DW.PR.A, DC.PR.A Not Directly Affected by CI Financial Bid

CI Financial has announced an unsolicited bid for Dundee Wealth:

for a price equal to $20.25 per share, representing a premium of approximately $6.94 or 52% per common share based on today’s closing price of DundeeWealth of $13.31.

The preferred shares are not mentioned in the press release.

DW.PR.A soared on September 18, presumably on the grounds that the deal with Scotiabank made them a much better credit than their current Pfd-3 rating from DBRS.

DC.PR.A (which used to be DBC.PR.A) has not moved much in the past week, but that might change – Dundee (DC) owns 50% of Dundee Wealth (DW). Making a fat chunk of change on DW and monetizing the asset could possibly affect the current Pfd-3(low) [DBRS] credit rating on DC.PR.A.

Who knows? It’s certainly not the kind of thing I like to bet on, but the Credit Anticipation players will be sharpening their pencils tonight. The following language from the prospectus of DW.PR.A is interesting:

On and after March 13, 2007, the Company may, at its option, upon not less than 30 days and not more than 60 days prior written notice, redeem for cash the Series 1 Shares, in whole at any time or in part from time to time, at $27.25 per share if redeemed on or after March 13, 2007, but before March 13, 2008, at $27.00 per share if redeemed on or after March 13, 2008, but before March 13, 2009, at $26.75 per share if redeemed on or after March 13, 2009, but before March 13, 2010, at $26.50 per share if redeemed on or after March 13, 2010, but before March 13, 2011, at $26.25 per share if redeemed on or after March 13, 2011, but before March 13, 2012, at $26.00 per share if redeemed on or after March 13, 2012, but before March 13, 2013, at $25.75 per share if redeemed on or after March 13, 2013, but before March 13, 2014, at $25.50 per share if redeemed on or after March 13, 2014, but before March 13, 2015, at $25.25 per share if redeemed on or after March 13, 2015, but before March 13, 2016 and at $25.00 thereafter (each, a “Redemption Price”), plus, in each case, all accrued and unpaid dividends up to but excluding the date fixed for redemption, provided that any redemptions prior to March 13, 2012 shall be limited to circumstances in which the Series 1 Shares are entitled to vote separately as a class or series by law. Notice of any such redemption to occur prior to March 13, 2012 may be provided by the Company at any time and from time to time prior to a meeting of shareholders of the Company at which holders of Series 1 Shares are entitled to vote separately as a class or series and for which a record date has been established, and during the period of 10 days following the holding of such meeting. On and after March 13, 2007 and prior to March 13, 2017, the Company may, at its option, upon not less than 30 days and not more than 60 days prior written notice, subject, if required, to regulatory approvals, convert the outstanding Series 1 Shares into freely tradeable Common Shares, provided that any conversions rior to March 13, 2012 shall be limited to circumstances in which the Series 1 Shares are entitled to vote separately as a class or series by law.

I do not believe the preferred shareholders will be entitled to vote separately on anything that has been announced to date … but I am neither a lawyer nor a clairvoyant!

2 Responses to “DW.PR.A, DC.PR.A Not Directly Affected by CI Financial Bid”

  1. tristram shandy says:

    Barry Schwartz, I believe he is an equity analyst from Baskin Financial Services recommended DC.PR.A-T on Market Call Tonight, 20-07-10. He was rushed and there was a severe spike in this equity on the chart. I checked on G&M and didn’t see such a severe spike. Anyway, he said it was 6 years retractible, and a good buy with good dividend, from what I understand from the above, it is only retractible if Dundee wants to do so.

    Do you think it is a good investment, can you clarify the “retractability” for me please?

  2. jiHymas says:

    Actually, the first question you need to ask yourself is “Who is Barry Schwartz and what is his track record?”

    Anyway, according to the prospectus for the issue (available on SEDAR, filed under Dundee Corporation, dated June 21, 2006):

    Prior to June 30, 2016, a holder of Series 1 Shares cannot require the Corporation to redeem any Series 1 Shares. Subject to the provisions described under ‘‘– Restriction on Dividends and Retirement and Issue of Shares’’ and applicable law, a holder of Series 1 Shares may require the Corporation to redeem such shares (by deposit by the holder of the Series 1 Shares to be redeemed not less than 30 days before redemption) on or after June 30, 2016 for a cash price of $25.00 per share, together with any accrued and unpaid dividends thereon to but excluding the date of redemption (less any tax required to be deducted and withheld by the Corporation).

    The information is summarized at my informational website PrefInfo.

    DC.PR.A closed last night at 23.10-60 to yield 6.66-23%

    DC.PR.A is rated Pfd-3(low) by DBRS; I don’t have any problem with this rating. The issue is relegated to the Scraps index on credit concerns; I do not recommend that such issues be held to the extent of more than 5% per single name and 10% in total; in both cases as part of a well-diversified preferred share portfolio.

    For monthly recommendations of preferred shares for long-term buy-and-hold investors, please see my monthly newsletter, PrefLetter … or consider the Malachite Aggresive Preferred Fund and I’ll do the work. The fund publishes its track record!

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