PrefBlog

National Bank has announced:

that NBC Asset Trust, a subsidiary of National Bank, and National Bank have filed a preliminary prospectus with the securities regulatory authorities in each of the provinces of Canada with respect to a public offering of Trust Capital Securities – Series 2 (“NBC CapS II – Series 2”) by NBC Asset Trust.

The NBC CapS II – Series 2 will be offered by a syndicate of underwriters including National Bank Financial Inc., acting as lead underwriter.

Subject to receipt of final approval from the regulatory authorities, the NBC CapS II – Series 2 will constitute Tier 1 capital of National Bank. This source of financing will also allow National Bank to optimize its capital structure. The net proceeds of the offering will be used for general corporate purposes.

In addition, although no definitive decision has been made, in connection with the offering, National Bank is considering making funds available to NB Capital Corporation to effect the redemption of all the outstanding 8.35% Non-Cumulative Exchangeable Preferred Stock, Series A of NB Capital Corporation, which currently qualify as Tier 1 capital of National Bank, in accordance with their redemption provisions. This redemption would be subject to the completion of the NBC CapS II – Series 2 offering by NBC Asset Trust, the determination by National Bank to make funds available to NB Capital Corporation for the redemption, the approval of the redemption by the Board of Directors of NB Capital Corporation, any applicable regulatory approvals and the issuance of a redemption notice by NB Capital Corporation specifying the redemption date and other relevant information regarding the redemption. The 8.35% Non-Cumulative Exchangeable Preferred Stock, Series A will cease to be included in the regulatory capital of National Bank upon completion of the NBC CapS II – Series 2 offering by NBC Asset Trust.

This is not something I would normally highlight in PrefBlog, but the nature of the security is of interest. According to the prospectus (on SEDAR):

The Trust proposes to issue and sell to investors pursuant to this prospectus (the “Offering”) transferable trust units called Trust Capital Securities – Series 1 or “NBC CapS II – Series 1”, each of which represents an undivided beneficial ownership interest in the Trust Assets (as defined herein), comprised of Residential Mortgages, Mortgage Co-Ownership Interests, Mortgage-Backed Securities, Eligible Investments (each as defined herein) and contractual rights of the Trust in respect of the activities and operations of the Trust.

So it’s ASSET-BACKED, not loan backed. This issue simply goes further to show that cumulative coupons to enable the issuance of Loan Based Tier 1 paper are not necessary; OSFI should rescind its ill-advised draft advisory, which rescues the loan-backed structure at the expense of non-cumulativity.

This entry was posted on Wednesday, June 25th, 2008 at 10:14 am and is filed under Regulatory Capital. 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.