Crazy pricing! RY.PR.A vs. RY.PR.B on 2006-07-20

OK, so the new issue was very badly received and the underwriters didn’t try to catch the falling knife and support the issue during the distribution phase.

┬áBut these relative prices are crazy! RY.PR.A started trading just a few months ago (and I didn’t like them either) and the terms of these two issues are virtually identical: the redemption schedule is simply shifted three months along, the ‘A’ issue pays a dividend of $1.1125 annually and the ‘B’ issue pays $1.1750.

So basically, you get 6.25-cents more per share in annual dividend with the B.

Closing Quotation of A : 24.40-45

Closing Quotation of B : 24.30-45

┬áLet’s not ever call the pref market efficient!

9 Responses to “Crazy pricing! RY.PR.A vs. RY.PR.B on 2006-07-20”

  1. […] PrefBlog Canadian Preferred Shares – Data and Discussion « Crazy pricing! RY.PR.A vs. RY.PR.B on 2006-07-20 Power Financial Series L » […]

  2. Drew says:

    The .B seems to have an attractive current yield at the bid for a P1. Is it sufficiently attractive to buy now and, if so, would it make more sense to wait a while in anticipation of the underwriters unloading inventory; or would it make more sense to go long the .B and short the .A?

  3. jiHymas says:

    Well, the .B & .A didn’t move much against each other today! The .B is an attractive perpetual issue at its current quotation of 24.35-45, particularly for trading accounts that like liquidity. Whether it’s attractive enough to buy is a question that only HIMIPref subscribers can answer with great assurance!

    I’m not sure if there will be an inventory-blow-out sale in the future … there’s a decent chance that this is the inventory-blow-out sale. Such questions are very hard to guess in advance without inside information so I’ll fall back on my usual tired response: if it looks like a good trade now, grab it, because good trades don’t come along every day of the week.

  4. […] RY.PR.B, bought near its July lows, returned 1.6633% […]

  5. […] I can only assume that they have a desired capital structure that includes some preferreds … and that the issue of RY.PR.B was an opportunistic move with the proceeds earmarked for this redemption. […]

  6. Lex says:

    Why would anyone buy RY.pr.B over $25 when you could buy RY.pr.W paying a much higher dividend well below $25 where you would also get a capital gain on redemption?. It appears that there would be a great Arbitrage here. any thoughts?

  7. jiHymas says:

    RY.PR.B yields 4.75% to a Deemed Maturity 2022-1-31, but RY.PR.W has a soft call (the company can force conversion to common). For the latter issue, there is therefore the possibility of getting NVCC status, similarly to the three similar CM issues.

    Thus, I do not consider RY.PR.W to be a DeemedRetractible, it is instead an ordinary PerpetualDiscount, yielding 4.97% to perpetuity at last night’s bid of 24.78.

    You can make a case for either issue, depending on your objectives, but in my estimation the extra yield on RY.PR.W is a little skimpy considering the longer term.

  8. Lex says:

    How does the RY.pr.B have a deemed Maturity to 2022-1-31. I see nothing in the prospectus indicating that. Is there something that I am missing?

  9. jiHymas says:

    Welcome to the blog!

    See the explanation of DeemedRetractibles at http://www.prefletter.com/whatPrefLetter.php and the January, February, March and June editions of PrefLetter for discussion.

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