FTN.PR.A : Rate Reset To 6.75% For Next Year, Minimum 5.50% For Next Four

Quadravest has announced:

Financial 15 Split Corp. (the “Company”) announced previously on March 2, 2020 it will extend the termination date of the Company a further five-year period from December 1, 2020 to December 1, 2025.

In connection with the extension, the Company may amend the prescribed minimum annual rate of cumulative preferential monthly dividends to be paid to the FTN.PR.A Preferred Shares (“Preferred Shares”) for the five-year renewal period, commencing December 1, 2020. The Company may also amend the dividend entitlement of the Preferred Shares on an annual basis.

Based on current market rates for preferred shares with similar terms, the minimum annual rate for the five-year term will be set at 5.5% (previously 5.25%). The annual payment rate will be set at 6.75% per annum, based on the $10 repayment value. This is an increase of one and a quarter percent from the current rate. The Preferred shareholders have received a total of $8.89 per Share in distributions since inception. The dividend policy for the FTN Class A Shares (“Class A Shares”) will remain unchanged.

In relation to the term extension and the Preferred Share rate increase, the Company has an additional retraction right for those shareholders not wishing to continue holding their investment, allowing existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2020 net asset value per unit. Alternatively, shareholders may sell their Shares for the market price at any time, potentially at a higher price than would be achieved through retraction, or shareholders may take no action and continue to hold their Shares.

The Company invests in a high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows: Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, Toronto-Dominion Bank, National Bank of Canada, Manulife Financial Corporation, Sun Life Financial, Great-West Lifeco, CI Financial Corp, Bank of America, Citigroup Inc., Goldman Sachs Group, JP Morgan Chase & Co. and Wells Fargo & Co.

Congratulations to Assiduous Reader cowboylutrell for his awesome prediction:

Thus, my expectation is that they will announce in the next few days a new annual dividend rate of 6.75% on FTN.PR.A to begin in December 2020, compared to 5.50% currently.

2 Responses to “FTN.PR.A : Rate Reset To 6.75% For Next Year, Minimum 5.50% For Next Four”

  1. cowboylutrell says:

    Thanks for the kind words Mr. Hymas! Though I thought the new 6.75% rate would apply for each year of the new 5-year term (from December 1 2020 to November 30 2025), because:

    i) Financial 15 Split is a very large issue for its sponsor (Quadravest);
    ii) I felt such a bold move was required in order to minimize retractions of FTN.PR.A.

    If they had done it this way, I believe FTN.PR.A would have risen to almost $10.00 already.

    But instead it will be 6.75% for the first year of the new 5-year term only, and a minimum of 5.50% for years 2 to 5. And because of that, there likely won’t be enough enthusiasm from speculators to move the bid closer to $10.00 in the weeks ahead, so conservative holders likely won’t be able to sell their shares of FTN.PR.A on the market at or above $10.00 in the weeks ahead, and instead will massively surrender them for retraction.

    Of course, we don’t know what proportion of FTN.PR.A shares are held by conservative investors at this point. Many of those conservative investors might have sold their shares out already because of the poor protection offered, and if so the retraction numbers might end up being lower than what I have in mind.

  2. prefguy says:

    I agree with you cowboylutrell, Quadravest should have done 6.75 % for the whole 5 years. FFN.PR.A (assuming a 10.00$ nov 2024 value) yields approximately that for the next 4 years.

    I wonder if they’ll do a reverse split on FTN in conjunction with the redemption of the FTN.PR.A to balance the prefs and common share numbers? This will be interesting to see.

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