{"id":1620,"date":"2007-12-19T21:48:16","date_gmt":"2007-12-20T01:48:16","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1620"},"modified":"2007-12-19T21:48:16","modified_gmt":"2007-12-20T01:48:16","slug":"december-19-2007","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1620","title":{"rendered":"December 19, 2007"},"content":{"rendered":"

Today’s big news was the downgrade of ACA Financial<\/a> by S&P, the subject of speculation on December 13<\/a>. According to the S&P Press release<\/a>:<\/p>\n

\n

The rating actions were prompted by worsening expectations for the performance of insured nonprime residential mortgage backed securities and CDOs of asset backed securities. Based upon current stress test analysis, the details of which are being published simultaneously with this release, the affected companies may experience claims and\/or capital consumptive negative rating transitions such that their capital resources may no longer be sufficient at their respective rating levels. Another consideration in the analysis, if there is a capital shortfall, is the magnitude of the shortfall and the extent to which the company has raised or is planning to raise new capital, and the viability of that capital plan.
\n…<\/strong>
\nStandard & Poor’s will host a teleconference today at 3 p.m. EST.
\n…<\/strong>
\nReplay Numbers:
\nUS\/Canada: 1-866-455-0459
\nAll Others: 1-203-369-1259
\nReplay will expire on Jan. 16, 2008<\/p>\n<\/blockquote>\n

CIBC had this to say<\/a>:<\/p>\n

\n

Following Standard and Poor’s announcement today that it had reduced the credit rating of ACA Financial Guaranty Corp. from “A” to “CCC”, CIBC confirmed that ACA is a hedge counterparty to CIBC in respect
\nof approximately U.S. $3.5 billion of its U.S. subprime real estate exposure.<\/p>\n

\u00a0\u00a0\u00a0 It is not known whether ACA will continue as a viable counterparty to CIBC. Although CIBC believes it is premature to predict the outcome, CIBC believes there is a reasonably high probability that it will incur a large charge in its financial results for the First Quarter ending January 31, 2008.<\/p>\n

\u00a0\u00a0\u00a0 As CIBC disclosed on page 52 of its Investor Presentation dated December 6, 2007, the mark of the hedge protection from the “A-rated” counterparty (ACA) as at October 31, 2007 was U.S. $1.71 billion. As at November 30, 2007, this mark was US$2.0 billion. If the charge in the First Quarter were to be U.S. $2.0 billion (US$1.3 billion after tax) CIBC currently projects its Tier 1 capital ratio to remain in excess of 9% as at January 31, 2008.<\/p>\n<\/blockquote>\n

Exciting times for CIBC! I have previously examined their capitalization<\/a> and later compared it\u00a0to the other Canadian banks<\/a>.<\/p>\n

Morgan Stanley had another example of sub-prime related write-offs<\/a>:<\/p>\n

\n

Morgan Stanley wrote down its subprime-infected mortgage holdings by a greater-than-expected $9.4 billion and received a $5 billion cash infusion from state- controlled China Investment Corp.<\/p>\n<\/blockquote>\n

To put those numbers into perspective, have a look at the actual quarterly report<\/a>:<\/p>\n

\n

Total capital as of November 30, 2007 was $193.7 billion, including $36.1 billion of common shareholders’ equity, preferred equity and junior subordinated debt issued to capital trusts. Book value per common share was $28.56, based on 1.1 billion shares outstanding.<\/p>\n<\/blockquote>\n

The $36.1-billion figure is what would usually be referred to a “equity capital”, the rest is simply long-term subordinated debt.<\/p>\n

I mentioned Bloomberg’s story about the antics at a Californian sub-prime origination office yesterday<\/a>. They continue the series today with the story of Hayman Capital Partners<\/a> that bet against them and made a fortune. Fascinating stuff!<\/p>\n

Funny day today. Trading continued fast and furious – next Monday, Dec. 24, is the last day for tax loss selling<\/a> – and there were some very strange moves. The market was down again – with the suddenly dubious Canadian Imperial Bank of Commerce greatly over-represented in the losers’ list.<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n
Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30<\/strong><\/td>\n<\/tr>\n
Index<\/td>\nMean Current Yield (at bid)<\/td>\nMean YTW<\/td>\nMean Average Trading Value<\/td>\nMean Mod Dur (YTW)<\/td>\nIssues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n5.13%<\/td>\n5.13%<\/td>\n85,670<\/td>\n15.22<\/td>\n2<\/td>\n+0.1234%<\/td>\n1,046.4<\/td>\n<\/tr>\n
Fixed-Floater<\/td>\n4.86%<\/td>\n5.05%<\/td>\n95,746<\/td>\n15.42<\/td>\n8<\/td>\n-0.0283%<\/td>\n1,025.7<\/td>\n<\/tr>\n
Floater<\/td>\n6.17%<\/td>\n6.18%<\/td>\n123,629<\/td>\n13.65<\/td>\n2<\/td>\n+1.2416%<\/td>\n782.7<\/td>\n<\/tr>\n
Op. Retract<\/td>\n4.89%<\/td>\n3.80%<\/td>\n85,957<\/td>\n3.45<\/td>\n16<\/td>\n-0.0507%<\/td>\n1,031.6<\/td>\n<\/tr>\n
Split-Share<\/td>\n5.32%<\/td>\n5.44%<\/td>\n110,054<\/td>\n4.31<\/td>\n15<\/td>\n+0.1921%<\/td>\n1,025.8<\/td>\n<\/tr>\n
Interest Bearing<\/td>\n6.34%<\/td>\n6.85%<\/td>\n65,562<\/td>\n3.67<\/td>\n4<\/td>\n+0.2064%<\/td>\n1,054.0<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.82%<\/td>\n4.64%<\/td>\n84,952<\/td>\n6.90<\/td>\n11<\/td>\n-0.1018%<\/td>\n1,013.0<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.57%<\/td>\n5.62%<\/td>\n389,951<\/td>\n14.45<\/td>\n55<\/td>\n-0.2077%<\/td>\n913.9<\/td>\n<\/tr>\n<\/table>\n<\/div>\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Major Price Changes<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
BNA.PR.C<\/td>\nSplitShare<\/td>\n-2.4189%<\/td>\nAsset coverage of 3.7+:1 as of November 30, according to the company<\/a>. Now with a pre-tax bid-YTW of 8.52% (interest equivalent: 11.93%!) based on a bid of 17.75 and a hardMaturity<\/a> 2019-1-10 at 25.00. Compare with BNA.PR.A (6.12% to 2010-9-30) and BNA.PR.B (7.49% to 2016-3-25).<\/td>\n<\/tr>\n
CM.PR.J<\/td>\nPerpetualDiscount<\/td>\n-2.0000%<\/td>\nNow with a pre-tax bid-YTW of 5.84% based on a bid of 19.50 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
GWO.PR.I<\/td>\nPerpetualDiscount<\/td>\n-1.4216%<\/td>\nNow with a pre-tax bid-YTW of 5.62% based on a bid of 20.11 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.4143%<\/td>\nNow with a pre-tax bid-YTW of 5.78% based on a bid of 23.70 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.P<\/td>\nPerpetualDiscount<\/td>\n-1.3813%<\/td>\nNow with a pre-tax bid-YTW of 5.88% based on a bid of 23.56 and a limitMaturity.<\/td>\n<\/tr>\n
W.PR.H<\/td>\nPerpetualDiscount<\/td>\n-1.3276%<\/td>\nNow with a pre-tax bid-YTW of 6.05% based on a bid of 23.04 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.I<\/td>\nPerpetualDiscount<\/td>\n-1.2852%<\/td>\nNow with a pre-tax bid-YTW of 5.99% based on a bid of 19.97 and a limitMaturity.<\/td>\n<\/tr>\n
RY.PR.F<\/td>\nPerpetualDiscount<\/td>\n-1.1990%<\/td>\nNow with a pre-tax bid-YTW of 5.46% based on a bid of 20.60 and a limitMaturity.<\/td>\n<\/tr>\n
RY.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.1765%<\/td>\nNow with a pre-tax bid-YTW of 5.42% based on a bid of 21.00 and a limitMaturity.<\/td>\n<\/tr>\n
IAG.PR.A<\/td>\nPerpetualDiscount<\/td>\n-1.1707%<\/td>\nNow with a pre-tax bid-YTW of 5.70% based on a bid of 20.26 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.1417%<\/td>\nNow with a pre-tax bid-YTW of 5.96% based on a bid of 25.11 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.H<\/td>\nPerpetualDiscount<\/td>\n-1.0169%<\/td>\nNow with a pre-tax bid-YTW of 5.97% based on a bid of 20.44 and a limitMaturity.<\/td>\n<\/tr>\n
BCE.PR.T<\/td>\nFixFloat<\/td>\n+1.0225%<\/td>\n\u00a0<\/td>\n<\/tr>\n
FTN.PR.A<\/td>\nSplitShare<\/td>\n+1.0902%<\/td>\nAsset coverage of 2.5+:1 as of December 14, according to the company<\/a>. Now with a pre-tax bid-YTW of 3.26% based on a bid of 10.20 and a hardMaturity 2008-12-1 at 10.00.<\/td>\n<\/tr>\n
FTU.PR.A<\/td>\nSplitShare<\/td>\n+1.2618%<\/td>\nAsset coverage of 1.7+:1 as of December 14, according to the company<\/a>. Now with a pre-tax bid-YTW of 6.22% based on a bid of 9.63 and a hardMaturity 2012-12-1 at 10.00.<\/td>\n<\/tr>\n
ELF.PR.F<\/td>\nPerpetualDiscount<\/td>\n+1.5294%<\/td>\nNow with a pre-tax bid-YTW of 6.57% based on a bid of 20.58 and a limitMaturity.<\/td>\n<\/tr>\n
POW.PR.B<\/td>\nPerpetualDiscount<\/td>\n+1.5790%<\/td>\nNow with a pre-tax bid-YTW of 5.63% based on a bid of 23.75 and a limitMaturity.<\/td>\n<\/tr>\n
POW.PR.D<\/td>\nPerpetualDiscount<\/td>\n+1.9969%<\/td>\nNow with a pre-tax bid-YTW of 5.48% based on a bid of 22.80 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.K<\/td>\nFloater<\/td>\n+2.7711%<\/td>\n\u00a0<\/td>\n<\/tr>\n
DFN.PR.A<\/td>\nSplitShare<\/td>\n+2.7711%<\/td>\nAsset coverage of just under 2.7+:1 as of December 14, according to the company<\/a>. Now with a pre-tax bid-YTW of 4.71% based on a bid of 10.36 and a hardMaturity 2014-12-1 at 10.00.<\/td>\n<\/tr>\n
BAM.PR.G<\/td>\nFixFloat<\/td>\n+5.611%<\/td>\n\u00a0<\/td>\n<\/tr>\n<\/table>\n<\/div>\n
\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nVolume<\/td>\nNotes<\/td>\n<\/tr>\n
TD.PR.P<\/td>\nPerpetualDiscount<\/td>\n291,550<\/td>\nNow with a pre-tax bid-YTW of 5.34% based on a bid of 24.88 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.N<\/td>\nPerpetualDiscount<\/td>\n142,985<\/td>\nNow with a pre-tax bid-YTW of 6.73% based on a bid of 17.75 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.M<\/td>\nPerpetualDiscount<\/td>\n113,310<\/td>\nNow with a pre-tax bid-YTW of 6.71% based on a bid of 17.80 and a limitMaturity.<\/td>\n<\/tr>\n
BNS.PR.M<\/td>\nPerpetualDiscount<\/td>\n79,165<\/td>\nNow with a pre-tax bid-YTW of 5.34% based on a bid of 21.41 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.K<\/td>\nFloater<\/td>\n66,820<\/td>\n\u00a0<\/td>\n<\/tr>\n
CM.PR.I<\/td>\nPerpetualDiscount<\/td>\n66,312<\/td>\nNow with a pre-tax bid-YTW of 5.99% based on a bid of 19.97 and a limitMaturity.<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

There were forty-seven other index-included $25.00-equivalent issues trading over 10,000 shares today.\n<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Today’s big news was the downgrade of ACA Financial by S&P, the subject of speculation on December 13. According to the S&P Press release: The rating actions were prompted by worsening expectations for the performance …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-1620","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1620"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1620\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}