CBU.PR.A Completes Investment of New Issue Proceeds

Ordinarily this wouldn’t be worth a post. A split-share company starts up, they get a cheque from the underwriters, they put it to work. Big deal.

On this occasion, however, the announcement from First Asset had a certain Wow! factor:

When the preliminary prospectus was filed on September 10, 2008, the approximate dividend yield on the Portfolio would have been approximately 4.74% with the Preferred Shares having initial dividend coverage of 172%. As a result of the sell off prior to and during the investing period, the yield of the acquired Portfolio is 6.06% with dividend coverage of the Preferred Shares of 218% with approximately $0.25/Unit per annum of initial excess cash flow after deducting expenses. Any such excess cash flow will contribute to the growth of the Net Asset Value of the Company.

The closing of this issue was reported on PrefBlog. CBU.PR.A will not be tracked by HIMIPref™. It’s a shame, given the fat coupon and the 2.5:1 asset coverage, but it’s just too small to trade efficiently.

6 Responses to “CBU.PR.A Completes Investment of New Issue Proceeds”

  1. yielder says:

    It’s a shame, given the fat coupon and the 2.5:1 asset coverage, but it’s just too small to trade efficiently.

    <img src=”http://i40.tinypic.com/339qeq9.jpg”

    By the time I saw it, this was gone. Maybe I could have finessed by shares into the stream. 😉

  2. jiHymas says:

    Wow! Somebody really wanted to capture the quarterly dividend!

  3. […] aside, the timing on this issue was excellent. They invested the proceeds at far better prices than anticipated in the prospectus and have benefitted to the point where a […]

  4. yielder says:

    How can CBU.PR.A be trading where it is when its redemption value is $10????? I can see CBU trading all over the place but not the pref shares.

    Surely it’s not yield chasing without reading the prospectus?????????????? That would be par for the course, I guess, for retail.

  5. jiHymas says:

    It could well be yield-chasing! CBU.PR.A pays $0.60 p.a. compared to the almost-standard $0.525 p.a. and it would not be unknown for such an issue to trade off its current yield rather than yield-to-redemption. The YTW is now about 3.3% – pretty skimpy!

    However, it is also possible that this is trading off the Capital Unit discount. The NAV is currently 32.85; CBU is at 17.38-60 and CBU.PR.A is at 11.76-99. The Capital Units are trading at an enormous discount to their intrinsic value; some players may be buying whole units (one of each) with the intent of retracting.

    Note that there is an embedded note which also has to be paid for on retraction, currently worth about $1.54

    Additionally, the company has an issuer bid for the combined units, which might be helping to enforce a price parity.

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