Great-West Lifeco Inc. has announced:

that holders of 1,475,578 Lifeco Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) have elected to convert their Series N Shares on a one-for-one basis into Non-Cumulative Floating Rate First Preferred Shares, Series O (the “Series O Shares”) on December 31, 2015.Consequently, on December 31, 2015, Lifeco will have 8,524,422 Series N Shares and 1,475,578 Series O Shares issued and outstanding. The Series N Shares and Series O Shares will be listed on the Toronto Stock Exchange under the symbols GWO.PR.N and GWO.PR.O respectively.

It will be recalled that I recommended against the conversion and

GWO.PR.N will reset to 2.176% effective December 31. Holders of GWO.PR.N have the option to convert to FloatingResets, which will pay 3-month bills plus 130bp, reset quarterly.

I must be getting wrong information here. I see the GoC5y to be 0.78 (http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/) and 1.30+0.78=2.08. How did they get 2.176?

It’s not yesterday’s rate that matters. Check the prospectus or James’ previous post announcing both rates.

It’s not yesterday’s rate that matters.Yes. From the press release quoted in the post GWO.PR.N To Reset To 2.176%:

Ok, so the GoC5y is 0.86 on Dec 1, 2016 at:

http://www.bankofcanada.ca/rates/interest-rates/lookup-bond-yields/?rangeType=dates&rangeValue=1&rangeWeeklyValue=1&rangeMonthlyValue=1&lP=lookup_bond_yields.php&sR=2005-12-21&se=L_V39053&dF=2015-11-21&dT=2015-12-21

Is that the right place to look it up?

I can’t find the prospectus, so I assume their formula is more complex than just 1.30 + the GoC5y on dec 1, because then the reset would be a 2.16, but it is 2.176

Thanks again for you help.

Most resets have a line in their prospectus that states exactly how they determine the 5 year rate for the reset. It is usually by calling a specific Bloomberg command on a specific date and time. In this case, the rate is taken at 10 am ‘Toronto’ time. The 5 year has been having multi basis point daily ranges for months, so its not surprising their rate was 1.6 bps off from the end of day GOC posted rate.

The prospectus is available on SEDAR via searching for “Great-West Lifeco Inc. Nov 16 2010 11:01:39 ET Prospectus supplement – English PDF 347 K”

For a thorough discussion, see the post What’s The Benchmark Five-Year?