BAM.PF.I Holds Its Own On Excellent Volume

Brookfield Asset Management Inc. has announced:

the completion of its previously announced Class A Preference Shares, Series 46 issue in the amount of C$300,000,000. The offering was underwritten on a bought deal basis by a syndicate led by TD Securities Inc. and Scotiabank.

The Preferred Shares, Series 46 were issued at a price of C$25.00 per share, for gross proceeds of C$300,000,000. Holders of the Series 46 Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.80% annually for the initial period ending March 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 3.85%, and (ii) 4.80%. The Series 44 Shares will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BAM.PF.I. The Preferred Shares, Series 46 may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

BAM.PF.I is a FixedReset, 4.80%+385M480 announced November 10. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

BAM.PF.I traded a very good 1,374,591 shares today in a range of 24.85-00 before closing at 24.95-96, 85×1. Vital statistics are:

BAM.PF.I FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-11-18
Maturity Price : 23.12
Evaluated at bid price : 24.95
Bid-YTW : 4.72 %

An Implied Volatility analysis yields ambiguous results:

impVol_BAM_161118
Click for Big

While BAM.PF.I looks a little expensive in this analysis (with a theoretical price of 24.58), it must be remembered that
i) the fit is very messy
ii) the analysis makes no accounting for the reset floor

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