReset Quote: 26.07 – 26.32
Spot Rate : 0.2500
Average : 0.1904

Maturity Type : Call
Maturity Date : 2017-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.07
Bid-YTW : 3.71 %

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