PrefBlog

Bank of Montreal has announced (bolding added):

the pricing of USD 750 million of non-viability contingent capital (“NVCC”) Additional Tier 1 (AT1) Limited Recourse Capital Notes, Series 5 (the “LRCNs”).

The LRCNs will bear interest at a rate of 7.300 per cent annually, payable quarterly, for the initial period ending, but excluding, November 26, 2034. Thereafter, the interest rate on the LRCNs will reset every five years at a rate equal to the prevailing 5-year U.S. Treasury Rate plus 3.01 per cent. The LRCNs will mature on November 26, 2084. The expected closing date of the offering is July 17, 2024.

On or before the issuance of the LRCNs, the Bank will issue NVCC Non-Cumulative 5-Year Fixed Rate Reset Class B Preferred Shares, Series 54 (“Preferred Shares Series 54”) to be held by Computershare Trust Company of Canada, as trustee for BMO LRCN Trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the LRCNs when due, the recourse of each LRCN holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of Preferred Shares Series 54 except in limited circumstances.

The LRCNs may be redeemed at the option of the Bank, with the prior written approval of the Superintendent of Financial Institutions (Canada), in whole or in part, on not less than 10 nor more than 60 days’ prior notice, every quarter on the interest payment date, commencing on November 26, 2034.

The net proceeds will be contributed to the general funds of the Bank and will be utilized for general banking purposes, which may include the redemption of outstanding capital securities of the Bank and/or repayment of other outstanding liabilities of the Bank, and are expected to qualify as Additional Tier 1 capital of the Bank for regulatory purposes.

BMO Capital Markets Corp., BofA Securities, Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, Truist Securities, Inc. and UBS Securities LLC are the joint book-running managers for the offering.

BMO.PR.T was issued as a FixedReset, 3.90%+224, NVCC-compliant issue that commenced trading 2014-6-6 after being announced 2019-05-28. BMO.PR.T reset at 3.624% effective August 25, 2019. I recommended against conversion and there was no conversion. It is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

It is certainly possible that BMO.PR.T will be redeemed with the proceeds from this LRCN, but certainly not guaranteed until BMO makes a formal announcement. So be careful! The market for this issue didn’t change much today, closing with a quote of 24.91-05 – the trading price went up $0.40 on June 24, the day TD announced an LRCN deal, which was also for USD 750-million.

Thanks to Assiduous Reader IrateAR for bringing this to my attention!

In late May, Mulvihill published a Notice of Special Meeting and Management Information Circular for World Financial Split Corp., known to us as WFS.PR.A (Capital Units were WFS) [bolding added for the critical bits]:

The purpose of the Meeting is to consider and vote upon a special resolution to reposition and recapitalize the Fund to enhance its ability to meet its investment objectives going forward. In this regard, the Fund proposes to change the following (collectively, the “Proposed Amendments”):
1. the investment objectives, strategy and restrictions of the Fund to expand and diversify the portfolio of equity securities to global equity securities selected by the Manager and increase the dividend on the Preferred Shares to $0.0625 per month (7.5% on the original $10.00 issue price) and reinstate the Class A Share distribution (targeted at 12.0% per annum payable monthly on the consolidated Class A Share net asset value per share of approximately $8.00 per share);

2. the articles of the Fund to:
(a) change the name of the Fund from “World Financial Split Corp.” to “Premium Global Income Split Corp.”;
(b) consolidate the Class A Shares of the Fund in order to reset the net asset value per Class A Share to approximately $8.00 per share;
(c) change the existing Preferred Shares of the Fund into a number of Class A Shares and a lesser number of the same class of Preferred Shares to be determined based on the number of shares surrendered pursuant to the Special Retraction Right referred to below (for example, assuming a 4:1 Class A Share consolidation, the Manager would expect 100 Preferred Shares to be exchanged into approximately 41 Class A Shares and 66 Preferred Shares with a value initially equal to the value of the Preferred Shares so exchanged. The exact numbers into which such shares are proposed to be changed shall be announced on June 17, 2024);
(d) extend the Termination Date of the Fund from June 30, 2025 to June 30, 2029 and provide the directors of the Fund with the ability to extend the Termination Date for successive five year terms;
(e) eliminate the $15.00 net asset value per Unit dividend threshold on Class A Shares;
(f) provide holders of Class A Shares and Preferred Shares who do not wish to continue their investment in the Fund with a special retraction right (the “Special Retraction Right”) to enable such Shareholders to retract their shares on June 28, 2024 on the same terms that would have applied had the Fund redeemed all Shares as originally contemplated for June 30, 2025 and provide that the Shareholders who wish to exercise the Special Retraction Right must give notice that they wish to exercise such right on or prior to June 14, 2024; and
(g) create an unlimited number of new classes of shares, issuable in an unlimited number of series and authorize the directors of the Fund to determine the rights, privileges and restrictions attaching to each such series;

On June 17, they announced:

as a result of the special retraction right to be provided to holders of Class A Shares and Preferred Shares who do not wish to continue their investment in the Fund should the Proposal be approved by shareholders, the Class A Shares will be consolidated on a 1:4 basis, such that each holder of a Class A Share will receive approximately 0.25 Class A Shares for each Class A Share held (the “Consolidation”) and the existing Preferred Shares will be exchanged into approximately 0.68 Preferred Shares and 0.40 Class A Shares, such that a holder of 100 Preferred Shares of the Fund will receive approximately 68 Preferred Shares and 40 Class A Shares for each Preferred Share held

On June 21 they announced:

that shareholders of the Fund have approved a proposal to change the investment objectives, strategy and restrictions of the Fund and to amend the articles of the Fund (the “Amendments”), all as more particularly described in the Fund’s management information circular dated May 10, 2024 (the “Circular”), at a special meeting of the shareholders held earlier today.

… and on July 5 they announced:

– (TSX: PGIC/ PGIC.PR.A) Mulvihill Capital Management Inc., the manager of Premium Global Income Split Corp., formerly World Financial Split Corp. (the “Fund”), is pleased to announce that the reorganization of the Fund has been completed, which included a change to the Fund’s name, ticker symbols, investment objectives and strategies of the Fund and amendments to the articles of the Fund (the “Reorganization”).

As a result of the Reorganization, there are 446,654 Class A Shares and 446,654 Preferred Shares of the Fund issued and outstanding following the consolidation of the Class A Shares and the exchange of Preferred Shares into Class A Shares and a lesser number of Preferred Shares.

Poor old WFS! The issue got hammered during the Credit Crunch (see page 8 of the 2023 Annual Report) and never really recovered.

With 862,417 preferred shares outstanding as of 2023-12-31 (see page 23 of the 2023 Annual Report) and “approximately 0.68 [new] Preferred Shares” issued per old preferred share, there should be 586,444 new preferred shares outstanding before accounting for the special retraction, but the company reports 446,654 currently outstanding, which implies a 24% retraction rate.

But anyway, with such a small float, no credit rating (discontinued in 2010) and no NAV test for Capital Unit distributions … I’m finally dropping this issue from HIMIPref™ coverage.

WFS.PR.A was last extended in 2018. The 2011 extension resulted in a massive retraction.