New Issue: Royal Bank Fixed-Reset 5.60%+267

Royal Bank has announced:

a domestic public offering of $200 million of Non-Cumulative, 5 year rate reset Preferred Shares Series AL.

The bank will issue 8 million Preferred Shares Series AL priced at $25 per share and holders will be entitled to receive non-cumulative quarterly fixed dividend for the initial period ending February 24, 2014 in the amount of $1.40 per share, to yield 5.60% per cent annually. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 4 million Preferred Shares at the same offering price.

Subject to regulatory approval, on or after February 24, 2014, the bank may redeem the Preferred Shares Series AL in whole or in part at par. Thereafter, the dividend rate will reset every five years at a rate equal to 2.67% over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series AL will, subject to certain conditions, have the right to convert all or any part of their shares to non-cumulative floating rate preferred shares Series AM (the “Preferred Shares Series AM”) on February 24, 2014 and on February 24 every five years thereafter.

Holders of the Preferred Shares Series AM will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 2.67%. Holders of Preferred Shares Series AM will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series AL on February 24, 2019 and on February 24 every five years thereafter.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is November 3, 2008.

Update: Fixed-Reset issues got clobbered today, not surprisingly … I have uploaded the Fixed-Reset Index Portfolio … the issues have a long way to go before they yield 5.6%. The yield differences is about 0.50% … if you think of them as 5-year issues, that will be about 2.5% further to go on price … if you think of them as perpetuals, that’s about 7.5% further downside on price. Although, mind you, there is no reason why the prices could remain unchanged, with the new Royal issue trading at an immediate premium.

3 Responses to “New Issue: Royal Bank Fixed-Reset 5.60%+267”

  1. […] did update the October 21 performance; and updated the post regarding the new Fixed-Reset Royal Bank issue with not entirely surprising news of what comparison of coupons has done for the prices of extant […]

  2. […] huge spread on 5-year money may go a long way to explain why Royal Bank was willing to issue Fixed-Resets at 5.60%+267. Who knows … with a new fiscal year on the way, we may see more issues like that […]

  3. […] Royal Bank Fixed-Reset 5.60%+267 closed today, an event fraught with interest due to the question posed on October 28: […]

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