{"id":21915,"date":"2013-05-06T22:17:36","date_gmt":"2013-05-07T02:17:36","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=21915"},"modified":"2013-05-06T22:17:36","modified_gmt":"2013-05-07T02:17:36","slug":"may-6-2013","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=21915","title":{"rendered":"May 6, 2013"},"content":{"rendered":"

PrefBlog’s “There’s One Born Every Minute” Department has uncovered some exciting news<\/a>:<\/p>\n

In about a week, a structured product offering, the Manulife Floating Rate Senior Loan Fund, will close.
…<\/b>
On Manulife\u2019s deal, holders are slated to receive 6.75%.
…<\/b>
It will try and achieve that 6.75% yield by investing in a broadly diversified portfolio consisting mostly of senior floating rate loans. Those loans will be at a spread above LIBOR. The sub-advisor is also allowed to invest up to 20% of the total in short duration debt securities.<\/p>\n

Given that the talk is that retail investors have committed almost $150-million to the offering, what does the success of Manulife\u2019s deal mean?<\/p><\/blockquote>\n

From the prospectus – to which I am unable to link, given CDS’ abuse of its regulatory monopoly – we learn how they’re going to make that “6.75%”:<\/p>\n

\"\"<\/a>
Click for Big<\/i><\/div>\n

The following helpful table is also provided:<\/p>\n

\n\n\n\n\n\n\n
Characteristics<\/b><\/td>\nIndicative Portfolio<\/b><\/td>\n<\/tr>\n
Average Credit Quality<\/td>\nB+\/B<\/td>\n<\/tr>\n
Average Maturity (years)<\/td>\n4.87<\/td>\n<\/tr>\n
Average Yield to Maturity<\/td>\n6.50%<\/td>\n<\/tr>\n
Option Adjusted Duration (years)<\/td>\n0.74<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Regretably, the term “Option Adjusted Duration” is not defined in the prospectus; I presume that the fact that this is much lower than the Average Maturity indicates at least qualitatively that a huge proportion of the portfolio is trading at or above its current call price. It is equally regrettable that they do not report the Option Adjusted Yield for the Indicative Portfolio. What a pity. I wonder why not.<\/p>\n

So let’s see … they’re plan to pay 6.75% p.a., after paying new issue commission a little in excess of 5% and issue expenses of somewhere between 0.3% and 1.5% (depending on how much gets sold); and after paying Management & Service Fees totaling 1.5% p.a.; and after paying expenses, estimated at between 8bp and 100bp p.a. (depending on how much gets sold). And they’re planning to do this with a low-quality portfolio of floating rate issues which could substantially called away in the next year or so, and is now yielding 6.50%.<\/p>\n

Nice work if you can get it.<\/p>\n

It was another good day for the Canadian preferred share market, with FixedResets continuing their recent pattern of being decoupled from the returns of other preferred share classes: PerpetualPremiums and DeemedRetractibles were up 5bp, while FixedResets won 27bp. Volatility was low. Volume was on the low side of average, but dominated by FixedResets.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1138 %<\/td>\n2,617.6<\/td>\n<\/tr>\n
FixedFloater<\/td>\n3.93 %<\/td>\n3.16 %<\/td>\n33,366<\/td>\n18.78<\/td>\n1<\/td>\n0.2490 %<\/td>\n4,178.4<\/td>\n<\/tr>\n
Floater<\/td>\n2.66 %<\/td>\n2.87 %<\/td>\n82,301<\/td>\n20.05<\/td>\n4<\/td>\n-0.1138 %<\/td>\n2,826.3<\/td>\n<\/tr>\n
OpRet<\/td>\n4.80 %<\/td>\n-0.38 %<\/td>\n60,481<\/td>\n0.15<\/td>\n5<\/td>\n0.0927 %<\/td>\n2,612.9<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.79 %<\/td>\n4.13 %<\/td>\n108,184<\/td>\n4.08<\/td>\n5<\/td>\n0.0235 %<\/td>\n2,965.6<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.0927 %<\/td>\n2,389.2<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.19 %<\/td>\n2.19 %<\/td>\n86,486<\/td>\n0.44<\/td>\n31<\/td>\n0.0530 %<\/td>\n2,385.1<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n4.84 %<\/td>\n4.86 %<\/td>\n179,679<\/td>\n15.66<\/td>\n4<\/td>\n-0.0911 %<\/td>\n2,688.6<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.86 %<\/td>\n2.64 %<\/td>\n242,012<\/td>\n3.53<\/td>\n81<\/td>\n0.2653 %<\/td>\n2,521.4<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.87 %<\/td>\n3.34 %<\/td>\n134,911<\/td>\n0.64<\/td>\n44<\/td>\n0.0494 %<\/td>\n2,460.9<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
MFC.PR.J<\/td>\nFixedReset<\/td>\n1.18 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-03-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.55
\nBid-YTW : 2.76 %<\/td>\n<\/tr>\n
CIU.PR.C<\/td>\nFixedReset<\/td>\n1.68 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-05-06
\nMaturity Price : 23.52
\nEvaluated at bid price : 25.45
\nBid-YTW : 2.55 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
MFC.PR.H<\/td>\nFixedReset<\/td>\n51,080<\/td>\nScotia crossed blocks of 17,300 and 25,000, both at 26.70.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-03-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.76
\nBid-YTW : 2.84 %<\/td>\n<\/tr>\n
BNS.PR.T<\/td>\nFixedReset<\/td>\n42,544<\/td>\nRBC crossed 30,100 at 25.90.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-04-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.91
\nBid-YTW : 2.53 %<\/td>\n<\/tr>\n
BNS.PR.N<\/td>\nDeemed-Retractible<\/td>\n40,499<\/td>\nRBC crossed 35,400 at 26.25.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-06-05
\nMaturity Price : 26.00
\nEvaluated at bid price : 26.25
\nBid-YTW : -5.53 %<\/td>\n<\/tr>\n
IFC.PR.C<\/td>\nFixedReset<\/td>\n36,970<\/td>\nTD crossed 22,600 at 26.75.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-09-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.76
\nBid-YTW : 2.18 %<\/td>\n<\/tr>\n
ENB.PR.F<\/td>\nFixedReset<\/td>\n35,850<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-06-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.94
\nBid-YTW : 3.36 %<\/td>\n<\/tr>\n
ENB.PR.D<\/td>\nFixedReset<\/td>\n34,594<\/td>\nTD bought 10,000 from RBC at 26.00.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-03-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.01
\nBid-YTW : 3.26 %<\/td>\n<\/tr>\n
There were 29 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Wide Spread Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nQuote Data and Yield Notes<\/td>\n<\/tr>\n
ENB.PR.D<\/td>\nFixedReset<\/td>\nQuote: 26.01 – 27.01
\nSpot Rate : 1.0000
\nAverage : 0.5581<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-03-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.01
\nBid-YTW : 3.26 %<\/td>\n<\/tr>\n

BAM.PR.G<\/td>\nFixedFloater<\/td>\nQuote: 24.16 – 24.97
\nSpot Rate : 0.8100
\nAverage : 0.5795<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-05-06
\nMaturity Price : 23.02
\nEvaluated at bid price : 24.16
\nBid-YTW : 3.16 %<\/td>\n<\/tr>\n

PWF.PR.M<\/td>\nFixedReset<\/td>\nQuote: 25.53 – 26.00
\nSpot Rate : 0.4700
\nAverage : 0.2972<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.53
\nBid-YTW : 3.21 %<\/td>\n<\/tr>\n

RY.PR.I<\/td>\nFixedReset<\/td>\nQuote: 25.45 – 25.72
\nSpot Rate : 0.2700
\nAverage : 0.1840<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-02-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.45
\nBid-YTW : 2.41 %<\/td>\n<\/tr>\n

MFC.PR.E<\/td>\nFixedReset<\/td>\nQuote: 26.28 – 26.52
\nSpot Rate : 0.2400
\nAverage : 0.1607<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-09-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.28
\nBid-YTW : 2.34 %<\/td>\n<\/tr>\n

GWO.PR.G<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.66 – 25.87
\nSpot Rate : 0.2100
\nAverage : 0.1328<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-06-05
\nMaturity Price : 25.25
\nEvaluated at bid price : 25.66
\nBid-YTW : -8.00 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

PrefBlog’s “There’s One Born Every Minute” Department has uncovered some exciting news: In about a week, a structured product offering, the Manulife Floating Rate Senior Loan Fund, will close.…On Manulife\u2019s deal, holders are slated to …<\/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-21915","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/21915","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=21915"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/21915\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21915"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21915"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21915"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}