October 26, 2018

It looks like the situation at Fortress is unravelling:

Senior lenders have moved to seize control of 13 real estate development projects co-ordinated by Fortress Real Developments Inc. as the loans mature or fall into default.

A new report from FAAN Mortgage Administrators Inc., a court-appointed receiver that took control of Fortress’s affiliated mortgage brokerage firm, says 24 of the 45 syndicated mortgage loans it is overseeing have matured but the principal has not been repaid, while 13 projects are now facing enforcement actions from senior lenders who rank first on any prospective claim.

The Globe, in the apparent belief that if it ignores the Internet it will go away, did not supply hyperlinks to the source material, but the FAAN website contains many links, including one to the second report of the Trustee dated October 23, 2018. It makes pretty sad reading, f’rinstance:

90. In addition to projects facing enforcement actions by senior lenders, the Trustee faces challenges to recoveries on the syndicated mortgage loan made to 2309918 Ontario Inc. (“Eden Borrower”). The Eden Borrower is indebted to BDMC in respect of loans made for a real estate development project in King City, Ontario, consisting of approximately 28 residential homes (“Eden Project”). These homes have been sold and the senior loans have been discharged. The mortgages in favour of BDMC have not been discharged and, to date, no payments of the sums secured by BDMC’s mortgages have been repaid. The Investors are owed in excess of $7 million (including accrued interest) in respect of the Eden Project.

91. As late as June 2018, Fortress was advising participants who attend certain periodic update conference calls hosted by Fortress that the syndicated mortgage loan secured on the Eden Project would be repaid in full within a matter of months.

92. In early July, 2018, the Trustee was advised by PACE Developments Inc. (“PACE”), the developer on the Eden Project, on behalf of the Eden Borrower, that there would be no recovery to Investors on the Eden Project, notwithstanding the communications by Fortress of full payment expressed weeks earlier. PACE advised that certain cost overruns not previously accounted for had absorbed the over $7 million payable to Investors. In light of the very concerning representations made to the Trustee and others, the Trustee engaged with PACE to obtain the financial information related to the Eden Project to undertake a detailed review of the sources and uses of funds advanced throughout the Eden Project.

93. Since July, 2018, the Trustee faced increasing pressure from representatives of the Eden Borrower, PACE and CDCM to discharge BDMC’s security on all of the homes to permit buyers to own the properties free and clear of any pre-existing security.

94. The Eden Borrower and PACE continued to insist that the Trustee discharge BDMC’s security without repayment of any of the amounts owing. When the Trustee refused to do so, the Eden Borrower threatened to bring legal action against the Trustee and also appears to have advised certain of the homeowners to seek a remedy against the Trustee.

95. As a result, on September 12, 2018, the Trustee made demand against the Eden Borrower and PACE. In addition to demanding repayment of the full amount owed to Investors and 29 professional fees incurred to the date of the letter, the Trustee demanded additional documents to explain the significant change in the Eden Borrower’s financial position over such a short timeframe.

96. While PACE has responded to the Trustee’s requests for documents, the Trustee is continuing to investigate the cause of the significant change in forecast recoveries to the Investors while pursuing remedies against the Eden Borrower.

97. Since the issuance of the demand letter on September 12, 2018, the Trustee followed up in writing seeking advice as to when repayment would be made. As no response has been received, the Trustee delivered a demand letter and a 244 Notice on October 19, 2018.

Meanwhile, in the Canadian preferred share market:

explosion_181026
Click for Big

TXPR hit a new 52-week low of 688.16 and closed down 88bp; CPD touched a new 52-week low of 13.63 and closed down 115bp at 13.72 on very heavy volume of 571,500 shares (about 14 times yesterday’s volume and a little under 5 times the highest volume of the past thirty days); and ZPR set a new 52-week low of 11.36, closing at 11.36, down 130bp on the day on volume of almost 183,000 shares (about double yesterday’s volume and the highest of the past thirty days). All “new lows” are based on the price index, not the total return index, and therefore do not account for dividend receipts.

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 -1.8802 % 3,048.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.8802 % 5,593.4
Floater 3.57 % 3.80 % 41,394 17.85 4 -1.8802 % 3,223.5
OpRet 0.00 % 0.00 % 0 0.00 0 0.0715 % 3,225.1
SplitShare 4.61 % 4.82 % 51,461 4.69 5 0.0715 % 3,851.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0715 % 3,005.0
Perpetual-Premium 5.71 % 5.71 % 65,334 14.20 12 -0.4804 % 2,872.1
Perpetual-Discount 5.66 % 5.78 % 74,224 14.22 21 -0.5937 % 2,902.5
FixedReset Disc 4.30 % 5.21 % 152,367 15.24 45 -0.9437 % 2,531.5
Deemed-Retractible 5.36 % 6.58 % 65,707 5.22 27 -0.2966 % 2,894.3
FloatingReset 3.76 % 3.92 % 44,037 5.48 4 -1.6831 % 2,764.2
FixedReset Prem 4.93 % 4.56 % 253,161 3.05 34 -0.5094 % 2,542.6
FixedReset Bank Non 3.18 % 3.92 % 87,953 0.33 8 -0.0663 % 2,576.8
FixedReset Ins Non 4.53 % 6.25 % 124,915 5.33 22 -1.0347 % 2,471.4
Performance Highlights
Issue Index Change Notes
SLF.PR.G FixedReset Ins Non -3.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.50
Bid-YTW : 8.94 %
TRP.PR.A FixedReset Disc -3.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 19.39
Evaluated at bid price : 19.39
Bid-YTW : 5.51 %
SLF.PR.J FloatingReset -2.92 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.59
Bid-YTW : 8.47 %
BAM.PR.B Floater -2.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 17.11
Evaluated at bid price : 17.11
Bid-YTW : 3.81 %
PWF.PR.P FixedReset Disc -2.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 18.30
Evaluated at bid price : 18.30
Bid-YTW : 5.19 %
BAM.PR.K Floater -2.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 3.81 %
PWF.PR.T FixedReset Disc -2.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.37
Evaluated at bid price : 23.20
Bid-YTW : 5.10 %
BAM.PF.D Perpetual-Discount -2.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 20.33
Evaluated at bid price : 20.33
Bid-YTW : 6.10 %
TRP.PR.F FloatingReset -2.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.51 %
BAM.PR.X FixedReset Disc -2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 18.14
Evaluated at bid price : 18.14
Bid-YTW : 5.40 %
BAM.PF.B FixedReset Disc -2.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.26
Evaluated at bid price : 23.01
Bid-YTW : 5.44 %
BAM.PR.C Floater -2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 17.18
Evaluated at bid price : 17.18
Bid-YTW : 3.80 %
TRP.PR.C FixedReset Disc -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.49 %
RY.PR.J FixedReset Disc -1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.49
Evaluated at bid price : 23.89
Bid-YTW : 5.22 %
PWF.PR.Q FloatingReset -1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 20.77
Evaluated at bid price : 20.77
Bid-YTW : 3.92 %
IFC.PR.C FixedReset Ins Non -1.79 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 6.25 %
SLF.PR.H FixedReset Ins Non -1.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.51
Bid-YTW : 7.42 %
HSE.PR.E FixedReset Prem -1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.99
Evaluated at bid price : 24.37
Bid-YTW : 6.02 %
MFC.PR.G FixedReset Ins Non -1.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.41
Bid-YTW : 5.90 %
MFC.PR.M FixedReset Ins Non -1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.92
Bid-YTW : 7.19 %
VNR.PR.A FixedReset Disc -1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.03
Evaluated at bid price : 24.40
Bid-YTW : 5.16 %
BAM.PR.T FixedReset Disc -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 20.26
Evaluated at bid price : 20.26
Bid-YTW : 5.54 %
BAM.PR.N Perpetual-Discount -1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 19.78
Evaluated at bid price : 19.78
Bid-YTW : 6.08 %
MFC.PR.Q FixedReset Ins Non -1.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 6.05 %
SLF.PR.I FixedReset Ins Non -1.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.45
Bid-YTW : 5.65 %
PWF.PR.Z Perpetual-Discount -1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 21.88
Evaluated at bid price : 22.21
Bid-YTW : 5.81 %
MFC.PR.J FixedReset Ins Non -1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.71
Bid-YTW : 6.12 %
NA.PR.G FixedReset Prem -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.10
Evaluated at bid price : 24.82
Bid-YTW : 5.05 %
BMO.PR.S FixedReset Disc -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.40
Evaluated at bid price : 23.27
Bid-YTW : 5.08 %
CU.PR.C FixedReset Disc -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 5.39 %
POW.PR.C Perpetual-Premium -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 24.55
Evaluated at bid price : 24.80
Bid-YTW : 5.89 %
MFC.PR.H FixedReset Ins Non -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 6.44 %
RY.PR.Z FixedReset Disc -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.11
Evaluated at bid price : 22.75
Bid-YTW : 5.01 %
CU.PR.I FixedReset Prem -1.32 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : 4.14 %
BAM.PF.E FixedReset Disc -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.76
Evaluated at bid price : 23.20
Bid-YTW : 5.30 %
RY.PR.W Perpetual-Discount -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.73
Evaluated at bid price : 24.04
Bid-YTW : 5.08 %
MFC.PR.I FixedReset Ins Non -1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.29
Bid-YTW : 6.12 %
BAM.PR.R FixedReset Disc -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 20.39
Evaluated at bid price : 20.39
Bid-YTW : 5.49 %
IAG.PR.I FixedReset Ins Non -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.99
Bid-YTW : 5.76 %
TRP.PR.J FixedReset Prem -1.27 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 4.64 %
RY.PR.M FixedReset Disc -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.38
Evaluated at bid price : 23.70
Bid-YTW : 5.11 %
TRP.PR.B FixedReset Disc -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 16.64
Evaluated at bid price : 16.64
Bid-YTW : 5.35 %
GWO.PR.P Deemed-Retractible -1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.82
Bid-YTW : 6.45 %
POW.PR.G Perpetual-Premium -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 24.34
Evaluated at bid price : 24.67
Bid-YTW : 5.71 %
BAM.PR.M Perpetual-Discount -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 6.03 %
BAM.PF.J FixedReset Prem -1.24 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.75
Bid-YTW : 5.14 %
MFC.PR.O FixedReset Ins Non -1.19 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 4.83 %
MFC.PR.N FixedReset Ins Non -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.77
Bid-YTW : 7.20 %
TRP.PR.E FixedReset Disc -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 21.50
Evaluated at bid price : 21.85
Bid-YTW : 5.40 %
BMO.PR.W FixedReset Disc -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.41
Evaluated at bid price : 22.89
Bid-YTW : 5.03 %
IFC.PR.A FixedReset Ins Non -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.54
Bid-YTW : 8.20 %
BAM.PF.F FixedReset Disc -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.43
Evaluated at bid price : 24.00
Bid-YTW : 5.46 %
CM.PR.Q FixedReset Disc -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.64
Evaluated at bid price : 24.00
Bid-YTW : 5.22 %
SLF.PR.C Deemed-Retractible -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.10
Bid-YTW : 8.69 %
BMO.PR.T FixedReset Disc -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.24
Evaluated at bid price : 23.00
Bid-YTW : 5.03 %
MFC.PR.L FixedReset Ins Non -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.20
Bid-YTW : 7.72 %
NA.PR.C FixedReset Prem -1.00 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-11-15
Maturity Price : 25.00
Evaluated at bid price : 24.65
Bid-YTW : 4.80 %
GWO.PR.G Deemed-Retractible 1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 7.00 %
TRP.PR.D FixedReset Disc 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 21.52
Evaluated at bid price : 21.86
Bid-YTW : 5.45 %
GWO.PR.T Deemed-Retractible 1.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.00
Bid-YTW : 6.86 %
IFC.PR.G FixedReset Ins Non 2.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.79 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.G FixedReset Prem 64,800 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-07-25
Maturity Price : 25.00
Evaluated at bid price : 26.07
Bid-YTW : 3.86 %
RY.PR.J FixedReset Disc 63,424 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 23.49
Evaluated at bid price : 23.89
Bid-YTW : 5.22 %
RY.PR.Z FixedReset Disc 62,710 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.11
Evaluated at bid price : 22.75
Bid-YTW : 5.01 %
RY.PR.Q FixedReset Prem 59,185 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.82
Bid-YTW : 3.99 %
NA.PR.S FixedReset Disc 58,361 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.06
Evaluated at bid price : 22.67
Bid-YTW : 5.24 %
CM.PR.O FixedReset Disc 56,898 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.22
Evaluated at bid price : 22.95
Bid-YTW : 5.07 %
There were 66 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.B FixedReset Disc Quote: 23.01 – 23.69
Spot Rate : 0.6800
Average : 0.4799

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 22.26
Evaluated at bid price : 23.01
Bid-YTW : 5.44 %

PWF.PR.Q FloatingReset Quote: 20.77 – 21.39
Spot Rate : 0.6200
Average : 0.4575

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 20.77
Evaluated at bid price : 20.77
Bid-YTW : 3.92 %

TRP.PR.A FixedReset Disc Quote: 19.39 – 19.82
Spot Rate : 0.4300
Average : 0.2735

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 19.39
Evaluated at bid price : 19.39
Bid-YTW : 5.51 %

BAM.PF.D Perpetual-Discount Quote: 20.33 – 20.80
Spot Rate : 0.4700
Average : 0.3272

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 20.33
Evaluated at bid price : 20.33
Bid-YTW : 6.10 %

BAM.PR.N Perpetual-Discount Quote: 19.78 – 20.18
Spot Rate : 0.4000
Average : 0.2888

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 19.78
Evaluated at bid price : 19.78
Bid-YTW : 6.08 %

TRP.PR.F FloatingReset Quote: 20.00 – 20.40
Spot Rate : 0.4000
Average : 0.2925

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-26
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.51 %

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