CM.PR.D To Be Redeemed

The Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Class A Preferred Shares Series 26 (TSX: CM.PR.D), for cash. The redemptions will occur on October 31, 2014. The redemption price is $25.00 per Series 26 share.

The $0.359375 quarterly dividend announced on August 28, 2014 will be the final dividend on the Series 26 shares and will be paid on October 28, 2014, covering the period to October 31, 2014, to shareholders of record on September 29, 2014.

Holders of the Series 26 shares should contact the financial institution, broker or other intermediary through which they hold the shares to confirm how they will receive their redemption proceeds.

CM.PR.D is a NVCC compliant Straight Perpetual, paying 5.75%.

13 Responses to “CM.PR.D To Be Redeemed”

  1. EtienneBrule says:

    Is this the first NVCC compliant preferred issue to be redeemed? I’m looking at the Scotia 2013 Guide to Preferred Shares and Tara Quinn has this issue listed as “Not likely to be redeemed under Basel III regulations.” This could explain why the issue dropped $0.38 today.

    Do you have an opinion on the thought process of CIBC corporate finance?

    I picked up some CM.PR.E today @ 25.11. CM.PR.E pays 1.4 vs 1.438 for CM.PR.G. Do you think the .E or even the .G (which pays 1.35) are slated for redemption under their thought process?

  2. EtienneBrule says:

    I mean 1.438 for CM.PR.D

    CM.PR.G – 1.35
    CM.PR.E – 1.4
    CM.PR.D – 1.438

  3. jiHymas says:

    Is this the first NVCC compliant preferred issue to be redeemed?

    Yes.

    “Not likely to be redeemed under Basel III regulations.”

    Since it’s NVCC-compliant, I would have said “Not at all likely to be redeemed under Basel III regulations”, and also “High potential to be redeemed on pure economic grounds.”

    Do you have an opinion on the thought process of CIBC corporate finance?

    No. I presume that they just think that this is pretty expensive for a preferred share, given that they could (almost certainly!) issue at less than today’s NA issue of 3.90%+225. That’s nearly 200bp of difference!

    Do you think the .E or even the .G (which pays 1.35) are slated for redemption under their thought process?

    Yes. Even CM.PR.G with its 5.4% coupon, is paying far more than they would have to pay on a FixedReset. I’ll bet a nickel they could even issue a straight at around 5.00% if they wanted to, but that’s a bit trickier.

    I picked up some CM.PR.E today @ 25.11.

    Well, your potential reward is earning a little under 5.4%; highly asymmetric since your chance of a capital gain is a big fat zero, while there is always the potential for a significant capital loss. Your other potential risk is of being called when you don’t want to be called (e.g., after everything available now has gone up in price).

    You have company in your decision! I mentioned an interview with Nicolas Normandeau of HPR on September 26, in which he explained his liking for Bank DeemedRetractibles; he believes that call risk is low relative to market expectations (I realize that the CM issues are not DeemedRetractibles, but the principle is much the same).

    Whether he still feels that way after the rapid-fire redemption calls for CM.PR.D, NA.PR.L (coupon of 4.85%!), and TD.PR.O (another coupon of 4.85%!) is something I can’t tell you.

  4. EtienneBrule says:

    I recognize the asymmetry and I was just about to ask you to comment upon the difference between the asymmetry of CM.PR.E and PWF.PR.R, which is in your portfolio, then I noticed that PWF.PR.R can’t be called until April 30, 2021. And so I now realize the wisdom of having PWF.PR.R.

  5. EtienneBrule says:

    LB.PR.E is another bank non-NVCC perpetual that was redeemed in favour of a NVCC fixed reset: LB.PR.F

  6. jiHymas says:

    I recognize the asymmetry … wisdom of having PWF.PR.R

    Yes indeed. It has always infuriated me that retail generally likes a near-term call. Calls are always bad, so the longer off they are, the better!

  7. EtienneBrule says:

    You should do a table in the newsletter that outlines the perpetuals that have long-off calls.

  8. broke says:

    EtienneBrule
    …then I noticed that PWF.PR.R can’t be called until April 30, 2021.

    It can be called as soon as April 30, 2017, but they have to cough up $26 to comply.
    http://www.powerfinancial.com/en/investor-relations/stock-information/preferred-shares/first-preferred-shares-series-r/

    cheers

  9. EtienneBrule says:

    And thereby injecting some asymmetry.

  10. jiHymas says:

    injecting some reducing the

  11. jiHymas says:

    I’ll think about adding call information to the table in PrefLetter but there are some problems with that idea.

    Just listing the first par call might lead to confusion with respect to potential earlier calls at a premium. Making a note of the standard schedule (callable at 26.00 after five years, declining to 25.00 after nine years) might not work because there are some issues with non-standard schedules. And listing each schedule individually makes the table extremely messy (or highly footnoted, which is almost as bad).

    So it’s not straightforward.

  12. FletcherLynn says:

    It does not appear that CM.PR.D and CM.PR.E are flagged on the PrefInfo list as redeemed.

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