TransAlta cancels a planned preferred share swap because of investor push back

Barry Critchley was kind enough to quote me in his piece TransAlta cancels a planned preferred share swap because of investor push back:

“It is a good day for shareholders. We don’t always do what the banks tell us to do,” said James Hymas, portfolio manager at Hymas Investment Management and the publisher of the PrefBlog. CIBC World Markets was TransAlta’s financial adviser while PWC provided a fairness opinion.

When TransAlta announced the plan in late December, Hymas said on the blog: “This is a rotten deal for the preferred shareholders, so rotten that we may call it a sleazy attempt by the company to pull the wool over the eyes of unsophisticated retail investors.”

Reached Friday, Hymas reiterated that it “was a bad deal. I suspect the early returns by shareholders combined with comments made to their investor relations department convinced them that it was not going to pass. Rather than be embarrassed, my guess is that they decided to cancel the deal.”

Hymas offered TransAlta, whose common share holders received a major dividend cut one year back, some advice: Get to work on improving the credit rating and spend less time on financial engineering. Last March DBRS changed the trends of all TransAlta’s long-term debt ratings – as well as on its preferred share ratings – to negative from stable.

There are also some amusing quotes from a portfolio manager who liked the deal so much, he’s willing to hide under his bed with the light turned off and say so anonymously:

The manager had little time for the view that holders were being “compromised” because they were not being offered full value, or $25 per share.

“That’s a fiction. They are perpetual securities and worth what they are worth. It’s not like a piece of debt where eventually they owe you the principal,” he added.

I hadn’t actually heard anybody say the holders were being compromised because they were not being offered full value. Perhaps the fact that all this guy has is a straw-man argument explains his anonymity..

This follows previous posts on this topic:

Affected issues are TA.PR.D, TA.PR.E, TA.PR.F, TA.PR.H and TA.PR.J.

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