December 5, 2008

BCE gyrations continue:

Citigroup Inc. and Deutsche Bank AG, lead lenders on the C$52 billion ($42 billion) acquisition of BCE Inc., have indicated they are unwilling to fund an alternative proposal that would keep the phone company publicly traded, according to two people familiar with the matter.

Private-equity firms had proposed investing C$8 billion to C$10 billion in preferred securities in lieu of the original leveraged buyout. The alternative transaction hinged on financing from the banks backing the LBO, which are opposed, according to the people, who asked not to be named because the discussions are private.

Golly, there’s a surprise, eh? It may be that the entire proposal was simply lawsuit-avoidance grandstanding … but who knows? BCE denies the rumours:

issuing a statement in response to certain rumours reported in the media regarding a possible minority investment in the company by some or all of theinvestor group led by Teachers’ Private Capital, the private investment arm ofthe Ontario Teachers’ Pension Plan, and affiliates of Providence EquityPartners Inc., Madison Dearborn Partners, LLC, and Merrill Lynch GlobalPrivate Equity.

While it is BCE’s policy not to comment on rumours or speculation, in theinterest of its shareholders, BCE is today confirming that no such offer has been made to the company.

The company continues to work with KPMG and the Purchaser to seek tosatisfy all closing conditions under the June 29, 2007 Definitive Agreement,as amended.

The press release has “legal advice” written all over it. It is not clear to me just what the precise, legally justifiable, meaning of “no such offer has been made” really means. To my untrained eye, it could mean ‘They haven’t actually signed anything yet’.

There is continued muttering that Bernanke’s Big Mistake was Lehman:

The more than half a million U.S. jobs lost in November were the latest in a drumbeat of dire economic data that may have been triggered by the Federal Reserve’s decision in mid-September to allow Lehman Brothers Holdings Inc. to fail, economists and bankers said.

“It’s the collapse heard around the world,” said Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “It’s probably one of the worst decisions the Fed ever made — to save everybody else but Lehman.”

Bernanke has said he won’t do it again. Assiduous Readers will remember my earlier remark:

The only mistake so far, I think, is allowing Lehman to fail … but neither I, nor any responsible commentator I know of, dreamed at the time that the bankruptcy would have such enormous systemic effects.

Across the Curve passes on some HSBC commentary on the jobs number. HSBC expects FOMC to cut to zero December 16.

Accrued Interest heaps scorn on the NY Port Authority for setting themselves up for a failed bond issue.

PerpetualDiscounts gained slightly as volume continued high. The weighted-average pre-tax bid-YTW of the PerpetualDiscount Index is now 8.01%, equivalent to 11.21% at the standard equivalency factor of 1.4x. This may be compared to long Corporates at 7.50%, implying a still-astonishing Pre-Tax Interest-Equivalent spread of 371bp.

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30.
The Fixed-Reset index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater index.
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet N/A N/A N/A N/A 0 N/A N/A
Fixed-Floater 7.21% 7.55% 83,576 13.05 6 -2.0302% 732.8
Floater 9.52% 9.80% 66,716 9.53 2 -3.2834% 372.3
Op. Retract 5.51% 6.99% 142,052 4.18 15 -0.1195% 979.9
Split-Share 7.35% 14.96% 69,171 3.92 14 -1.2643% 835.2
Interest Bearing 9.42% 19.85% 57,380 2.87 3 +2.3045% 776.9
Perpetual-Premium N/A N/A N/A N/A N/A N/A N/A
Perpetual-Discount 7.89% 8.01% 202,056 11.41 71 +0.0785% 700.7
Fixed-Reset 6.14% 5.60% 1,040,933 14.18 15 -0.0582% 973.7
Major Price Changes
Issue Index Change Notes
BNA.PR.B SplitShare -7.3333% Asset coverage of 1.6+:1 as of December 4 based on BAM.A at 16.72 and 2.4 BAM.A per unit. Now with a pre-tax bid-YTW of 15.37% based on a bid of 13.90 and a hardMaturity 2016-3-25 at 25.00. Closing quote of 13.90-16.44, 2×5. Day’s range of 14.54-15.75.
NA.PR.N FixedReset -6.2951%  
ALB.PR.A SplitShare -4.9683% Asset coverage of 1.2-:1 as of December 4 according to Scotia Managed Companies. Now with a pre-tax bid-YTW of 16.52% based on a bid of 19.51 and a hardMaturity 2011-2-28 at 25.00. Closing quote of 19.51-21.24 (!) 34×3. Day’s range of 20.02-53.
BCE.PR.Z FixFloat -4.6875%  
WFS.PR.A SplitShare -4.5743% Asset coverage of 1.3-:1 as of November 30 according to Mulvihill. Now with a pre-tax bid-YTW of 18.47% based on a bid of 7.51 and a hardMaturity 2011-6-30 at 10.00. Closing quote of 7.51-88, 20×10. Day’s range of 7.44-87.
LFE.PR.A SplitShare -4.5033% Asset coverage of 1.7-:1 as of November 28 according to the company. Now with a pre-tax bid-YTW of 14.91% based on a bid of 7.21 and a hardMaturity 2012-12-1 at 10.00. Closing quote of 7.21-74, 45×1. Day’s range of 7.15-50.
BNA.PR.C SplitShare -4.3668% See BNA.PR.B, above. Now with a pre-tax bid-YTW of 19.30% based on a bid of 8.76 and a hardMaturity 2019-1-10 at 25.00. Closing quote of 8.76-9.18, 2×1. Day’s range of 8.51-50.
DFN.PR.A SplitShare -4.1860% Asset coverage of 1.9-:1 as of November 14 according to the company. Now with a pre-tax bid-YTW of 9.22% based on a bid of 8.24 and a hardMaturity 2014-12-1 at 10.00. Closing quote of 8.24-42, 1×21. Day’s range of 8.25-90.
NA.PR.L PerpetualDiscount -4.0667% Now with a pre-tax bid-YTW of 8.56% based on a bid of 14.39 and a limitMaturity. Closing quote 14.39-70, 2×3. Day’s range of 14.10-15.15.
POW.PR.C PerpetualDiscount +4.4989% Now with a pre-tax bid-YTW of 7.30% based on a bid of 18.35 and a limitMaturity. Closing quote 18.35-73, 10×4. Day’s range of 17.52-18.94.
BSD.PR.A InterestBearing +5.1220% Asset coverage of 0.9-:1 as of November 28, according to Brookfield Funds. Now with a pre-tax bid-YTW of 24.13% based on a bid of 4.31 and a hardMaturity 2015-3-31 at 10.00. Closing quote of 4.31-44, 4×2. Day’s range of 4.00-30.
Volume Highlights
Issue Index Volume Notes
YPG.PR.A Scraps (Would be OpRet but there are credit concerns) 389,862 RBC crossed 360,000 at 15.55. Now with a pre-tax bid-YTW of 17.12% based on a bid of 16.10 and a softMaturity 2012-12-30 at 25.00.
PWF.PR.M FixedReset 307,380 Nesbitt bought 300,000 from anonymous at 24.00.
SLF.PR.D PerpetualDiscount 219,522 Desjardins crossed 80,000 at 14.00, then another 110,000 at the same price. Now with a pre-tax bid-YTW of 8.38% based on a bid of 13.32 and a limitMaturity.
SLF.PR.E PerpetualDiscount 202,290 Desjardins crossed 80,000 at 13.90, then another 110,000 at the same price. Tax loss internal cross against SLF.PR.D? Now with a pre-tax bid-YTW of 8.13% based on a bid of 13.90 and a limitMaturity.
BNA.PR.B SplitShare 121,800 TD crossed 30,000 at 14.80; Scotia crossed 70,000 at 15.20. Asset coverage of 1.6+:1 as of December 4 based on BAM.A at 16.72 and 2.4 BAM.A per unit. Now with a pre-tax bid-YTW of 15.37% based on a bid of 13.90 and a hardMaturity 2016-3-25 at 25.00.
WFS.PR.A SplitShare 249,250 Desjardins crossed 120,000 at 7.54, then another 100,000 at 7.55. See above
PIC.PR.A Scraps (Would be SplitShare but there are credit concerns) 119,038 Desjardins crossed 100,000 at 11.65. Asset coverage of 1.2-:1 as of November 30 according to Mulvihill. Now with a pre-tax bid-YTW of 20.98% based on a bid of 11.67 and a hardMaturity 2010-11-1 at 15.00.
TD.PR.Q PerpetualDiscount 112,478 National Bank crossed 40,000 at 19.05, 49,700 at 19.09 and 100,000 at 18.90. Now with a pre-tax bid-YTW of 7.44% based on a bid of 19.15 and a limitMaturity.
BCE.PR.I FixFloat 111,846 TD crossed two lots of 50,000 each at 16.10.
BCE.PR.H Scraps (Would be Ratchet but there are volume concerns) 100,000 TD crossed 100,000 at 16.30.

There were sixty-eight index-included $25-pv-equivalent issues trading over 10,000 shares today

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