PrefBlog

Thomson Reuters has announced:

the offering of US$500 million of 5.85% notes due 2040. The offering is expected to close on March 30, 2010, subject to customary closing conditions. Thomson Reuters plans to use the net proceeds from this offering and available cash to repurchase all of its US$700 million principal amount of 6.20% notes due 2012, as previously announced earlier today.

J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated, RBS Securities Inc. and UBS Securities LLC are the joint book-running managers for the offering.

DBRS rates it A(low).

USD 30-Year Swaps are now at 4.45%, implying that the issue could be swapped into 3-month USD LIBOR +140bp. This in turn implies (to me!) that TRI.PR.B, paying 70% of Prime and quoted today at 23.75-95 (95% of par; hence paying about 74% of Prime as a dividend (so call it pre-tax interest equivalent = prime, close enough for government work).

Therefore TRI.PR.B pays the pre-tax equivalent of Prime, which is equal to about the overnight rate +200bp … so you’re getting a yield increment for the prefs of about +60bp, which is way, way less than you get for nominals … although, mind you, there is a LOT of basis risk in this calculation.

So I say TRI.PR.B is expensive.

This entry was posted on Wednesday, March 24th, 2010 at 6:01 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.