Yellow Pages Income Fund (the “Fund”) (TSX:YLO.UN) announced today that its subsidiary, YPG Holdings Inc. (the “Issuer”), will be issuing 12,000,000 cumulative redeemable preferred shares, series 1 (the “Series 1 Shares”) for aggregate gross proceeds of $300 million on a bought deal basis to a syndicate of underwriters led by Scotia Capital Inc., CIBC World Markets Inc., RBC Capital Markets and BMO Capital Markets, acting as joint book-runners.
The issue price is $25.00 and the dividend is 4.25% p.a., payable quarterly. Issue size is 12-million shares ($300-million) and the underwriters have the option until March 31 to purchase an additionaly 1.8-million shares ($45-million).
The initial dividend will be $0.32894, payable June 27 based on a closing date of March 6, 2007.
There are call privileges on the issue, which are exercisable only in circumstances in which the Series 1 shares are entitled to vote separately as a class or series by law. This “special call privilege” has the following schedule:
| Special Call, if redeemed during the 12 months | |
| Commencing March 31, | Redemption Price |
| 2007 | $26.25 |
| 2008 | 26.00 |
| 2009 | 25.75 |
| 2010 | 25.50 |
| 2011 | 25.25 |
There is a normal call, exercisable on and after March 31, 2012 at the corporation’s whim, to call at $25.00 cash.
The corporation can force conversion in to Trust Units of Yellow Pages Income Fund at the greater of (i) $2, or (ii) 95% of the Trust Units’ trading price at any time at which it could redeem the shares (including the special call).
The shares are retractible to cash on and after Dec 31, 2012 at $25.00.
This issue has ratings (provisional, presumably) of :
| DBRS | Pfd-3(high) |
| S&P | P-3 |
More later.
Update & Bump: The issue has been entered into the HIMIPref™ database on a preIssue basis, with the securityCode P50011.
There aren’t too many comparables for this issue, but I’ll do what I can!
| Curve Price & Comparables for YPG.PR.? | ||||
| Item | YPG.PR.? | BNA.PR.C | BAM.PR.J | CFS.PR.A |
| Price due to base-rate | 24.15 | 24.00 | 26.57 | 9.89 |
| Price due to short-term | -0.51 | -0.61 | -0.65 | -0.19 |
| Price due to long-term | 1.40 | 1.67 | 1.78 | 0.52 |
| Price to to Cumulative Dividends | 0.00 | 0.00 | 0.00 | 0.00 |
| Price due to SplitShareCorp | 0.00 | -1.19 | 0.00 | -0.22 |
| Price due to Retractibility | 0.84 | 1.52 | 1.52 | 0.29 |
| Price due to Liquidity | 0.46 | 0.85 | -0.09 | 0.16 |
| Price due to Credit Spread (2) | 0.00 | -0.39 | -0.39 | 0.00 |
| Price due to Credit Spread (3) | -0.60 | 0.00 | 0.00 | 0.00 |
| Price due to Credit Spread (High) | 0.00 | 0.00 | 0.00 | 0.00 |
| Price due to Credit Spread (Low) | 0.00 | 0.00 | -0.29 | 0.00 |
| Price due to error | 0.02 | 0.09 | 0.05 | 0.01 |
| Curve Price (Taxable Curve) | $25.76 | $25.94 | $28.50 | $10.46 |
| DBRS Credit Rating | Pfd-3(high) | Pfd-2 | Pfd-2(low) | Pfd-1 |
| Quote, 2/19 | $25.00 (Issue Price) | 24.91-95 | 27.86-97 | $10.20-23 |
| YTW (After Tax) | 3.36% | 3.54% | 3.32% | 3.07% |
| Modified Duration (YTW – after tax) | 5.27 | 9.61 | 6.16 | 5.40 |
| Pseudo-Convexity (YTW – after tax) | 0.38 | 0.42 | -12.44 | 0.47 |
| YTW (Pre-tax) | 4.24% | 4.46% | 4.17% | 3.86% |
Update 2007-02-20 : I note that the YPG bonds, 5.25% of Feb. 2016 are indicated at Canada 4.5/15 + 143bp, call it 5.51% at last night’s close. So, at a pre-tax YTW of 4.24%, interest equivalent (for rich Ontario residents) to 5.94%, the new prefs are trading at a reasonable spread to bonds.
Mind you, these are only Pfd-3(high). As credit quality decreases, so does the quality of HIMIPref™’s yield curve analysis. I do not recommend that these prefs be considered for more than 5% of a diversified preferred share portfolio.
[…] This new issue looks attractive when valued in strict accordance to the yield curve. But as I warned in my post about the YPG New Issue: As credit quality decreases, so does the quality of HIMIPref™’s yield curve analysis. I do not recommend that these prefs be considered for more than 5% of a diversified preferred share portfolio. […]
[…] The market appeared to disdain the Yellow Pages Group new issue, as it dropped well below the issue to close at 24.63-65, 50×14, on heavy volume of 757,556 shares. The YPG bonds, 5.25% of Feb 2016 are now indicated at Canada 4.5/15 + 146bp, call it about 5.44% at last night’s close. So the bonds have improved since announcement date – even though they’ve widened. Can’t blame the bond market for this one! […]
[…] incorporated in the “Scraps” index due to credit concerns. The last mention of YPG.PR.A discussed its issue price and the last mention of YPG.PR.B commented on its hostile reception on its opening day in June […]