New Issue: RY FixedReset, 3.60%+262

Royal Bank of Canada has announced:

a domestic public offering of Non-Cumulative, 5-Year Rate Reset Preferred Shares Series BF.

Royal Bank of Canada will issue 12 million Preferred Shares Series BF priced at $25 per share to raise gross proceeds of $300 million. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 2 million Preferred Shares Series BF at the same offering price.

The Preferred Shares Series BF will yield 3.60 per cent annually, payable quarterly, as and when declared by the Board of Directors of Royal Bank of Canada, for the initial period ending November 24, 2020. Thereafter, the dividend rate will reset every five years at a rate equal to 2.62 per cent over the 5-year Government of Canada bond yield.

Subject to regulatory approval, on or after November 24, 2020, the bank may redeem the Preferred Shares Series BF in whole or in part at par. Holders of Preferred Shares Series BF will, subject to certain conditions, have the right to convert all or any part of their shares to Non-Cumulative Floating Rate Preferred Shares Series BG on November 24, 2020 and on November 24 every five years thereafter.

Holders of the Preferred Shares Series BG will be entitled to receive a non-cumulative quarterly floating dividend, as and when declared by the Board of Directors of Royal Bank of Canada, at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 2.62 per cent. Holders of Preferred Shares Series BG will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series BF on November 24, 2025 and on November 24 every five years thereafter.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is March 13, 2015.

We routinely undertake funding transactions to maintain strong capital ratios and a cost effective capital structure. Net proceeds from this transaction will be used for general business purposes.

The issue will be NVCC compliant, so it will be treated as a true perpetual in the course of HIMIPref™ analysis.

The market’s certainty that anything issued by a Big Bank will keep its value, regardless of terms, is illustrated by the Implied Volatility chart – the Implied Volatility of 40%+ is completely unrealistic.

impVol_RY_150305
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