Canadian Chat

There is plenty of discussion going on throughout the site on various Canadian securities so this post is for creation of a “Canadian Discussion” page.

This was requested by a reader and it is easy to do so we can do it quickly.

Hopefully this will be a page for those with Canadian interest will meet up.

432 thoughts on “Canadian Chat”

  1. TWIMC, Domtar (UFS) going private, equity up debt down. They have 2 issues, both are long (’42&’44), now trading with ytm of about 6%. Looks like a buying opportunity to me 🤔

    1. Yuriy – anything to add to initial report? I do have a toe hold in the 2044 bond and the recovery was nice but it’s now time to harvest or grow.

      S&P characterizes the recent deal as an acquisition of Domtar (US) by Paper Excellence, a private (but large) Canadian company. Bonds are callable by the company, with make whole, and puttable by the holder in a change of control at 101%. S&P has them at BBB- with neg watch, the neg watch being a consequence of the acquisition.

      Looking at the merger agreement, the plan is to de-list and de-register Domtar securities in both the U.S. and Canada. There may be little if any public financial info about the company post merger.

      Is 6.75% enough in this situation?

      1. Hi, Bob.
        I believe these risks are typical for a private equity company, so each investor himself assesses how critical they are for him. Perhaps I would not get involved with this in other conditions, but today there are practically no interesting points on the market for investing capital. Since I needed to place somewhere the funds received from closing the position in T I took some of these bonds, taking into account the fact that their debt load is relatively small (by today’s standards) and the issue’s amount itself ($ 250 mln) looks like a not so big to create a real problem for the company of this size.
        Anyway this is not a “risk-free” bet and it is better to limit the max position size. Let’s see what further decisions the rating agencies will make, although it is clear that in the short term this issue cannot go significantly lower than 101, regardless of the decision taken.

  2. Cdn min rate preferreds, what a preferred ought to be.

    Preferred perfection except for the rich pricing. Table sorted by Column N, time to reset. If you own any coming up to reset soon you have your fingers crossed that they don’t get called. (BIP.PR.C announced intention to call this morning). If you own any that recently reset and was not called you are breathing a sigh of relief.

    For newbies: these reset once each 5 years, can only be called when they reset, cannot drop in coupon but can go up, and have a built-in option to go from fixed to floating rate. The universe is small and shrinking.

    This is a static sheet, meaning figures do not update. Everything is as of close of market last Friday.

    https://docs.google.com/spreadsheets/d/1dC5hVZrElXm8jg7zZivWSUBbLp3p24XcDXkuooHF_4s/edit?usp=sharing

  3. Misc Canadian ………..

    Canadian resets remain at close to a 52-week high (see ZPR) and the CA$ is close to a 5-year high. Not an especially attractive place to put new money from a U.S. perspective. If the (relatively) stronger yields attract you be sure you can live with big draw downs, so you will be around to collect those yields.

    If you have a sizeable position in CA$ preferred (or bonds, or common), you may want to consider selling CA$ futures to lock in that exchange rate. It’s close to cost-less (unless it’s a naked position) and easy to do at IBKR. CA$100k for full contracts and CA$10k for minis. Even if you bought your issues in $US on the OTC your real exposure is in CA$.

    A number of Canadian preferred have redeemed recently and it is likely more will be. Few new issues, some redemptions, and the option for financials to issue something called LRCNs (in lieu of preferred) means a shrinking universe of Canadian preferred in the long term.

    Finally, a word on the Enbridge Line 5 situation: For the benefit of Americans (Canadians will get this) the threatened closure of Line 5 by the State of Michigan is tantamount to a declaration of economic war. No exaggeration. Line 5, in relative terms, is more important to Canada than is the Colonial pipeline to the U.S. And had the Colonial pipeline been offline for months rather than days the U.S. was in for economic calamity. The closure, even for a short time, of LIne 5 would decimate the economies of Ontario and Quebec, and Alberta.

    The U.S. really needs to stop doing these kinds of things. Reminds me of the economic warfare that the U.S. was waging against the Japanese (you read that right) prior to Pearl Harbor. The confiscation of Japanese assets and the economic and shipping blockades of Japan lead directly to Pearl harbor. Sorry, but most of you learned the history backwards.

    Now, Canada is not about to invade the U.S. but the closure of Line 5 would sure be interpreted as an act of hostility. It would not lead to anything good. Geez, maybe I need to re watch Canadian Bacon!

    1. we would not want a repeat of the war of 1812.

      fortunately in 1977 America granted non-interference clause for utilities and pipelines crossing boarders for this very reason.

      1. Where did she graduate in her law class? The lure of political ego can be very strong. Few really control it well.
        Sounds like there is no real senior party planning/advise, on either side of the aisle during this Age of Arrogance. Canada is our last real friend. I lived there and would again. They have real clout here, but may not have the political will to flaunt it.
        Politicians worry about the Unwashed Masses? It’s always a wild-eyed wannabe with no real skill. It takes real, long term consensus and planning to really perform, not a slick picture and a campaign. Exactly what the uber-pros at ENB want to execute! Hell of a way to get attention. Enbridge wants to spend over half a billion dollars of PRIVATE cash on real trickle-down on joint Jobs, Infrastructure and Security and all they get is the raspberry and a threat?How sad.
        Just because you may not live in Michigan does not mean you can not send an email with your public opinion:
        https://www.michigan.gov/whitmer/0,9309,7-387-90498_90663—,00.html

        Long ENB and three prefs.

        1. just to illustrate the connection between Mich & Ont – as noted in NYT at start of covid in 2020 – 1600 nurses and health care workers crossed the border daily from Windsor (population 210,000) to work in Detroit hospitals .

  4. Regarding the fx-currency conversion place concurrently with an order at IBKR.: See below the email response I got from IBKR toady.
    Originally, I had attached margin and used this method upon placing the orders out of USD. When I had margin, it had to do with using the “advanced tab” and choosing, then approving the small lot. Soon I ended up totally in CAD.
    Eventually, I rescinded margin after I had fully invested all that cash allocation. I realized I would keep this a “pure” Canadian account and intend to keep it that way, even if base currency was USD. Of course to send monies out at some point I will have to do a manual currency transaction, and that is easy on the Account Management Screen/Client Portal where it is almost impossible to mess it up. Distribution is a couple years out for me.
    Divs still dump into CAD and are stored that way and no currency transaction needed for reinvesting. (which I just did yesterday with two new sliver additions).
    Like most things I dive into the deep end/explore then retire to a stripped down version of just what I really need. Like Grid, now I want warm water, in the shallow end with an umbrella drink and a ‘nice’ view.

    PS: I am still waiting for IBKR’s “supposed” and “coming-soon” direct investment into Sov. Bonds. No follow through yet, but I am not expecting to see it UNTIL the rates are firmly going against the Pros and THEY need liquidity chumps. For me, THAT will mark the bottom of Central Bank, secular, Global Rate Regime.
    Here’s the email reply: Keep Pushin’! Here’s to coffee! JA

    Our system reflects your account is a Cash account. Only Margin accounts can use an attached FX Hedge order. A Cash account cannot use a FX Hedge attached order because it takes IBKR a fraction of a second to see how much negative cash is in the account after the non-base currency stock order executes. Even though it would only be a short amount of time that the Cash account would be holding a negative cash balance, a loan to the account is not allowed under any circumstances. In a Cash account you will need to first execute a FX currency conversion order and then place an order for a contract denominated in a foreign currency.

    Please note any residual cash balances (less than USD 5 or non USD-equivalent) in non-base currency post currency conversion are converted automatically in base currency (USD for your account) within 2 working days at no cost for clients.

    1. speaking of currency — just FYI — CDN $ vs US$ is now at a 5 year high due to our more hawkish central bank forecast and correlation with oil prices. So good for US investors who are gaining on currency but negative for this Canuck holding US$ investments – but my US$ will allow me to go see the Tigers/Red Wings once borders open up again

      1. Last time I saw Wings in person Gordie Howe was still on the team. You think Ali had a good left hook?

        1. Craig Berube is a Canadian so this fits the forum. Jeremy Roenick said in his rookie season he cheap shotted Berube in a game. Berube said he would get him back. But that was Berube’s last year. Fast forward 12 years later as an asst coach Berube went into Roenick’s locker room after a game and slugged him in the kisser and said “I told you I would get you for that”. Roenick said he deserved it, lol…
          Ottawa Senators are my Canadian love this year. I had $2500 on their 47.5 over as my big season bet. They went on a late season 8-2-1 tear to pull over the mark, and leave the Nucks in the cellar.

        2. the “Gordie Howe hatrick” (as opposed to 3 goals in one game) was a goal, an assist and a fight. Reputed to be the strongest man in hockey in his prime – an amazing athlete and truly humble person

          1. Many an opponent tried to pick off Gordie How only to find themselves lying on the ice with a bloody nose. I don’t recall Gordie starting many fights but he sure did finish them.

  5. Just an idea for resource:
    III, Tim and Yuriy have been a real godsend to pushing into preferred in general, Canadia and IBKR.
    IF? …there is a way to help with a donation to whom ever is the organizer of the Canadian Sheets, as well as Tim’s sheets; I would be a willing subscriber. Keeping the data in an updated is an effort and a job and has really been proven with a “freebie-window” thus far that has PROVEN its merit to me.
    If there is a way that I can participate and contribute, you know how to reach me personally by email.
    Re: CA Resets: I see opp in these issues still. Also, see some close in resets being called in this environment just as in US. Seems that I have been “neutrally rewarded” in following a laddering structure that I began two years ago, but since I am NOT selling or spending today must manage the roll outs (compounding). Hopefully a neutral tactic will continue to serve as an antidote to my desire to apply a crystal-ball approach. Again, having access to this data has been fantastic and very useful.
    Thanks, JA

    1. Joe–have you seen Yuriy around lately? I can post his spreadsheet but not without his/her permission.

      1. Hi!
        I am here all the time, just more in reading mode lately.
        Tonight I will update the spreadsheets, there are several positions for which the rate has already been reset or they was called. I would be happy if they be helpful to the members of community, of course you can publish them as you see fit.

          1. Yuriy, You are gathering very good karma!
            Thanks, I have a small list of changes I will compare a few details this week. I’m trying to learn to do shorter screen times now, but still chicken scratch every corner of the yard. I am thinking we may see a few already suspect issues go down in inv grade in both countries.
            It just so happens I launched a major portfolio and reinvestment deep dive on these again. Been rewarding on market timeliness, interest rate reversion AND currency triad! Trying to wait to see if there are calls instead actual selling below pars. Yields are getting bone dry there too in the face of real inflation.
            THANKS again! JA

    2. Hi, Joel.
      Unfortunately, the number of interesting positions in the Canadian market is also steadily decreasing. I even thought about adding split companies to the spreadsheets, but I’m not sure whether it is a good idea to popularize such risky instruments. I also still hold a lot of Canadian securities (about 1/4 of the overall portfolio, both preferreds and commons), but I haven’t added anything from that market for a long time. Let’s wait, maybe the situation will change in our favor, as it was last year.
      WBR.

  6. Does anyone use a Schwab Global Account to trade Canadian stocks on the Toronto Exchange in Canadian Dollars? I would appreciate your comments. I deal with TD Ameritrade and I can only buy those stocks that have OTC symbols.

    1. David – it can be done at Schwab but it’s awkward at best. This is 2nd hand but I’ve heard the same thing from many people.

      If you really want to buy off the TSX, using TSX tickers, you need to go to IBKR. Executions are actually on the TSX, not OTC, in C$. You can fund the account with US$ but you need to convert to US$ to C$ or else you are taking C$ margin loans every time you make a buy.

      The only exception would be the 5 or 6 TSX issues that are priced and traded in US$.

      1. Bob, thanks for this note: I wrongly assumed that IBKR would automatically convert my USD to CAD when I bought a CAD issue on the TSX (which I haven’t done yet, but looked into with BEP-G (their Ser.7)).

        1. Re: IBKR:You can add an order to automatically transact the FX conversion, on any given order and it asks you to approve that action before placing the order, but it is always an odd lot and a bit of a more cost. Lately, and nicely, it has been good for my account to just plop all my usd into cad since the dollar has been in the crapper…that’s the technical term.
          I segregate all my Canadian holdings now in one account there and it has been a bit of a learning curve, not too bad since I knew exactly what I wanted to do and hold. My advice would be to, right now, sign up for and begin their papertrading account, developing the Watchlists and retrieving reports. Getting in touch with them for broker assistance with ANYthing is teeth grinding, but possible if you have no expectations on service protocols (see…I put that NICE!)
          Use their TWS platform since the online {Client Management Portal) and mobile app is like writing on toilet paper with a magic marker and mailing the order in to them. Only good to do a view in my op.
          Has been a good move for me.

          1. Good info, Joel. I do explicit US$ to CA$ conversions but if it can be automated it removes the risk of accidentally getting into CA$ margin. If you go the explicit exchange route you can do full contracts ($100k) or minis ($10k) at a very slightly higher rate. Institutional rates, so it’s great.

            Keeping all your Canadian “stuff” in one account is a good idea. That’s what I do. One account for all things Canadian; one for all else.

            Learning via the paper trading account is also a good idea. It is 100% totally realistic except that it’s not real money.

            The Webtrader platform is excellent but requires that you have at least a $100k account to access. I use Webtrader for 99% of my IBKR trades and it has become my favorite trading platform not just at IBKR but at all brokerages that I inhabit. Sometime, when I have spare time, I may learn TWS. It is a beast both in complexity and power.

        2. Bur – it’s not automatic but as Joel reports it can be set up to be automatic. News to me but it is good news.

    2. I do it in Cd$ but usually settle in USD. If I had a Cd$ balance in my account I could transact in that currency. Making purchases it isn’t too bad if you call the International Desk to transact, but working through the regular trading desk is a pain. A few issues will let you transact yourself without calling anyone, but very few. Selling, on the other hand, is very easy as you can do that unassisted. I am still waiting for an official response to my request for correcting Cd$ preferred dividends to QDI status. I hope this will come through, but in the meantime my CPA believes I have excellent documentation to justify this characterization in my 2020 returns.

      1. Whoops – my answer is in reference to Fidelity, not Schwab. The latter is on my mind because I moved my preferreds away. I find Fidelity easier on sales but basically the same on most purchases.

  7. I just can across this on Yahoo Finance dated April 21, 2020. It sounds like a new Rate Reset. but I cant find any other information anywhere:

    April 21, 2021·2 min read

    NA-PA.TO
    +0.08%

    NA-PC.TO
    -0.31%

    NA-PE.TO
    +0.53%

    +5
    /NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./

    MONTREAL, April 21, 2021 /CNW Telbec/ – National Bank of Canada (“National Bank”) today announced the closing of its previously announced offering of $500 million of 4.05% Limited Recourse Capital Notes, Series 2 (Non-Viability Contingent Capital (NVCC)) (Subordinated Indebtedness) (the “Notes”).
    Concurrently with the issuance of the Notes, National Bank has also issued Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares, Series 45 (Non-Viability Contingent Capital (NVCC)) (the “Series 45 Preferred Shares”) to be held by Computershare Trust Company of Canada as trustee for NBC LRCN Limited Recourse Trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the Notes when due, the recourse of each Note holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets in respect of the Notes, which will consist of Series 45 Preferred Shares except in limited circumstances.

    The Notes and the Series 45 Preferred Shares were issued under a prospectus supplement dated April 15, 2021 to National Bank’s short form base shelf prospectus dated August 17, 2020.

    The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or under any state securities laws, and may not be offered, sold, directly or indirectly, or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. This press release shall not constitute an offer to sell or a solicitation to buy securities in the United States.

    https://finance.yahoo.com/news/national-bank-canada-announces-closing-140900466.html?.tsrc=applewf

    1. LRCNs are debt that turn into worthless equity if the company ever defaults. They are new, as in the last couple years or so. I would not buy them if you held a gun to my head. NVCC is the same concept.

      Canada, along with much of Europe, now requires financial institutions to issue securities that effectively become worthless if the issuer ever gets into trouble. This is so the government won’t have to bail them out. The risk is totally that of the security holder.

      The concept has not come to the US yet but probably will. 100% that this is under consideration by Yellen.

  8. A Canadian miracle ……

    No, nothing to do with Sainte-Anne-de-Beaupré but rather the Canadian preferred market. Not only did a non-garbage company issue a new preferred, it is a minimum rate issue. This is the first min in something like 3 years and I never expected to see another one in this environment. But here it is:

    https://sedar.com/GetFile.do?lang=EN&docClass=9&issuerNo=00011625&issuerType=03&projectNo=03183684&docId=4918926

    Buyable on the TSE as EMA.PR.J. No OTC ticker that I know of but I would not be surprised to see one pop up at some point. 4.25% for first 5 years. Can reset higher but not lower. The company has one shot at redemption every 5 years. Investors have the option to convert to a floating rate at the same time the company has the option to redeem.

    1. PS: to access the SEDAR filing you will have to do one of those annoying verification things. It’s not me; it’s SEDAR.

    2. thanks for the heads up Bob — Emera is a very sold well diversified utility with the common yielding about 4.5% too . Currently trading at $25.35 using CDN symbol

      1. Bob,

        It might be helpful to remind folks of another minimum rate issue preferred that will be around for at least another 4+ years.

        BEP.PR.G or BRENF in the OTC market has a minimum of 5.5% (based on a price of $25). It’s priced in loonies and pays in loonies.

        The security is Brookfield Renewable Partners L.P. Class A Preferred Limited Partnership Units Series 7 and does not yield a K-1 at tax time.

        FD, I’m very long BEP / BEPC and have some BRENF.

        1. You can play on my team, Greg.

          BRENF is a wonderful issue for a Roth (or Canadian equivalent). 5.5% MINIMUM coupon as Greg said and isn’t callable again for almost 5 years. The payer is a Bermudian partnership, meaning no income tax and no withholding. It all goes to your bottom line.

          At the time I bought it, the YTW was about 8%; now, it would be closer to the 5.5% coupon. I’d like it at a lower price but otherwise it is about the closest thing to “perfect” for a tax qualified account.

          I say the same about BEP and BIP, so long as you are buying the partnership and not the corporations (BIPC and BEPC). The partnerships get you a lower price, higher yield, better tax treatment, and no UBTI.

          Just wait for the next market correction to pile in.

            1. I don’t own it, but the description on QOL says it is debt, so it can’t be QDI and would not throw off a K-1.

              1. See my post of 3:12 PM. QOL is often wrong. Need to check original sources. The prospectus is only several hundred pages and the discussion of taxes is 50 pages at most. Bathroom reading.

            2. My interpretation: The issuer is a Canadian corporation. For Canadian purposes it is treated as debt but for US purposes it is treated as equity.

              What that means, if I am correct, and understand correctly, is a) no withholding deducted on the Canadian side, and b) treated as a QDI preferred for a US holder.

              Apart of my interpretation is the issue of whether your brokerage will get it right.

              This is a Brookfield special, a real oddball designed to test the waters on tax treatment.

              QOL just looks at the “subordinated note” in the title and comes to the conclusion that’s it’s treated as interest.

        2. Am I correct in assuming that BRENF is priced in US$ and BEP.PR.G is priced in CDN$?

        3. Greg – just for FYI here is an article on CDN rate reset prefs from a couple days ago. Our Bank of Canada governor (Tiff Macklin) is a bit more hawkish on rising interest rates in next 12 – 18 months which also likely has helped this part of the market.

          What’s driving the surge in rate-reset preferred shares?
          ANDREW ALLENTUCK
          SPECIAL TO THE GLOBE AND MAIL
          PUBLISHED 2 DAYS AGO
          UPDATED MAY 4, 2021

          The prospect of rising bond interest rates combined with a bonus of several percentage points has turned rate-reset preferred shares into glamour stocks.

          Prices of rate-reset preferred shares, which pay dividends at a fixed rate until they’re reset every five years, have been soaring. And as interest rates rise, these shares’ payouts will increase as their rates reset – regardless of what their issuers’ common stocks do on the basis of sales or profits.

          Rate-reset preferred shares make up three-quarters of the S&P/TSX Preferred Share Index, which has risen by 56 per cent since hitting a low on March 16, 2020. Meanwhile, the S&P/TSX Composite Index has risen by about 62 per cent in the same period. Looking ahead, investors are pushing the prices of rate-reset preferred shares even higher in anticipation of further interest rate increases.

          What’s driving the performance of these stocks is their architecture. Every five years, they adjust their payouts to the five-year Government of Canada bond rate plus a hefty bonus of several percentage points. That varies with each issue.

          Thus, a rate-reset preferred share with a typical boost of four percentage points to the recent five-year Government of Canada bond that paid 0.94 per cent on April 26 will have a net return of 4.94 per cent. That’s the rate for five years regardless of how the issuing company does as long as it has the money to pay preferred share dividends.

          Those dividends have to be paid before common shareholders get their dividends. To be sure, dividends on rate-reset preferred shares are only paid when the issuing company has the cash. Yet, they get treated like common stock when it comes to taxes, and therefore have the benefit of the dividend tax credit, making them – depending on the holder’s tax bracket – a much more attractive investment than a fully taxed bond

          In a sense, rate-reset preferred shares are in recovery. When the Bank of Canada overnight rate, which had been at 1.75 per cent since October, 2018, fell to 0.25 per cent in March, 2020, as the COVID-19 crisis began to grip the Canadian economy, it dragged down all long-term interest rates and, in effect, rate-reset preferred shares.

          Now, the tables have turned. The market expects interest rates to rise, although there is disagreement about just when. Nevertheless, the prospect of rising bond interest rates plus a bonus of several percentage points has turned rate-reset preferred shares into glamour stocks.

          For example, Manulife Financial Corp.’s 3.80 per cent Series 17, MFC-PR-M-T +0.51%increase
          rate-reset preferred share traded at more than $22.50 for 2018 and much of 2019, then tumbled with falling interest rates below $12.50 in 2020. It has recently traded at $23.10 on the prospect of the rising five-year Government of Canada bond rate plus 2.30 per cent on the payout reset date of December, 2024.

          The bad news is that all preferred share dividends come after bondholders and other corporate obligations are paid. Moreover, preferred share issuers can call them – or redeem the stocks – on reset dates rather than pay higher dividends in the ensuing five years.

          That risk is evident in the yields of rate-reset preferred shares compared to yields of bonds and stocks. For example, BCE Inc. BCE-T +0.53%increase
          common shares, recently priced at $57.87, pay an annual dividend of $3.50 to yield 6.56 per cent. For preferreds, the BCE 4.26 per cent Series AO preferred share BCE-PR-O-T +0.61%increase
          was recently priced at $24.03 to yield 4.43 per cent. It resets on March 31, 2022. at the Government of Canada five-year bond rate plus 3.09 per cent.

          At the time of writing, the five-year Canada bond pays 0.94 per cent, so if the BCE rate-reset preferred share were reset today, it would pay 4.03 per cent – more than four times the federal bond. Meanwhile, a BCE 7.0 per cent bond was recently priced at $134.34 to yield 3.32 per cent. Clearly, yield rises with risk. But rate-reset preferred shares’ call price restrains how high their prices can go.

          In fact, Alfred Lee, portfolio manager and investment strategist at BMO Global Asset Management in Toronto, notes that 65 per cent of preferred shares are called by issuers, which then pay the usual price of $25 a share. If investors bought the share for more than the call price, they risk a loss. If not called, the shares, which are perpetual, can be outstanding for a great many years.

          In contrast, if investors bought a preferred share for less than $25, a call at $25 offers a capital gain. But even a small loss is mitigated by the fact that preferred dividends get the dividend tax credit, which makes them more appealing than bond payouts taxed as income. Investors have to balance the tax disadvantage, in the case of bonds, with tax-advantaged preferred share yield.

          But there is a catch, says Chris Kresic, head of fixed income and asset allocation for Jarislowsky Fraser Ltd in Toronto.

          “When you buy a preferred [share], you are transferring a call option to the issuer. It can take away the upside,” he says. “The investor has to price the call risk. It’s the difference between the current share price and the call price. That’s one potential loss. The other is that preferred shares, which are equity, tend to follow the prices of their issuers’ common shares. If the price of a common share goes down, the preferred share is likely to follow.”

          Looking five years ahead, James Orlando, senior economist at Toronto-Dominion Bank, says the five-year Government of Canada bond rate could be 1.95 per cent in 2026. That would make a typical preferred with a base interest of 3 per cent pay 4.95 per cent, a fact that would be noticed by issuers who could call at the usual $25 price, depending on whether they could refinance at lower bond rate interest, which would be tax-deductible as a cost of business to the issuer. Dividends for preferred shares, like common dividends, come out of profits. They are not costs.

          For rate-reset preferred share investors, the advantage of being first in line for dividends ahead of common shares needs to be balanced with the risk of the share being called.

          Your Globe

    3. Contacted TD Ameritrade to see if they could buy the stock for me on the TSE and they said “no.” So, I also hope that someone can buy it and get an OTC symbol established.

      1. David

        Are you trying to purchase BRENF (in the OTC market) on TD Ameritrade?

        The only brokerage I’m aware of in the US that will support purchases on the TMX directly is Interactive Brokers. (Which I find bizarre as the TD in TD Ameritrade refers to a bank in Canada.)

  9. Update from Canada ……

    The Globe & Mail (Toronto) runs some pretty good political cartoons. Most are good natured – too good natured by my calculations.

    Recently, in a Zoom meeting of parliament an MP (Member of Parliament, akin to a US Representative) appeared onscreen mine his coat and tie, and everything else. “Pontiac” is not a reference to the car but to the name of the Riding (parliamentary district) of the MP:

    https://docs.google.com/document/d/1FM_5X1142xhLfQu6H4cPo52f_hv9_V5ghG1wCIiWfME/edit?usp=sharing

    The undercurrent, as I see it, is that the cartoonist is using the “incident” to make a broader comment on the state of Canadian politics, perhaps a reference to the incredibly poor job Canada has done on COVID vaccination.

    You take the good with the bad.

    1. Sad but true. However what do CDN expect when our PM’s last job was as a drama teacher

      1. CB – I would have said he was a drama queen, like his mother was. But I will give Justin this: he is about the snappiest dresser you will ever see ruining (meant running, sorry) a country. That’s not just my opinion:

        https://www.amazon.com/Mr-Dress-Up-Justin-Trudeau-Colouring/dp/1696145295/ref=sr_1_1?dchild=1&keywords=mr+dress+up+trudeau&qid=1620078015&sr=8-1

        https://static.boredpanda.com/blog/wp-content/uploads/2017/11/halloween-superman-costume-justin-trudeau-canada-fb__700-png.jpg

        The photo is not a fake.

  10. Does anyone have current info on the IPL situation? By that I mean, has Brookfield raised its offer or has any new company stepped up, or has IPL found a partner to work with them on the new plant? I’ve owned this forever at $23.38. What a disaster! No one to blame but myself.

    1. Randy – last article in Globe & Mail regarding IPL from April 5th – Alberta government providing $400MM grant to IPL to assist with new complex

      Brookfield under pressure to raise takeover bid after Inter Pipeline lands $408-million grant for petrochemical complex
      TIM KILADZE
      EMMA GRANEYENERGY REPORTER
      PUBLISHED APRIL 5, 2021
      UPDATED APRIL 5, 2021

      was set to receive under a different government program.

      The Heartland complex just outside Edmonton lies at the heart of Brookfield’s bid for Inter Pipeline. The plant is overbudget and has faced construction delays, creating uncertainty that has weighed on Inter Pipeline’s share price. Management has been looking for a partner for the plant to split some development costs but so far has been unsuccessful in its search.

      The new cash grant is likely to change Brookfield’s takeover calculus. “We view this as a significant positive for Inter Pipeline as there were previously concerns about the recovery of the credits under the prior grant,” Stifel FirstEnergy analyst Ian Gillies wrote in a note to clients, adding that the updated cash grant translates to 95 cents per Inter Pipeline share. “We expect Brookfield may need to revisit its cash bid of $16.50 to $18.25 per share,” he wrote.

      The grant could also make the project more appealing to a partner by partially offsetting remaining development costs. However, analysts have argued that Brookfield is in the driver’s seat because it holds securities that amount to a 19.65-per-cent stake in Inter Pipeline. They have also argued that its bid range was fairly valued (before the recent grant).

      Yet Brookfield only has voting control over half of its position. The rest gives the company economic exposure to Inter Pipeline through securities known as total return swaps, but it is different from direct ownership. Brookfield declined to comment for this story.

      Should the grant result in a higher bid from Brookfield, it may appear that shareholders are benefiting at taxpayers’ expense. Asked about the timing, the Alberta government said Inter Pipeline’s initial application was made last November and added that the program application focuses on the project itself and does not take ownership into consideration.

      “All projects that meet the eligibility criteria will be eligible for funding under [the Alberta Petrochemicals Incentive Program], regardless of any specific ownership or shareholder situations,” Dale Nally, Alberta’s associate minister of natural gas, wrote in a statement to The Globe and Mail.

      Brookfield originally approached Inter Pipeline’s board about a full takeover last fall but was ultimately rebuffed. Frustrated, Brookfield went public with its intentions in February.

      Brookfield’s formal takeover bid is worth $16.50 a share. At this price, the 80-per-cent position it does not currently own is worth $5.7-billion, and Brookfield is willing to pay a maximum cash consideration of approximately $4.9-billion, with the remainder in shares. The offer values all of Inter Pipeline, including Brookfield’s stake, at $7.1-billion.

      Inter Pipeline’s board originally said very little after the bid was made public, but the directors have since adopted a new approach and launched a strategic review of the company.

      The Heartland facility will convert propane into polypropylene plastic pellets used for scores of products, including children’s toys. Last May, Inter Pipeline disclosed that its construction cost had jumped by half-a-billion dollars to $4-billion. The ready date was also pushed out, and Heartland is now expected to be fully operational in 2022.

      Projects like Heartland fit squarely into Alberta’s new grant program, which is designed to encourage building petrochemical facilities in the province. Alberta has ample supply of natural gas, and propane is a by-product of natural gas production. However, natural gas prices have suffered from growing North American supply over the past decade as technological progress made it much easier for producers to tap vast quantities of shale gas in the United States.

  11. EML.PRA called, a 5.75% issue that would have reset around 6%. since the five year shot up at this reset time. Another drip, another cut, death by Bula-bula.
    Say a prayer if it soothes one. This has been a brutal week of slaughter at the hands of special private, emboldened interests here and in Canadia. What’s the REAL end game and for whom? Pertinent question.
    I suppose non-voting common stock is all that is going to be left? Everything at risk? Capital Gains mined on the Big Rock Candy Mountian?
    Holding down rates artificially is NOT helping middle of the road citizens in ‘free’ countries retain their stability or a balanced social contract. This is NOT some aimless political statement, but our current accurate situation amplifying now into clarity.

    1. EML.PR.A call was a simple case. No reason for a BBB issuer to pay a 6% coupon when the going rate is probably 4 and a half. No great conspiracy here.

      One is unlikely to see many bank or insurance company new issue from Canada owing to ability to issue fake debt. Preferred are a shrinking business in Canada, which is something that should keep prices up over time.

      1. What rates would you get on lending your money to a company if rates were not managed? Eventually, the hand forms to the hammer.

    2. Joel – you could take a look at Cdn Convertible Debentures as another option – appx 100 plus trading on TSX (eg. Cargo Jet 5.25% debenture – CJT.db.d) I have a number of them along with pref shares. They took a real nose dive last year (especially the energy ones) but have all now recovered back to near par and in mean time kept paying good interest. Would have made some nice capital gains if I bought more last spring but was too nervous.

      1. Where can I read up on this type of security? Any difference between Cd/US?

              1. Will read. Overall, less in fixed income is going to “retail” (exchange traded) and even in the institutional market more is going to 144A issues. Significance is that 144A issues can’t be traded by individuals, even at IBKR.

                The retail market is shrinking and the quality is going down! One of the reasons I suggest that individual investors get acquainted with the institutional market.

                1. Bob;

                  Where would I find information on institutional issues? I always enjoy researching new information, just not sure where to start on this topic.

                  Thanks.

                  Mike Havel

              2. Article is pay walled and Outline won’t bring it up. Do you know another route?

                1. Dang, that is crazy, it is now pay walled on my end too. It wasnt when I read it, sorry about that. In summary it was 74% of all high yield bonds are now 144a. 30 years ago it was less than 1%. It basically said what you have, retail investors get the crap offerings. And now small institutional firms cant even get a sniff either of them either. They gave an examples like Carnival Cruise (or one of the big name cruise liners) who offered during early Covid an 11% secured asset bond. It was high yield but little chance of default because assets secured it. Good deals like that where big institutions would gobble those offerings up. It implied it was just going to keep getting worse unless some intervention occurs to make offerings more accessible to public.

                  1. Retail investors are being squeezed out of the high-yield bond market
                    The SEC should reform 144A regulation to prevent Wall Street streaking further ahead
                    ELLEN CARR Add to myFT

                    The secured bond is the best deck chair on a cruise ship — yet it’s the only one you can’t sit in © Jorge Delgado/Reuters

                    Ellen Carr SEPTEMBER 15 2020

                    The writer is a bond portfolio manager at Weaver Barksdale

                    Every pandemic has a silver lining. For high-yield bond investors, one upside of stressed credit markets is attractive new issuance.

                    Many companies have tapped the market for investor-friendly rescue financing. Bankers have priced deals at concessional rates, which have resulted in equity-like returns for those brave enough to buy. A three-year, first lien bond from Carnival Cruise Lines in April, for example, was priced at $99 with an 11.5 per cent coupon. It’s now trading at $112. Even paying $112, an investor would lock in 6 per cent through April 2023 for a security with almost zero loss potential thanks to its collateral protection.

                    But there’s a problem. You cannot buy CCL’s bond, because it is a private placement. Individuals can’t purchase these bonds, also known as 144As after the Securities and Exchange Commission rule that relaxed disclosure for bonds marketed to “sophisticated” investors. Only “qualified institutional buyers” can. QIBs must have at least $100m of assets under management, so even some institutions are excluded.

                    According to JP Morgan, 72 per cent of new high-yield issuance in 2020 is 144A. You might think this share dates back to the Liar’s Poker era of frenzied bond sales in the 1980s. But, as recently as 2005, private placements were only 1 per cent of the high-yield market. To reach the largest pools of debt capital, issuers had to register their bonds with the SEC, or document their intention to do so within a specified period.

                    Today 144As “for life” are 48 per cent of the market and they are likely to continue their growth as companies replace registered debt with 144A issuance. Take Tenet, a hospital company that relies on the high-yield market for much of its financing. It has five registered bonds maturing in 2025 or earlier, but only one of its six bonds with a maturity longer than five years is registered. Tenet’s treasurer, like many others, no longer needs investors like you.

                    This might not seem like a big deal. Shouldn’t individuals leave high-yield debt investing to professionals in light of its higher risk? I am a professional investor, so of course my answer to that question is yes. But here’s the wrinkle: 144A securities are sometimes at pole position in the capital structure.

                    The secured bond is the best deck chair on the Carnival cruise ship — yet it’s the only one you can’t sit in. You’ll find several offerings of CCL unsecured debt available for purchase in your Schwab brokerage account, along with its common stock. You can load up the boat with the riskiest CCL securities, but its safest investment is off limits to you.

                    Should CCL file for bankruptcy, the QIBs who bought the secured bonds will be treated like first-class passengers, rowing for safety in their collateralised life rafts, while the steerage-class unsecured bondholders fight over the company’s shipwrecked remains.

                    This phenomenon in high yield bucks a larger trend aimed at making investments more accessible to individuals. The SEC recently relaxed the accredited investor definition to permit a wider group of individuals to invest in “private capital markets”, including private equity but not 144A bonds. The recent boom in Spacs — a backdoor vehicle for initial public offerings with lower disclosure requirements — has swept up individuals, despite risks to retail investors.

                    It is obvious who benefits from increasing 144A issuance: large high-yield managers. Fund structures are becoming the only way for individuals, and small institutional investors, to invest in high-yield bonds. The SEC should reform 144A regulation to prevent Wall Street from streaking further ahead in this important corner of the capital markets. Why not let individuals invest in private placement bonds? If they’re allowed to sit in the equity deck chair, they should have the chance to upgrade to the 144A cabin.

                    Weaver Barksdale may hold interests in companies mentioned

                    This is using a different app from outline or save to pocket

              3. I have been on the 144A crusade for a decade or more. Truth is you can buy all the 144A issues you want – through a fund. Several 144A funds are almost entirely 144A issues or other issues that individuals can’t buy. Just pay the Piper, and they are safe. It’s a Government-mandated shakedown.

                No sense in that. The SEC is decades behind on securities regulation. It’s almost like the Internet never happened.

                1. There have been a few 144A issues that have sneaked through for public trading such as CBKLP and CBKPP which are now caught in No Man’s land regarding ability to trade once you own them… As I remember some of the brokerage houses that allowed you to buy these CoBank issues now won’t allow you to sell…. I own both and haven’t been interested in selling but I do remember some old discussion on here where there now seems to be no way out…… Anyone tried testing this by attempting to sell?

  12. Cnd preferred ….

    Mins and resets remain close to all time highs. As Peter says below, follow ZPF (EFT) to get a one ticker sense of the market. A number of issues have been called, something that would have been unthinkable not long ago.

    I would not put new money into the market now. Why take 3% on Sun Life or 5% on Enbridge? If anything I would be a buyer of common.

    Personally, I find decisions on sell/hold trickier. I have big cap gains and big currency gains (measured in US$) but I don’t feel compelled to sell and I don’t have offsetting cap losses to cushion the taxes. So, I hold.

    I did, however, in something of a violation of personal policy, hedge out a substantial amount of currency “risk” through currency futures.

    This from the perspective of a US domicile, buy/hold investor, with a big appetite for international diversification. This may not be you.

    1. Would agree with your thinking Bob (but of course the reverse approach for myself as CDN investor). CAD$ dipped down to about 70 cents last March with fears in market and collapse in oil but now around 80 cents which tends to be the upper limit. CDN economists are forecasting our dollar to start declining again as we continue to lag rest of world in vaccinations and uptick in covid rates across the country.

    2. Agree – they are no longer a screaming buy, but relative to what you can find in the FI-like universe, can. Prefs are still cheap. I’m a dane (with a long history as a Fixed income PM), and I had almost 45 pct. of my net worth in can. Reset prefs a month ago. Of course that was aggressive, but having lived with negative rates for 7 yrs, you know how desparate investors will get searching for yield. That will not change. Most min. resets still offer value at par – same thing with dated/retractables @4-4,5 pct. (best credits that is)

    3. Yes, an interesting situation. The bulk of my holdings go long-term in early May through June. I’ve resolved to harvest some capital gains on holdings that are up 50% or more and/or have a current yield below 5%, which is 18 out of 24 holdings; not cashing out but recouping original investment dollars. Nothing goes up forever. I’ll end up parking it in cash but it seems the best course.

  13. Congrats to everyone, that held on to or bought Canadian prefs since march – it sounds kind of crazy, but ZPR (ETF with resets) have outperformed SPY and is very close to QQQ. Most just extrapolated the last 10years of performance instead of looking at valuation and fundamentals….Now everybody is looking for “rate-up” protection and “Value” names. Maybe it’s time to take some chip of the table….

    1. ChinChin! The problem is reinvestment risk, making a string of correct decisions in a row! Yield on ZPR went below 5% a couple weeks ago. The flipping game is great when rates are down and promised to be put-down by govt. Monetization has begun and now in Ring 3 for your entertainment: Inflation. There will be breathers there too. All eyes are moving there. Above pars may go, those HSE>CVEs have been a dream!

      1. I obviously agree with Joel about the importance of inflation expectations and believe that there is more room to growth, especially for the rate-resets. I’m not a buyer at these levels, but sure I will try to keep about 15% of my portfolio in these issues. Apparently no way for me to push the sell button.
        Just see nothing to buy instead of my current holdings, everything in the market looks too expensive to me.

    2. Here is an article in today’s Globe & Mail from investment columnist regarding CDN floating rate prefs for some ideas (note: symbols are the CDN TSX) :

      Rob Carrick: These preferred shares are right at home in a rising rate world
      ROB CARRICKPERSONAL FINANCE COLUMNIST
      PUBLISHED MARCH 30, 2021
      UPDATED 1 HOUR AGO
      The forward momentum in the stock market is so strong that even preferred shares are rising with gusto.

      But there’s one corner of the preferred market that could still be undervalued – floating rate preferreds. If interest rates rise as expected in the years ahead, these floating rate shares would be especially appealing.

      Most preferred shares these days are of the rate reset variety, where the dividend is reset every five years to adjust for changes in the yield on the five-year Government of Canada bond. Floating rate preferreds typically have their dividend rate adjusted every quarter, or even monthly in the case of some BCE Inc. shares. The reference rate for setting the dividend is either the average prime rate at selected big banks or the 90-day treasury bill rate. Investors may get 100 per cent of these rates, or a portion of it.

      The longtime lameness of preferreds is captured well in the annualized 10-year total return to Feb. 28 for the S&P/TSX Preferred Share Index – just 2.4 per cent. But things have changed over the past 12 months, with the index surging 17.4 per cent. Bank and Insurance as well as regular rate reset preferreds have led the charge, and floating rate preferreds have risen as well. Still, these shares typically traded in late March at levels below their $25 issue price.

      John Nagel, preferred share specialist at Leede Jones Gable, says these floating rate preferreds may actually be more suited than some fixed rate resets to the rising interest rate environment widely expected for the years ahead. “I’d much rather have something that adjusts quarterly or monthly than I would every five years,” he said.

      Here’s an example of a floating rate preferred share issue Mr. Nagel likes right now – Brookfield Asset Management Inc. Series 2 (BAM-PR-B-T ), with a yield is 3.67 per cent based on the current prime rate of 2.45 per cent and a share price of $11.68. If prime rises to 2.95 per cent, the implied yield based on today’s share price rises to 4.42 per cent; another increase of a further 0.25 of a percentage point in prime takes the implied yield to 5.17 per cent. The formula for these is 70 per cent of average prime based on a $25 par value.

      Another example is BCE Inc. Series AB (BCE-PR-B-T) where the dividend is reset monthly using a ratcheting formula that gives shareholders a minimum of 50 per cent of prime and a maximum of 100 per cent, depending whether the shares trade just below or just above the par value of $25 (a lower price means you get more of the prime rate). BCE.PR.B now pays 100 per cent of prime and will do so until it trades over $25. The shares traded in late March around $16.05 which gave them a current yield of 3.8 per cent.

      Some other floating rate preferred issues Mr. Nagel likes include

      Fairfax Financial Series F (FFH-PR-F)
      Brookfield Asset Management Series 13 (BAM-PR-K)
      Cenovus Energy Inc. Series 2 (CVE-PR-B)
      TC Energy Corp. Series 2 (TRP-PR-F-T)
      Brookfield Renewable Partners LP Series 2 (BRF-PR-B-T)
      All of these shares have current yields that range between 3 and 4 per cent, and have traded at prices much below their $25 issue price in recent days. If interest rates turn lower because of disappointing economic news, expect these shares to drop in price. If rates go up as expected, Mr. Nagel says you’d very likely get both higher dividends and a corresponding increase in your share price.

      While floating rates have moved higher in price over the past year, Mr. Nagel thinks there’s more to come. “I don’t think anyone’s gotten excited about them yet.”

  14. TCANF – There was discussion recently on III about buying AFINO because it has a long first coupon and will show as yielding over 8% instead of its actual 7.375% coupon yield when it first goes x-div. That got me thinking of the potential for the reverse effect to potentially happen on resets such as TCANF which actually did reset on Jan 30… When TCANF goes x-div later this month, it will have a rate of 1.949% (as confirmed by TC) for the next 5 years, down from 2.263%. Given the 5 year is up from approx .41% to 1.03% now since January and rising, that might come to a shock to holders… So after owning a small 1k amount for over a year and experiencing the volatility it had been thru, I decided to get aggressive and sell this morning at 11.06 average… What the heck, it looks great on paper with TCANF showing as being up 30%+ on the day, and at this level I think current is only about 4.30% or so. It’s been an interesting experiment that turned out fine with a 22% gain… I did manage also to do a couple of trades during that time taking advantage of both buyers and sellers who mixed up translations between USD and CDN prices, but I never did jump into CDNs asI thought I might other than this one (thanks for the ride, Grid!) and EBGEF/EBBNF. I’m sticking with EBGEF.

    1. speaking of pipeline companies — Interesting development overnight with Interpipeline ((IPPLF) the chairman has retired (age 75) amidst the takeover battle with BAM . Still holding onto my shares as take over price even if raised to $18.25 (CDN) too low

  15. Mr Yuriy and others,
    Do you understand via a simple formula the Floaters that have the 50% to 100% variable in the monthly rate calculation?
    I have just spent a half hour with BAM-E as a model and on BAM’s webpage where the term is defined in words. Easy navigation: Using the link on your page then the pdf for Pref E.
    I’m good with math and of course can look it up on TSX, but I can not rationalize why these floaters have moved up so far when Prime has NOT moved at all. Can’t rationalize the 50 – 100% clause. Trying to see what the underlying factor driving these is. May come to US soon too?
    Could it be the conversion feature to the five year reset ‘dragging’ it higher?
    Signed, Perplexed, but usually pretty good at math. JA
    You may want to ignore this small universe, I would understand, but I had found good plow ground looking deeply into the splits and retractables.

    1. “I can not rationalize why these floaters have moved up so far when Prime has NOT moved at all. ”

      Expectations for Prime to move higher in the future. Market has priced in several Fed rate hikes by 2025 and BoC usually follows the Fed, or could actually lead the Fed if energy prices go higher.

    2. Floaters are either tied to 5yr GOC or prime rate. My favourites are the monthly payers two bce issues and the one bam issues.

      Have only bought them at the 10yr lows when everyone thinks yields are going to zero.

  16. TRP.PR..J to be called. Would this be considered a surprise? I just happened to notice because I own a small amount of TCANF.
    https://www.sec.gov/Archives/edgar/data/1232384/000123238421000031/exhibit991tcehybridredempt.htm

    TC Energy announces closing of $500 million subordinated notes offering by TransCanada Trust

    CALGARY, Alberta – March 4, 2021 – News Release – TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company) today announced that TransCanada Trust (the Trust), a wholly-owned financing trust subsidiary of TransCanada PipeLines Limited (TCPL), has closed an offering of $500 million of 4.20% subordinated Trust Notes, Series 2021-A due March 4, 2081 (Trust Notes), guaranteed on a subordinated basis by TCPL. The Trust Notes were offered through a syndicate of underwriters, co-led by BMO Capital Markets and Scotiabank, under the Trust’s short form base shelf prospectus dated February 26, 2021, as supplemented by a prospectus supplement dated March 1, 2021.

    The Company intends to use the proceeds to redeem its issued and outstanding Cumulative Redeemable Minimum Rate Reset First Preferred Shares, Series 13 (TSX:TRP.PR.J) pursuant to their terms, and pending such redemption, to reduce short-term indebtedness as well as for general corporate purposes.

    1. Sad but expected. This is one of the min rate issues that issuers have a strong incentive to be rid of. 5.5% MINIMUM (no upside limit) for an IG issue.

  17. More news from Canadia:
    Brookfield obviously pursuing their hostile takeover of IPL.
    Got Tender Offer letter and vote by email this AM.
    NO…go away…pursue a position on the board if that make sense to your management expertise or maybe a minority partner in Heartland. Fantastic. Step up.
    The robber is usually someone in your own neighborhood.

    1. I’ve owned IPL for a very long time and what a disaster it has been. Finally starting to see some light at the end of the tunnel. No reason for IPL to accept this offer now that Heartland is close to being finished. I would not be surprised if IPL finds another partner or sells out in a bidding war. I’ll be delighted to come out with a small loss or, if I’m lucky, break even.

  18. Here’s a CN common traded on US exchange (yes there are preferred too): PBA. IG, rock steady history of MONTHLY payouts, more entrenched in some ways than ENB, options selling available on US exchanges, at a low still, management that is TOUGH and experienced.
    Minimally, worth a put sell for a return on short term cash with very high expectation of expiration or a roll out, but get no divys. I bot common and will sell OTM calls instead. Take me out…please.
    Tee up that DD, that Ye See!

  19. Look at that bond yield jump! Wow, one helluva percentage one day move. Got one reset based on end of Feb, but like everything…got a few days to go…

  20. As a reply to MA in Sandbox on 2-20:
    MA: If you are going to research Canadians here is a link to Yuriy’s Sheets on Fixed Preferreds there, where he has included the five retractable issues labeled there. Three are IG.
    Also, research these four issues which are found on this sheet too: BPS, PR A,B,C,U. They are older (past call where there was company only retraction) hence, gone past the date where holders can now retract at par with a short notice to the company. They are not labeled as retractables on his sheet.
    Yuriy’s glorious and generous work here also links over to the prospectuses! ZAM! https://docs.google.com/spreadsheets/d/1nJTjD1H3PKvqcuntO7hL3rwI2p5-7AIBa5bplxKky-U/edit#gid=0
    If you get into it, he has produced sheets for Resets, Floats and a all inclusive comprehensive sheets too.
    I am still wondering where the fine print is buried in the ‘ACCEPT ALL TERMS’ for Yuriy’s fee? Just kidding. It has helped me ALOT!

  21. Fidelity has classified all of my 2020 Canadian preferred stock dividends as ordinary income and none of them as qualified dividend income. Based on IRS holding period rules at least a good percentage of my dividends should have qualified! I moved my accounts from Schwab to Fidelity having heard from others here that they did it right. I am very puzzled by this situation given feedback on this issue last March/April.

    Interested in hearing how others succeeded in getting this fixed for themselves! Appreciate any help anyone has to offer. I hate the idea of moving these accounts again!

    1. Tim – I cannot address the Fidelity question because I don’t have an account. I have 4 US brokerages and I have held Canadian and other foreign (“F” suffix) issues in all 4. The results as far as Canadian preferred go:

      Vanguard won’t let you buy many Canadian preferred (maybe about a third of those with OTC tickers) but once you own them they classify the dividends correctly 100% of the time.

      TDA will let you buy darn near anything and they classify dividends correctly but they didn’t do right by me with a Canadian issue that was redeemed, charging me a $50 fee and skimming about 1% on the exchange rate. I had the same issue redeemed out of 3 accounts and no other brokerage pulled this one me. So I’m done with TDA except for a few issues that only they will trade.

      Schwab misclassifies 100% of the dividends and deliberately so, so your chances of getting them to correct the classification is zero. I’ve been done with Schwab for some time.

      IBKR get the classification right without fail. But you have to buy off the TSX (an advantage to me) as they won’t trade any OTC issues with an “F”.

      If I was constrained to buying OTC I would go with Vanguard and live with the limited issue selection. Otherwise, IBKR is the clear choice, especially if you have a significant commitment to Canadian preferred. Just remember to exchange your US$ for CA$ before you buy or else you are taking out CA$ margin loans every time you use US$ to buy CA$ denominated issues. Currency exchange on the IBKR platform takes about 5 seconds once you have it figured out. If you are buying the US$ denominated ENB issues you can do that with US$.

  22. ENB offering $500 Mil US denominated Senior Floating Rate Notes due 2023 NOT to be sold to Canadians… Will be SOFR + 40 basis pts… interestingly it will pay quarterly like a baby bond but funny thing is on a quick scan, I don’t see where they mention what par will actually be… it’s gotta be there somewhere and I’m betting 1k but I don’t see it spelled out. Proceeds to refinance existing indebtedness of the Corporation or its subsidiaries and for general corp purposes. I also noticed they are rated BBB+ by Fitch – don’t know about the other majors.

    https://www.sec.gov/Archives/edgar/data/880285/000110465921024859/tm216594d1_424b2.htm#a_008

    1. 2wr, Pfffooooot! Thought that was sulphur dioxide from the sour gas distiller!

        1. Very punny, good laugh! Reminiscent of the old financial shows on PBS in the 70s and 80s when people used ‘Lampoons’.
          ENB has more offerings to consider. I am not an insurance or annuity company with short term annual IG cash set-aside liabilities to compute. I am terminal. That feat is getting more and more interesting (in a Chinese meaning).
          Suppose the Am market looked ripe for this sort of issuance.

    2. ENB new notes …..

      I wasn’t going to mention them but since you did …… these are short term notes, investment grade, at SOFR + 40. SOFR is 6 bps now so a coupon of 46 bps. No bottom stop on SOFR so coupon could, in theory, go to zero. Or negative. Do you mail ENB a check each month or do they take it off the principle? Not sure.

      These are notes, not preferred, so “par” not relevant. They are $1,000 face notes. Non exchange traded.

      Much better places for short term cash for the individual investor. For long term, I’ll take ENB common at 8%.

      1. Bob – I certainly agree there are better places for short term cash for individuals but thought it was relevant ENB chose to issue $500mil US floaters denominated with terms such as these at this time. Seems pretty opportunistic of them…
        However, I don’t understand you saying , “so ‘par’ not relevant” because ‘these are notes…. Of course it’s relevant, yes? As long as they’re callable, and these are callable, or as long as they have a maturity date, and these do, “par” is most definitely relevant. If you put an order in for 100, it sure need to know if you’re buying $100,000 or $2500 and you don’t know the answer if you don’t know what par is. Mysteriously, it seemed difficult to easily figure out from a quick looksee at the language what par is but as mentioned, I thought it had to be 1k as well….. For that matter, technically speaking, its “par” that’s not relevant for a preferred, not a note, isn’t it? Preferreda have “liquididation preferences” not “par.” Am I misunderstanding you? All no more than semantics actually I guess, but still…

        1. Question of proper terminology. They have no “Par” value. They are not equities. They are notes. They have a principal amount. No redemption except for tax event and then you get principal + accrued. No make whole.

          1. Bob, I have to take the other side of the fence here based on my understandings. Its the opposite. Bonds have a par value, as that is the redemption price.
            Preferreds are the ones that the word “par” is totally misused and misunderstood. Par is only a book value accounting term for preferreds. It has basically no meaning to a preferred buyer. This is the where “redemption price” comes in. Preferreds have a “par”, “redemption”, “issue price”, and “liquidation value”. Most times the above 4 are not the same.
            Most preferreds today are issued with a $0.01 or $0.00 par value.. Some old preferreds were issued at $100 and have an official $100 par value, but redemption price wasnt always par either. Many have redemption prices several dollars higher. But liquidation value would not be the same as redemption value either.

            1. Correct Grid–one of my pet peeves which I have given up trying to correct.

              1. Lol, Tim, yes the term has “morphed” into a total unrelated meaning. Most of the time its understood in its intentions but words can have meaning. I generally use it, too, but try if Im not lazy at that moment to wrap quotations around the word though.
                Take MNR-C… Par value is $0.01….Liquidation and Redemption price is $25.
                Take NSARO.. Par value is $100 …Liquidation is $100…Redemption price is $102.80

                1. Grid: What’s the difference between Liquidation and Redemption in this context? I had been using them synonymously and from your exchange above I clearly am wrong.

                  1. Scooting around how the language might change officially were you talking about a bond vs a preferred, I think what Grid’s saying is that not all preferreds (or bonds) a callable (aka redeemable) only at 100% of their liquidation preference amount (par amount) … Some are callable always at a premium such as NSARO while others might be first callable at a premium and eventually find themselves callable at the liquidation preference amount after a given period of time… Ignoring for the sake of this post that it’s a note, not a preferred, the first examples of sliding scale “redemption” prices that come to my mind are many of the Rily issues such as RILYH that begin as being redeemable at 25.75 then eventually decline to 25. Simple stuff I’m sure you already know..

                  2. Bur, I dont think 2WR, hit your question on what you meant. Redemption value is when the company publicly announces they are terminating the preferred at the contractually agreed upon price.
                    Liquidation value is when the company ceases to be an operating entity and closes up shop and sells everything off. Notice this is not meaning being acquired by another company.
                    Liquidation value could also in bankruptcy. I wouldnt hold my breath getting liquidation value in a bankruptcy event. Usually in this situation a thanks for playing pat on the back is most likely than any proceeds.

                    1. The whole issue of nomenclature needs addressing at some point. “Par” should be abandoned as a term.

                      To pick an nit, one should speak of “liquidation preference” not value with preferred. LP is relevant on almost every single preferred as the dividend paid is a stated percentage of the LP (not redemption price, not “par”). Common language from prospectus ….

                      “Dividends on the Series C Preferred Stock, when, as and if declared by our board of directors or a duly authorized committee of the board, will accrue and be payable on the liquidation preference amount of $25.00 per share …”

                      LP in the context of liquidation is rarely relevant. If a company does liquidate there is rarely anything for the preferred.

                      These days, most preferred have the same redemption price as liquidation preference. But many exceptions, especially among older issues. Often, the redemption price declines with time. Almost all Canadian fixed rate preferred are structured this way. As always, read the prospectus. I generally go to the FWPs rather than the 424s linked in QO as they are a much faster read.

                    2. I grok (I think):

                      – ‘Liquidation preference’ is a price set in the prospectus (it’s what many of us mean when we use the term ‘par’). The dividend is expressed as a percentage of this price.
                      – ‘Redemption price’ is what’s actually paid when the issue is called (redeemed). It may or may not equal the liquidation preference, due to further terms set in the prospectus.
                      – And if the company ever had to liquidate, ‘Liquidation price’ (price, not preference) would be what the company would pay when they liquidated the issue (if indeed they paid anything at all).

                      ?

                    3. Bur, I wont debate your knowledge! :). There is an entire underworld of misspeaks we all do in terms of terminology. Its more academic as long as we misspeak in same language, Technically I dont remember off hand seeing a preferred with an “issue price” just the liquidation preference.. As most are shoveled out at different prices anyways.
                      MLP K-1 preferreds dont issue dividends, they distribute “distributions”. All sorts of lingo like that…And dont think the brokerages are up to snuff completely either. Anytime I go hunting in my account to see if interest payments showed up, more times than not with my brokerages its not in the “interest” section where it should be, but in the dividend section.
                      For us, yes Bob, par is not a relevant or correctly used word. But accounting wise for the balance sheet Par MUST be used. Some states regulatory require a par value in the financials. Some allow $0.00, but some (last time I read anyways) require some value, thus companies choose a penny to minimize possible issues and potential litigation stemming from a higher par value.
                      One can see some unusual par values over time. For example Hecla Mining has its common and its convertible preferred as $0.25 par values.
                      Ameren has its par value at the more typical penny. But they own all the common stock of both Ameren MO and Ameren Ill. The former has a $5 par value while the latter has a zero par value.
                      The use of par and researching it several years ago was interesting, but irrelevant.

                    4. Bur – no such thing as liquidation price. In liquidation you are guaranteed NOTHING. You get in line behind all proceeding claims and when they get to your tranche you get a pro rata share of remaining assets based on LP. That could be 100 cents on the dollar, nothing or any number in between. As a practical matter, in most liquidation scenarios, the preferred get little if anything. If you have to actually look at and consider LP you are probably buying one of HDO’s recommended securities and should reconsider. Really.

                      Redemption price (or amount) is exactly as you state.

                      Liquidation preference is set in the prospectus and the dividend is usually expressed as a percent of LP, correct. LP is often often called “par” which it should not be. Despite being the most commonly used term for both preferred and bonds the term “par” is problematic as it leads to misunderstandings.

  23. I had posted my thoughts regarding IPL/BIP yesterday. I mentioned that the responsible and wider governance in Canada is reflected into corporate, even if it is just a polite and business like procedure while being steamrolled:
    Hi Joel,
    Thank you for your email and feedback. It will be passed along directly to our Management team and Board of Directors, who are committed to acting in the best interest of Inter Pipeline and all of its shareholders. Please note that Inter Pipeline did release a news release this morning that can be found on our website at the following link: https://www.interpipeline.com/news/news-releases.cfm?newsReleaseAction=view&releaseId=1376
    At this stage, the Board has concluded that accepting and recommending Brookfield’s confidential and conditional proposals would not be in the best interest of shareholders:
    Inter Pipeline is open to engaging with shareholders and others to explore opportunities to create value and the Board gives due consideration to any credible proposals for the Company. The Board is reminding shareholders that no formal offer has been made by Brookfield, and as such there is no need for shareholders to take action at this time. When a formal offer is made, it will be reviewed by the Board with its legal and financial advisors, and a formal recommendation by the Board will be made to shareholders in due course.

    1. Inter Pipeline rejected a $12+ Billion ( or about $30 CDN share) take over offer from Hong Kong Billionaire Li Kai Shing in Sept 2019 . Shing has a long history of investing in Canada and at one time was on the Board of Directors for CIBC bank. Total appx value of IPL now is only $7.1B. So the Bd of Directors have overseen a drop of $5B+ in value in about 18 months. I was not a happy camper back in 09/2019

  24. Is there something going on with the Manulife preferreds today? I own the M and the N series and they are up big like 10% on strong volume.

    1. LI, Looks like a few issues:
      four of their resets have jumped, one close to reset prob not a call target with an under 2% probable reset,
      three around 4% yield to reset and one at 4.8 to reset,
      all below par,
      low volume, close to xdiv.
      maybe someone sees the value of IG resets here?
      PLEASE do NOT tell anyone else! Everything else in in stratosphere. Consider the garbage that has been coming to the US exchanges.

      1. Thanks for your comments. Was wondering if they announced a call or something but another IG life insurance reset I own SLF-I is also up big. However, FTS-G an IG utility is doing nothing today.

        “ maybe someone sees the value of IG resets here?”

        Not me. I’ve been a seller not a buyer here.

        1. LI, Just logged on and clicked thru my watchlist of resets.
          Seems like there are other impulses up on some IGs regardless of yields.
          I’ll pare back if needed if there is absurdity, but the question is always, “Compared to What?” (By the way, that is a great song if you are looking for a YouTube jazz flashback: ‘Gotta Make it Real, Compared to What?’ I like Mayall’s version, I think the other is Les McCann?)
          Anyway, I am looking out a decade and have cash to allocate. I think the light has now found these resets and no telling what the chasers can do now.

          1. I have access to the futures market, so the alternative for me is adding to something like WFC-L/BAC-L and hedging out the rate risk by shorting the 10 year.

    2. Manulife came out with huge earnings yesterday and also issued A- rated LRCNs. LCRN’s are debt that goes away in a financial crisis. The effect of both is to strengthen the MFC preferred.

      Rates have also been inching up.

      SLF is a similar company so I’m thinking it went up in sympathy.

      1. Bob – yes both companies reported excellent 4th quarter results with common shares up over 1% on large volume today when overall TSX down 0.35%. (Manulife $48B market cap vs Sunlife $36B) . Both CEO’s provided optimistic forecasts for 2021

  25. Resurrecting an old discussion – EBBNF v EBGEF Can anybody explain why not only is EBBNF trading higher than EBGEF right now (19.50 v 19.05), it’s also bid higher as well (19.50 v 18.26)? Assuming I’ve got my facts straight, EBBNF currently has a 4.96% coupon and it resets 9/1/22 at 5 yr US Treas + 3.15. EBGEF has a lower + 5 yr US Treas reset rate of + 2.82 BUT it’s current coupon is 5.3753% AND its current 5.3753% stays in place a year and a half longer than EBBNF. So presently, EBBNF has a current yield of 6.36% v EBGEF, 7.05% and EBGEF is locked in until 3/1/24 while EBBNF, were it to adjust today, would go DOWN from 4.96% to 3.63% coupon a year and 1/2 before EBGEF even changes. How does that make EBBNF worth more than EBGEF???? The only possible rationale I can come up with is the marketplace might be valuing the higher reset rate over Treas that EBBNF has v EBGEF, 3.15% v 2.82%. But if the rally that all these issues has had it based on an accurate belief that we could be entering an era of rising interest rates, wouldn’t that .33% differential be expected to easily be absorbed by the fact that EBBNF resets 1 1/2 years earlier than EBGEF??? That’s my premise anyway – who wants to take the other side?

  26. BEPC –

    Brookfield Renewable Announces Secondary Public Offering

    February 08, 2021

    BROOKFIELD, News, Feb. 08, 2021 (GLOBE NEWSWIRE) — Brookfield Renewable Partners L.P. (the “Partnership”) (NYSE: BEP; TSX: BEP.UN), Brookfield Renewable Corporation (“BEPC” and together with the Partnership, “Brookfield Renewable”) (NYSE/TSX: BEPC) and Brookfield Asset Management Inc. (“Brookfield Asset Management”) (NYSE: BAM; TSX: BAM.A) announced today the commencement of a proposed secondary public offering of 15,000,000 class A exchangeable subordinate voting shares (the “Exchangeable Shares”) of BEPC by subsidiaries of Brookfield Asset Management (the “Selling Shareholders”). The Selling Shareholders expect to grant the underwriters a 30-day option to purchase up to 2,250,000 additional Exchangeable Shares. Brookfield Renewable is not selling any Exchangeable Shares in the offering and will not receive any of the proceeds from the offering. The offering is subject to market and other conditions, and there can be no assurance as to whether or when the offering may be completed.

    Each Exchangeable Share is structured with the intention of providing an economic return equivalent to one non-voting limited partnership unit (a “Unit”) of the Partnership (subject to adjustment to reflect certain capital events). Each Exchangeable Share will be exchangeable at the option of the holder for one Unit (subject to adjustment to reflect certain capital events) or its cash equivalent (the form of payment to be determined at the election of Brookfield Renewable).

    Barclays, J.P. Morgan, Morgan Stanley, and Scotiabank are acting as joint book-running managers for the offering.

    The offering will be made only by means of a prospectus.

    1. Never ceases to amaze me the convoluted deals that BAM puts together with all their subs – but I continue to hold a number of them and just let it ride for the long term

      1. TBH. If investors keep holding BEPC even when it trades at a premium to BEP of 25-30 pct. they are asking for it…It’s not in the interest of BAM to have such a big price difference between 2 share classes, that are economically identical.

        1. There is one difference, Peter. BEPC can be exchanged 1:1 for BEP but not the other way.

          Still, no reason for the big difference. Some, perhaps is the K-1 discount that BEP (as a partnership) generates, but a 20% difference?

          Buy BEP and put in in your Roth (or standard IRA if you haven’t figured out how to do conversions). No withholding, no tax, no UBTI.

          1. In today’s Globe & Mail — Brookfield looking at IPO spin out for $20B – BAM is definitely the CDN leader in financial engineering.

            Canada’s Brookfield Asset Management Inc. is aiming to take Clarios public that could value the car battery maker at $20 billion, Bloomberg News reported on Wednesday, citing people familiar with the matter.

            Brookfield bought Glendale, Wisconsin-based Clarios from Johnson Controls International Plc, a maker of digital solutions for buildings, for $13.2 billion in 2019.

            The Canadian firm is considering an IPO for Clarios later this year, according to a report

            No final decision has been made and Brookfield could opt to keep the business, Bloomberg reported.

            Brookfield and Clarios did not immediately respond to Reuters requests for comment.

            1. Now tonight just announced BIP is making a hostile bid for CDN pipeline company Inter Pipeline which has been struggling trying to build a new petrochemical plant near Edmonton. BIP is trying to lowball taking advantage of IPL current weakness. BAM classic strategy

              1. AHHHH…again…..just when the steadfast management has just entered the light. In this case f BIP!
                Money men do not build anything, they raid like Vikings just when the crops are coming in.
                The management at IPL or IPPLF has done a magnificient job, just to become a target? These guys are ROCK STEADY. Keep the present management.
                I know IPL was looking for a minor partner at Heartland, so encourage them to do just that.
                Here is IPL’s contact info, call and email to REBUFF BIP and support their shareholders: DO THIS!
                https://www.interpipeline.com/contact.cfm
                Unlike The US, they will probably contact you back, even by phone.
                AZP all over again. Nothing left for us bums when the strippers show up.

            2. CB,
              So many things related in the world, have to see what is happening. Batteries can be a dirty low margin business.
              A year ago the market fell out of the battery business. People cut way back on driving so no demand for new batteries, hence no demand for Pb so price for it fell below cost of what the “battery Breakers” needed to get above cost of recycling for the Pb and getting rid of non-recycle material. So no demand low price. Now people are driving more and finding out they need to replace their battery so great time to be selling batteries and good time to get rid of a low margin business.

            3. Typical Brookfield. Buy good assets that aren’t loved at the time, or aren’t well managed, or the seller is distressed or otherwise motivated. Then, wait until it’s loved, fix the management issues, recapitalize, and sell off part at a considerable profit.

              It’s a simple formula but few actually do it. And it isn’t destructive of value like what all the hedge fund people do. BAM isn’t an asset stripper. But they do make money for their shareholders.

              BAM started with 2 guys, some name recognition, and about $10 million in capital.

          2. Agree Bob. Spread should not be zero – maybe 5-10 pct. at most. As I’m danish (and pay high taxes no matter what), I’m really not an expert of all the K1 issues etc., but in general I believe 3 things are driving this:

            1. ETF’s – BIPC/BEPC are included in more indices, resulting in more ETF-buying. Free float in specially BIPC is low relative to BIP.
            2. Retail investors. Sorry, but a lot of inexperienced investors have entered the market and a making “strange” investment decisions. Including putting way to much focus on tax issues etc.
            3. Momentum. If something goes up in a strange line, it attracts more “investors” for the ride.

            I was lucky to put on long BEP&BIP vs. short BIPC/BEPC trades at the start of 2021 (BIP/BIPC @45 pct). Could have gone either way as there are obviously very few grown ups around. But this time I was lucky. Have now closed BEP/BEPC but still holding BIP/BIPC hoping that BAM will sell some of their shares. Only good thing you can say about these markets are, that there are opportunities out there, where you have a decent chance of making money – Without taking too much outright market risk.

      2. Complex they are but to my eye they are complex with a purpose. Creating the two classes of “stock” with BEP/C and BIP/C was brilliant. BAM pay a lot of attention to taxes and to shareholder preferences. They deliberately don’t accrue UBTI because of the problem that creates for qualified accounts.

        Many U.S. MLPs and LPs should study what BAM did but I suspect most will not.

        One more reason for BEP to trade rich relative to BEPC that I didn’t mention in another post has to do with institutional investors and index funds. Most cannot or will not include partnerships, so they have to go for the corporate entities. BEPC is likely to always trade at a premium to BEP but the spread should bot be 20-30%.

        1. Hadn’t seen this post when i replied to your other, but yep. Only mistake they made was that they underestimated the interest for BIPC to begin with. But BAM still holds quite a few BIPC’s. Would be a no-brainer to sell them and buy back BIP. At least to my knowledge – nothing keeps them from doing that.

  27. Thoughts on Canadian preferred as of Feb 6 …..

    I am not a buyer. Prices on min rates, fixed and resets remain at or near 52-week highs and in many cases all time highs. Yields in some cases remain attractive viewed in isolation from price risk but the price risk to the downside is considerable. So, overall, I don’t like the risk-reward proposition.

    Neither am I a seller. For me, it’s a buy and hold portfolio and except for some tax selling I have sold nothing and what I did sell was simultaneously swapped out for other issues. Exposure remained unchanged.

    Currency: since the March meltdown, the CA$ has appreciated almost 14% against the US$. Readers may recall me saying in the past that currency risk is also known as currency diversification. The last 11 months have shown why this is the case.

    Hang tight would be my advice. There will be better buying opportunities for preferred ahead. Canada is doing a terrible job on COVID vaccine and the possibility of another market meltdown is there. Much higher possibility than the U.S. Even the Trudeau loving Globe & Mail has made an issue of the problem:

    https://docs.google.com/document/d/1362A35mRQD9_X6NmEgoyPeI7tBIApHpijNHU-ABE9PQ/edit?usp=sharing

    The fellow depicted is PM Trudeau.

    And don’t forget common shares. Relative to preferred, I would go for the common for most Canadian companies. Especially such dividend stalwarts as ENB, BEP, BIP, the banks, the insurance companies, PPL, etc.

    1. always enjoy reading your insights Bob and concur with your comments on Trudeau’s lack of direction. Luckily CDN are more accepting of wearing masks and limiting social contacts (haven’t seen our grandkids face to face who are only 25 mins away for 8 weeks due to Ontario lockdown). CDN companies in a number of industries have the benefit of being an oligopoly which leads to almost guaranteed profitability. In addition to your excellent choices would add TFII (trucking) and some forestry companies with strong housing markets in both US and CDN.

  28. Bob-in-DE, I read an old post of yours indicating that BEP was going to be issuing a security that would not have a K-1. Was it ever issued? I can’t seem to find anything on it. Thanks

    1. Alan – Are you thinking of BEPC? Same mirror imaging happening with BIP and BIPC.. Both C’s trade at premiums to the Ps because of the structure, but recently, the premium has been narrowing…..

    2. Alan – short answer is BEPC. Economically equivalent to BEP but it’s a corporation so no K-1. But compare the prices. BEPC sells at a much higher price than BEP.

      If you are a US person I would suggest you buy BEP and hold in a qualified account, ideally a Roth. No withholding, no tax, no UBTI, just lots of income/growth. The K-1 doesn’t matter. It’s a forever hold.

      If it’s for a non-qualified account, and you totally hate K-1s, and don’t mind the higher price, buy BEPC. No K-1 but you have 15% withheld, which you can claim as a credit against US tax.

  29. LWSCF, Sienna Senior Living, took a hit possibly because of Covid-19.
    I’v held this security for several years but since I live outside of Canada
    I do not have the latest information.
    Has anyone on this forum researched or own this security?

    Thanks

    1. Jackson – CDN nursing homes have been ground zero for Covid 19 deaths and there has been a huge outcry against for profit nursing homes not adequately protecting the residents. The whole sector has taken a big hit and Sienna would be part of this group. There will be much higher operating costs for PPE and already some class action lawsuits being started by families. A sector I would be cautious on .

  30. I want to express my gratitude to Yuriy for his sharing here and the free tools he has shared. Also, the Canadian Club (pun intended), who know whom they are, that has lent support. Straight, no chaser.
    Ul-TIM-ately, our tireless Instigator of Research here at III for the format and framework to interact freely…with individual responsibility and respect.
    It has made all the difference for me in the thread of my just having turned 63. I have made a point to go back and show my appreciation to a few who were, perhaps unwittingly, important mentors to me along the way. I hope to send out a few good ripples too.
    JA

  31. My Initial opinion of buyout at Atlantic Power: NAY.
    Private money chasing established, contracted green energy projects is entirely in vogue, now that the problems have been resolved and current management has effected a good stabilization with cashflow improving the current balance sheet. I reported this here back about two months ago.
    Now the silver spoon rich boys want to play TakeOver of real assets with their access to paper and equity conversions, below par but a slight permium…That’s not good enough for their bragging rights and payola.
    Sure it’s legal, the Board needs to vote NAY.
    Contact management:
    Investor Relations Contact:
    (617) 977-2700
    info@atlanticpower.com
    The docs are old, merged prospectus and I have not read them yet, but NOTHING will be left for us plebeians soon. The management is doing the WRONG thing. This is Yield RALLY why the rates are allowing assets to be massively privatized…except the equity and the secondhand debt marked at super premiums left for the lower tranches. The common men have no defense left, but are supposed to make it on their own? BS

    1. Didn’t pass my due diligence, it’s just me and everyone has a different risk profile, maybe 20 years ago I would have bitten.

    2. Joel – there is talk on another CDN site I follow about a possible counter offer for Atlantic. It noted some interesting trading going on right now which could signal a higher offer coming. I sold one pref but still holding the common and other prefs . Stay tuned !

      1. Good to hear. I called and emailed. The AZP Board had just pulled out of the tunnel and into the light with good old pragmatic management over the last few years. I own no common though. The reset shot up to the $22 target of course.
        Re: My Study of Splits:
        I suppose this is a good place to mention this regarding my deep dive into Split Shares without a lot of explanation on the underlying mechanisms by the issuers (prospectus exam).
        If I had to make a play, it seems that the sector is the first view. I am a value and reversion kind of guy and have been bullish on oil, so I chose to dive into OSP Brompton’s offering for a study. By the way, I found two gems in the portfolio: Gibson and Parkland that I did not know about!
        After it was all over and I had a good grasp of what the management could put the holder through (and that is important, like re-allocating the income stream!), I came to understand it as a possible tool for owning BOTH, equal number and paired, the common and preferred AFTER a deep value of crash scenario of a POOL of targeted sector assets. No matter how the management reallocates, you win and let them manage the call selling in Canada on a large number of stocks. A fairly conservative approach to great companies.(Basic rationale).
        In OPS case it was a combined pricing I have been monitoring of OSP at $0.76 paying 0% and OSP.PR.A at $6.76 paying 9.5% = $7.52 or 8% yield on combined pair.
        Current combined now = $1.57 + 6.99 = $8.56 to yield = 6.7% with a $1.04 sh term cap gain = 13.8%.
        I took a small position like this because I have found that it makes me really want to study and get the numbers correct. I am overweight and like oilys and CN Oil. I am doing this from memory now, but these are fresh numbers. So more work and seems to be best tactic in a bottoming or crash environment if only their bank/lifeco: LBS/LBS.PR.A pair would crash!
        Not all of the story here. Points to ponder. JA

        1. Thanks for sharing your research, Joel. Went and looked at the OSP chart. Any idea why the spike from $0.50 to $1.95?

          1. Bur and Buck,
            Possibly the CVE merger marking a bottom/confidence?
            Deep value on the good pool of assets where a small volume can create a spike? The largest volume day recently was only about 50,000 shares or $50,000 – $100,000.
            The tough, persistent management of these companies? I would not want to play poker with this crew. I get the feeling that the culture outside of our Cowboy Wall Street has already guided some sensible, generational pragmatism into the management of these companies. To them , it’s a very long term game. My Dad used to ask me, “who ya hanging out with these days?”
            PS: Wall Street was apparently named for a fence that was erected for the driving of herds into the city…for slaughter.

            1. Joel – doing some weekend reading and came across an interesting play if you really like Enbridge as a pipeline company. There is a new “split share” vehicle which just came out in November with a common and preferred option (as per usual with CDN split shares). The common is ENS (ENSRF for US trades I believe) -it is yielding little over 13% and will give a leveraged return to ENB. The preferred shares may only trade on TSX (ENS.Pr.A yielding about 5.75%) . I cannot comment on risk etc but only put this out for higher risk investors with a bullish view on ENB in 2021.

        2. Joel -you have definitely done some great number crunching ! I have common in both Gibson & Parkland and road the CDN oil sector down and did some dollar cost averaging when at the low point. Took some big hits on oil sector convertible debentures (a lesson learned on my part) when I thought they would be less volatile. Good luck!

  32. Well, It’s happening, as I suggested it might.

    Pembina, aka PPL, has announced its intention to redeem 2 min rate issues when they become redeemable, which is soon. The issues are PPL.PR.K and PPL.PR.M. These are issues that investors love, because of the min rate feature, and companies want to be rid of, for the same reason. Both issues have 5.75% min rates. 5.75% minimum coupon from a strong company!

    Back in March/April, when these issues were trading at 14 and change I offered the thought that min rates could be redeemed notwithstanding the fact that most were trading (at the time) well below redemption price. sadly, it’s happening. Hell, Rida should be working for me!

    PPL has 3 other min rate issues outstanding but all have lower min rates and in any event can’t be called for another 2+/- years.

    I’m afraid the ship has already sailed on the min rates. With the exception of 4 BPO issues there is no meat left to pick off the bone. BPO is a spec buy in my mind. It’s Brookfield, almost all trophy properties, but highly leveraged and lots of exposure to offices and retail. Is the 6%+ yield worth the risk? Maybe. But they were much nicer at 10%+ earlier in the year.

    My hands are in my pockets.

    1. Luckily I’ve got one of the later PPL issues, the “G” series. I bought most of my Canadian issues in the 2nd quarter of 2020 and they’ve had an amazing run-up in value, making it difficult to actually purchase more when they’re at 12-month highs. If you ignore that factor, there are still yields over 6% on investment grade companies. I really bought these as a long-term income producing investment, not for capital gains, so am hoping your overall prediction does not prove out.

    2. Bob for what it’s worth you may want to take a look at Aimia pref’s (AIM.pr.A and C ) both are yielding over 8% and Aimia has been a turn around company since Mittleman brothers took over the helm. There is info too on SA under symbol GAPFF. Higher risk but if you have a DB pension like I do I’m comfortable looking at situations like this

        1. Greg those are the ticker symbols on the TSX sorry don’t know the US version symbol if there is one.

      1. CB – since most readers here are U.S. I have chosen not to follow (or discuss) anything unrated, rated lower than BB (sole exception Altagas), or split shares. Aimia is an “interesting” company to be sure.

        1. Gotcha Bob – makes sense re: unrated securities. Also although I’m a retired boomer I believe my risk appetite is higher than most readers.

  33. I’ve been following the discussion here for a while and check in on Prefblog now and then.
    Are there literally never going to be new Canadian Rate Resets ever again? It sure seems that the banks and larger, higher quality issuers of the past have now abandoned them.

    1. New issue Canadian resets ……

      In present market conditions you are almost certainly not going to see any min rate resets and odds of new straight resets are low. Last min rate issued was March, 2019 and last reset was May, 2019.

      Resets and especially min rates came out when it was hard to raise capital and the issuers had to throw in an extra to sell it. Not the case any more and issuers now have other, lower cost options, especially the financials.

      Grab them when they are well priced (which is not now).

      U.S. issues that have adopted the 5-year reset model have done so without either a min rate or the option to convert to a floating rate. Thus they are far less attractive than Canadian issues, which have one or both of these features.

      Above discussion excludes low rated issues, split shares (don’t ever buy spit shares) and a few issuers I don’t follow.

        1. Bur I can comment from my experience as CDN investor.
          Split shares are a creation by investment firm where they buy a pool of companies and then offer the pool as either a common share basket or preferred share basket. (so similar to an ETF with an ongoing management fee) Most CDN financial reviews I’ve read warn against the common share version but if you are looking for income they view the pref version as an alternative to pref ETF’s.
          I’ve had two of the pref version for a number of years and both are still paying over 6% – LFE.pr. B (Cdn insurance co.) and PIC.pr.A ( Cdn banks). They took a big hit in March but are now back to near 52 week highs like a lot of other prefs. Just my two cents worth of info

            1. Bur – for more info on split shares I’ve attached below is a description of the PIC.pr.a stock screen in my brokerage account. PIC.a is the common shares and the dividend is based on capital gains growth over time whereas the PIC.pr.A version I hold is the dividend stripped off the common shares. So basically you’d buy the regular PIC.a if you thought CDN banks were going to go up in value but for steady income I opted for the PIC.pr.A. They expire after 5 yrs but when this happened the company just rolled them over for another 5 yr term.

              Premium Income Corporation is a split share company. The Fund’s investment objectives are to provide preferred shareholders with cumulative preferential quarterly cash distributions of $0.215625 per share; provide Class A shareholders with quarterly cash distributions of $0.20319 per share, and return the original issue price to holders of both preferred shares and Class A shares upon windup of the Fund. It invests approximately 75% of its net asset value (NAV) in common shares of the Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and The Toronto-Dominion Bank (collectively, the Banks) and may also invest up to 25% of its NAV in common shares of National Bank of Canada. In addition, the Fund may purchase public investment funds, including exchange-traded funds and other Strathbridge Asset Management Inc. (Strathbridge) funds that provide exposure to such common shares. Strathbridge is the investment manager of the Fund.

              1. CB and re: splits in general: (PLEASE! read the prospectus. The large print giveth…)
                – Use call writing
                – Have a convoluted retraction which provides the holder little value, but it sounds great
                – Management can change contract and divy formula at time of reset
                – Pref can end up (and some currently DO) paying the fees of the fund
                – Is good, or better, when the underlying is doing well
                – More details too.

                1. Joel completely agree with you they are very convoluted investments and I didn’t mean to imply I was recommending them (rather just providing some background info). As a DIY investor I try to read up on investments from various sources and this site is EXCELLENT! The CDN pref market is very small with limited options – I read in some CDN finance newsletters about split shares and they were generally not recommended – there was some support for the pref version but as you noted those too have risks. I only touched the split shares pref version (a small holding) based on CDN banks and insurance companies for peace of mind. As you say do your own due diligence to ensure it fits your comfort level

      1. Bob, one just never knows. You were concerned a month or two ago they were not a good buy then, and I just cashed almost 20% on Enbbf for a short hold flip. Its getting harder though isnt it.

        1. Grid – the “advice” has to be generalized given the audience and the number of issues and issuers involved. Those with experience in the Canadian marketplace can and should make their own calls.

          But to generalize again, there just isn’t much room for Canadian preferred as a group to move higher. Most are near 52-week highs, if not all time highs. Lots of room to the downside. To most, I say wait.

          If you are brave the best long term play right now is BPO. BAM is buying up the minority and shares, in time, should trade at comparable yield to BAM. Right now, they are well above. Arguably, free money.

          Short term trades can be good if you stay glued to the trade screen but really require IBKR to get the execution needed for such trades. Itra-day volatility can be high and bid-ask can be wide, even on high volume issues, which is just what you want in a day trading environment.

          1. Im just playing with you Bob….I always appreciate your comments. Even though they dont help much because we already think in a similar manner! Though I agree with you here its from a slightly different angle. To me the problem isnt they are near 52 week highs. As in years past they have been significantly higher than past 52 weeks.
            The problem to me is they are currently in “no mans land”. The 5 yr Tbill trades off the short end of yield curve not the long end. This is an asymmetric advantage given to the issuer, as these are perpetual issuances. If Govt is determined to keep a lid on short end, the 5 year wont move nearly like the 10 or 30 can. One can see that occurring already with the different price movements of 5,10, and 30 in recent weeks (widening spread).
            Start extrapolating a 5 yr reset date in 2021 or 2022 with even a 1% five year, and the reset yield is not that exciting in relative terms for the issues I track anyways.

          2. you are so right Bob and thanks for mentioning BPO prefs earlier this year. My R and I version are up about 14% since Nov 30th after BAM announced bid for BPY. If border ever opens up I will treat you to a “double double” at one of our 3 Tim Hortons in our small town in SW Ont.

          3. I would agree with you Bob. I sold my BPO.A on the announcement, but have not sold others ‘preference share’ that have good gains, but I do have a few open sell limits if I can get some plum-reachers; otherwise I am willing to hold and gather coupon rate. I have open buy limits as well and just wait. Shhh, we’re hunting pwee-ferds!
            I have done a good deep dive into the Splits and see the basic game is to peg the common and the preferred together. The contractual terms for retraction seems appealing but are “rigged” to the management’s terms. One should not bite on these until they have done a large study of the prospectus. There is more to know as the rigging, as I call it above, is a complex variation as a sailboat to a clipper ship. There is only one scenario I could imagine holding these myself, that is narrow and a judgement call to be made on an individual basis.

  34. Mr Yuriy,
    I see that you added a credit rating on INE recently. Nice.
    Along that same line of debt and caution, I might add that that there may be reason for a mental rating on Brookfield Office/Properties as well as their four other American listed securities. The perceived “trouble” that surrounds REITs in general right now IS reflected in the discounts given to the prices in BPO/BPY’s prefs, but there may be more than that, even with their incredible parent and international spread.

  35. ZERO COUPON PREFERREDS? or Fun with Prefs:
    Yep, take a look at BPO and BAM’s floaters at 70% of Prime x $25 par. Prime equals zero and is SUPPOSEDLY set by inter-bank loans? All speculation on interest rates. The instruments are getting volume and have climbed approx 25% this year with no yield. Someone is playing the fish.
    Can prime go negative? How would THAT look.
    Fun, fun times scratching in the chicken yard this morning.

    1. Correction I see now that Prime in Canadia = 2.45%, so 70% of that does offer a yield of 1.7%. I must have been up too early as the computers had deferred to 0% before the posting of the most recent rate at market open. I wondered how that was possible,,,well more coffee first.

      1. Almost choked when I read the first one :-)…. own both BAM and PWF. Carry ok compared to what you can get for IG elsewhere and leverage to higher rates icing on the cake….

    2. “Prime” is an administered rate (bank set). My chart says the lowest ever prime was 2.25%. Time was banks made many loans and issued paper based on prime but not any more. Very few prime adjustable prefs left, most of them Canadian. Rates and therefore prices on prime adjustable are more stable than those based on Canadas (treasuries), which is their appeal.

      Some of the adjustment provisions are a bit wacky, meaning they aren’t as simple as x% of prime. Some have mins and maxes while others involve management discretion. Pays to know what the terms are. SEDAR is the place to go to for the prospectuses.

      1. low prime of 2.25% was April 2009 highest ever was 21.25% in July 1981 (my second yr out of university working for a CDN bank with a 20% car loan and that was “staff rate”

        1. My kids think I’m making it up when I tell them my first mortgage was 14.5%.

          1. I see this morning Brookfield parent (BAM) is looking to take Brookfield property (BPY or BPY.un) private with appx 14% premium on common and likely redemption of pref’s at $25 (if I read news release properly). Common holders will have option of cash, shares in BAM or shares in a new pref.

            1. WOW – big jump in the BPO pref’s today along with BPY after the BAM take over announcement

              1. BAM does not do things on a small scale. They clearly feel they will have better opportunity to clean things up and move the puck down the ice without minority shareholders. Benefits will accrue more to BAM than to minorities.

                One reason I say you always have to own some of the mother ship. At the end of the day it’s where all the money ends up.

  36. I contacted Ally.com about buying Canadian preferred stock in my account. Their reply: “OTC stocks with 5 letter stock symbols ending in ‘F’ are charged a $50 foreign settlement fee in addition to the normal commission rate.” Just thought you might like to know. Will stick with TDA.

    1. I have an Ally account and that is an improvement from when I inquired a few years ago. They wouldnt allow any 5 ticker F ending purchase,ha. Ally has its warts, but it allows me quicker access to any new issues than TD or Vanguard in my experiences. Plus as long as its not a foreign issue, they will let you buy any obscure illiquid. The only fly in ointment is you have to break purchases into sub $10k increment buys or you have to call in for an override buy from rep to do it.

    2. RE: $50 fee and Ally

      They are reading what’s on the screen. In practice, some buys will attract the $50 fee and others won’t. It has to do with the source of the shares.

      Vanguard at least warns you before the purchase that there will be a fee.

  37. Happy Boxing Day Boys and Girls, eh!
    Seems like the resets have rich markup resets in general. Too bad they are pegged near par right now since they could be strong call candidate five years from now. The strong reset rate might be a real pressure if the 5GofC rate really moves over that time span. I like embedded influences, esp with the guarantee floor. These could hang near par for a CD-like profile.
    Look like long term holds esp if bot in the last couple of years way below par! Opportunity temporarily lost. I did not have them on my radar at that point as I was still trying to wrap my mind around the other permutations of ‘Grandmother-Land’ Markets.

    1. I hope Santa was good to everyone! Out of curiosity I just looked at the 6 month performance of an ETF for Cdn Pref shares (CPD on TSX) as of Nov 30 the 6 month performance was 20.89% (1 yr 5.59%)

      1. CB – the folks should also watch ZPR, which tracks only the resets. I use it as a tracker but always buy individual issues. Individual issues give you more ability to fine tune the strategy and you don’t have to pay the 50 basis points for the ETF.

        ZPR is up about 60% from the March low. I don’t believe it’s tradable in the U.S.

  38. Min rates and calls …..

    Earlier this year it seemed inconceivable that any min rates would be called. But as prices rebounded, calls became a real possibility.

    So far, of those that came up for call, 2 were called and 3 survived. ALA.PR.I (TGAPF) and W.PR.K are going away and BAM.PF.H, BIP.PR.B and CU.PR.I (CDUTF) will survive another 5 years.

    Next on the bubble is BEP.PR.G (BRENF), of which I own a boatload. Last date for a call announcement is January 7. It’s trading right around redemption price and has a 5.5% minimum rate on it. No tax of any kind if held in a qualified account.

    The entire universe of min rate issues is only about 3 dozen in number and they all will be subject to call over the next few years. I expect more will bite the dust.

    1. Bob,

      I’m long BRENF as well. As Brookfield has recently let other mins survive, maybe BRENF will live long and continue to prosper.

      Thanks for letting us know the date for the news.

      1. Greg – Brookfield’s decision making on the finance side is quite centralized so there is reason to think BRENF will live on.

        1. To all interested? been looking for an opportunity to discuss “brookfield” further. In November I asks some questions about BIP & BIP-C a good exchange with several of you commenting, an article from early in the year detailing transactions and various options was posted. The 2 mentioned assets “now” trade at a 46% price difference but “exchange” in one direction only, what a disparity, any further ideas or thoughts?

          1. I will chip in after more thought but clearly the price divergence in BIP and BIPC is stunning. This is B-school case study material.

          2. Haven’t seen any comments in our Cdn business papers about why the divergence. I’m just glad I sold off some BIP to buy BIPC when I got the shares in spin off. Better to be lucky than smart sometimes!

            1. thanks Buck, since your canadian was your motivation for your original move canadian tax law or roll of the dice? I’m awaiting Bob’s “chip”, if it’s a US perspective. I got the share also in the Special Div. am setting tight as of now, would prefer to have the “C” also, but not now @ at a 46% premium. Somebodies profiting with a form of arbitrage.

              1. Mike my understanding was BIPC would be more advantageous for US investors and basically neutral for CDN investors. So thinking the fact US investors would prefer BIPC I should increase my weighting in that stock as the demand would be higher. I still hold both but certainly BIPC way ahead now.

                1. “buck” got it , we both did good, you just did better up north! know what to do on a pullback. Happy New year.

          3. It has to be (at least partly) due to passive flows. ETF’s buying one and not the other. I have seen a lot of crazy stuff in the last year and this one is up there. Thanks for mentioning it – I have started to try and arb it (long BIP, short BIPC)…no one knows how crazy it can get, but I have room to add…

          1. On the buy list for the next downdraft. 7 more min rates for up for call or no call in 2021.

  39. Dick and Grid, I too have read up on the tax treaty with Canada (and also Singapore!). It is law.
    My wife and I both have recent interactions, over and over since before Thxgiving, with TD back of the house operations that make me wonder how many nice and polite, but very junior newbies we have to go over and over things until the are trained. Both issues are still not resolved. Seems Senior Compliance is working overtime to keep their jobs by creating munutia.
    It took three business days to get SESCF set up until it ran away, now I have a distant buy limit somewhere down there. I see Grid’s earlier buy ticks at somewhere besides TD.
    This week I was surprised to see my last two EBBNF and ALTGF OTCs hit a sell limit within three days of each other at my TD account. Everything has been migrated over to IBKR now. I am anticipating the Schwab merger and just keep an eye on one account now. I had already bought the ENB same series and a different ALA series over there, now I am clear.

    1. Joel, I had earlier a few in Vanguard then they shut it down. After that it was all TD. I remember Enbridge and Fortis being ok in tax free. But Emera, Canadian Utilities, and Altagas had it withheld. One guy complained about a half dozen times and got Emera resolved, but subsequently I just sold out.
      I just have a slug of ENB Series J now in taxable.
      It is better for me now to have it there as I always owe money anyways so it will knock the payment down a bit.

      1. J, Sorry for the inserted comment above, info not complete as I was going from memory from a CPA site I read on occasion. Luckily, alot of this detail, accounting and filing is falling off for me after this year!
        Sing and US have a ‘Totalization Agreement’ that is a balancer and holds some filing exclusions, BUT for wage earners. Accuracy IS imp. If there is more, your IRS link should be relied upon. JA

  40. There’s been a lot of talk around withholding tax on Canadian prefs held in IRAs. After several conversations with Schwab, I have learned that they will not withhold on BKFAF/BAM.PR.B if held in a retirement account. They told me it is because the security is DTC eligible. I own these shares myself and they did not withhold on the last dividend I received.

    I bought some additional shares today at $7.30 which gives me a yield of around 4.65%. These float off of the Candian prime rate so I liked these as a hedge against rising interest rates down the line.

    1. How generous of Schwab to say they will adhere to the U.S.-Canada Tax Treaty! Makes me want to reach out and say Hi to Chuck.

      I’ve had more than a few bruising conversations with brokerages on tax treatment of certain issues held in qualified accounts. I’ve won the arguments but at some cost in time and trouble. Asking is easier for sure but not always effective.

      For the information of others, Canadian preferred held in a qualified U.S. brokerage account should never have tax withheld. It’s a matter of tax law; it’s not at the discretion of the brokerage, or the paying agent, or the transfer agent, or anyone else.

    2. Schwab also does not withhold on SLFSF (SLF.PR.B) held in an IRA. The dividend hit my account last night with no withholding.

  41. 1) HSE/CVE merger clears all regulatory hurdles today.
    2) INE downgraded on weight of debt service.
    3) AZP achieving success on broad buyback of prefs and commons at market.

  42. ENB common is probably a better buy than the prefs. right now.
    Definitely a better trading/flipping vehicle after the reset run ups.

    1. I might add: deep value ENB a great cash covered put sell here 2.2% on cash cover by mid-Jan expiration or, if exercised; ENB bot at $32 with (8% annual) 2% div paid mid-Feb.
      Considered conservative methodology.

      1. Joel, I’m long ENB, but wouldn’t mind adding to the position, so this is an interesting idea. I don’t see any $32 puts (via E*Trade) but I do see $32.50. Are you suggesting selling cash-covered 15Jan2021 $32.50’s?

        1. Bur, Yes, imputed from the info I gave, that is correct. This ENB set up is exactly what I look for and wait for this sort of set up or just keep watching a few established, good volume, deeper value income stocks that I might be interested in anyway. PRU has been decent too lately. This is the best part of American Capital Markets, the rest is probably best when used as buy and hold. (I just heard multiple jeers from across SA-land!)
          Once the flow of this thinking gets established, just like looking at prefs, then throwing a bit of twisting, like resets, floats and such. Not too difficult and easy with these fancy, elektornik brokerage accounts!
          There is a good primer here:
          https://www.lynalden.com/treasury-bonds-risks/
          I like this young lady and it gives me a positive spin on the very competent generation behind us.
          Scroll down and on the right column, Experienced Investors: Covered Call and Selling Puts.

          1. Bur, Just an add on after I thought about what I wrote here. Will go to Common Stock Area next time: There alot here!
            Here HOW I watch and wait (in general) using ENB as a topic:
            First just watch:
            -I have seen the industry in which ENB is in, Oil, make the first ‘wave up off a gross bottom. Now I see interest in these deep value and a rotation.
            -Now that the first wave has run up and I can see the survivors and div commitments thru the down cycle, etc. Things like capital raises and inv grade. (EPD a candidate, but options not as rich)
            – 1 option contract = 100 shares/ a round lot.
            – Now sell (you get paid cash premium) cash covered puts if I am interested in owning that stock anyway and will be patient with a new position. Collecting the div helps, esp if it is decent and has proven persistent.
            – If exercised, then I pay cash to own the shares and wait for the div. My Rule: Wait until first div to make any more decision; the first decision has been made, go with it.
            – If not exercised collect the premium and sell puts again, or just by stock. It can run away from you, but often that is FINE.
            – Here’s what takes a bit of mind-warp. Once you own actual shares in 100 lots, you can sell calls (you collect cash again). Now you have been paid three times.
            – If the ex-div date goes by, you get the cash div of record. It does NOT go to the option Buyer unless exercised.
            – If the call is in the money, your shares can be pulled to cover the call AT ANY TIME that the contract is active. This is AMER Options. Euro options can only be called on expiration date. This has happened to me when the share price really zooms up with sold calls into the money OR is a tactic used for the Buyer to exercise (call) and capture the div. and cap gains.
            – Sounds confusing, but write out all info on a sheet and see how the divs and option contract dates overlap, or not. Some scenarios are better odds plays. Especially, write out the Sell to Open and Buy to Close relationship. Pretty easy. You can use this to capture value as a short term cap gain instead of waiting for a terminal date on the contract. I have bought back contracts for a few cents a share when the stock runs away from the contract strike price.
            – Lastly and a bit more esoteric: An ETF can have options and they are often bought to capture big hidden gains within the fund that may be getting ready to get paid out, espec in Dec, end of year. Think: a tech fund this year that may have a big Cap Gain embedded in the price. Of course an American Option can be called on the ex-div date!
            Best to You in your studies! JA

          2. Joel,

            That’s a nice link.
            This year’s most regularly profitable trade for me has been selling put options in my IRA, and I do it a little differently than Ms Alden suggests.

            I do a bullish short term (~4 weeks) bullish put vertical with the higher strike ~8% below the current market price. In option math it typically yields 12-15% per month. The option math uses the net premium in the numerator and the net of the strike prices less the premium in the denominator.

            I have been getting assigned the underlying stock about 10% of the time. Using this method, frees up cash in the account as the margin required is equal to the net of the strike prices and not the full price of the stock.

            1. GG, Nice, will do on paper. That way I visualize it. Always learning any new method until I really get it, esp now with lockdown time! The closeness to strike price is a personal “acquired taste” (read: greed tolerance) for an individual. You still have to buy a put too, an expense.
              I remember my breakthrough was when I learned to effectively enter: Net Debit/Net Credit orders. It just takes time and play.
              The method above, is conservative and a good ‘primer’ way to start to enhance income, esp since all elements are income, with div collection in view and on a stock you might just buy outright and just hold naked.
              IRAs are being offered some limited Margin too now. It used to not be allowed for UBIT or some such in a trust (all IRAs). Of course there are some costs with margin too. I’m a skinflint.
              I am adverse to using margin for very long, except to place low buy limits on more positions than I have cash for, just in case some wonder-sale hits. The other problem is in a preferred heavy portfolio, prefs are ‘usually’ not , or barely, margin-able, I think because of perceived bad liquidity, so avail.margin is limited.
              The wonders of mind-play! JA

              1. If possible, I suggest using the Think Or Swim Platform from TD Ameritrade for your options activity. The Analyze function is great and they provide real time Level 2 quotes on stocks AND options. My screen for the options highlights: number of open options orders (by strike and date), probability in/out of the money, bid and ask and most recent price. It’s Very helpful.

                My typical OTM monthly covered call has a likelihood of being in the money of 10-12% and the bullish put spreads have a likelihood of ~15-20% being assigned.

                I’ve been writing covered calls on high dividend stocks (LUMN, MO) and writing bullish put spreads on stocks with great charts but pricey valuations (NXPI, REAL).

                1. GG, Thanks for the lively chat. I already did some look up some info on combo. strategies and I’ll look into TOS since I have not done that before, or really understood the ‘greeks’. I’m sure I have the experience to go there now. and make good decisions.
                  I’ll report back at some point on Common Stock Category before Tim directs me over there. Hope something here is useful to others! JA

    2. Joel, I have given that thought. I bought an ENB reset less than a month ago and its already up 15%. But its in taxable, and I already owe so much short capital gains, Im just trying to hang on to Jan before selling out and not adding to what I owe Uncle Sam this year.

  43. Mr Yuriy,
    I do not see any of the three IAF prefs on your sheets: B flat fixed, I &G both 5reset.
    I see them active on TSX though.
    Was there some merger from old Industrial Ins to iA Financial you know about, new symbols? JA

      1. You da mahn! After my recent traumatic wipeout of my watchlists; these resources have been used daily!

  44. Bob-in-DE or others, what do you think the likelihood is that CDUTF or CUTLF is called now that they are trading at or above par? Thanks

    1. Zero on CDUTF. Company had to announce the call at least 30 days in advance and the window has closed. One chance every 5 years.

      CULTF is continuously callable on 30 day’s notice. Right now it’s callable at 26, so it’s not going to happen. The stripped price is well below that so you have no call risk in the sense of capital losses.

  45. What I’m doing with Canadian preferred now ……

    In short, waiting. Min rates are up almost 60% from March lows and resets a bit more than 60%. That’s in Canadian $ terms. In US$ terms the gains have been greater, because of exchange rate movements.

    In April, near the lows, I sold my positions in those issues that had dropped the most and bought back similar exposure by buying different, same-issuer preferreds. Keep the exposure, capture the capital loss. I am now able to sell off vastly overpriced U.S. preferred without capital gain liability. This is a good strategy anytime you have substantial losses on issues and the ability to buy back in without triggering the wash sale rule.

    I am not a seller now but neither am I a buyer. Timing is very important with Canadian preferred and the timing is not right now. Better to hold cash and wait for the next market decline. In the meantime, the cash flows like crazy. I do not DRIP.

    1. Bob, I dont disagree with your assessment at all as usual. But ironically you can extrapolate your same thoughts even to US perpetuals from low March points. SR-A for example is up 72% from lows and SJIJ is up almost 90% from March lows. Amazing one can say that about quality utility preferreds and baby bonds isnt it over less than a years time.

      1. Yeah, I’ve sold those 2 and many others bought in that swoon.

        But I’m not waiting in cash for another one. Someone told us all how to fund one in case there’s a repeat. 😉

        1. Camroc, Im already locked and loaded. Hopefully we arent trying to trample over each other at the same time trying to get out the same door, ha!

      2. I have sell orders in on perhaps 2 dozen pref and baby bond issues, including SR-A at 28.50.

        One went this morning at a negative YTFC (first call) and the other was a rotation out of AGM-F to AGM-E.

        NLY-D is going as is TGAPF so the cash piles up.

    2. I did mean to mention, I started toeing back in. Only on a relative value basis to market certainly not absolute value. Bought some ENBBF at $14.69 a week or two ago. First CAD position for me since selling off Fortis 4.9% fixed after it went over par a while back.

      1. Obviously, you have some downside price risk on Enbridge but the 8% yield is nice.

        The fear of midstreams is overdone. COVID and some regulatory/legal decisions certainly separated the men from the boys.

        1. Humor me Bob and play the game we both know….If you had to choose one, would rather ENBBF or ENBA at their respective prices? Such a dichotmy in relative pricing isnt it.

          1. ENBA was at 28 earlier in the year for a YTC of almost nothing, not that Enbridge would call it. Folks don’t seem to appreciate that in less than 3 years the coupon is going to be cut almost in half. It may be a good buy after it goes floating and the price drops to 15.

            1. RE: ENBA – How unusual is the increasing LIBOR + provision in ENBA? Not that I’m advocating for it, but I’ve not seen a provision like ENBA has where the reset rate as amount of points over LIBOR increases fractionally every 5 years. Do other CDN resets have that provision that you know of? I’ve never owned ENBA but have watched it in comparison to EBGEF that I do own, trying to figure out why it seemed to be so high relative to the preferreds. That was the only reason I could think of as as maybe an added plus… Subord note vs preferred shouldn’t make that much difference.

              1. 2wr – it’s not a common provision. The Canadian resets keep the same spread throughout; it does not increase.

                Sub note vs preferred means very little in credit terms.

                The relative pricing is just a market inefficiency. ENBA is easily tradeable; the ENB US$ denominated preferred take a bit of knowledge and work and you may get hit with the pesky foreign trading fee. Clearly, the preferreds are a much better deal than the sub note.

                I trade the ENB prefs at IBKR. Much easier to trade TSX than OTC and no foreign fee.

              2. 2WR, A few have these features. Im sure you read long ago and forgot, NI-B has a modest step up feature way out in the hinterlands unrelated to my needs now.

                1. Grid – Are you calling me forgetful????? What’s your name again? I’ve fogotten….. yeah, you’re right…. I did read it in NI-B and I did forget…Hey I even forgot about the put provision on BRG-A and C until someone brought it back to attention here, and I own that one… Then again, maybe NI-B’s price reconfirms the theory that the market does assign a positive value to the unusual structure because NI-B was another one that always seemed to trade too high in the secondary. I always attributed that more to the US markets just getting used to resets vs Canada where they knew more from experience how to value them but maybe the structure is reflected in price..

                  1. 2wr – you are right about Canadians and resets. Canada went through the reset crash some years ago and understand how far prices can fall. American have not yet. When U.S. issues go to floating or reset at 200-300 basis points lower than present prices will go down. I promise.

                    Look at the two STT issues or NI-B as examples. Sky high prices and huge downward adjustments in store.

                    Anyone holding U.S. F2F or resets should be keeping track of the float rate or the reset rate and doing a delta with current coupon. To generalize, I advocate dumping issues with big downward adjustments baked in and plan to buy them back after they go to float or reset.

                    1. I have a friend who keeps harping on that theme. Besides LIBOR going away which might be a nightmare unto itself…there’s the float date year. With predictions of maybe, just maybe, a return to inflation perhaps that’s why there’s been a bid behind some of these?

                      So Bob In Del what’s your take on YTC w batches of 2023,….2025-6….. and some at 2028 or longer. The longest dated calls seem to be trading poorly. And shorter floats are lower ytc I try not to take specifically about any issue so I’m just asking ‘in general’

                    2. IYP – take STT-D as the example. At present price this 5.90% coupon issue has a stripped yld of 5.24% (not bad but means nothing) and a TYFC of 1.96% in 3.29 years. I’m not really interested in a 1.96% yield for a 3.29 year hold. I can do better.

                      But it may be worse if it doesn’t get called. That 5.90% coupon drops to 3.34% at current LIBOR. And, the price drops. So you now have a 3.34% coupon trading well below redemption price.

                      To generalize, when I look at YTC the longer the time to first call the more the number matters. If it’s 2% YTC in 1 years it’s a 2% 1-year CD. Maybe OK. But if it’s 4 years and 2% YTC it’s a 2% 4-year CD. Not OK.

                      To generalize again, the more the delta between current coupon the the coupon at float or reset, the bigger the problem. If the delta is large I am out. Happy to buy back in after the price has dropped to reflect the new, lower, coupon.

                      Canadian resets are a perfect example. GWO.PR.N is a IG preferred that sold originally for $25 with a 3.65% coupon. It reset to 2.18% 5 years after issue. It now sells for $10.35. Let some other guy take the capital loss.

        2. Bob, It might be time for me to sell already as Enbbf is up almost 11% since I bought about 2 weeks ago.

    3. thanks for your input Bob. Liked your comment on SA about the “State of Ontario” LOL

        1. LOL too funny . Mr Dress Up was a famous CDN kids show back in 70’s thru to 90’s with Ernie Coombs (an American but he enjoyed Canada and was like our Fred Rogers). Justin unfortunately can’t hold a candle to his father even though at times I didn’t agree with Pierre.

    4. Of course there will come a pullback at one point. And prefs have gone up a lot, BUT if you look at valuation (yield/credit risk) I believe that canadian prefs. are the cheapest “fixed income” asset class worldwide. Take a look a US HY, take a look at Europe – everything FI. Take a look at the riskfree arb you can do in BEP/BIP – us vs. Canada listing

      Investing in EIT you can lock in 4,5 pct. for 3-5 years in a High IG issue – no perp risk. Point me to a similar opportunity globally.

      In Europe people where waiting for better entry points when ECB went to zero and then negative. Just saying rates on bonds/prefs can go a lot lower than everyone thinks. Except for some new PVS and some of the CU-I I too stopped bying when everything started popping a month ago, but I find extremely difficult to build a case of why you should sell…but again if everything falls canadian prefs will of course join…

      1. Peter – I suspect you are right about yields on Canadian prefs. The average stripped yield on the 35 min rates I follow is 5.59% and on the 138 reset issues is 6.15% (although this would be lower if they all reset tomorrow). Considering the credit ratings, this has U.S. preferred beat to Hell.

        Still, I would urge anyone thinking about them to be sure they understand how much downside price risk is there. Be sure you can stomach 30-40% price declines without selling in a panic.

        Personally, I will not buy now. I have a large position in Can prefs, all of which I held through the March decline. (The selling I did do was to capture tax losses; I bought back the same exposure by switching issues.) I’d be happy to buy more after a major draw down, which is the plan.

        If one were going to be a buyer today I’d be looking at the BPO min rate issues and resets that reset in 6-18 months, on the theory that if rates move up these issues have the most upside price potential.

        I look at Canadian pref much as I do CEFs, meaning entry point is very important to return. You know they go on sale periodically, so why not wait for the sale?

        PS – from the time of your post you are either a very early riser or (I’m guessing) in Europe. Am I close?

  46. Back home again. Never would have figured I would travel most of the last three months with all this stuff in our society going on. Back to the computer screen:
    I think I worded my question regarding HSE/CVE prefs poorly a couple of weeks ago while typing on a pad. I’ll try to simplify:
    1) A “do-nothing” action on the recent proxy will be counted as a “vote along side HSE management”.
    2) Has anyone been able to figure out if the management has stated in the very lengthy proxy that they support a transition into CVE preferreds?
    Thanks! JA

    1. Regarding the Management of HSE position regarding the HSE/CVE prefs.: Looks like HSE Management wants shareholders to vote YES on conversion to CVE.
      SO NOT voting the proxy WILL vote FOR the conversion along side Management, NOT a subsidiary.
      To wit:
      “Husky will also seek the approval of at least two-thirds of the votes cast by holders of outstanding Husky preferred shares voting together as a single class. If Husky preferred shareholder approval is obtained, each Husky preferred share will be exchanged for one Cenovus preferred share with substantially the same commercial terms and conditions as the Husky preferred shares. The transaction is not conditional on Husky preferred shareholder approval and, if not obtained, the Husky preferred shares will remain outstanding in a subsidiary of the combined company.

    1. RE: ALA.PR.I

      Readers may recall my raising the possibility if not the probability of companies calling the min rate resets notwithstanding that they were trading below redemption amount, in some cases much less.

      This issue has a 52-week low of 12.00 and was trading at 23 and change before the announcement. Even so, it’s gone.

      The min rate resets have the best structural character, from an investors perspective, of any preferreds I know of. Wish U.S. companies would adopt the structure but fat chance of that.

    2. another one of mine bites the dust – now where to put the proceeds is the question. May look and see if any prefs may get sold during tax loss season presenting a buying op

  47. Just received a HSE proxy vote (regarding prefs) by email that says it will be voted with management’s recommendation IF there is one. There had been discussion here about allowing CVE to re-name the prefs and drop HSE special holding pool.
    Has anyone perused the 408 page document to see if management has made a recommendation?
    The voting deadline is 12-11-2020.
    I do not want to take for granted that they will vote for me to go to CVE symbol. nor do I want to take for granted that the YES vote counts for conversion into CVE prefs.
    I am in a very poor location to research right now or would try to post the answer myself. The Control-F pulled up over 1,800 finds for “preferred”.
    Searching the mind trust.

    1. RE: HSE

      It’s not just a change of ticker, it’s about reissuing as a CVE issue. Big difference.

      You do not want to end up in a special holding pool. I got the same proxy and will vote for the reissue.

  48. For those interested in Canadian preferred I posted something in Broker/Brokerage section about my experience at IBKR.

  49. Re: Canadian preferred issues
    It would be helpful to me ( and probably others ) if anyone would offer guidance to a site that lists the the Canadian preferred symbols conversion to the U.S. / OTC 5 character symbol. Many of the comments leave this information out.
    Thanks, Howard

  50. BAM is doing a very interesting thing. They are in essence cloning themselves and dividending out the cloned stock to existing shareholders of BAM. Although not announced I’m relatively sure the cloned entity will be a Bermudian partnership. BAM is a Canadian corporation.

    The new issue will be economically equivalent to BAM, have the same payout, will be exchangeable into and out of with BAM and will be listed on both the TSX and NYSE.

    This move is all about the shareholders, both existing and would-be. Depending on what country you live in, your personal tax situation, and the kind of account in which it’s held, you may be better off holding either the Canadian corporation or the Bermudian partnership. And Brookfield will give you the choice. If you opt for the partnership, yes you will get a K-1 and no, it won’t generate UBTI in any meaningful quantity.

    A registration statement will be filed with the SEC when the details are worked out.

    1. Bob to me BAM is one of the most innovative companies in Canada for financial engineering – own the common of parent and some subsidiaries along with some PREFs .

    2. Canuck & Bob, My Brookfield saga continues, First off I consider the original Bip I bought almost 10 years ago, one of my best moves in my Roth ira. Along the way I sold some and got my original money out.. I tried to buy some back this year and Edward Jones no longer allowed purchase in a Roth? Brookfield website specifically say it ok for us investors. At about the same time they gave a special dividend of 15 shares of the new BIP-C, this has always traded at a premium to the partnership. I bought a little BAM as a “compromise” now this cloning? Don’t get me wrong all this is positive, but my wife, my advisor, and certainly Edward Jones, doesn’t have a clue whats going on, “probably 4 different ticker”, any ideas guys? thanks mike

      1. Move the account out of Edward Jones. Seriously. No reason a broker should not allow SEC registered, US exchange listed issues.

        For a Roth, the corporate entities should be fine. There should be no withholding tax because of the US-Canada Tax Treaty.

        1. thanks bob , not the first time I’ve got that advice. I straighten Jones out on the with withholding issues long ago, now their hangup has become UBTI and K1’s, I even got shot down when I tried to buy the “new preferred”recently. This new development will really get their a** in the air. thanks Mike

          1. Mike – I know there are brokerages that balk at UBTI because they (not the beneficial owner) are responsible for filing the return and paying the tax (using your money) but most will do it. Moving brokerages is a very easy process unless you hold a bunch of weird stuff.

            Is your brother in law the account exec or something? 🙂

            1. Bob-in-DE , the advisor is not my brother in law, I’d force him to go to bat for me. this guy has to no avail. Jones no longer sends me copies of the k-1’s. I now pay close attention to the $1000 limit by visiting MLP websites tax information. I haven’t come close to $1m since I unloaded another MLP several years ago. I think I know the rules better than Jones’ and it pi* *es them off. thanks again Mike

              1. it’s interesting the quirks in cross border trading. As a CDN I have purchased some of the recommendations from Tim and others on this board in my “registered” accounts (self directed accounts thru CIBC) where the bulk of our $$ is only to be told by my bank investment rep a few days later they don’t qualify to be held by a CDN investor and they have to be sold off. Luckily they have all been up as opposed to down when sold.

                1. U.S. domiciles run into the same issue. When it’s happened to me I have refused to consent to a sale and in most cases the brokerages backed off.

                  Check out an account at IBKR Canada. Unless what you’re talking about are U.S. OTC issues you may be able to buy them there.

      2. MIKE — I found an article (Globe & Mail) from back in April which covered some questions about BIP.un and BIPC transaction. Hope this helps with some of your questions.

        Digging deeper into the Brookfield Infrastructure unit split
        JOHN HEINZL
        SPECIAL TO THE GLOBE AND MAIL
        PUBLISHED APRIL 17, 2020
        UPDATED APRIL 17, 2020
        PUBLISHED APRIL 17, 2020
        This article was published more than 6 months ago. Some information in it may no longer be current.

        BOOKMARK
        1) I read your column last week about Brookfield Infrastructure Partners LP’s BIP-UN-T unit split to create Brookfield Infrastructure Corp. (BIPC). Can you explain the tax consequences?

        First, a quick recap: Effective March 31, BIP.UN unitholders received one share of BIPC for every nine units of BIP.UN held. BIP.UN investors – who will continue to own the same number of BIP.UN units as before, in addition to the new BIPC shares – will also receive a small amount of cash in lieu of any fractional BIPC shares to which they are entitled.

        The unit split, or special distribution, is not taxable. However, for BIP.UN investors who hold their units in a non-registered account, the adjusted cost base (ACB) of their BIP.UN units should be reduced by an amount equivalent to the fair market value of the new BIPC shares and any cash received. The ACB must be reduced in order to properly calculate the capital gain for tax purposes when the units are sold. Investors who hold BIP.UN in a registered account will not face capital gains tax, so their ACB is irrelevant.

        2) I hold my BIP.UN units and BIPC shares in a non-registered account. How do I figure out the fair market value of the new BIPC shares and, hence, the amount by which I need to reduce the ACB of my BIP.UN units?

        This is where the confusion starts. Different brokers are providing different numbers to their clients. I’ve seen “book value” or “average cost” figures for the new BIPC shares as low as $44.71 and as high as $51.77, based on e-mails from readers.

        According to Melissa Low, senior vice-president of investor relations with Brookfield Infrastructure Partners, investors can use the “volume-weighted average price” (VWAP) for BIPC over its first five trading days on the Toronto Stock Exchange through April 6. The VWAP – which is the total dollar value traded divided by the total number of shares traded – works out to $50.12 per share for BIPC over this period, Ms. Low said in an e-mail.

        So, if you owned, say, 100 BIP.UN units and received 11 shares of BIPC in the unit split, you would reduce the ACB of your BIP.UN units by $551.32 (11 times $50.12) and the cash received in lieu of a partial share. The company is using the same five-day VWAP formula to calculate the cash portion.

        One other thing to note: The ACB per share of your new BIPC shares would also be $50.12. You would use this number to calculate your capital gain – or capital loss – when you eventually sell your BIPC shares or exchange them for BIP.UN units.

        3) I don’t want to exchange my BIPC shares for BIP.UN units. I would prefer to convert my BIP.UN units into shares of BIPC. How can I do that?

        For now, you can only exchange shares of BIPC for units of BIP.UN – not the other way around (the company is looking into whether it could facilitate such exchanges but has offered no details). If you would prefer to own only BIPC, you would need to sell your BIP.UN units and purchase BIPC shares. This would entail two trading commissions and, if you’re investing in a non-registered account, could trigger capital gains tax on the sale of your BIP.UN units.

        That said, BIPC does have certain advantages over BIP.UN in a non-registered account. BIPC will pay dividends that qualify for the dividend tax credit (DTC), and the dividends will not be subject to U.S. withholding tax. BIP.UN’s distributions, on the other hand, do not qualify for the DTC and may be subject to withholding tax. But the amount subject to withholding tax is typically small – in the first quarter it was just 2 US cents.

        “While we don’t expect there to be significant U.S. withholding tax, it can vary quarter-by-quarter and has the potential to be higher with the recent acquisitions of some new U.S. businesses,” Ms. Low said. Under the Canada-U.S. tax treaty, you can avoid withholding tax by holding BIP.UN in a registered retirement account. However, withholding tax still applies in a tax-free savings account, she said.

        4) I’m wary of holding BIPC because the new corporation only owns a small subset of the partnership’s global infrastructure assets. Is this a concern?

        It’s true that BIPC directly owns only natural gas transmission assets in Brazil and regulated utility operations in the United Kingdom. However, the fact that BIPC shares are exchangeable into BIP.UN units and both will pay the same dividend/distribution means BIPC investors are getting access, albeit indirectly, to the complete global portfolio of infrastructure assets including railways, ports, toll roads, pipelines, communications towers and data centres. It also means that BIP.UN units and BIPC shares should track each other closely in price, which has been the case so far.

        “In order to effectuate the stock split, we were required to transfer assets to BIPC since it’s a separate reporting issuer/listed entity,” Ms. Low said.

        “The assets we chose to transfer (being the gas transmission system in Brazil and regulated distribution operations in the U.K.) were selected as they were relatively easy to transfer considering regulatory, legal, financial and tax implications,” she said.

        “So while BIP LP and BIPC do hold different assets, investors should be indifferent as BIP LP and BIPC should be considered one entity, which collectively share the same assets, returns and management.”

        Full disclosure: The author owns BIP.UN and BIPC personally and in his model Yield Hog Dividend Growth Portfolio. View it online at tgam.ca/dividendportfolio.

        1. Bob & Buck, Thanks for all the info, now I don’t feel like “the lone ranger”. Where else but here, could I get this kind of feed back. thanks again, and also Tim, for providing this forum. Mike

        2. CB – for some reason I’m seeing you write up of BIP/C only just now.

          To emphasize for the readers, the essential difference between the two is that BIP is a Bermudian partnership while BIPC is a Canadian corporation. Bermuda doesn’t withhold income taxes (they don’t even have an income tax) while Canada withholds 15% on dividends going to the U.S.

          For an American domicile the best way to play this is to hold BIPC in a qualified account. The 15% withholding doesn’t apply and you have no K-1, which you will get in the case of BIP. I put a lot of BIPC in various Roth account when it issued and it’s on my shopping list for the next crash. To me, it’s one of those companies you get in on at a good price and plan to hold forever.

          Have you any thought about the price divergence between BIP and BIPC? BIP is at 51 and BIPC at 68. If the difference is solely a K-1 issue it should start people thinking.

          I know you publish on the Globe & Mail website. I subscribe but most here don’t (I may be the only one besides you). If people want to read your work can they get it some place other than G&M?

  51. Looks like the site: https://canadianpreferredshares.ca/ went into a limited data for free mode. The more robust info is now premium and reasonable for $48 annually. There were elements that had me spoiled like the blended rate if reset at different GOC 5 year rates in the future. Still great resource.

  52. I know this thread is about prefs, but since a lot of guys from Canada come here, I’ll ask a question here. What do you think about the Acadian Timber (ADN)? I like their balance sheet and of course their juicy divies. Confused by the fact that Brookfield came out of there last year, maybe there are some pitfalls? I would be grateful for any thoughts about this company.

    1. Only Canadian timber company I track is WFT.TO (West Fraser Timber).

      For Acadian Timber top line sales to be less q-ov-q and y-ov-y makes me wonder given random length lumber has nearly doubled. WFT is reporting doubling of Adjusted EBITDA margin.

      Once you figure this out then I would invest.

      1. In the last report, they explain this by the fact that the demand for hardwood pulpwood has fallen sharply, although this explanation also seemed strange to me. The difference between them and WFT is that WFT is a large full-cycle company, starting from logging and ending with the production of final products such as building materials, LVL, MDF, plywood, pulp, newsprint, etc.
        And ADN just cuts trees )))

        1. Another company more comparable Rayonier Inc. (RYN) top line revenue up 42.5 from same period last year.

          1. Exactly, I see the ADN like a very undervalued RYN:
            RYN P/E 78, P/B 2.5, divi 4.1%;
            ADN P/E 15, P/B 0.9 (sic!), divi 8%.

            P.S. I have to disclose as I am long ADN (very small, about 1/3 of my full position) and now I think about if it makes sense to increase it. So my opinion here may be biased.

            1. RYN is a REIT so you need to compare AFFO. PE can not be used.

              Would think beyond yield with ADN and see if any near term catalysts are coming as I can not believe top line is not moving with lumber price rocketing.

              1. Apparently you have a point, it looks like a not good idea increase this position. Thanks for the thoughts.

  53. A couple of notable resets recently ……………

    CU.PR.I (CDUTF) will become the first min rate issue to survive its first call and will continue at a 4.50% coupon to yield 4.51%. BBB+.

    PPL.PR.I will reset to 4.302% to yield 6.79%. BB.

    TRP.PR.G will reset to 3.351% to yield 5.83%. BBB-.

    Yield are stripped based on present price and coupons will remain unchanged for the next five years.

    1. Thanks for the update, Bob. I own CDUTF and had assumed it would be called. Good news as far as I am concerned.

    2. thanks for update Bob! Enbridge results this morning on balance seem not too bad.

      1. Buck, I looked at ENB results also, Not bad at all. Whats your opinion on the election results for ENB an a dampened possibility of a green new deal at least for awhile? I’ve been debating adding to my position with this nice yield. Thanks for anybodies input

        1. Enbridge is the class of the midstream opportunities: best assets, best management, best financials. Plus, they only build pipelines where they have permits. If you’re a “low risk” midstream investor this is the place to be.

          Price, at least on preferred issues, are very rich. The common yields better than the preferred and has upside (and downside). I would probably favor common over prefs but personally I am not adding to an already considerable exposure. They are on my buy list for the next crash.

          1. Bob, thanks so much, confirms my thoughts, have 170 shares of common plus some exposure in a qualified dividend etf EMLP, the question as always, how much is enough? maybe I’ll save some room, if a real opportunity happens. thanks again Mike

            1. Mike – I can’t say how much is enough but I think like a banker and manage my risks accordingly, by industry, by issuer, by country, etc.

              My total exposure to a single issuer is about 5% of total portfolio. ENB total across all issues is about 2%. I place bets but I like diversification.

              1. Bob , based on “your” formula I’ve got some room left to pull the trigger. To all that commented on this topic, it was a very interesting and informative. thanks to all. Mike

        2. Mike, if Biden is elected, I am HIGHLY skeptical he’d be able to put through anything resembling a Green New Deal, with continued R Senate and R’s picking up several seats in the House. I respect ENB’s management and the latest permit ruling went their way. I’m holding.

          1. Bur , Thanks for your thoughts, I have avoided oil,gas,&fracking, just the usual around the edges, pipelines utes etc, hedged where I can with some exposure to renewable s. Thanks again Mike

          2. From what I understand Biden has indicated he would cancel the Keystone pipeline project which would be negative for TC Energy but should favour Enbridge with their existing pipelines. So to me another reason to keep the faith with ENB

            1. Canada has switched most of its oil production over to low decline assets (oil sands) which do not require high maintenance capital like conventional drilling / fracking techniques.

              Refineries processes are setup to receive a specific blend of light and heavy oil products for the various items produced creating a long term need for heavy canadian or saudi crudes. Majority of oil produced within America is of lighter grades.

              In my view. Governments should increase regulations on the energy industry. Cause consolidation, Industry Responsibility, and Shareholder value restoration due to prohibition. Prohibition taught us the market will find a way to use any commodity making the industry more sustainable with lower change of boom and bust cycles.

    1. Hi Joel – I read the DBRS write ups and my sense is they got it wrong. Perhaps right in the credit rating agency world but wrong from an investor perspective.

      This is a true merger, not a leveraged buyout. No new debt. The exchange ratio actually favours Husky even though that wasn’t the intent. Financial economies of scale are significant and not airy fairy. This ends up a much stronger company.

      The market read as to the Husky preferred was correct, up +10% on the announcement.

      1. I got that too, I think that from a rating agency perspective, they are taking the price and ‘Rona-nomics’ (my own proud contribution to economics!) value of oil like the perspective of interest rates that will stay lower for longer and a long term cloudy perception based on the last year. World demand down ONLY 10%? America’s No Energy Policy? Alot of stranded asset allocation needing rescue (new funding) and going off line? I just saw three states with oil strippers standing still and gasoline at $1.75. Not a good time to make money…but there may be a more disciplined snap back too.
        These two businesses are already lean and wringing out more.
        As a fact of math: Energy is at a 2% weighting in the SP whereas the average over decades is 9+%. Buying the best in a depressed sector is what John Templeton would do as Buffet has done already. I am already weighted as I need to be. My wife is a bit ticked off that I got her to buy a small amount PREKF royalties (with no debt) in Roth recently with only a 3% div. Tick, tick, tick.

  54. Textbook example of trading Canadian preferred on the OTC …..

    Some enterprising fellow has been securing new OTC tickers including two just yesterday. Both were Husky Energy resets, HSE.PR.E and HSE.PR.G. The corresponding OTC tickers are HUSPF and HSEPF.

    HUSPF traded 2,200 shares on the first day of listing, all at essentially the same time, all through the same U.S.-based broker, so presumably were traded by one person. Price on the OTC was US$9.64 per share, which corresponds to CA$12.82 per share, which was exactly were the issue was trading on the TSX at the time. All trades, even though executed through the OTC, were immediately reported on the TSX website.

    So, you had good execution, at the correct price, correctly reported. I doesn’t always happen this way but it did for this buyer on this trade.

    HSE is of interest because of an impending merger with Cenovus Energy. This is an economy of scale merger that will produce sizable savings for the combined company. And a lot of unemployment in Calgary. HSE has 5 preferred issues outstanding, including 4 resets and 1 floater spawned from one of the resets. If approved by HSE preferred owners, the HSE will be reissued as Cenovus preferred.

    The issue that I would be going for would be HSE.PR.E, HUSPF. Current (stripped) yield is 9.10% and the reset yield is 7.79%, with 4.42 years to run on the reset clock. I was a heavy buyer of HSE earlier in the year but have a full position and won’t add now.

    Generally, there aren’t a lot of deals among resets. I would be waiting for the next market panic.

    As always, don’t buy Canadian preferred if you can’t live with volatility, think the US$ is the only currency in the world, and don’t know how to find prices on the TSX and convert from CA$ to US$ before entering your order on the OTC.

    From the It Can’t Get Much More Corrupt State of Delaware

    1. A reader of this thread sent me a PM through SA questioning my use of the word “fellow”. Point taken; it may have been a “fellow” of the female kind. Loose language perhaps.

    2. I am also an HSE (C) holder and would like to ask your opinion on the best way to vote: stay in the HSE or move to CVE?
      Thanks at advance.

      1. From what I understand it will be the same contract backed by the combined company, just a different symbol if accepted by 2/3s of HSE pref holders. If not it will stay HSE symbol. Should be the same treatment with a relatively better credit rating regardless of the symbol after the merger is complete.
        Any other views out there?
        See the Prefblog description of the merger.

        1. Joel – if new CVE preferred issue they will be the same TERMS as the old HSE issues. The merged company, which will trade as CVE, will be financially stronger than an the special purpose sub that would hold the HSE preferred if they don’t convert. The financial benefits of the merger are going to be felt in the merged company, meaning CVE.

          Some have expressed the opinion that because HSE has a better credit rating than CVE that you are better off holding HSE paper. They miss the point.

      2. I will be voting to exchange into CVE. I wouldn’t want to be stuck in a sub that exists only to hold the preferred.

        Same situation as when ALA acquired KMI (canada) a couple years ago.

        1. I agree with your reasoning and your conclusion, Bob, and will be taking the exchange option.

          1. I have not gotten to that point yet, but I am glad that you guys brought it up. I am actually back in an OFFICE where I can work and be organized to reconsider many things. It makes sense to go with CVE. The conversation here helps!
            I have shown that I am obviously a bull on the long term prospects for fossil fuel with coal being phased out quickly now; not out of stubborn persistence or familiarity, rather an on-balance Ben Franklin style choice of many factors moving forward when a very large ship is being turned on a very small planet. Here is a good article that I just stumbled over on SA that is a good ‘Franklin’ type checklist of factors that involve a long term view of Oil, especially Big Oil. It makes more sense to present the facts…but retain confidence that we CAN make the moves necessary…especially with a concerted and perhaps progressive global policies.
            https://seekingalpha.com/article/4382875-clean-energy-vs-oil-gas-biggest-lie-of-2020

          2. likewise will be going with the exchange. More importantly waiting for results of Tuesday’s election. Contested election could result in a lot of short term volatility and opportunities if panic selling.

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  56. Husky/Cenovus merger?? Apparently will need a HSE preferred holders vote of 2/3s. (???, not clear to me yet)
    https://www.wsj.com/articles/cenovus-and-husky-to-merge-in-18-billion-deal-11603632994
    Cenovus re-rated over a year ago to positive and BBB.
    Husky IG.
    Both pay common divys.
    BIG resources, Big synergies, Big know-how. WOW! Hope this is the kind of thing that marks a nadir. Alberta dumped max-production quotas last month too. Apparently HSE prefs will become CVE’s next year if green lighted.
    Lots of detail with a Google-search.
    (Snowed in in Red River NM…end to the fire season!! )

    1. HSE prefs were insanely cheap. I had a good size position in HSE.PR.C that I sold out a month ago for the cap loss. I put it all back in HSE.PR.G, so I’m happy with this deal.

      But sad, too. HSE has been around for about as long as Standard Oil.

      I recall Red River from my ski bum days. There isn’t a lot of town as I recall. Does the altitude get to you?

      1. Lived out West alot, had a good long spell to adjust this time. Six feet of snow plowed down center of six blocks of main street.
        Have not been able to find any mandatory, or voluntary, redemption language in the prospectus, but am limited to a small Chromebook today. Looks like the preferred shareholder can not scrub the deal, but have some sort of say with 2/3s vote on some-thing? (See PrefBlog recent comment with no reference to source). Some conversion to common or? Have not seen any huge premiums hit any pref issues and do see that this will be an all equity deal. Of course, would love a redeem at par.
        I have no common, except some SU Nov $12 puts sold, so may end up with some at a very cheap price. Remember when very cheap prices of a good company was a good patient play? May be again! Happy Considerations, JA

    2. HSE preferred holders don’t get a vote on the merger. They do get to vote on either keeping their HSE preferred or exchanging for new preferred issued by the combined company.

  57. My current take on Canadian preferred ……………

    Mins, resets and fixed were very strong earlier in 2020 before plunging into the 3rd basement in March/April. With some exceptions, most issues have fully recovered and many gone on to new 52-week highs.

    Mins are starting to come up to first call, with 13 issues becoming callable in the next 12 months. Those trading above call or even a dollar or two below may well be called. My sense is that companies want these off their books and in any event can issue debt much cheaper.

    The first one in line is a CU issue, which becomes callable December 1. Next Friday (Oct 30) is the last day the company can give notice; otherwise, it’s good for another 5 years. It’s an interesting, albeit short term spec play. It’s very pinned to par (because of the possible call) but if it isn’t called will probably pop in price for a buck or so. Ticker is CU.PR.I or CDUTF. Do not pay above 25.28 CA$, that being $25 stripped.

    The best buys among mins – and I do call them spec buys – are the 4 BPO issues and 2 PPL issues. At present prices, the BPO issues are floored at around 8% yield and PPL at about 6%. Only US ticker is PMMBF.

    As always, don’t invest in Canada if you can’t live with volatility or think the US$ is the only currency in the world.

    Resets and fixed later in the week.

    1. thanks Bob – really enjoy your analysis! I share your thoughts on long suffering ENB – it eventually will have its day in the sun and meantime great yield

  58. Buying Canadian preferred on IBKR ………… how to do it right.

    If your interest in Canadian preferred is limited to the handful of US$-denominated issues, you don’t need an IBKR account. If you want to stray into the weeds a bit and buy CA$ denominated issues, but just a few issues, I would say the same: you don’t need an IBKR account. Buy the issues of interest on the US OTC and stick to the better known issuers and the most liquid issues.

    If you’re still with me, you have 2 methods to buy CA$-denominated issues at IBKR, one of which is much better than the other:

    The wrong method. Transfer US$ to IBKR (I assume you are a U.S. resident) and start buying Canadian preferred under their TSX tickers (you can’t buy them under their OTC tickers and I assume you are not buying US$-denominated issues).

    What is happening is you are buying CA$ assets in CA$ and on each buy IBKR is making you a loan of CA$. You know this because you look at the Market Value page on the IBKR platform and you see no change in your US$ balance but a negative figure on your CA$ balance. That negative balance is a loan, and you are paying interest on it.

    You are also being paid interest on your US$ balance but the rate is lower, so the net interest is against you.

    Don’t do it this way.

    The right method: After you have opened your IBKR account and transferred US$ to the account your first transaction will be to sell US$ and buy CA$. This you do on the IBKR platform, at institutional rates if you do at least US$25,000. Go to the trading section, enter “USD.CAD” as the ticker and make sure you are SELLING, not buying. You then have actual, real CA$ in your account and can buy CA$ assets with them, with NO LOANS and, of course, no interest.

    For example, today I sold US$100,000 at a rate of 1.31349 to get me CA$131,349, with which I can now buy that amount of CA$ securities without a loan and without interest charges. If I want to buy more, I have to convert more US$ to CA$.

    If you are inclined to give IBKR a go I strongly recommend you open a paper trading account first. It’s monopoly money and nothing is at stake. Figure out how to do it right before putting in real money. I use only the Webtrader platform at IBKR, which is the basic platform. Trader Workstation is the advanced platform but I have no need of it or the complexity of it. Same at TDA; I use the basic platform.

    1. Bob, thanks for this very useful primer on buying CAD-denominated issues via IBKR.

    2. Re IBKR account: I agree and learned that under a careful scrutiny of details over time. Making the transaction are very easy. When I have called and insisted on instructions I have seen that it is very easy and that world of operation gels more and more. When I have no open orders I have played a bit of FX exchange rate between the CND:UDS which has been significant lately. Keeping $25,000 minimums in CN dollar to cover trades and open orders IS the way to go as Bob directs.
      The brokerage is in biz to make money and will not question your maneuvers. These posts are the greatest value of sites like Tim’s here as we make our own independent decisions. Thanks Bob!

  59. I’m a fan of certain Canadian preferred issues but for a variety of reasons I’m not a fan of Interactive Brokers and their trading platform. Recently I’ve discovered a non-trivial monthly interest charge that appears to be related to having a cash balance in my account. What am I missing here? I’m not being lazy but I’ve found that unlike Schwab the process of talking to one of IB’s reps involves long waits and unsatisfactory results.

    1. I found their trading platform very difficult to understand. As with anything, practice would have made it accessible, but visiting their website was like walking into a party and realizing that I really didn’t belong there, followed by a slow, backwards walk to the door.

    2. See above comments. IBKR has by far the best online help but the call center is not a strength. If I can’t find the answer to a question with the online resources I write an email enquiry. The answers are sufficiently prompt and accurate for me.

      IBKR doesn’t do hand holding. Vanguard will hold my hand all day. It’s a matter of what your need is.

  60. I have not paid attention, but what happened to the love for EBGEF and EBBNF last year when trading around 20? SInce both are now under 16, was the 20% loss due to company specific issues, exchange rates, resets, or a combination?

    I owned EBGEF for a short while but decided to exit all non U.S. related companies. In hindsight it was a good move, but wondering what current thinking is on them.

    1. there was a recent article in Globe & Mail (Canada’s lead business newspaper) which proposed a recovery in CDN prefs over next 12 months as banks are moving to “Limited Recourse Capital Notes” to raise capital. Writer indicated the banks will be moving to redeem a number of their prefs in favour of LRCN which in term will lead to a shortage of prefs in the CDN market. ETF’s and MF’s which are primarily pref funds will need to buy the remaining prefs to replace bank redeemed ones. Which in theory will lead to higher prices (the old law of supply and demand). For the sake of my long suffering CDN prefs I’m hoping he’s correct!

      1. CB – I agree with G&M. LRCNs are a game changer. The last banking preferred issued was several years ago. There will be a lot of calls, even of issues that are selling below redemption. Anything in the 23-24 range is a candidate to be redeemed. Anything close to 25 is a near certainty.

        The only positive on the LRCNs is that there is a limit to how much the banks can sell.

        1. Will the price closeness to par really matter?
          Banks pay out based on par and call at par, but I do not see them trying to absorb free float issues at market before a potential call. I do not know if Canadian rules allow for this without open announcement?
          LRCNs are a real admission of expectation of systemic risk; serious passing of risk to the lower tranche holders for suspension or wipe out. There is a serious indication that the regulators, by their actions, are implying that real risk is rising and they are worried about banks ability to keep the capital heart beating, so they are installing pacemakers, drug-protocols (rules) and stints. The real problem is with the diet that the banks keep pushing into the system. It really is a classic obsessive-complusive aspect of our generation’s general behavior.

          1. Canadian issuers are allowed to buy their own stock or bonds with notice. You can find the notice in press releases and SEDAR filings. Many preferred issuers have so-called “normal course issuer bids” in place right now.

    2. The two Enbridge issues you reference got hit by a combination of investors hating on petroleum companies and the drop in the 5-year Canada rate. Both of these are reset issues. Current yields are fine at 8-9% but will reset to 5.5-6% in time unless the 5-year rate goes up.

      I would not put new money into these two issues but would rather wait for the next market panic. Enbridge issues show a lot of price volatility so timing is important.

      If I was buying now I would be buying the common with its 8.5% yield. The company has the best assets in the business and is rock solid financially. But either view as a long term hold or wait for a better entry point.

      I rarely cite SA as a reference by my view essentially is the same as this:

      https://seekingalpha.com/article/4379080-enbridge-is-best-high-yielding-dividend-stock-on-market

      I own a lot of ENB and I have for years.

      1. @Bob-in-DE, I own a chunk of ENB as well, and it seems to have held up fairly well (=smaller decline than pipeline common in my portfolio ;-).

        What’s your thought on prospects for the Line 3 Replacement and the effect of that project on ENB’s fortunes? Morningstar opined as follows last week: “Line 3 does face opposition from pending litigation, but a negative outcome is more likely to delay construction than cancel the project altogether. Accordingly, we assign an 80% probability that Line 3 will be replaced. Fortunately for Enbridge, safeguards are in place if the project is not built that allow the company to recoup expenses and earn a return on the capital that has already been spent.”

        I haven’t spent any time researching the issue, looking for any musings…

        1. Bur – I did take note of this announcement:

          https://www.startribune.com/administrative-law-judge-upholds-minnesota-pca-decisions-on-enbridge-pipeline/572771591/

          The Line 3 replacement makes great sense. ENB has the savvy, the money and the track record to get it done. If this gets shot down then I would think you can’t get a pipeline built anywhere in this country. So, in addition to running out of electricity at some point, we can run out of heat, too.

          ENB has the best assets, best balance sheet, and best management in midstream. If one is to be invested in midstream this is the place to do it.

    3. furcal,
      EVERYone BELIEVES that rates are going to be held down forever by private banking interests with implicit public govt consent…the Fed. History shows this is not an accurate assumption. Interest rates are as volitile as common stocks and will revert to this behavior. These resets are factually a hedge against rising interest rates. The mindsets do not match. hence the discomfort.
      My proposal to myself is to use a percentage allocation method to collect decent divies on way below par bonds (preferred attributes) and HOLD as a weighted ballast. Ultimately, interest rates are the very first knee jerk reaction to any financial change. Change is persistent. The two issues you have mentioned above continue to pay real cash as a long term put option premium on the five year note. Sooner or later the preferred mechanisms will react with potential price improvements or let’s dream: with a call? We ALWAYS want to be right and see action move our way soon when we are into an investment. Inflation is the pillar of capitalism and we will see it exerted.
      As a side comment: I am more concerned with the TDAM and Schwab merger and misrepresentation of CN divs. I have a few more CN OTC issues at TD like these F issues to migrate over to IBKR. I am going to have to do a dive into Fidelity as an alternative to TDAM and encourage anyone here who has inputs regarding their experiences there to post as it was VERY helpful to me to make a good decision on migrating my CNs to IBKR.
      Thanks, JA

  61. It all started two years ago. I put an eye on the CN market in a larger scale for all of it’s varied characteristics and I may say unique charms. Wading into the swamp after the beasts that may be there in the muskeg would have been near impossible without the help of the group efforts of the individuals at this site.
    This is the power of many-minds and a positive model for the hopeful redeeming characteristics of the Internet, a tool used properly, that can be employed in other areas in our lives.
    The resources that have been discovered and shared by readers and posters here have been a real blessing to me.
    Thanks to All Contributors.
    PS: Husky creeping into a nice portfolio spice zone. Just finished a project CN$100 MM under budget that is now cash flowing and projected to add CN$1.1 billion in free cash over the next ten years. No maturity calls until 2022 and a fairly low percentage. Very disciplined management capital readjustments and IG focused.
    Outlier (Chili Pepper Spice!) ?: The floating E series, under CN$6, are over 7.5% currently is a real lever on the 3 month going out over years if someone is looking for an rising interest rate hedge. Just sayin…do your own math/homework. I own a full position of resets in the CN reset ladder I have put together at IBKR.
    Again, thanks to all the positive assistance. JA

      1. Other than CNQ/ENB never bought any of the common shares of energy producers.

        Look at EPD bonds trading like grim reaper is coming.

        EPD Corp 5.375 Feb15’78

        Suncor volumes reduced at major production facility. Refining margins have been slow to recover. Recent credit rating drop. Expecting bonds to reprice as risks are rising. Suncor best assets next to Imperial oil in Canada meaning long term will do just fine.

        SUNEVC Corp 6.0 Apr01’42

        1. Mia – I, too, have generally avoided the common of energy issues but I am rethinking that. Few get rich betting on favorites (or favourites) but betting on what’s hated can work out very well. I’m even thinking on SLB.

    1. Just announced in Globe & Mail this morning Cenovus is taking over Husky Energy in a share swap. Combined entity vaults Cenovus into third largest CDN energy producer. Picked up some HSE prefs a few weeks ago be interesting to see what happens to them on Monday.

      1. Good news for both companies and combined they will restore dividend on the common.

        A-lot of retirees got a surprise when Census suspended earlier this year.

        1. Here’s what I found about the preferred shares:

          “If Husky preferred shareholder approval is obtained, each Husky preferred share will be exchanged for one Cenovus preferred share with substantially the same commercial terms and conditions as the Husky preferred shares. The transaction is not conditional on Husky preferred shareholder approval and, if not obtained, the Husky preferred shares will remain outstanding in a subsidiary of the combined company.”

          https://huskyenergy.com/news/release.asp?release_id=2113977&utm_source=HP2&utm_medium=HuskyCenovus&utm_campaign=INV

          1. not bad for a crappy day in the markets my HSE prefs (B & E) were both up over 10% no doubt due to less credit risk now

      2. I also own some Husky, HSE.PR.E. Do we know yet what is going to happen with these? Do they get redeemed or continue in force? Thanks.

  62. Freg – RE BRENF

    It’s sitting at a stripped price of 23.77. If it’s called I’ll take the cap gain. Otherwise, you have a min 5.5% coupon and about a 5.8% yield on present price.

    For best effect keep it in a qualified account with no tax and no withholding.

  63. Folks, could you point me to a web page where I can follow incoming Canadian IPOs? Or check historical IPOs?

    Thank you,
    MB

    1. No overall IPO site that I am aware of, I use a major CDN bank’s discount brokerage service and they show IPO’s that they are involved with but minimal details about the issues.

    2. If wanting to keep abreast of Canadian financial news one should subscribe to the (Toronto) Globe & Mail and/or the Financial Post.

      I don’t know of any site that just tracks IPOs.

      1. Bob, big thanks for your work on the Canadian minimums and specifically for pointing out the desirability of BEP.PR.G. Might not have to wait for a sub-par call.

  64. CU issued 30-year notes at 2.6% and BAM did the same at 3.5%. Won’t see any new pref issues when debt is available at these rates.

  65. BBD – halted all issues, commons and preferreds. Looks like they are close to bankruptcy.

    1. On the contrary, a big take-off after opening. I do not understand what is happening.

  66. A really bad strategy ………..

    This is a Canadian story but could be replicated in the U.S.

    From the Globe & Mail (Toronto but national in coverage), lawsuits have been filed against brokerage units of BMO (Bank of Montreal) because an advisor implemented the following strategy for a number of his widow & orphan clients: short Canadas (treasuries) and other high grade bonds, and use the proceeds to buy reset rate preferred. And then add margin. And have the March crash send prices on the resets down 20-30-40-50%. Then have your account liquidated for margin calls. And then have BMO tell you to pound sand.

    Sad part is, had the accounts not been liquidated, or sold out, the strategy would have worked.

  67. Explanation of LRCNs …………

    Limited Recourse Capital Notes are a new breed of security recently approved by Canadian banking regulators for issuance by the big banks. They are deeply subordinated, long term notes that magically (when the bank gets into trouble) turn into newly issued but preauthorized preferred shares.

    Great for banks as they can issue what are de facto preferred shares at bond rates and get to deduct the interest payments. Not so good for investors, as you are effectively getting bond yields on preferred shares and paying tax on interest.

    I have no doubt all of the banks are going to issue these up to the maximum allowed. Most have already put out a first issuance. It was my understanding that, initially, LRCNs could be bought only by institutional investors but I see Joel is indicating that they are going to be available as an exchange traded product.

    So, don’t look for any new banking preferred issues. Hang on to what you have because there aren’t going to be any new ones. You may even see some banking issues redeemed even though trading below redemption price.

    1. Bob, Appreciate the content here. This is an accurate modeling of the privatized privileged relationship that the private money institutions and regulators enjoy at the Pal Club over drinks. Public be damned. The mountain of “crammed debt” IS the problem. This is the endemic mindset of the weekly paycheck trusted, Humpty-Dumpty regulators who are busy congratulating each other on Bay Street. Who polices the police (regulators)? A classic question of secular philosophy. I will say in public that this is irresponsible and BAD POLICY. Another tranche-robber is heinous regulatory action. Did I expect anything else? Party on Dwayne!
      The real diligence is accurate risk assessment. The Paper Markets are a factual mine field, but the Myth of Smartest Financial Innovation persists.
      From Smoky Colorado. JA

      1. Joel – I have family in both Colorado and the SF bay area, so I’ve seen the pics of the smoke. But for COVID my wife and I would almost certainly be spending the month of September in California. Saved by COVID.

  68. I own RY-PW the RBC Perpetual which is being called Oct.1. I’m looking to add to one of my existing common stock positions with either T(Telus), BCE, RY, NA or TD. Dividend and Capital Preservation are my investing themes. Not being in Canada makes it a bit more challenging to assess who is going to be where over the next year or two.
    Any thoughts?

      1. With a history of 12 years of almost zero percent interest rates and the probability of another 3-5 years to come its almost impossible to find any yield in the Fixed Income universe. In the US as you may know, Money Markets and CDs are paying under 1%. Corporate Bonds are either so expensive or offering so little yield there’s literally no reward for any level of risk. Fixed income ETFs and Dividend plays are the only places left. As much as I like US high quality Preferreds or Canadian Rate Resets at some point, for me, about 20% of my total portfolio, I have to draw a line and cap my total investment in that area. Thus I’m forced to trade one uncertainty for another. I have far more confidence in a Telus or BCE then an AT&T. And would buy any of the Canadian Banks at least as far down as National Bank before buying common stock in a comparable US bank. Though I must say, I wish Trudeau was a bit more business friendly and more balanced in his view of the transition to a Green Energy Economy and the needs of the Canadian Energy Sector which makes up 11% of Canada’s GDP

        1. Richard, thanks for answer, I’m always interested in other people’s thinking.

          I agree as far as bank equities go. The Canadian banks are really financial utilities. If you were going to look at US banks I would stick to STT, NTRS, BK or FRC. They all make their money from fee based sources rather than lending.

          I would buy T over BEC. I don’t follow Canadian bank common enough to have a worthwhile opinion.

          I do think, however, there are still pockets of good value in fixed income in both the US and Canada. In Canada, I look at the min rate pref and the reset preferred at least weekly. I have a large position already and I’m accumulating C$ for the next crash. I know it will come. I placed big bets back in March that some of the min rate preferred would be called, no matter that they were selling at 20-21-22 at the time.

          In the US past call issues that are no more than 1 coupon above redemption price offers some nice yields, albeit with some call risk and a good bit of work. I had a huge position in STT-E before it got called. My replacement has been BK-C. Just don’t overpay relative to stripped par. VER-F is another.

    1. Richard speaking as a Cdn there is somewhat of a “dog of the Dow” theory when it comes to Cdn banks – ie. each year pick the worst performing bank as they will be working on a restructuring which will improve its performance over the coming year. Statistically it works just a matter if you want to be trading bank stocks annually. With regards to telecoms Telus is about $30B market cap vs BCE at $50B – my preference is for Telus as tends to be more nimble and has committed to raising their dividend on annual basis. Another good sector in Canada is the pipelines (Enbridge, Pempina , Keyera, Interpipe) as no matter price of oil or gas it has to flow thru pipelines. All have good yields

      1. Actually I own several Enbridge and TransCanada Rate Resets and I own Enbridge common shares on the NYSE. Though with all the resistance to pipelines both in the US and Canada and all the Kafkaesque Environmental and Judicial absurdities I’m reluctant to commit any more resources there.
        I own both BCE and Telus stock and bonds. I’ve never understood BCE’s Rate Resets. I tend to like Telus also. I’ve seen many Telecom companies spend billions on their dream of being something between Disney, the old real AT&T and Comcast rolled into one. It seems BCE has been at least moderately successful at pulling that off, whereas AT&T’s debt load is testament to a totally different outcome….. Telus seems mostly a pure Telecom play with a company that knows what it does well.

    2. Richard,
      If you’re looking for boring (and not much price appreciation), then BCE is your man. I’ve owned this thing for a couple years and to me, it’s not really different than owning a fixed income security. Used to own TU (much better IMO), as well as RY and TD. All seemed like good earners but I moved on to other items. You might want to throw RCI into your mix. They are the largest of Canada’s 3 national carriers.

  69. LRCNs are apparentlyt going to be available on Canadian Exchange and from what I can see perhaps (hopefully) at new offering. This would be good news to ordinary investors as a CD proxy (still a structured, long term bond).
    I am out in the sticks and can not do research from this pad, but an account at IBRK should be able to facilitate this?
    Honestly, I am baiting a couple of the excellent and diligent CN sources here to look into this so when I return home I can just copy their homework! Full disclosure of motive.
    I hope to see the public being able to fully participate as much of the institutional market seems to be conveniently reserved for the Lords of Finance.
    Also a comment on resets and interest rates: As a long term trend the universal, huge expansion of debt continues to show a deflationary trend toward consumption and maintenance of status quo and not reinvestment into productive, future demand on resources or labor demand as we go forward several years. A time of conundrum for the self directed investor. Seems at some point we will witness a long wave of negative real adjusted rates across the board as the hole gets deeper. I’m holding my good resets as about 15% of portfolio as a paying hedge for the next “planetary crisis”.

    1. Hi Joel….I’ve noticed a major drop off in new Rate Resets from the Big 4 Banks plus National Bank in 2020 and was wondering if this first RBC, LRCN in July was going to permanently kill the market. Evidently the LRCNs offer tax benefits that ordinary Rate Resets don’t.
      Any idea other than Prefblog.com and canadianpreferredshares.ca if there are any resources to track new offerings especially in the LRCN space?

    2. Joel attached below is article from Globe & Mail d/d July 22 when RBC announced the issue of first LRCN – very new to me but reading article not sure if anyway for retail investor to pick up any?

      Royal Bank of Canada bolstered its balance sheet this week by selling $1.75-billion of a new, tax-efficient security, opening the door to what’s expected to be a wave of similar offerings from rival Canadian banks.

      The country’s largest bank sold what is known as a “limited recourse capital note,” or LRCN, that is seen as debt by institutional investors but will be treated similar to equity by federal regulators for the purpose of calculating RBC’s all-important capital requirements.

      RBC’s launch of LRCNs is shaking up the domestic preferred share market, with some investors expecting the new notes to take the place of new preferred share offerings.

      In practice, LRCNs are a combination of two securities. RBC will issue 60-year non-callable debt securities to investors. Alongside this, the bank will issue preferred shares that will be held in a kind of escrow account. In the unlikely event that RBC defaults on its debt payments, investors will be handed the preferred shares.

      “You can think about the preferred shares as collateral for the notes,” said Timothy Hughes, a partner with the law firm Osler, Hoskin & Harcourt LLP, who worked with RBC to develop the structure. “They only become activated if they get handed over.”

      Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, approved the innovative structure last week. RBC spent years developing the securities and wasted little time launching a deal, working with J.P. Morgan Securities Canada Inc. The LRCN offering was snapped up by 105 institutional investors, with demand more than twice the supply of notes.

      RBC’s LRCNs pay 4.5-per-cent interest for the next five years, then the payout resets every five years at a set premium above the interest rate on Government of Canada debt. Each RBC note has a face value of $1,000 and matures in 60 years. The product can only be sold to institutional investors.

      From RBC’s point of view, the LRCN is far more tax efficient than preferred shares, as the interest payments on the note can be deducted from the bank’s income for tax purposes, while dividends on preferred shares are not tax deductible. RBC paid $3-billion of tax last year, when it earned $12.9-billion in income.

      “These terms make LRCNs very attractive funding instruments for financial issuers,” said Toronto-based Brompton Group in a report. The fund manager said these securities are “the holy grail for financial issuers: tax-deductible equity financing.”

      Other OSFI-regulated banks and insurance companies are expected to issue LRCNs. In a report, National Bank Financial said the Big Six banks alone could issue $16.7-billion of LRCNs.

      STORY CONTINUES BELOW ADVERTISEMENT

      The treasury departments at other Canadian banks are closely following the RBC deal, said Sean St. John, head of fixed income at National Bank Financial Markets. The structure is attractive for several reasons. RBC managed to price the deal around 75 basis points, or 0.75 per cent, below where similar preferred shares are trading. It also managed to attract a huge amount of interest from institutional investors.

      The preferred share market would be hard-pressed to “digest” a $1.75-billion offering, Mr. St. John said, “whereas the institutional debt market has the capacity to do that and can actually accommodate all this size.”

      “I think people are moving fairly quickly to get lined up and see what capacity they have to issue [these notes], and are looking keenly at the market right now,” he said.

      OSFI’s approval of LRCNs and RBC’s subsequent offering appear to have reverberated through Canadian preferred share markets. Starting last week, investors bid up the price of preferred shares, apparently in the expectation that banks will use the proceeds from LRCN issuance to redeem outstanding preferred shares.

      Investors, however, may be “overly hopeful” on this front, according to the report from Brompton Group. “Preferred share issuance may be on pause for now as financial issuers focus on issuing LRCNs to institutional and accredited investors with lower market-based demand for income than retail preferred share investors, but this event should not represent the end for Canadian preferred shares or preferred share issuance,” the note said.

      Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

    3. RE: trading of LCRNs.

      I haven’t seen anything to the effect that these are moving to the exchange but I’ll take it as true. Originally, these were issued as the Cdn equiv of 144 issues, meaning institutional only.

      Until and unless they get US OTC tickers I would think an IBKR account would be the way to buy these. But why not buy a real preferred and get higher and qualified dividends? The recent BMO issue of LRCNs came in at 4.3%.

  70. Canadian min rates …..

    If you loaded up on min rates (or resets or fixed) during the March sell-off, you were either very lucky or very smart. The average min rate is presently priced 54% up from the March low and some nearly doubled. There is still some up side to them but also a lot of down side. For the most part I see them as being of interest to long term holders who don’t fuss over the occasional 10-20-30% drop in price.

    That said, there is an interesting short term play coming up. Because of the favorable pricing structure (rates can reset higher but not lower) companies that issued these don’t like them. They sold them because it was the only way they could sell preferred at the time. None of them has ever come up for reset/redemption but that is about to change.

    13 of the 36 issues that I follow will either reset or be called for redemption in the next 12 month A couple of these are selling a tad above call but the rest are all below, but not far below. Some of these may get called even though trading below call price. Some nice cap gains available if they are.

    If they aren’t then you have a nice rate for the next 5 years. Just make sure you can live with price volatility and CAD$ risk. (Risk is aka as “diversification”).

    On the table, focus on Columns AD (years to call), X (strip price), Y (strip yield) and AA (yield if called).

    I personally own a significant amount of BEP.PR.G (bought as BRENF) in a Roth and after browbeating Vanguard long and hard finally got them to stop withholding 15%. It will get me close to a 9% after tax return on cost on an IG rated issue.

    If the following link does not open for you please let me know.

    https://docs.google.com/spreadsheets/d/1wy08_dQCkLDRHh_FFtzcfV6v_JmGWZw_elB_z0iF5gE/edit?usp=sharing

    1. Thanks very much, Bob. I have a fair amount of CDUTF in my IRA at about a dollar under par. I am reluctant to add more Canadian preferreds since Schwab continues to withhold the 15% for the 5 issues I have in my IRA. I will look at some of these for my taxable account.

      1. Alan – welcome. Think about moving on from Schwab. 15% is too much to give up in my mind. Domestically, I do business with Vanguard, TDA, and IBKR, as well as Schwab, and every brokerage got it right except Schwab.

        This includes both the treatment of preferred dividends as qualified and withholding of dividends paid into IRAs and similar accounts.

        I believe the reason that Schwab won’t give on the issue is liability for past mistreatment of Canadian dividends. I imagine it could be in the hundreds of millions of $. It reminds me of a tax case involving the state of Michigan. The state’s main argument against a Michigan Supreme Court ruling was that the state couldn’t afford to refund taxes illegally taken from citizens if it lost the case.

        1. Bob, Running to TD may not prove beneficial going forward. One of our members here who has unsuccessfully fought Schwab on QDI treatment asked what are all the TD customers going to say when they suddenly arent able to get QDI after Schwab takes them over… She was told “Good question” and implied we were going to have to suck up the QDI tax loss when that time comes. If that comes to pass this will limit my desire to hold them. Maybe some in tax free account provided the 15% withholding is not being screwed up either.

          1. Grid – I will be watching happenings at TDA closely. TDA will do many things that other brokerages won’t do or you have to arm wrestle them to get done.
            If TDA follows Schwab, I will move on from TDA.

            If Schwab is smart they will leave TDA alone.

            PS – anyone out there who wants to do a FINRA arb on Schwab’s QDI position on Canadian preferred treatment I will talk support and risk sharing. My own position at Schwab is too small for me to do it on my own.

            1. Bob, in my interactions with Schwab earlier this year I was told that they have two companies (I believe they called them holding companies) that handle Canadian securities for them. One withholds the 15% on deferred accounts and one does not. All of the Canadian preferreds that I have in my IRA are with the one that withholds the 15%. Seems pretty strange that Schwab would allow different treatments, but that is what they told me.

              1. Alan – Schwab lied to you, like they lied to me and many others. There is actually a very long string of posts on this site (Canada and Sandbox and Brokers sections) on which folks laid out all their communications with Schwab. Schwab has at times given half a dozen differing explanations for not giving Canadian preferred QDI treatment. It’s an interesting read if you have the time.

                Turns out the truth is that Schwab relies on a 3rd party for its QDI determinations and the 3rd party relies upon a proposed treasury regulation going back something like 20 years that was never implemented. The proposed regulation is not binding and never was. I researched this issue quite carefully.

                As I said earlier, the only reason I can come up with for Schwab’s position is liability. I would love to see someone take them on in a public forum, like a courtroom. I believe one can “break” the arbitration requirement by going for a declaratory judgement (i.e. a case in Equity, not Law) and Delaware Chancery Court would be the perfect forum.

                Schwab was to be a major part of my brokerage picture. Instead, I have moved every single position I had out of Schwab to other brokerages, save for 3 issues that other brokers would not take.

                I use TDA primarily for one issuer but it’s a big position and other brokers won’t let me buy it. I’ve told my TDA rep that if TDA adopts Schwab’s business methods that I would be gone. He said so would he.

                In comparison I find Vanguard honest but at times frustrating. Given the evidence they will correct errors in tax treatment, as they did on BRENF. They even called me a few weeks back to apologize for not allowing some trades that should have been allowed under their rules.

                IBKR, never had a problem.

                1. I have been a happy TDA customer for decades but their support of Canadian Preferred shares drives me nuts. I have a position in BRENF and have looked to add to it on dips. Seems their internal system which populates valid share references (i.e., BRENF) has to be loaded daily and typically does NOT include Canadian Preferred shares and kicks out limit orders (and new daily orders). As it is not updated, the price is not updated as well.

                  Very frustrating and amazing when you consider they are a Canadian Bank (TD = Toronto Dominion),

                  1. Greg – I hear many good things about TDA. Yes, it has a Canadian connection but they are separate entities and the integration between US and Canada is minimal. Same on the brokerage side.

                    Buying Canadian issues off the OTC is quirky. The execution can be poor, sometimes want foreign transaction fees, and at times valid symbols are rejected. But proper tax treatment is key to me and Vanguard gets it right, albeit at times only after I have made known their errors to them.

                    If you want true execution off the TSX the only way for most Americans to do it is IBKR. IBKR Canada is fully integrated into the US platform. It’s seamless.

            2. I am in a similar position; I didn’t build out my Cd portfolio substantially until 1Q20 – 2Q20 so haven’t suffered much of a loss yet; didn’t wake up on the issue until I couldn’t get the 1099s corrected! It looked to me like Schwab’s tax department was seizing on pretexts to justify a bad position on the issue vs. making a logical decision based on principle. Knowing entrenched bureaucracies from my insurance background, it’s hard to see them folding easily unless the TD folks have taken over the tax department.

              I moved my preferreds all over to Fidelity at the end of the second quarter.

              If it would help to have another party formally complaining about the issue I would consider it, but it hasn’t cost me much at this point in time & it wouldn’t make sense for me to invest in an arbitration proceeding.

              My only regrets are not piling more heavily than I did into Cd preferreds back in March-May, appreciation has been significant and yields on investment are much higher for equivalent credit ratings over US issues. Feels nice even though these are long-term holds.

    2. In the context of a preferred stock, rather than a bond, can you help me by clarifying the meaning of “strip price” and “strip yield?” I gather it is a measure of the present value of the future flow of dividends, only, and the value of the stripped equity, valued independently. Since there is no maturity date on a stock like there is on a bond, though, I’m not catching the intrinsic value of the latter unless you posit a call, and these issues have tended to get rolled over more than they have been redeemed. Would you coach me a bit on what the meaning and practical utility of these factors is when comparing issues? Thank you, professor!

      1. Tim – 1st thing to appreciate is that most exchange traded fixed income (bond or preferred) trade “dirty”, while institutional issues (the ones most of us have to buy off the bond desk) trade “clean”. The difference goes to how accrued dividends or accrued interest are treated in the pricing.

        With dirty issues, the price you see, the price you pay, includes accrued dividends. You don’t pay extra for the accrued dividend, it’s part of the package.

        With clean issues, the price you see is without accrued dividends. If you see a bond priced at (say) $102.50 (which is actually $1,025.00), the price you will actually pay is $1,025.00 PLUS whatever the accrued dividend happens to be. On your brokerage confirmation the two will always be split out, so you can see how much you laid out for the accrued dividend.

        Figuring yield on issues that trade clean is simple – just the amount of the dividend divided by the price (without considering what you paid for the accrued dividend).

        On a dirty issue, to calculate yield, you have to calculate and back out the amount of the accrued dividend from the price you paid to get the “stripped” or clean price. (In effect, making the dirty price a clean price.)

        1. So, what is getting stripped out is just the embedded value of the immediate next dividend?

  71. RE: TSX/OTC list

    I am going to leave this up through Friday.

    https://docs.google.com/spreadsheets/d/1gzdZjt4LmLjF_wNBgRkaIMrikBpbyM04qGhf2g-7sUo/edit?usp=sharing

    Beside the persons who saw the link here I got about 3 dozen requests through google sheets and hopefully some of them will become regulars here.

    For market commentary, prices on can pref, especially mins and resets, have gone rather high since the March crash. I would be careful and selective about buying in this environment.

    Since the March lows, mins have increased an average 55% in price and the resets by 58%.

  72. I was surprised that Canadian Utilities Preferred Series EE, CUTLF, was not called since the call price increased from $25C to $26C on Sept 1. It is currently paying a little over 5% and seems unlikely to be called now.

    1. Alan, I think you have read it backwards, as the longer its outstanding, the lower the redemption price until reaching $25 CAD. Agree with you that redemption is not likely. Since this one has dribbled over par now, I think there are only 3 “true” ute preferreds with a 5% fixed yield and presently under their issue “par” price (not counting suspended PCG).
      On or after September 1, 2020, the Corporation may, at its option on not less than 30 nor more than 60 days prior notice, redeem for cash the Series EE Preferred Shares, in whole at any time or in part from time to time, at $26.00 per share if redeemed during the 12 months commencing September 1, 2020, at $25.75 per share if redeemed during the 12 months commencing September 1, 2021, at $25.50 per share if redeemed during the 12 months commencing September 1, 2022, at $25.25 per share if redeemed during the 12 months commencing September 1, 2023, and at $25.00 per share if redeemed on and after September 1, 2024, in each case together with all accrued and unpaid dividends to but excluding the date of redemption.

    2. Alan RE can Utilities

      You have the redemption scheme backwards. It starts out at 26 when it first becomes redeemable (which it did yesterday) and drops 50 cents per year until it hits and stays at 25.

        1. Ya, but I needed you Bob…I guess I thought I was in 2021, so I needed your post to correct mine, ha.

      1. Thanks for the clarification, Grid and Bob. My mistake. I was thinking it was already callable. Still, it seems unlikely that it will be redeemed this year with a call price of $26C. Appreciate the quick correction.

        1. FYI most Canadian fixed rate preferred follow a similar redemption price schedule, i.e. they start high and fall to 25 over a 2-5-year period.

  73. I posted this link elsewhere on III but am posting it here, too. It is a list of all of the Canadian preferred with US OTC tickers that I follow.

    I am posting here for the benefit of the several dozen who asked for access to the list through the google sheets system. The intent is that they will become regulars of the site and contribute thinking and analysis of their own, not just “free” information.

    https://docs.google.com/spreadsheets/d/1gzdZjt4LmLjF_wNBgRkaIMrikBpbyM04qGhf2g-7sUo/edit?usp=sharing

    1. Thanks for posting this, Bob. Do I need a Google account to open the spreadsheet?

      1. The link I provided opens for me. If it doesn’t open for you try another browser. maybe you do need a google account to open google sheets.

  74. Re: Canadian Preferred issues
    Can anyone provide a site that displays each U.S./ OTC symbol which
    corresponds with the equivalent Canadian TSX symbol., where available. I find it a difficult hit or miss adventure. I would be far more interested in Canadian preferred issues if the crossover to a U.S. symbol wasn’t such a difficult and time consuming adventure to determine (for me ). Thanks.

    1. Trading under the OTC symbols is pretty hit and miss in my experience, exceedingly low volumes on many issues. Since these are long-term holds for me I buy them on the TSX using Fidelity’s International desk.

      1. Tim, for me the volume on OTC is irrelevant. But you have to pay posted ask price correctly CAD converted. It literally hits in seconds on TD. Not great flipping methods so typically longer holds. But shares are there through TSX flow through.

        1. For whatever reason, I’ve posted buy orders with the OTC symbol offering a good margin over the ask, (the systems usually do such a good job of scarfing up lower cost lots) and seen them remain open all day long without being filled, hence my comment. That said, I was successful selling an EBGEF position today as I was going to be in and out and didn’t have time to camp on the phone waiting for a Fidelity rep to place a TSX order.

    2. Hi Howard,

      US/OTC is for the common shares only. There is a small subset of Canadian Preferreds U.S. $ based that trade in us exchanges.

      The majority > 95% you can only purchase on the TSX. These preferreds have the additional advantage of the Dividend Tax Credit for Canadians.

      1. Alex and Howard, the funny thing is an astute broker can get an OTC ticker expedited and assigned for trading for you through FINRA. An online friend got EBGEF and FORFF assigned for me to trade from a Schwab broker she had an account with. She had to buy shares first then it became a tradeable ticker symbol a day or two later.

      2. There about 90 OTC tickers out of perhaps 450 preferred issues. I don’t include split corps in my figures.

  75. Any September resets priced yet? Would like to pick up some Intact Financial, Fairfax and Northland Power since the banks have had such an amazing run-up. Not sure which of these has something repricing in September, but think it’s the first two.

    1. So far, data are known only for those issues that are reset in August:
      BMO.PR.Y -> 3.054%
      EMA.PR.A -> 2.182%
      Two more issues (ENB.PF.G, NPI.PR.C) should be reset in September, but no press releases on the results have been released yet

      1. Yuriy – worth noting that the reprice date (the date that really matters) comes (typically) 30 days before the reset date (the date the rate actually changes). ENB has already repriced (with effect from 9-1) and on NPI I believe it’s the A issue that is repricing soon.

    2. Hi Tim,

      You can find a list of upcoming Canadian preferred shares and their reset date at https://canadianpreferredshares.ca/preferreds-resetting-within-180-days/. The table can be sorted by reset date and it brings in anything resetting with the next 6 months.

      The yield of these reset is set by the issuer 30 days before the reset date. This website updates to the new yield once every 2 weeks so it picks up the new yield at the latest 2 weeks before the reset.

  76. Name two things that have not happened in a very long time? Yes it’s a gag line as we can all think of many such things having nothing to do with investing. Such as a full, grammatically correct sentence from Joe Biden (I am from Delaware, after all).

    But the two I’m thinking of are these:

    1) Except for split corps, there has not been a Canadian preferred issued in several years. (Sorry, no time for the split corp rant; search for it if inclined), and

    2) Until a couple days ago, there had not been a Canadian preferred redeemed in many years.

    The Canadian pref market used to be like the U.S. market, with a steady stream of issuances and redemptions. But the spread between what Canadian investors demand in yield on preferred and what companies can issue straight debt at has grown to the point no deals in preferred are going to get done.

    This may change, however, as the min rate resets come up for reset/redemption over the next 2 years. Structurally, these issues are great for investors – rates can reset higher but not lower – but many are now trading close to or above redemption price and in any event companies are very eager to get these off their books.

    If rates start to tick up companies are going to call these issues even if trading below redemption, or so I believe. I have personally placed some sizable bets that this will happen.

    1. As always, meaningful and interesting analysis. Thank you, Bob.
      P.S. It’s a pity that you rarely comment on the Canadian market lately.

  77. Rally at ALA today: PR.A is 7.5% up, PR.G 6.3%, PR.U 6%.
    The only question is “to sell or not sell” ))))

    1. By my own ratings ALA is IG. Seems others are doing some homework instead of just looking at a rating that may have lack of timeliness or analyst prejudice?
      Hey, I’m holding and do so if you bot it right!! Or try a sell stop? I just had my last SR-A taken at $28 on a sell order that I had forgotten about. Thin vol can be a help at times.

      1. I’m still long at U which is a USD issue. The rests had gone with a good (at that time) profit, but apparently too early…

  78. Big ramp at BBD-B. I don’t know the reason of this, but I’m happy to finally get rid of this trash, lol

    1. This week first call (redemption) I have seen of a reset: EFN.pr.g (verify). Nice 10%premium + the div.
      Waiting with cash, but getting antsy to be topped up. Have open orders in place to stop out some chickens. Somebody give me some fear in the market!
      HSE is IG and has a debt swell refi overhang over the next few years. Should routinely be an easy refi, but the prices are still indicating refi-doubt. Some beat down prices here and elsewhere.

      1. Thanks for the tip Joel, I will need to remember to remove it from the spreadsheets at the end of the month.

      2. This is the first Canadian preferred issue to be called in a very long time.

        A bunch of Royal Bank issues will be called soon. So, too, will some other bank issue. This is a Basel III issue that is effectively forcing these calls by early 2022. Otherwise, this would not be happening. This issue has been known for about a decade.

    2. BBD exists only because both the Fed and the PQ governments support into this endless money pit. It’s a big employer in manufacturing in a province that has very few.

      An investment in Bombardier is an investment in continued government support.

      1. Sadly Bob you are 100% correct in that BBD exists only due to Govt support from provincial and federal govt. Reality is for either the Liberals (traditionally strongly supported in Quebec) or Conservatives to get a majority govt they need to get seats in Quebec. Thus regardless of the govt in power BBD will always get govt support. They are downsizing (just closed another plant in Ontario of course) which is their only small hope to stay in business. For a lark I took a small position in the D prefs back in June for a 12% yield and am currently up about 10%. Figure this is a way to get my tax $$’s back from supporting BBD. Definitely just play money though.

  79. Yes, the USD now is weak and a weak USD for me is a reason to buy more USD against other currencies (I also operate with CAD, AUD and JPY denominated assets). Therefore, I do not raise my exposure in other currencies, preferring the USD. Just see no reason to buy expensive assets since my base currency is USD.
    But I proudly hold my CAD prefs which I bought during the last crash and collect its fat divies, lol

    1. I would suggest it has weakened, but not weak historically speaking to CAD. Its still high, only slightly less high, chart wise, but I understand… Actually CAD has been higher earlier this year than even now.
      I have actually recently bought Fortis 4.9% fixed at $17.81 so I am, undeterred, ha.

      1. I thought about it too. Yes, it is quite possible that it will go even lower.
        I am focusing on the average price over the past 5 years, at which the USD was worth 1.32 CAD. So my guess is that if the price is close to this figure, then the buy is unlikely to be a great deal.
        But the 10-year average is already much lower (1.19 CAD), so if my assumptions are not confirmed and the fall does not stop at the 5-year average, I will lose.
        I will most likely return to the CAD market when there is confidence that the USD will remain below 1.3 over the long term. But so far in this situation there are too many incomprehensible things for me.

        1. For what it’s worth most CDN economic depts are forecasting the CDN$ to stay relatively flat against the US$ and if anything actually weaken against the US$ over next 1 – 2 yr timeframe. Our consumers are very heavily indebted (worse than 2008/9) which leaves little capacity for economic expansion. Our Liberal govt has no appetite to develop our oil & gas sector which is a key export. As a CDN I am looking more to US & Intl stocks for better growth prospects.

          1. Buck, but on a positive note Canadian govt debt as percentage of GDP is half of what the US is. 🙂

            1. depends how you measure Gridbird – when you add in all the provincial debt and corporate debt (which is a truer picture than just looking at Federal debt only) as David Rosenberg (Canada’s version of Dr Doom) did in a recent article Canada is at 350% of GDP vs US @ 330% . He’s looking at CDN $ going down to low 60 cent range vs US$ (which seems too extreme for me) . So good for me holding US$ stocks but bad for you US citizens holding CDN$ stocks.

              1. I definitely can see the value for some in currency diversity as a hedge. But predicting any such currency movements by any expert I would say is no more reliable than you or I throwing darts seeking the answer. I dont really have enough CAD to really concern me. The fixed ones I own North are just better quality and have no YTC issues, so I own for those reasons. The currency movements are just a minor irratent to me. Over time it largely corrects.

        2. Yuriy here is an interesting little factoid — TOTAL market capitalization for our Canadian TSX is $3.3 Trillion (rounding from a Google inquiry) vs Apple at $1.9 Trillion . Used to advise investment clients that the Canadian market was less than 3% of world equity markets and thus the rationale for Canadian investors to look beyond our borders.

    2. Mr Y, Don’t overlook the availability to use a simple FX transaction on cash holdings to other currencies if you are using IBKR. The cost is $2 each way. It can be managed right off of the Account Management page or by creating a pairing on a watchlist. Accounting will show as cash in currency on your portfolio page. Don’t forget that the first one named in the currency pairing is the one you are buying or selling.

      I have had to retrain my eyes (also to using your sheets) as well as using IBRK’s tool-power.

      I have held my wad of cash there in CAD, since CN is all I hold over there, and now can move back to USD when it has appreciated. I know it becomes a currency ‘flip’ and this is speculation. Gotta know the nature of the beast.

      There is also the ability to add an auto-transaction with currency; ie: use my USD to buy CAD instrument; on the trade ticket by using the ‘advanced’ drop down at the end of the order placement.

      I think knowing all the tools in the toolbox is a good idea for just when you may need it and is a good use of Tim’s forum here. You are probably a lot more sophisticated than I am since I am close to a reformed Luddite, but there may be someone here who can use the info. Forgive me since I used to talk people through electronic brokerage sites in a previous life. The intimidation barriers are dropping on global access.

      PS: I am ready for IBRK’s promise of direct purchase of sov bonds to come through, but may not until ALL global rates at at zero! It’s a protected market still.
      Hope this is an open share with after all the diligence you have contributed! JA

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