CU Inc. has an issue trading on the Toronto Stock Exchange, CIU.PR.A, now bid at 20.50 for a pre-tax bid-YTW of 5.64% based on a limitMaturity; this is an interest-equivalent of 7.90% at a conversion factor of 1.4x. These are Series 1 Preferred. The company also has an approximately equal value of “Series Second Preferred” outstanding, all of which are held by the parent company.
Today they issued some 30-year debs at 5.58%.
Mainly I was interested in this because of the 232bp interest-equivalent spread between the prefs and the long debs, but there’s a little twist …
A grossly abbreviated statement of their liabilites is:
CIU Inc. Liabilities | |
Item | Value CAD Millions |
Current Liabilities | 250.6 |
Non-Current Non-Capital | 229.6 |
Long-Term Debt | 2,459.4 |
Series 1 Prefs | 115.0 |
Series 2 Prefs | 130.0 |
Equity | 1,675.5 |
Total | 4,860.1 |
According to the prospectus for CIU.PR.A:
In the event of the liquidation, dissolution or winding up of the Corporation, or other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, the holders of the Series 1 Preferred Shares shall be entitled to receive the amount paid up on such shares together with all accrued and unpaid cumulative preferential dividends thereon and, if such liquidation, dissolution, winding-up or distribution is voluntary, a premium of $1.00 per share if such event commences prior to June 1, 2009, and, if such event commences thereafter, a premium equivalent to the premium payable on redemption if such shares were to be redeemed at the date of commencement of any such voluntary liquidation, dissolution, winding-up or distribution, before any amount shall be paid or any property or assets of the Corporation shall be distributed to the holders of any Class A non-voting shares or Class B common shares or other shares ranking junior to the Series 1 Preferred Shares. After payment to the holders of the Series 1 Preferred Shares of the amounts so payable to them, they shall not be entitled to share in any further distribution of the property or assets of the Corporation.
… which is not entirely satisfactory, because nowhere in the document is the seniority of the “Series Second Preferred Shares” clearly defined relative to the “Series 1 Preferred Shares”.
I have used their contact form to ask the question:
Are the CU Inc. Series 1 Preferred Shares junior, senior, or parri passu to the Series Second Preferred Shares?
Where may I find legal documentation of the relative status?
Update, 2008-5-27: I have received a note from Atco staff denying the existence of Series Second Preferred shares. Further inquiries are in progress.
[…] This post arises from inquiries I made subsequent to their debenture issue. […]