E-L Financial has announced a new perpetual issue. See CCN Mathews for the press release … the actual press releases cannot be linked, but were timestamped 9:47 & 9:48 am, ET, today.
No prospectus is yet available on SEDAR, but informal information available to me indicates that it can be described as follows:
Dividend: 4.75%, or $1.1875 p.a. per share, non-cumulative
Redemption: $26.00 commencing October 17, 2011, declining by $0.25 p.a. until it’s redeemable at $25.00 at any time on or after October 17, 2015. The company has the right to force conversion into stock, using the applicable redemption price and the greater of $1.00 or 95% of the average common price (as defined) to determine the exchange ratio.
Rating: A preliminary rating of P-2(high) from Standard & Poors has been claimed. I have no information regarding a DBRS rating but, for analytical purposes, have assumed a Pfd-2(low) rating, the same as the existing ELF.PR.F.
It’s a bought deal via RBC-DS.
Preliminary analysis using a taxable yield curve indicates the following:
| Curve Attribute | ELF.PR.? | RY.PR.B |
| Price due to base-rate | 23.61 | 23.57 |
| Price due to short-term | 0.08 | 0.07 |
| Price due to long-term | 0.70 | 0.75 |
| Price due to Credit Spread (2) | -0.72 | N/A |
| Price due to error | 0.02 | -0.01 |
| Price due to Credit Spread (Low) | -0.33 | -0.38 |
| Total Intrinsic | 23.35* | 24.00* |
| Price due to Liquidity | 1.44 | 1.44 |
| Total Curve Price | 24.79* | 25.45* |
| *Note Rounding Error | ||
The “Price due to Liquidity” for the ELF.PR.? is a little fishy. As with all new issues, the analysis assumes maximal liquidity, but on the other hand, the ELF is only a $100-million dollar issue. $1.44 liquidity value seems a little steep!
Another way to say the same thing is: I think the EL new issue should be priced at less than the RY.PR.B by the sum of:
- $0.72 for the credit spread
- Somewhere between $0.00 and $1.44 for the liquidity
Well, I won’t be rushing to pull out my chequebook for this one! Seems to me that, like the Fortis new issue, the underwriters are pricing this deal according to the trading levels of all the Pfd-1(low) bank perps and hoping nobody notices the credit difference.
This new issue has been added to the HIMIPref™ database with the symbol ELF.PR.?.
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