I indulged myself on February 26, complaining about sales competition from Mortgage Investment Corporations:
I have a great personal interest in this matter, as every now and then a prospective client sneers at the pathetic yield offered by preferred shares and condescendingly informs me that he can get 8%, no problem, from a mortgage investment corporation. I don’t think these guys know about risk … but then, they don’t have to! Every one I’ve ever talked to is smart enough that he’ll get out before problems become apparent to the hoi polloi.
So I’m following the Fortress receivership with great interest:
Syndicated mortgage loans for real estate projects developed by Fortress Real Developments Inc. are “under considerable stress,” and lenders could face “significant losses,” according to a new report from a court-appointed receiver.
In its first update since it was appointed in April, FAAN Mortgage Administrators Inc. said some of the largest loans provided for Fortress projects are at risk because senior mortgage lenders are moving to foreclose on the properties.
…
FAAN said it needs more time and money to do more appraisals of the projects to find the best potential outcomes for the syndicated lenders, whose loans often rank in third place or lower to those of other lenders.
…
FAAN’s update also said about 35 per cent of the money raised from syndicated lenders was used to pay “development consultant fees,” about half going to the brokers who raised the funds from individual investors, and the other half paid to BDMC in its capacity as the borrowers’ broker and to Fortress.
It’s hard to make money when 35% of your investment pays up-front brokerage fees!
FAAN is communicating well, with links to relevant material prominently displayed on the index page of their website. There are a few juicy bits in the Report of the Receiver:
Moreover, many Investors agreed to terms that permit repayment “waterfalls” that, at least in some instances, appear to permit owners of the real estate (including the borrowers and owners of the borrowers) to recover some of the amounts they invested in the developments in priority to the amounts loaned by the Investors.
…
The Trustee has been advised that many of the projects need further funding to permit developments to continue and that such funding is only available if the security interests granted to BDMC are further postponed and subordinated to new financing.
Professional fees appear to be $150,000 monthly, according to Paragraph 53 of the report. Oh, it’s a great business!
Manulife is exiting the fixed annuities business:
Toronto-based Manulife Financial Corp.‘s decision to discontinue external sales of individual fixed annuities will mean there are fewer options in an already limited annuities marketplace for clients who are seeking a guaranteed income stream during retirement.
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Manulife became one of the largest providers of annuities in Canada following its acquisition of Montreal-based Standard Life Assurance Co. of Canada in 2015, the latter of which offered a “full spectrum of products,” according to Lawrence Geller, president of L.I. Geller Insurance Agencies Ltd. in Campbellville, Ont.Manulife’s exit from the annuities business leaves a big gap. In fact, Geller says, there are “fewer and fewer” insurers offering annuities.
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In 2011, Manulife’s U.S. subsidiary, Boston-based John Hancock Financial, discontinued several annuities lines because of low interest rates and volatile equities markets. That year, Manulife’s income statement took a hit of $900 million triggered by John Hancock’s annuities-related losses.Then, in 2013, Toronto-based Sun Life Financial Inc. sold its U.S. annuities business following earlier losses for reasons similar to those suffered by John Hancock, which forced Sun Life to beef up its reserves.
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Although Manulife is exiting this space, other big insurers, such as Toronto-based Canada Life Assurance Co., Winnipeg-based Great-West Life Assurance Co. and Sun Life, continue to offer fixed annuities in Canada.
| 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 | -0.2650 % | 2,978.4 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2650 % | 5,465.3 |
| Floater | 3.38 % | 3.59 % | 71,832 | 18.31 | 4 | -0.2650 % | 3,149.7 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1911 % | 3,167.6 |
| SplitShare | 4.64 % | 4.65 % | 66,363 | 4.97 | 5 | -0.1911 % | 3,782.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1911 % | 2,951.5 |
| Perpetual-Premium | 5.63 % | -7.38 % | 62,235 | 0.09 | 9 | 0.0000 % | 2,888.8 |
| Perpetual-Discount | 5.37 % | 5.54 % | 62,408 | 14.59 | 26 | 0.0393 % | 2,971.9 |
| FixedReset | 4.32 % | 4.58 % | 149,951 | 5.69 | 106 | -0.1667 % | 2,534.5 |
| Deemed-Retractible | 5.16 % | 5.67 % | 69,669 | 5.53 | 27 | 0.2717 % | 2,957.7 |
| FloatingReset | 3.06 % | 3.72 % | 33,388 | 3.42 | 9 | -0.0698 % | 2,796.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.O | FixedReset | -1.37 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 4.37 % |
| TD.PF.D | FixedReset | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-06-25 Maturity Price : 23.29 Evaluated at bid price : 24.34 Bid-YTW : 4.72 % |
| BAM.PR.R | FixedReset | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-06-25 Maturity Price : 20.26 Evaluated at bid price : 20.26 Bid-YTW : 5.01 % |
| EIT.PR.B | SplitShare | -1.12 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2025-03-14 Maturity Price : 25.00 Evaluated at bid price : 24.68 Bid-YTW : 5.08 % |
| MFC.PR.F | FixedReset | -1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.67 Bid-YTW : 7.79 % |
| MFC.PR.K | FixedReset | -1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.30 Bid-YTW : 6.23 % |
| SLF.PR.D | Deemed-Retractible | 1.39 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.21 Bid-YTW : 7.42 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.A | FixedReset | 111,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-06-25 Maturity Price : 22.75 Evaluated at bid price : 23.20 Bid-YTW : 4.52 % |
| BAM.PF.F | FixedReset | 90,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-06-25 Maturity Price : 23.84 Evaluated at bid price : 24.27 Bid-YTW : 4.93 % |
| RY.PR.H | FixedReset | 54,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-06-25 Maturity Price : 23.04 Evaluated at bid price : 23.55 Bid-YTW : 4.46 % |
| TD.PF.I | FixedReset | 42,000 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-10-31 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 4.74 % |
| SLF.PR.I | FixedReset | 41,300 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 4.83 % |
| NA.PR.E | FixedReset | 38,400 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-06-25 Maturity Price : 22.71 Evaluated at bid price : 23.83 Bid-YTW : 4.76 % |
| There were 14 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.B | Floater | Quote: 16.75 – 17.50 Spot Rate : 0.7500 Average : 0.4816 YTW SCENARIO |
| PVS.PR.D | SplitShare | Quote: 25.22 – 25.70 Spot Rate : 0.4800 Average : 0.2865 YTW SCENARIO |
| BAM.PF.E | FixedReset | Quote: 23.00 – 23.69 Spot Rate : 0.6900 Average : 0.5333 YTW SCENARIO |
| EIT.PR.B | SplitShare | Quote: 24.68 – 25.01 Spot Rate : 0.3300 Average : 0.2004 YTW SCENARIO |
| MFC.PR.O | FixedReset | Quote: 25.90 – 26.22 Spot Rate : 0.3200 Average : 0.1937 YTW SCENARIO |
| TRP.PR.D | FixedReset | Quote: 22.54 – 23.06 Spot Rate : 0.5200 Average : 0.4010 YTW SCENARIO |