It looks like we’ll be seeing some issuance out of Intact Financial in the near future:
Intact Financial Corporation (TSX:IFC) announced today that it has entered into a definitive agreement and plan of merger pursuant to which it has agreed to acquire OneBeacon Insurance Group, Ltd. (NYSE:OB), a leading US specialty insurer. Under the terms of the all-cash deal, OneBeacon shareholders will receive US$18.10 cash per common share, a 14% premium based on OneBeacon’s closing stock price on the NYSE of US$15.89 as of May 1, 2017 and a 15% premium to the volume weighted average price over the last 30 days. This represents an aggregate cash consideration of approximately US$1.7 billion ($2.3 billion). In addition, OneBeacon debt of approximately US$275 million will remain outstanding. The transaction has been unanimously approved by the Boards of Directors of both companies and is subject to approval by OneBeacon’s shareholders.
…
Intact intends to finance the acquisition and related transaction expenses using a combination of $700 million of equity financing, approximately $700 million of excess capital and approximately $1.0 billion of financing comprised of bank term loans, medium term notes and preferred shares. Intact has hedged the purchase price against the exposure associated with USD/CAD exchange rate fluctuations. Intact will maintain its strong capital position with an estimated MCT above 200% on closing and expects its debt-to-total capital ratio to return below the target level of 20% within 24 months following the closing of the acquisition.
Meanwhile DBRS is nervous about Home Capital:
DBRS Limited (DBRS) has today downgraded Home Capital Group Inc.’s (HCG or the Group) Senior Debt rating to CCC from BB and its Short-Term Instruments rating to R-5 from R-4. Additionally, DBRS has downgraded the ratings of Home Trust Company (HTC or the Trust Company), HCG’s primary operating subsidiary, including the Issuer Rating as well as the Deposit and Senior Debt rating to B from BB (high). DBRS has also downgraded the Trust Company’s Short-Term Instruments rating to R-5 from R-4. All ratings remain Under Review with Negative Implications. DBRS has also lowered HTC’s Intrinsic Assessment to B from BB (high).The Support Assessment for HTC remains SA3, which implies no expected systemic support for the Trust Company.
These rating actions reflect DBRS’s concern over recent events, including HCG’s announcement yesterday that it has postponed the release of its Q1 2017 earnings from May 2, 2017 to after market close on May 11, 2017. DBRS considers this delay in announcing results as a negative, especially given that the initial Ontario Securities Commission’s (OSC) hearing regarding the Statement of Allegations made against three former members of HCG’s senior management is scheduled for May 4, 2017. These events are likely to continue to draw unfavourable attention to the Group.
Furthermore, in DBRS’s opinion HTC has not demonstrated an ability to stabilize its funding and liquidity, as accelerated withdrawals of on-demand High Interest Savings Account (HISA) deposits continue. The Group announced that HISA balances had fallen to $391 million as of May 1, 2017, down from $1.4 billion as recently as April 24, 2017. Showing more stability, Guaranteed Investment Certificate (GIC) deposits stood at $12.86 billion as of April 28, 2017, down from $13.0 billion as of April 24, 2017. DBRS views GICs as more stable since the majority of these deposits are reportedly fixed and non-redeemable ahead of their maturity date.
- •Since our last rating action on April 27, further developments at Home Capital Group Inc. (HCG) have continued to weaken the firm’s franchise position and financial performance, including heightened liquidity risk stemming from accelerated deposit outflows of high-interest savings accounts, as well as elevated operational challenges exacerbated by additional board turnover.
- •We are therefore lowering our long-term issuer credit ratings on HCG and Home Trust Co. to ‘B-‘ from ‘B+’ and ‘BB’, respectively. At the same time, we are affirming our ‘B’ short-term issuer credit ratings on both companies. We are also lowering our senior unsecured debt rating on Home Trust to ‘B-‘ from ‘BB’.
- •We are revising the CreditWatch implications to developing from negative. The developing CreditWatch reflects the potential for either a further downgrade on evidence of continued deterioration in HCG’s funding and liquidity profile, weaker-than-expected business performance or further management and leadership flight, or a potential upgrade on evidence of stabilization in the company’s funding profile, effective repositioning of its franchise, and stabilization of its management team.
To me, the big story with the travails of Home Capital is the illustration of the power of the Big Banks:
Many of the big banks are now limiting sales of Home Capital Group’s guaranteed investment certificates (GICs) to their clients. Their reticence calls into question the fate of the $13-billion worth of GICs that Home Capital currently has on its books and will need replacing as they mature. Many of those certificates come due in 2017.
and:
After Home Capital revealed in March it was under investigation by the Ontario Securities Commission over its disclosure practices, Canadian Imperial Bank of Commerce introduced a cap of $100,000 per client for purchases of Home Capital guaranteed investment certificates (GICs), which is the maximum level covered by Canada’s deposit insurer.
A spokesperson from Royal Bank of Canada said that, “several weeks ago” the bank introduced a $100,000 cap on Home Capital GICs bought through a full-service broker, although there were no limits for purchases through the firm’s discount brokerage.
Late last week, Bank of Nova Scotia said it would stop selling all GICs sold by Home Trust, but said Monday that policy was amended to a limit of $100,000. Bank of Montreal’s brokerage unit also confirmed it has a $100,000 limit on Home Trust GICs but would not say when it went into force.
Several of the banks imposed their GIC caps last week after the OSC unveiled a series of allegations, accusing Home Capital and a number of current and former executives of making “materially misleading statements” to investors.
The OSC news shook investors, but the panic was heightened as news of the banks’ moves to cap investor deposits slowly seeped through Bay Street in subsequent days, raising concerns that major financial institutions were pulling away from Home Capital.
The huge captive sales force and financial system hegemony maintained by the banks makes them a crucial force in the distribution of any financial product. This is one reason why, for instance, trailer fees are at risk of being banned, with an intermediate step of explicit, lengthy disclosure. Only the naïve would imagine that this has anything to do with investor protection; it is all about improving the banks’ competitive position even further. The Joe Blow Equity Fund doesn’t have a lot of salesmen … maybe, if they’re big enough, they have a few guys who chat up the independent distributors and have dinner with important prospects now and then. They can’t have a lot of full timers because they’re a niche product … the average salesman with maybe 100-300 clients simply will not be able to sell enough units of Joe Blow Equity to stay in business. The obvious solution is to pay the salesmen on a piecework basis, i.e. trailer fees. And now the banks, having raised their share of the industry past the critical point, have decided to eliminate this option for their smaller competitors.
Even the mechanics of distribution are subject to the hegemony. The banks own FundSERV and you basically cannot do business as an independent mutual fund producer without being a member of FundSERV. And that is a very expensive proposition … which, of course, works to the advantage of … guess who!
The banks are now doing essentially the same thing with Home Capital GICs, while weeping copious crocodile tears about their need to protect their customers. What a shame that those customers will now be more likely to purchase the Big Banks’ GICs!
Both OSFI and the securities regulators are responsible for this mess. Canadians are currently paying the price for a bloated financial system; and there is a risk that one day the whole concentrated system will come crashing down. Then we will miss the good old days of the fourth quarter of 2008!
| 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 | -0.4314 % | 2,141.6 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.4314 % | 3,929.8 |
| Floater | 3.56 % | 3.70 % | 52,515 | 18.04 | 4 | -0.4314 % | 2,264.7 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 3,028.6 |
| SplitShare | 4.70 % | 4.34 % | 69,535 | 1.61 | 5 | 0.0000 % | 3,616.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,821.9 |
| Perpetual-Premium | 5.31 % | -2.43 % | 74,134 | 0.09 | 22 | -0.0479 % | 2,783.9 |
| Perpetual-Discount | 5.07 % | 5.09 % | 108,986 | 15.32 | 14 | -0.0448 % | 3,007.4 |
| FixedReset | 4.46 % | 4.07 % | 222,934 | 6.55 | 94 | -0.4263 % | 2,323.1 |
| Deemed-Retractible | 5.01 % | 4.92 % | 139,907 | 2.67 | 31 | -0.0406 % | 2,890.1 |
| FloatingReset | 2.51 % | 3.04 % | 50,853 | 4.48 | 10 | 0.0186 % | 2,532.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PF.E | FixedReset | -1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 21.41 Evaluated at bid price : 21.41 Bid-YTW : 4.39 % |
| BAM.PF.A | FixedReset | -1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 21.88 Evaluated at bid price : 22.42 Bid-YTW : 4.45 % |
| BMO.PR.W | FixedReset | -1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 20.89 Evaluated at bid price : 20.89 Bid-YTW : 3.99 % |
| BMO.PR.Y | FixedReset | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 22.27 Evaluated at bid price : 22.78 Bid-YTW : 4.09 % |
| BAM.PF.B | FixedReset | -1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 21.48 Evaluated at bid price : 21.48 Bid-YTW : 4.38 % |
| TRP.PR.E | FixedReset | -1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 21.26 Evaluated at bid price : 21.54 Bid-YTW : 4.06 % |
| BMO.PR.T | FixedReset | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 3.99 % |
| BAM.PR.B | Floater | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 12.85 Evaluated at bid price : 12.85 Bid-YTW : 3.71 % |
| MFC.PR.J | FixedReset | -1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.51 Bid-YTW : 5.38 % |
| MFC.PR.N | FixedReset | -1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 5.91 % |
| TRP.PR.D | FixedReset | -1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 20.97 Evaluated at bid price : 20.97 Bid-YTW : 4.17 % |
| BAM.PR.C | Floater | -1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 12.86 Evaluated at bid price : 12.86 Bid-YTW : 3.70 % |
| MFC.PR.M | FixedReset | -1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.45 Bid-YTW : 6.01 % |
| TRP.PR.A | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 4.08 % |
| PWF.PR.A | Floater | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 14.60 Evaluated at bid price : 14.60 Bid-YTW : 3.23 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.R | FixedReset | 135,125 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.94 Bid-YTW : 4.15 % |
| SLF.PR.E | Deemed-Retractible | 134,196 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.68 Bid-YTW : 6.12 % |
| CU.PR.C | FixedReset | 78,297 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 21.72 Evaluated at bid price : 22.12 Bid-YTW : 3.92 % |
| PWF.PR.P | FixedReset | 76,593 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-05-04 Maturity Price : 16.15 Evaluated at bid price : 16.15 Bid-YTW : 4.01 % |
| HSB.PR.D | Deemed-Retractible | 65,750 | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-03 Maturity Price : 25.00 Evaluated at bid price : 25.34 Bid-YTW : -5.90 % |
| BMO.PR.C | FixedReset | 53,219 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.71 Bid-YTW : 4.04 % |
| There were 28 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| POW.PR.A | Perpetual-Premium | Quote: 25.62 – 25.86 Spot Rate : 0.2400 Average : 0.1628 YTW SCENARIO |
| BNS.PR.Y | FixedReset | Quote: 22.01 – 22.20 Spot Rate : 0.1900 Average : 0.1226 YTW SCENARIO |
| BAM.PR.B | Floater | Quote: 12.85 – 13.07 Spot Rate : 0.2200 Average : 0.1584 YTW SCENARIO |
| BMO.PR.Z | Perpetual-Premium | Quote: 25.55 – 25.79 Spot Rate : 0.2400 Average : 0.1792 YTW SCENARIO |
| POW.PR.B | Perpetual-Premium | Quote: 25.23 – 25.42 Spot Rate : 0.1900 Average : 0.1339 YTW SCENARIO |
| RY.PR.W | Perpetual-Premium | Quote: 25.05 – 25.24 Spot Rate : 0.1900 Average : 0.1358 YTW SCENARIO |
What a shame that those customers will now be more likely to purchase the Big Banks’ GICs
Just the opposite is my observation over the last 10-15 days: At BMO Investorline – my choice of GICs is (almost oddly) limited to EQ, Peoples, Home. CWB appeared in the last few days. BMO is only offering 1 year terms. It is as tho there is a push to spread it around.
Dont know about the retail channel.
BarleyandHops – I’m surprised that BMO only offers 1 year terms on GIC’s. I believe the other banks all offer all terms up to 5 years.
I bank at TDDI and they have 12 different institutions and offer 1,2,3,4,5 year terms and even 6,7,10 years uninsured GIC’s. TD offers the usual bank GIC’s from BNS, BMO, ROYAL, TD, CWB and also the alternatives of EQ, HSBC, CTC, Manulife, HomEquity, B2B.
What’s up with BMO?
The banks have to maintain a pretense of equitable access to their distribution channels, but will jump on any plausible excuse to restrict the competition – as they have in this case.
Up until now BMO (Investorline) has offered many GICs from many institutions …I have to watch rollovers to keep things under 100k per institution. This recent change has me somewhat worried as I wont be able to manage my 100k cap, per institution. If this does not change, I will move some funds.
My Spidey sense is that someone somewhere wanted to push funds in a few directions.
Yes I have a few GICs w/ BMO going out 1-5 years. Now the only offer is 1yr, 1yr cashable, only. Never once seen a Royal GIC at BMO (lol!).
that’s the TD offer https://fibondoneselfserve.tdwaterhouse.ca/FIP_GICLinkWeb/GICLink?language=en
Thx dodoi.
Given the rates, I had to blink if these were MMFs or GICs. They seem a tad low. However the array is good.
Just rolled over a 1yr (paid monthly – not my preference w/ Peoples but the cap had played a roll since interest is not insured) @ 1.35%. On daily MMF w/ BMO I get .75 (annual).
I long for days when I could roll over GICs at, say, 6.9%. But thats why I am here to look at tax efficient Prefs. That said some tiny bits of bonds offer some hope – better if it were not for the commissions clawed back by BMO to reduce yield. Traded a matured GIC to a AC (HY) bond spread was +3.6bsp for the same time period; and I’m okay w/ the bond risk vs the GIC. That said – I never fly AC. lol!
Interesting that BMO GICs with terms of 6, 7 and 10 years are being offered by TD Direct Investing but that there are problems with BMO.
However, I see GICs from both BMO and BMO Mortgage Corp being offered at all terms via InvestorLine, as of about 2am May 10.
My BAD!
When I roll over the GIC bits, I never (in the last six years) click the Year Tab; I accept the summary first page. By clicking on the year/term you do get a list of many options. So, I learned something.
I’m a bit less stupid now, lol! That’s why discussions are good.
THX all