This note is a little stale by now, but Barry Critchley was kind enough to quote me in his piece TransAlta Corp takes to the airwaves to spread the advantages of its pref share consolidation, published on January 24:
Some financial advisers, and at least one portfolio manager, argue the higher yield and better terms aren’t enough to make up for the potential capital loss investors are being asked to take.
James Hymas, portfolio manager at Hymas Investment Counsel said, “that’s the crux of the issue. The reduction in the effective redemption price (from $25), is an incredibly major change, an incredibly valuable feature to be given up, and TransAlta is not even close to matching that value on the income side.”
It was also interesting to read:
[TransAlta CFO Donald] Tremblay noted that the preferreds par value of $25 “is theoretical in the sense that prior to the announcement of the transaction these shares were trading at or below $0.50 on the dollar; Management would never have utilized the call option on the Preferred Shares,” he said.
This is disingenuous: it is remoteness of the potential call that makes the extant preferreds so valuable. Potential calls are always harmful to the investor!
This follows previous posts on this topic:
- TA Proposes Sleazy Exchange Offer
- TransAlta plays the Grinch with its preferred share holders
- TransAlta Nudges TA.PR.D Offer; Hopes To Pay Sleaze Fees To Banks
- TransAlta pref shareholders not happy with consolidation plan
Affected issues are TA.PR.D, TA.PR.E, TA.PR.F, TA.PR.H and TA.PR.J.