AZP.PR.B / AZP.PR.C : Net Conversion of 12% to FixedResets

AZP.PR.B used to be CZP.PR.B, which used to be EPP.PR.B, and throughout these changes was a FixedReset, 7.00%+418, which commenced trading 2009-11-2 after being announced 2009-10-13. You can’t tell your players without a programme! Notice of extension was provided in November, 2014, and it reset to 5.57% effective 2014-12-31. I recommended in favour of conversion and the conversion rate was 42%. The company announced the extension to 2024 on 2019-11-14. An erroneous announcement of a reset to 5.67% was announced 2019-12-2 but it was later announced that AZP.PR.B will reset at 5.739% effective January 1, 2020.

AZP.PR.C resulted from the partial conversion of AZP.PR.B and commenced trading 2014-12-31.

Atlantic Power can’t be bothered to issue a press release or otherwise indicate on their website just what the results of the conversion option were (just like 2014), but there is information available on TMXMoney, maybe.

According to the TMX Money page for AZP.PR.C (the FloatingReset), there are 1,077,391 shares outstanding (down from 1,661,906). There are reporting 2,504,131 AZP.PR.B outstanding (up from 2,338,094).

In its 2018 Annual Financial Statements (inconveniently available via SEDAR with a search for “Atlantic ower Corporation Feb 28 2019 18:10:49 ET Audited annual financial statements – English PDF 2381 K”, since neither the company nor the regulators want you reading this stuff – who do you think you are?) the company states:

We also purchased and cancelled 5,000 and 164,790 of the Series 2 and 3 Shares at Cdn$17.99 and Cdn$17.89 per share for Cdn$0.1 million and Cdn$2.9 million, respectively for a total cost of $8.0 million. A $7.9 million gain on the redemption was recorded as a component of income attributable to preferred shares of a subsidiary company in the year ended December 31, 2018. From December 31, 2018 through February 27, 2019, we purchased the maximum limit of 427,500 shares of Series 1 Preferred Shares, 27,777 of Series 2 Preferred Shares and the maximum limit of 148,311 Series 3 Preferred Shares at a total cost of Cdn$9.2 million

… so obviously the company knows a bargain when it sees one! If only they were more prolific with their press releases!

So the 2014-12-31 proportion of AZP.PR.B was 58% and the 2019-12-31 proportion is 70%. So call it a net conversion to FixedResets of 12%.

So that’s a conversion rate of about 42%. In my post just before the decision deadline, I recommended conversion.

12 Responses to “AZP.PR.B / AZP.PR.C : Net Conversion of 12% to FixedResets”

  1. mbarbon says:

    More and more of these shares are being bought by their respective company on the open market for far less than than $25…

    Maybe at some point they’ll be indirectly forced to redeem at $25 when the cost of staying listed will be considerable given the number of shares outstanding.

  2. stusclues says:

    “More and more of these shares are being bought by their respective company on the open market for far less than than $25”

    By my count, with my own probably somewhat ricketty Google Finance-based model, a net (redemptions and buybacks less new issuance) of 8.9M preferred shares have disappeared from the market since mid-October, as of yesterday. This is 0.24% of the market. An open question for me is how big this net disappearance needs to be to begin to affect basic supply/demand, and thus pricing, in the market overall?

  3. baffled says:

    stusclues says: , interesting question , unless you can find past issues that were partially bought up and see what happened to the share price of the remaining float . there are so many variables that could impact the price , int rate change , investors risk on or risk off buying , credit quality of the company ( are they issuing lots of debt to buy the pref stock ) , i think it would be very hard to say any price change is due to decreased number of shares . i think it would be easier for common stock

  4. mbarbon says:

    If there are less and less shares available, volatility will increase !!! This can both be both good and bad for investors.

    Worse case, as these shares trade less and less, they could be could become “un-investable” (just not worth it for anyone to commit to)

  5. DanG says:

    I will continue to clip the very generous coupon until they pay me $25 to relinquish them.

  6. baffled says:

    DanG , i 100% agree , and also keep buying as many as i can afford under $ 25 .00

  7. stusclues says:

    Update: as of Friday, a net of 18.9M preferred shares have been eliminated from the TSX since I began tracking on October 13th (3 months). This is 0.52% of the market. Close to half a billion $C.

  8. skeptical says:

    stusclues
    Thanks for the update. How are you tracking the total number of outstanding preferred shares?
    Are there any non-NVCC bank issues that were supposed to be recalled a part of this?
    I do know that other than this issue, Brookfield has been buying back their own issues. Anybody else digging up annual reports?

  9. stusclues says:

    Skeptical

    I downloaded a complete list of preferred shares on the TSX from my broker’s screener tool. I copied that list into Google Sheet then used created a formula to convert the tickers to match Google Finance tickers (e.g. ALA.PR.A becomes TSE:ALA-A). I manually cleaned up the errors and then applied a Google Finance function to each ticker to look up the outstanding shares. I then applied a sum function for all the shares. It auto updates so I simply need to look periodically.

    I have used a (very light) sampling method to verify the individual share counts against those at TMX Money with no errors – so I assume (but obviously don’t know for sure) that the aggregate is correct. I will need to add any new issues (or creation of floaters) manually.

    I haven’t done any analysis of component changes, just the aggregate.

  10. skeptical says:

    Great. Thanks for the hardwork…
    How do you get a list of only preferred stocks from the broker site?

  11. baffled says:

    stusclues , thank you for that , please keep us updated after your periodic looks .

  12. stusclues says:

    skeptical – one of the selection criteria is share type.

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