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.
Not sure if this site will be interesting to anybody, but it was interesting to see which are Canadian partnerships
https://services.cds.ca/applications/taxforms/taxforms.nsf/PROCESSED-EN-?OpenView&Start=1&Count=3000&RestrictToCategory=T5013-2020
Article in Saturday Globe & Mail regarding the ongoing saga of Inter Pipeline take over (and the lawyers are getting richer and richer)
Alberta securities regulator hears complaints about bids for Inter Pipeline
JAREN KERRMERGERS AND ACQUISITIONS REPORTER
PUBLISHED 1 DAY AGO
UPDATED JULY 10, 2021
FOR SUBSCRIBERS
The board of directors at Inter Pipeline Ltd. said it supported a takeover deal the company signed with Pembina Pipeline Corp., despite an increased offer from Brookfield Infrastructure Partners. That has now led to an unfair tactics dispute with regulatory agency.
HO/THE CANADIAN PRESS
Inter Pipeline Ltd. IPL-T
unfairly favoured Pembina Pipeline Corp. PPL-T
by agreeing to pay it an onerous break fee if Pembina’s takeover offer does not succeed, rival bidder Brookfield Infrastructure Partners LP BIPC-T
told a regulatory hearing on Friday, while Inter Pipeline countered that Brookfield’s offer was misleading and deterred other parties from bidding.
The battle between Brookfield, which lodged a hostile bid for Inter Pipeline in February, and Pembina, which made an improved white knight offer in June, has moved to the Alberta Securities Commission after all parties complained about unfair tactics in the takeover fight. Pembina’s bid is supported by Inter Pipeline’s board of directors.
Lawyers for Brookfield argued Tuesday that there should not be a $350-million termination fee attached to Pembina’s friendly takeover offer for Inter Pipeline, which is payable if the Pembina deal does not succeed. If the fee is not removed and Brookfield’s bid is supported by Inter Pipeline shareholders, Brookfield will effectively have to pay it.
Brookfield’s lawyers said the fee is “option chill” that serves as a tax on Inter Pipeline shareholders who could have unlocked value by now, and said Inter Pipeline never consulted with Brookfield about a suitable sum for a break fee.
Inter Pipeline’s lawyers said the break fee was within a typical range, and necessary to attract Pembina’s friendly bid. They countered that Brookfield’s use of securities known as total return swaps to acquire an ownership stake in Inter Pipeline was misleading because the swaps made Brookfield appear to have nearly 20-per-cent voting control in the company, when it actually has just less than 10 per cent.
Brookfield owns a 9.75-per-cent stake in Inter Pipeline’s common shares outright, and has another 9.9-per-cent economic interest in Inter Pipeline through its total return swaps with its counterparty, Bank of Montreal.
Lawyers for Inter Pipeline also referenced court documents that said that BMO would receive a $15-million success fee if Brookfield’s hostile bid won, which, they say, creates a conflict of interest and could sway BMO’s vote as a shareholder of Inter Pipeline.
Inter Pipeline’s lawyers argue Brookfield has always combined the outright ownership with the total return swaps in its materials, which effectively discouraged other bids for Inter Pipeline.
Canadian securities laws require shareholders with a stake of more than 10 per cent to publicly disclose their holding. The rule is meant to prevent creeping takeovers, in which a shareholder amasses a large position covertly and can then effectively control the outcome of a takeover battle. Brookfield has remained below the early warning threshold because it owns just 9.75 per cent of Inter Pipeline.
Brookfield made its takeover offer in February after Inter Pipeline’s stock plummeted because of weak oil prices, along with delays and rising costs at its Heartland Petrochemical Complex northeast of Edmonton. The facility has been under construction for more than three years, and Inter Pipeline struggled to find a partner on the project until Pembina’s offer arrived in June. The facility will convert Alberta propane into polypropylene pellets for manufacturers.
The ASC panel said it expects to deliver an oral decision on Monday.
Looks like Pembina has thrown in the towel and accepted the parting gift.
https://www.pembina.com/media-centre/news/details/135515/
The merger vote was set (still is I guess) for Aug 6 and I’m assuming Pembina thought IP shareholders would vote in favor of the BIP offer. You read same or differently?
If BIP will pay the price they are paying with zero operational synergies they must see big value in IP once the megaplant is complete.
Bob,
I have two thoughts.
– Brookfield was willing to keep increasing their offer and PBA did not want to over pay.
– Likely some institutional holders (beyond ISS) have told them they will vote for Brookfield.
While it would have been a great combo, the $350 million looks good on their balance sheet.
Looks like Brookfield was going to pay 1 buck more than whatever Pembina was going to offer. Brookfield has more money than Pembina.
I assume that Pembina was being told that the Aug 6 vote was going to go Brookfield’s way.
The 350M breakup fee is good for Pembina. Works out to about 65 cents per Pembina share.
Still, I think this went the wrong way. Institutions will sell you out for a nickel and they have the patience of a two year old.
Here’s a thought. This could end up down the road with Brookfield acquiring Pembina. The fit is too good for it not to happen one day. BIP calculated they could get the two cheaper buying one at a time than the two combined. I’ll be buying more Pembina.
Bob, I see that Pembina declared a June 2021 dividend of $0.21 (unchanged since Jan 2020 from what I can tell). Yet Yahoo Finance is reporting annual divs of $2.00. Any idea why they shouldn’t be reporting $2.52 instead?
Monthly and conversion!
Looks right.
Bur …..
without looking I think what you see is the currency difference. Pembina is listed on both TSX (as PPL) and NYSE (as PBA) and trades on both in the local currency. 0.21 CA$ per month works out to 2.00 annual in US$.
Confused yet?
Bur – as per Bob’s comments I got my latest 21 cents (CDN) on July 15th which times 12 equals the $2.52 (CDN) or appx 6.4% yield on common price today
So for anyone looking at a possible cause and effect event – just saw item on CDN biz channel that the annual Calgary Stampede is back on this year after being cancelled last year due to Covid. What does this matter? According to the reporter who covers CDN oil patch a lot of M&A activity gets discussed during the social meet and greets during the Stampede festivities. Ergo – if you like to dabble in smaller cap CDN oil & gas stocks there may be some activity this fall (kind of like the hedge fund that tracks corporate jets to try and figure out potential M&A’s)
Geez, can’t imagine what the gold ol’ boys from Canadian oil have got to talk about this year. Nothing going on in pipelines. No lawsuits flying. No M&A action.
Been a longggg time since I was at Stampede.
Completely off topic for this board, but one of my fondest memories is of attending the Pendleton Round-up as a kid with my great uncle back in the ’70s.
Why, you were almost walking distance to Calgary.
LOL — Bob the biggest challenge to the Cdn oil patch is the fact that Junior and the Liberal party have 0 seats in Alberta and Saskatchewan so consequently no big urge to offer much assistance. Then you add on our new Minister of Finance (Chrystia Freeland) has a BA in Russian history & literature and was a business journalist before becoming a politician. Poor John Kenneth Galbraith (born about half hour from where I live) would be spinning in his grave.
not to be political.. but have read in a number of places that everything Galbraith put forth and been proved absolutely wrong.
BAM & BAMR ………..
The story is half Canadian anyway. Out of the box BAMR traded all the way up to 85 when the stock it tracks, BAM, was in the low 50s. Well, reality has caught up with the theory and the two tickers are trading at almost the same figure now, 52 for BAMR vs 51.58 for BAM.
If you have existing holdings in BAM in a TAXABLE account, I would look at converting to BAMR. But look at cap gains first (this is not a tax free exchange), as it may alter the decision. But going forward, certainly, you should prefer BAMR over BAM. No withholding on BAMR (15% on BAM) and your tax rate on qualified dividends may well be less than the 15% withheld. It may be zero. So, BAMR saves on taxes.
If you hold your Brookfield in a ROTH I don’t think it matters what you hold as there is no tax and no withholding on either. But be alert for arbitrage opportunities between the two. Sell the pricier one and buy the cheaper one. More shares for less money and since it’s a Roth you don’t have to worry about taxes from trading back and forth.
For a REGULAR IRA, well, after thought, I decided I wouldn’t personally hold either BAM or BAMR in a regular IRA. The dividend yield is only about 1%, so the current tax savings isn’t much and an IRA (dirty little secret!) converts what would be LTCG into ordinary income when the profits are eventually withdrawn from the IRA. Most of BAM/R’s long term return is going to be cap gains so holding BAM or BAMR in a regular IRA may actually leave you with less money that holding in a taxable account.
Save your IRA space for something that pays a fat dividend and won’t generate as much in the way of cap gains. ENB, with a 7% dividend yld, comes to mind.
My take anyway ….
Some of the big oil companies in Canada are looking at significant blowout FCF leverage to oil prices for the long term , even with bouts of reversion to downward pricing in the future. Their business expenses have been wrung out during this last cycle, technology applied and much of the CAPEX needed already in place. The gusher phase is now in their view.
Just as a general personal prediction, I would not be surprised to see some of the preferreds, now below (some way below) par and yielding decently for the holder for a few years, being redeemed at call from free-cash. Interest rate refi risk may just not be an issue.
They are also aggressively and realistically going after the Green Questions with very realistic applications.
Way long after a long study. Been shifting these instruments and commons with call writing into sheltered accounts.
Too bad govts aren’t run by these forward-looking bad-ass managers! We need a ‘lottery of this type of Unwilling, but uber-competent’ at election time. At one point that was a promise of business/govt partnership, but the undisciplined have to end up somewhere.
I am going to try to go up into Alb and BC this Summer, but will see what a passport can do at the border.
PS: All Hail the Canadiens…again?
Joel – CDN energy has a history of feast or famine and we are definitely in the feast phase right now. As energy proxy the I Shares Cdn Capped Energy (XEG on TSX) as of June 30 is YTD +56% and 1 yr +132% but 3 yr – 9% 5 yr -3% and 10 yr -5%. So timing is everything. I follow an energy specialist portfolio mgr (Eric Nuttall) who appears frequently on BNN Bloomberg TV (Cdn business channel). There is a 1 hr show at noon (Market Call) where portfolio mgrs take calls / emails on stocks from viewers. You can find the show on the internet and there are frequent calls from US viewers. Right now Nuttall is looking at smaller cap CDN energy companies having more leverage to higher oil prices. Nuttall’s fund is Ninepoint Energy if you want to see what he is currently holding.
Les Canadiens have certainly make it exciting for us Canucks this year as Vancouver was the last Cdn team to even make it to the finals and that was 2011 (Montreal last winner 1993 with Patrick Roy in net)
Happy July 4th by the way !
Underwhelming news of Canadian preferred ……
Two new issues with OTC tickers:
GWO.PR.H is available as GRWLF, and
SLF.PR.D is available as SLFIF.
Both are strong investment grade FIXED (not reset) rate issues yielding 4.86% and 4.47%, respectively.
Better than one can get on comparable U.S. issues but that’s a left handed compliment. I’m much preferring Bermudian insurers now, with their higher yields and NO withholding.
And a rarity! A variable rate issue, BAM.PR.S (aka BMKAF) will self-destruct and turn back into 5-yr reset BAM.PR.R (BAMGF). This is as a result of the once-every-5-year option that resets carry to convert to floating rates, and vice versa.
The holders of the variable voted for this. They are trading in a variable rate of 2.41% (yld 3.14%) for a rate fixed for the next 5 years of 3.24% (yld 4.22%. Point being that the expectation among those voting was for rates to remain low.
To my knowledge, this is the first case of a converted variable converting back to a reset.
And for the second year running the trip to Muskoka is off. Canada will just have to survive without Yankee tourists, and their money. I’m surprised the LCBO in Port Carling has survived, not to mention Silver Stream farms. Between Justin and Joe it’s a race to the bottom.
Bob you need to be wearing a Vegas hockey jersey to get across the border right now. (go Habs go !) I believe the border is going to open July 22nd but Junior & Dougie Ford seem to change the rules every other day. You like BAM I believe and I stumbled across a unique BAM offshoot called Brookfield Select Opportunities Income Fund (BSO.un ticker on TSX). Has about 10% yield and quarterly pay . Threw a few loonies at it out of curiosity.
Junior, you mean the former drama teacher?
Since I pay taxes to the demented one I’m looking for the new BAMR starting Monday. Gets me rid of that pesky 15% withholding.
yes along with a few other names the drama teacher has been tagged with Junior in deference to his father . Who knows you may be in same boat some day with Don Jr or Ivanka : )
Bob I see that GWO.PR.H is trading on the TSX at $25.03 ex div date was June 1. And the other symbol GRWLF brings up a price and a blank page on the OTC and a listing on Quantum Online of a Preferred that has/had a call date of 9/30/2014.
Are you sure those symbols are right?
Richard – don’t bother with QOL. See below.
https://www.otcmarkets.com/stock/GRWLF/overview
https://www.otcmarkets.com/stock/SLFIF/overview
Use TSX pricing and convert. Never rely on the OTC pricing that you see.
TWIMC, Domtar (UFS) going private, equity up debt down. They have 2 issues, both are long (’42&’44), now trading with ytm of about 6%. Looks like a buying opportunity to me 🤔
Yuriy – anything to add to initial report? I do have a toe hold in the 2044 bond and the recovery was nice but it’s now time to harvest or grow.
S&P characterizes the recent deal as an acquisition of Domtar (US) by Paper Excellence, a private (but large) Canadian company. Bonds are callable by the company, with make whole, and puttable by the holder in a change of control at 101%. S&P has them at BBB- with neg watch, the neg watch being a consequence of the acquisition.
Looking at the merger agreement, the plan is to de-list and de-register Domtar securities in both the U.S. and Canada. There may be little if any public financial info about the company post merger.
Is 6.75% enough in this situation?
Hi, Bob.
I believe these risks are typical for a private equity company, so each investor himself assesses how critical they are for him. Perhaps I would not get involved with this in other conditions, but today there are practically no interesting points on the market for investing capital. Since I needed to place somewhere the funds received from closing the position in T I took some of these bonds, taking into account the fact that their debt load is relatively small (by today’s standards) and the issue’s amount itself ($ 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.
Yuriy – have you been following the Domtar bonds? There is a tender out for them right now and my quick look says the tender price is way low. Below current market and well below recent prices.
Am I missing something here? I didn’t read the full offer.
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
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!
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.
Bob, I was interested to read this op-ed from a couple of days ago: https://calgaryherald.com/opinion/columnists/smith-is-the-line-5-showdown-with-michigan-all-about-the-money. Sounded hopeful…
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.
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 .
I’m happy that Enbridge is making their case to a wider audience. The CEO has a letter to the editor in response to Whitmer’s Op Ed in the Washington Post.
https://www.washingtonpost.com/opinions/letters-to-the-editor/the-great-lakes-pipeline-is-safe–and-getting-safer/2021/05/21/0341d310-b97c-11eb-bc4a-62849cf6cca9_story.html
I’m long the common and two of the preferreds and think Enbridge is looking to do the right thing.
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.
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
Last time I saw Wings in person Gordie Howe was still on the team. You think Ali had a good left hook?
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.
LOL great story !
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
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.
ENB in the news: the governor of Michigan is suing to shut down one of their pipelines, while they counter-sue in U.S. federal court. https://news.yahoo.com/whitmer-threatens-profit-seizure-pipeline-192354645.html
I was hoping this would be a buying opportunity for EBGEF but so far nothing.
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
Joe–have you seen Yuriy around lately? I can post his spreadsheet but not without his/her permission.
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.
Ok, now it’s ready:
Resets https://docs.google.com/spreadsheets/d/1UB3TVsCo_bPDD4tkYu88tQxEO1KrybbY429PoObEYS0/edit?usp=sharing
Fixed https://docs.google.com/spreadsheets/d/1nJTjD1H3PKvqcuntO7hL3rwI2p5-7AIBa5bplxKky-U/edit?usp=sharing
Floating https://docs.google.com/spreadsheets/d/11vDz_swj2Z8-VQjl7nKgnlSRURz3k8Y8YLqCDMwC-II/edit?usp=sharing
Please let me know if you find there some error-trouble-etc.
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
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.
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.
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$.
Thanks for the input.
Bob, thanks for this note: I wrongly assumed that IBKR would automatically convert my USD to CAD when I bought a CAD issue on the TSX (which I haven’t done yet, but looked into with BEP-G (their Ser.7)).
Re: IBKR:You can add an order to automatically transact the FX conversion, on any given order and it asks you to approve that action before placing the order, but it is always an odd lot and a bit of a more cost. Lately, and nicely, it has been good for my account to just plop all my usd into cad since the dollar has been in the crapper…that’s the technical term.
I segregate all my Canadian holdings now in one account there and it has been a bit of a learning curve, not too bad since I knew exactly what I wanted to do and hold. My advice would be to, right now, sign up for and begin their papertrading account, developing the Watchlists and retrieving reports. Getting in touch with them for broker assistance with ANYthing is teeth grinding, but possible if you have no expectations on service protocols (see…I put that NICE!)
Use their TWS platform since the online {Client Management Portal) and mobile app is like writing on toilet paper with a magic marker and mailing the order in to them. Only good to do a view in my op.
Has been a good move for me.
Good info, Joel. I do explicit US$ 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 $100k account to access. I use Webtrader for 99% of my IBKR trades and it has become my favorite trading platform not just at IBKR but at all brokerages that I inhabit. Sometime, when I have spare time, I may learn TWS. It is a beast both in complexity and power.
Bur – it’s not automatic but as Joel reports it can be set up to be automatic. News to me but it is good news.
I do it in Cd$ 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.
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.
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
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.
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.
PS: to access the SEDAR filing you will have to do one of those annoying verification things. It’s not me; it’s SEDAR.
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
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.
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.
What about BEPH? Is this also a Bermuda corp or Canadian?
Seems that not QDI but well rated and hopefully no K1?
See https://innovativeincomeinvestor.com/security/brookfield-brp-holdings-canada-inc-4-625-perpetual-subordinated-notes/
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.
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.
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.
Am I correct in assuming that BRENF is priced in US$ and BEP.PR.G is priced in CDN$?
Correct, but don’t look at the price of BRENF and use that for a trade as it’s months old.
Get current price from TSX
https://money.tmx.com/en/quote/BEP.PR.G
Multiply by current exchange from moneywatch (ticker cadusd)
https://www.marketwatch.com/investing/currency/cadusd?mod=over_search
and come up with a current US$ price for OTC. About US$21.
Thank you Bob.
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
Buck
Nice read, thanks for sharing.
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.
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.)
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.
Sad but true. However what do CDN expect when our PM’s last job was as a drama teacher
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.
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.
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.
thanks
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.
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.
What rates would you get on lending your money to a company if rates were not managed? Eventually, the hand forms to the hammer.
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.
Check on that! Thanks.
Where can I read up on this type of security? Any difference between Cd/US?
Tim – I also follow a CDN website (divestor.com) and below is a spreadsheet of convertible debentures traded on TSX. (CDN and some US$ issues)
If you google ” Canadian Convertible Debentures” you will see some old articles from the Financial Post (Cdn business paper) which will have a general description of how convertible debentures work.
https://docs.google.com/spreadsheets/d/1ZWLueyQ13lw8oy0Pi5z4OYcRIHNSwM0XlTsAfBBz5c4/edit#gid=0
Will check it out.
Bob, speaking of debt, you have mentioned this before incidentally so you should enjoy this article. The small investor is getting squeezed out of the high yield market. Over 70% last year of all this debt was issued via 144a method.
https://www.ft.com/content/5117f3d2-a342-4deb-a3c8-8f0a3d08f801
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.
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
Article is pay walled and Outline won’t bring it up. Do you know another route?
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.
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
Try this link:
https://oltnews.com/retail-investors-are-squeezed-out-of-the-high-yield-bond-market-financial-times
Works, thank you.
Thank you, Tex, that was it.
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.
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?
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.
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.
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)
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.
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….
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!
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.
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.”
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.
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
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.
“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.
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.
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.
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.
Got it,,, Thnx, Bob
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.
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.
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!
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…
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!
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!
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$.
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
2wr, Pfffooooot! Thought that was sulphur dioxide from the sour gas distiller!
Joel – You talking about SOFR dioxide?
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.
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%.
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…
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.
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.
Correct Grid–one of my pet peeves which I have given up trying to correct.
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
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.
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..
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.
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.
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).
?
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.
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.
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.
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