The Bank of Nova Scotia has announced:
BNS Split Corp. II (the “Company”) announced today that it has called 34,446 Preferred Shares for cash redemption on September 20, 2019 (in accordance with the Company’s Articles of Incorporation, as amended) representing approximately 7.70% of the outstanding Preferred Shares as a result of the special annual retraction of 68,892 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on September 18, 2019 will have approximately 7.70% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $19.71 per share.
Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including September 20, 2019.
Payment of the amount due to holders of Preferred Shares will be made by the Company on September 20, 2019. On and after September 20, 2019 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.
BNS Split Corp. II is a mutual fund corporation created to hold a portfolio of common shares of The Bank of Nova Scotia. Capital Shares and Preferred Shares of BNS Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols BSC and BSC.PR.C respectively.
BSC.PR.C is tracked by HIMIPref™ but relegated to the Scraps index on volume concerns – the average trading volume is little more than 100 shares daily. The issue was last mentioned on PrefBlog when it was upgraded to Pfd-2 by DBRS in September, 2016; DBRS recently confirmed it at that level.
“Not all rate-reset preferred shares get hammered by falling interest rates ” by Rob Carrick
Great article here . These ‘minimum dividend’ rate resets look pretty good. They have a dividend floor of ~ 4.5-6.5% depending on credit quality. So you get the > of the original reset % or the floor. Nice they only dropped 5-6% while rate resets got hammered up to 20% recently.
This looks like the FI alternative they were originally intending w rate resets – take away the risk in a rising rate environments plus downside risk if rates actually fell.
Hopefully someone will create an ETF for these.
Thoughts on these?
https://www.theglobeandmail.com/investing/markets/inside-the-market/article-not-all-rate-reset-preferred-shares-get-hammered-by-falling-interest/
This looks like the FI alternative they were originally intending w rate resets – take away the risk in a rising rate environments plus downside risk if rates actually fell.
Take away a big chunk of the return, too.
There was some discussion of this on the November 22, 2018 and the MAPF Performance: January, 2019 posts.
I think they’re grossly expensive. If you do an Implied Volatility analysis of the TRP series of FixedResets, for instance, you will find that there are two issues with Minimum Rate Guarantees. TRP.PR.J is about $1.70 rich and TRP.PR.K is about $3.65 rich. That’s an awful lot of cash for options that aren’t even in the money!
Yes, they have done extremely well relative to non-guaranteed issues in the downdraft, and some may consider my views to be a little … silly, to be diplomatic. But I believe it’s all behavioural, not fundamental. Investors’ behaviour can change, sometimes dramatically – but fundamentals cannot.
Hi James,
Thanks for the feedback. I knew there had to be some drawback or limitation. Will read the discussions for more detail.