DW.PR.A to Vote on Redemption

DundeeWealth Inc. has announced:

that it has called a special meeting of shareholders of DundeeWealth for September 7, 2011 to consider a special resolution authorizing an amendment to the Company’s articles to permit the Company to redeem all of the issued and outstanding first preference shares, series 1 (the “Series 1 Shares”) at a price of $26.50 plus accrued and unpaid dividends up to but excluding the redemption date. If the proposed amendment is approved, the redemption will occur on September 8, 2011 (or, if the special meeting is adjourned or postponed, on the business day immediately following any such adjourned or postponed meeting).

The Series 1 Shares are currently redeemable by DundeeWealth at a price of $26.25 per Series 1 Share plus accrued and unpaid dividends thereon up to but excluding the redemption date, provided that circumstances exist where holders of the Series 1 Shares are entitled to vote separately as a class or series by law. Commencing on March 13, 2012, DundeeWealth will have the right to redeem the Series 1 Shares at a price of $26.00 per Series 1 Share plus accrued and unpaid dividends thereon, without any requirement for a vote.

The proposal provides holders of Series 1 Shares with an opportunity to realize on their investment in DundeeWealth at a premium of $0.25 over the current redemption price and a premium of $0.50 over the redemption price that will apply commencing on March 13, 2012. In addition, the redemption price contemplated by the proposal represents a premium of $0.50 over the 20-day volume weighted average trading price for the Series 1 Shares for the period ended July 26, 2011.

The Series 1 Shares are listed for trading on the Toronto Stock Exchange under the symbol “DW.PR.A”. If the special resolution is approved by shareholders, DundeeWealth intends to apply to delist the Series 1 Shares from trading on the Toronto Stock Exchange and to exercise its right to redeem its $200 million 5.10% series 1 notes due September 25, 2014. Upon the redemption of the Series 1 Shares and the series 1 notes, DundeeWealth will apply to cease to be a reporting issuer under the securities laws of each province of Canada in which it is currently a reporting issuer.

In order to become effective, the special resolution must be approved by: (i) two-thirds of the votes cast together by all holders of common shares, special shares, series C and first preference shares, series X present in person or represented by proxy at the meeting; and (ii) two-thirds of the votes cast by the holders of Series 1 Shares present in person or represented by proxy at the meeting voting as a class. The Bank of Nova Scotia owns all of the outstanding common shares, special shares, series C and first preference shares, series X as well as approximately 1.6% of the outstanding Series 1 Shares and has indicated that it intends to vote in favour of the special resolution. Accordingly, the approval referred to in (i) above is assured.

Details of the proposal will be outlined in an information circular to be sent to shareholders in connection with the special meeting. Copies of the information circular will be available on the SEDAR website at www.sedar.com.

DW.PR.A was last mentioned on PrefBlog when it was upgraded to P-2(high) by S&P.

The proposed redemption price of $26.50 to be paid 2011-9-8 implies a yield of 3.52% (quarterly compounding) until the par call date of 2016-3-13. Note that:

Any redemption before March 13, 2012 is limited to circumstances where the Series 1 Shares are entitled to vote separately as a class or series by law.

If redeemed 2012-3-13 at 26.00, the yield to par call would be 3.92%.

So basically, although 3.52% seems like a fat yield for the company (compared to, say, the 1.98% that National got on its tender offer) or the YTWs on investment grade operating retractibles, it’s probably as good as you’re gonna get. I recommend voting ‘Yes’.

One Response to “DW.PR.A to Vote on Redemption”

  1. […] potential for redemption was discussed on PrefBlog when the Special Meeting was […]

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