BBD.PR.B / BBD.PR.D : 32% Net Conversion to FixedFloater

Bombardier has made no explicit announcement regarding the results of the interconversion privilege between BBD.PR.B AND BBD.PR.D, possibly because doing so would require a fat government subsidy. However, we can determine what happened by comparing the figures disclosed in their 17Q2 report (or the 2016 Annual Report) with the “Shares Out” field published on the TMX website for BBD.PR.B and BBD.PR.D.

Calculation of Net Conversion
Shares Out Prior
(per 17Q2 report)
9,692,521 2,307,479
Shares Out Now
(per TMX)
5,811,736 6,188,264

Thus we see that there has been a net conversion of 3,880,785 shares from BBD.PR.B (the RatchetRate issue) to BBD.PR.D (the FixedFloater issue), which represents 32% of the total float.

It is also of interest to note that there is nothing on the Bombardier website or on SEDAR regarding the numbers of shares currently outstanding, or regarding the results of the conversion privilege, but the bank-dominated Toronto Stock Exchange knows all about it! This is similar to the selective disclosure noted with respect to the IAG.PR.G conversion results that the regulators are supposed to be so concerned about; but as long as their very important buddies and future employers at the banks are advised, it seems they feel actual investors can go to hell.

Assiduous Readers will recall that in my terminology, BBD.PR.B is a Ratchet Rate preferred, currently paying 100% of Prime, reset quarterly. BBD.PR.D is a FixedFloater which will now pay $0.99575 p.a., or 3.983% of its $25 par value. The latter rate resets every Exchange Date; the next exchange date will be 2022-8-1. Both issues have been relegated to the Scraps subindex since inception on credit concerns.

I previously made no recommendation regarding conversion, on the grounds that the issues were expected to trade at approximately the same price and that investors should choose the alternative best suited for their individual circumstances. The market has decided to make me look like an idiot, with BBD.PR.B being quoted at 10.21-42 and BBD.PR.D at 11.10-28 as of August 11, resulting in a break-even prime rate of 2.95% over the next five years; but we’ll see how long that lasts. It’s the lowest of all the FixedFloater / RatchetRate pairs at the moment:

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