In a press release, Brascan Soundvest Rising Distribution Split Trust…
…announced that following the annual redemption of Capital Units (TSX: BSD.UN) by holders of such units, the Trust purchased in the market a sufficient number of its Preferred Securities (TSX: BSD.PR.A) to ensure that the number of Preferred Securities that remain outstanding is equal to the number of Capital Units outstanding. As a result, the Trust will not exercise its Call Right, as described in the prospectus of the Trust dated February 25, 2005, to call any Preferred Securities for redemption in connection with the annual redemption of Capital Units.
And that was it! There is no indication of just how many Capital Units were retracted.
This is the way it should work. BSD.PR.A has a declining call premium feature: according to the prospectus:
Preferred Securities may be called by the Trust and purchased prior to the Maturity Date (the “Call Right”) if, as a result of the redemption of Capital Units, the aggregate number of outstanding Preferred Securities would exceed the aggregate number of outstanding Capital Units. In such case, Preferred Securities will be redeemed at a price per Preferred Security which until March 31, 2006 will be equal to $11.00 and which will decline by $0.10 each year thereafter to $10.10 after March, 31, 2014, plus any accrued and unpaid interest. Notice of the exercise of the Call Right will be given by the Trust to Securityholders whose Preferred Securities will be redeemed.
So those who wanted to keep their prefs, kept them, and those who wanted to sell, sold.
The capital units market price crept up to the NAV just prior to the redemption deadline, but are now reported to have fallen out of bed:
| Date | NAV Per Capital Unit | Market Price, Capital Units |
| December 1, 2006 | $8.5644 | $7.55 |
| November 24, 2006 | $8.4426 | $7.50 |
| November 17, 2006 | $8.1018 | $7.98 |
| November 10, 2006 | $8.0610 | $8.00 |
| November 3, 2006 | $8.6822 | $8.94 |
BSD.PR.A is rated Pfd-2 by DBRS. For some reason it was left off the list of income-trust backed prefs put under review after the Hallowe’en Massacre.
[…] I will admit to being puzzled by the poor performance of the Interest-Bearing Index, also shown prior to its rebalancing. Note that BAM.PR.T is about to be called, but look at the pre-tax bid-YTWs available for BSD.PR.A and FIG.PR.A! As of June 22 the former had an asset coverage ratio of 1.97:1 (the June month-end distribution will have reduced this a bit, but not much) and a DBRS rating of Pfd-2. As of June 28, the latter had asset coverage of 2.58:1 (and has already accounted for the second quarter distribution), while also being rated Pfd-2. It (FIG.PR.A) remains under review with developing indications (”pending the resolution of their respective reorganization and amalgamation plans, which are expected to occur shortly”) but that reorganization settled months ago … DBRS seems to be dragging its feet a little! […]