BCE Inc. has released its Notice of Conversion Privilege for BCE.PR.K:
1. Holders of BCE Inc. fixed-rate Series AK Preferred Shares have the right to convert all or part of their shares, effective on December 31, 2016, on a one-for-one basis, into floating-rate Cumulative Redeemable First Preferred Shares, Series AL of BCE Inc. (the “Series AL Preferred Shares”). In order to convert their shares, holders must exercise their right of conversion during the conversion period, which runs from December 1, 2016 until 5:00 p.m. (Montréal/Toronto time) on December 16, 2016.
4. As of December 31, 2016, the Series AK Preferred Shares will, should they remain outstanding, pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on a fixed rate equal to the sum of: (a) the yield to maturity compounded semi-annually (the “Government of Canada Yield”), computed on December 1, 2016 in accordance with the articles of BCE Inc., of a Canadian dollar denominated non-callable Government of Canada bond with a term to maturity of five years, and (b) 1.88%. The “Government of Canada Yield” computed on December 1, 2016 is 1.074%. Accordingly, the annual fixed dividend rate applicable to the Series AK Preferred Shares for the period of five years beginning on December 31, 2016 will be 2.954%.
5. As of December 31, 2016, the Series AL Preferred Shares, if issued, will pay, for each quarterly period beginning with the quarterly period from and including December 31, 2016 up to but excluding March 31, 2017, as and when declared by the Board of Directors of BCE Inc., a quarterly floating dividend rate equal to the “Floating Quarterly Dividend Rate” for such quarterly period. The “Floating Quarterly Dividend Rate” for any such quarterly period shall be equal to the rate, expressed as a percentage, equal to the sum of:
(a) the “T-Bill Rate”, calculated in accordance with the articles of BCE Inc. on the 30th day prior to the first day of the new quarterly period, and (b) 1.88%, calculated on the basis of the actual number of days in such quarterly period divided by 365. The “T-Bill Rate” means, for any quarterly period, the average yield expressed as a percentage per annum on three-month Government of Canada Treasury Bills, as reported by the Bank of Canada, for the most recent treasury bills auction preceding the applicable calculation date. The “Floating Quarterly Dividend Rate” computed on December 1, 2016 and applicable to the Series AL Preferred Shares for the quarterly period beginning on December 31, 2016 will be 0.58907% (annual rate of 2.389%, based on an initial T-Bill Rate of 0.509%).
BCE.PR.K is a FixedReset, 4.15%+188, that commenced trading 2011-7-5 after being announced 2011-6-20. The issue is notorious for having been to subject of an experiment by BCE to see if stockbrokers and their clients were really as dumb as all that; this was tested by reopening the issue when the spread was nowhere near market rates. The experiment concluded that giving the salesmen a 3% commission on sales to retail is a great business, at which point the experimenters sent another letter to the OSC decrying trailer fees on mutual funds and collapsed in giggles.
I will make a recommendation regarding whether this issue should be converted or held in the near future.