PWF.PR.P To Reset To 2.306%

Power Financial Corporation has announced:

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series P (the “Series P shares”) and Non-Cumulative Floating Rate First Preferred Shares, Series Q (the “Series Q shares”).

With respect to any Series P shares that remain outstanding after February 1, 2016, holders thereof will be entitled to receive quarterly fixed non-cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Power Financial. The dividend rate for the 5-year period from and including February 1, 2016 to but excluding January 31, 2021 will be 2.306%, being equal to the 5-year Government of Canada bond yield determined as of today plus 1.60%, in accordance with the terms of the Series P shares.

With respect to any Series Q shares that may be issued on February 1, 2016, holders thereof will be entitled to receive quarterly floating rate non-cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Power Financial. The dividend rate for the 3-month floating rate period from and including February 1, 2016 to but excluding April 30, 2016 will be 2.100%, being equal to the 3-month Government of Canada Treasury Bill yield determined as of today plus 1.60%, calculated on the basis of the actual number of days in such quarterly period divided by 365, in accordance with the terms of the Series Q shares.

Beneficial owners of Series P shares who wish to exercise their conversion right should communicate with their broker or other nominee to ensure their instructions are followed so that the registered holder of the Series P shares can meet the deadline to exercise such conversion right, which is 5:00 p.m. (EST) on January 18, 2016.

The news about the extension was reported on PrefBlog.

PWF.PR.P is a FixedReset, 4.40%+160, that commenced trading 2010-6-29 after being announced 2010-6-17, so the reset represents a cut of 48% in the dividend rate. Ouch!

As noted in the Press Release, holders have until 5:00 p.m. (EST) on Monday, January 18, to notify the company of a desire to convert to the FloatingReset Series Q. Brokerage deadlines will be earlier; missing the deadline at the brokerage probably means you’re going to have to grovel to get them to try to get the instruction to the company in time and in such a case they will do it only on a ‘best efforts’ basis. So ensure you know well in advance – by which I mean ‘right now’ – just when your brokerage’s internal deadline is.

I will make a recommendation January 13 based on the theory of Preferred Pairs, for which a calculator is available. Given recent market behaviour, it is highly likely that I will recommend holding PWF.PR.P and not to convert, but that won’t be final until I post!

Leave a Reply

You must be logged in to post a comment.