Category: New Issues

Bank of Montreal has announced:

that it has entered into an agreement to privately place its Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 36 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 36”). BMO Capital Markets is acting as the sole agent on the transaction. Bank of Montreal will issue 600,000 Preferred Shares Series 36 at a price of $1,000 per share to raise gross proceeds of $600 million. The closing of the offering is scheduled to occur on October 16, 2015, subject to the satisfaction of certain closing conditions. The net proceeds will be used by the Bank for general corporate purposes.

Holders will be entitled to receive non-cumulative preferential fixed quarterly dividends as and when declared by the board of directors of the Bank, payable in the amount of $14.625 per share, to yield 5.85 per cent annually. Subject to regulatory approval, on or after November 25, 2020, the Bank may redeem the Preferred Shares in whole or in part for an amount equal to $1,000 per Preferred Share Series 36 together with declared and unpaid dividends to the date fixed for redemption.

So this is a strange one on a great many levels and we probably won’t really be able to understand this issue until we get the BMO 2015 Annual Report – and perhaps not even then!

So first off, it’s a private placement. The only private placement of preferred shares – from an investment-grade, major public issuer – that I can recall is BNS.PR.S, FixedReset, 6.25%+384, which closed December 12, 2008 after having been announced December 3, 2008; $250-million issued to Sun Life Financial as part payment for CI Financial Income Fund. In that case, details were later available on SEDAR, but there was a difference in that BNS.PR.S was the private placement of a public issue, while there is nothing in the current announcement to indicate that this issue will be – at least theoretically – tradable by the public. At $1,000 per share par value, my guess is “no”!

Second, there’s the size of the thing. $600-million, done without a whisper, so one can well presume that it was to an individual client or, possibly, a small consortium of clients. Now my question is: who’s got that kind of money? The size represents roughly 1% of the entire Canadian preferred share market; while there are a fee issues that are in that ballpark (RY.PR.J, $600-million; FTS.PR.M, $600-million; TRP.PR.D, $600-million; TRP.PR.A / TRP.PR.F weighs in at $550-million; BMO.PR.S, $500-million; RY.PR.H, $500-million; ) they were all issued at a time when the preferred share market was, shall we say, a little more robust than it is now.

Who’s got that kind of money? I suggest that there are two logical places to look for people who can throw down amounts like this: pension funds and foreigners. But the problem is … pension funds and foreigners don’t get the benefit of the Dividend Tax Credit and Gross-up (although foreigners could do it through a Canadian subsidiary). So why would they care about preferred share dividends. Which leads us to the next question …

Thirdly, does it pay dividends or interest? On the one hand the word “dividends” is used twice in the press release; on the other hand, so what? I don’t think anybody will go to jail if they refer to the payments as dividends in a press release, but then call it interest when preparing the tax slips – of course, I could be wrong on that! But 5.85% is a whacking great huge rate for a dividend; it will be recalled that BAM did a recent issue at 5% after CU did one at 4.50%. BMO is still Pfd-2 by DBRS although only P-3(high) from S&P. Do they really need to pay 5.85%? Are they really that short of capital?

I suspect they aren’t; and I note that when you divide 5.85% by the standard equivalency factor of 1.3, you get 4.5% (exactly!) which is at least in the ballpark of where they would be willing to do a public issue (whether they actually could do it in size in the present environment is another question!). So, from two perspectives (three, if you include the $1,000 par value) it makes sense that this 5.85% is an interest rate, not a dividend rate; but whether or not this is true will have to await confirmation.

And fourthly, what’s the Issue Reset Spread? We are told that this issue represents “(Non-Viability Contingent Capital (NVCC))” which suggests that OSFI has blessed the issue and OSFI won’t (quite rightly) allow step-ups, so the spread won’t be much more than +500bp over five-year Canadas; but it could, conceivably, be less. Another mystery! And we’re not even sure if the touted “Rate Reset” bears any relation to the standard terms of public FixedReset issues. The underlying rate could be just about anything and the reset frequency is equally obscure.

Hat tip to Assiduous Readers JB, GB and LM, who ensured I was informed of this issue!

Brookfield Asset Management Inc. has announced:

that it has agreed to issue 6,000,000 Class A Preferred Shares, Series 44 on a bought deal basis to a syndicate of underwriters led by Scotiabank, CIBC, RBC Capital Markets and TD Securities Inc. for distribution to the public. The Preferred Shares, Series 44 will be issued at a price of C$25.00 per share, for gross proceeds of C$150,000,000. Holders of the Preferred Shares, Series 44 will be entitled to receive a cumulative quarterly fixed dividend yielding 5.00% annually for the initial period ending December 31, 2020. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 4.17%, and (ii) 5.00%.

Brookfield has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 2,000,000 Preferred Shares, Series 44 which, if exercised, would increase the gross offering size to C$200,000,000. The Preferred Shares, Series 44 will be offered in all provinces of Canada by way of a supplement to Brookfield’s existing short form base shelf prospectus. The Preferred Shares, Series 44 may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

Brookfield intends to use the net proceeds of the issue of Preferred Shares, Series 44 for general corporate purposes. The offering of Preferred Shares, Series 44 is expected to close on or about October 2, 2015.

The rate floor seems to have made it a popular issue! They later announced:

that as a result of strong investor demand for its previously announced offering it has agreed to increase the size of the offering to 10,000,000 Class A Preferred Shares, Series 44. The Preferred Shares, Series 44 will be issued at a price of C$25.00 per share, for gross proceeds of C$250,000,000. There will not be an underwriters’ option as was previously granted. The Preferred Shares, Series 44 are being offered on a bought deal basis by a syndicate of underwriters led by Scotiabank, CIBC, RBC Capital Markets and TD Securities Inc.

The Rate-Floor provision was recently introduced with the announcement of the CU FixedReset, 4.50%+369M450, which settled firm today on good volume. It will be noted that there is no floor rate on the BAM issue’s Strong Pair FloatingReset counterpart, which is the same as the CU issue.

Implied Volatility analysis indicates that the issue is priced fairly at the close today, after all the carnage amongst the BAM FixedResets on the day. There are two major caveats to this conclusion, beyond the usual warnings about Implied Volatility analysis:

• At 13% the indicated Implied Volatility is higher than I would expect for truly perpetual FixedResets. A decline in this value would be correlated with underperformance by lower spread issues.
• No allowance is made in this analysis for the rate floor, either in terms of expected dividend or of value. I don’t think the floor has much value in this environment, but it surely must have some!

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However, the tentative conclusion that the new issue is fairly priced despite the day’s carnage suggests we might be back to the Credit Crunch new issue paradigm: new issues are offered with a concession, as usual, but instead of settling with a slight premium, as is the intent, they might be projected to settle at par with the rest of the market having gone down in price! This can be taken as an indication that it has become awfully difficult to attract new capital to the preferred share marketplace.

Royal Bank of Canada has announced:

announced a domestic public offering of Non-Cumulative, Preferred Shares Series BJ.

Royal Bank of Canada will issue 6 million Preferred Shares Series BJ priced at $25 per share to raise gross proceeds of $150 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 BJ at the same offering price.

The Preferred Shares Series BJ will yield 5.25 per cent annually, payable quarterly, as and when declared by the Board of Directors of Royal Bank of Canada.

Subject to regulatory approval, on or after February 24, 2021, the bank may redeem the Preferred Shares Series BJ in whole or in part at a declining premium.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is October 2, 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.

It’s nice to see another Straight!

Implied Volatility analysis shows that market differentiation between NVCC compliant and non-compliant issues is significant:

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When only the NVCC-compliant issues are used for fitting, it appears that Implied Volatility is very low (which suggests that the relationship will steepen somewhat in the future) implying that higher-coupon issues are relatively expensive. However, there are only four data points to support this conclusion and the variety of coupon rates is minimal, so don’t mortgage the farm!

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There was no formal announcement, but the final short form prospectus for the new BSC refunding issue has been released on SEDAR and may be found by searching for }BNS Split Corp. II Sep 15 2015 16:59:32 ET Final short form prospectus – English PDF 276 K”. I am not permitted to link directly to this document because the regulators feel that access to public documents by investor scum should be inconvenient.

The issue has a monthly retraction, but it’s pretty lousy:

A holder who surrenders a Series 2 Preferred Share for retraction will receive on the Retraction Payment Date the amount, if any, by which 95% of the Unit Value exceeds the aggregate of (i) the average cost to the Company, including commissions, of purchasing two Capital Shares in the market; and (ii) $1.00.

Additionally, there is the potential for annual redemptions at par and redemption any time at a small premium:

In addition, the Company may also redeem Series 2 Preferred Shares on any Annual Retraction Payment Date (defined herein) at a price per share equal to the issue price of a Series 2 Preferred Share. The Company will only redeem Series 2 Preferred Shares in these circumstances to the extent that unmatched Capital Shares have been tendered for retraction under the Special Annual Retraction (defined herein). Where less than all the Series 2 Preferred Shares are to be so redeemed, Series 2 Preferred Shares shall be redeemed on a pro rata basis or in such other manner as is approved by the Board of Directors of the Company. The Company may also redeem Series 2 Preferred Shares in the circumstances described under “Changes Affecting Portfolio Securities.”

In addition to the annual redemption right as described above, Series 2 Preferred Shares may be redeemed by the Company at any time prior to the Redemption Date at a price (the “Premium Redemption Price”) which, until September 2016, will equal the issue price of the Series 2 Preferred Shares multiplied by a premium which will initially be 4% and which will decline by 1% each year to nil after September 22, 2019.

The dividend is, as noted, 4%:

Holders of Series 2 Preferred Shares will be entitled to receive quarterly fixed cumulative preferential distributions equal to $0.1971 per Series 2 Preferred Share. Quarterly distributions on the Series 2 Preferred Shares are expected to be paid by the Company on or before the 22nd day of December, March, June and September in each year. On an annualized basis, this would represent a yield on the offering price of the Series 2 Preferred Shares of 4.0%. Based on the expected closing date of September 22, 2015, the initial dividend will be $0.1971 per Series 2 Preferred Share and is expected to be payable on or about December 22, 2015.

There is no NAV test for Capital Unit distributions, but according to the July Information Circular:

Holders of Class A Capital Shares are entitled to receive dividends as declared by the Board of Directors.

The policy of the Board of Directors is to only pay a dividend on the Class A Capital Shares provided that the Unit Value ras herein described) at the time of declaration of such dividend is, after giving effect to the dividend, greater than or equal to the original issue price of the Series 1 Preferred Shares. The current running yield on the Class A Capital Shares is 2.97% based on the closing price of the Class A Capital Shares of $19.85 on June 26, 2015.

Policies are nice things to have. Contractual obligations are better.

The issue is rated Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today finalized the provisional rating of Pfd-2 (low) of the Class B Preferred Shares, Series 2 (the Preferred Shares) to be issued by BNS Split Corp. II (the Company).
…
Dividends received from the BNS Shares will be used to pay fixed cumulative quarterly distributions to the holders of the Preferred Shares in the amount of $0.1971 per quarter, which represents an annual yield of 4.0% on the offering price. Excess dividends net of all expenses of the Company and after the preferred cumulative dividends have been paid to the holders of the Preferred Shares may be paid as dividends on the Capital Shares or re-invested by the Company in additional BNS Shares as determined by the Board of Directors of the Company.
…
The initial downside protection available to the holders of the Preferred Shares is expected to be approximately 62% (after offering expenses). Based on the current dividend yield on the Portfolio and the initial offering size, the Preferred Share Dividend coverage ratio is expected to be approximately 2.6 times.

The issue was previously discussed in the post BSC.PR.B Refunding Issue Moves Closer.

Canadian Utilities Limited has announced (emphasis added):

it has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and RBC Capital Markets, and including TD Securities Inc., Scotiabank, CIBC, Canaccord Genuity Corp., and GMP Securities L.P. The underwriters have agreed to buy 4,000,000 4.50% Cumulative Redeemable Second Preferred Shares Series FF at a price of $25.00 per share for aggregate gross proceeds of $100,000,000. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.

Canadian Utilities Limited has granted the underwriters an option to purchase at the offering price an additional 2,000,000 Series FF Preferred Shares exercisable in whole or in part at any time up to 7:00 AM (Calgary time) on the date that is two business days prior to closing. Should the option be fully exercised, the total gross proceeds of the Series FF Preferred Share offering will be $150,000,000.

The Series FF Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable quarterly for an initial period of five years, as and when declared by the Board of Directors of the Company at an annual rate of $1.125 per share, to yield 4.50% annually.

Thereafter, the dividend rate will reset every five years to the then current 5-Year Government of Canada Bond yield plus 3.69%, and in any event, no less than 4.50%. On December 1, 2020, and on December 1 of every fifth year thereafter, the Company may redeem the Series FF Preferred Shares in whole or in part at par.

Holders may elect to convert any or all of their Series FF Preferred Shares into an equal number of Cumulative Redeemable Second Preferred Shares Series GG on December 1, 2020, and on December 1 of every fifth year thereafter. Holders of the Series GG Preferred Shares will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of the Company, equal to the then current 3-month Government of Canada Treasury Bill yield plus 3.69%. On December 1, 2025, and on December 1, of every fifth year thereafter, the Company may redeem the Series GG Preferred Shares in whole or in part at par. On any other date, the Company may redeem the Series GG Preferred Shares in whole or in part by the payment of $25.50 for each share to be redeemed.

The offering is being made only in the provinces of Canada by means of a prospectus supplement and the closing date of the issue is expected to be on or about September 24, 2015.

Assiduous Readers with sharp eyes will have noticed the bolding and murmured to themselves ‘oh, a minimum rate on reset guarantee! So that’s what the “M450” in the headline of this post means! It wasn’t a typo! Gee, I wish I hadn’t sent that vituperative eMail!’

The minimum rate guarantee seems to have been very popular, since later in the day they announced:

that as a result of strong investor demand for its previously announced offering of Cumulative Redeemable Second Preferred Shares Series FF, the size of the offering has been increased to 10,000,000 shares. The aggregate gross proceeds will now be $250,000,000.

It’s an interesting idea and I’m sure that investors will be demanding this feature for some time to come (images of stolen horses and barn doors come to mind!). But will the banks and insurers issue them? We can take a refreshing look at the Capital Adequacy Guidelines, Chapter 2, “Definition of Capital” for some hints … I don’t see anything that would stop them.

Item 2.1.2.1(11)(4) states:

Is perpetual, i.e. there is no maturity date and there are no step-ups [Footnote 14] or other incentives to redeem [Footnote 15].

Footnote 14 reads: A step-up is defined as a call option combined with a pre-set increase in the initial credit spread of the instrument at a future date over the initial dividend (or distribution) rate after taking into account any swap spread between the original reference index and the new reference index. Conversion from a fixed rate to a floating rate (or vice versa) in combination with a call option without any increase in credit spread would not constitute a step-up.

Footnote 15 reads: Other incentives to redeem include a call option combined with a requirement or an investor option to convert the instrument into common shares if the call is not exercised.

So I don’t think there’s a problem there – OSFI is worried about issuance of 2% century-wink-wink-nudge-nudge bonds that step up to 25% on the first call date, thereby giving the issuer a certain incentive to redeem. But that’s not the case here; there is a floor, but it will not necessarily be applied.

The other rule I thought of that might throw a monkey-wrench into bank issuance was item 2.1.2.1(11)(9):

The instrument cannot have a credit sensitive dividend feature, that is a dividend/coupon that is reset periodically based in whole or in part on the institution or organization’s credit standing [Footnote 18]

Footnote 18 reads: Institutions may use a broad index as a reference rate in which the issuing institution is a reference entity, however, the reference rate should not exhibit significant correlation with the institution’s credit standing. If an institution plans to issue capital instruments where the margin is linked to a broad index in which the institution is a reference entity, the institution should ensure that the dividend/coupon is not credit-sensitive. [BCBS FAQs #12, p.5]

So, while it was worth checking, that particular rule is very specific that increases in spread based on credit quality is prohibited, but increases in spread based on interest rates seems to be OK.

So I think this minimum rate guarantee structure will be permissible for banks. But I’m neither OSFI nor an underwriter nor a bank treasury analyst!

Update, 2015-9-17: This chart compares the CU issues to extant MFC issues. See the comments for discussion.

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The Bank of Nova Scotia has announced:

BNS Split Corp. II (the “Company”) announced today that the final condition required to extend the term of the Company for an additional five years to September 22, 2020, has been met as holders of 89.2% of Class A Capital Shares (“Capital Shares”) have elected to extend. Holders of Capital Shares previously approved the extension of the term of the Company subject to a minimum of 800,000 Capital Shares remain outstanding after giving effect to the special retraction right (the “Special Retraction Right”).

Under the Special Retraction Right, 137,506 Capital Shares were tendered to the Company for payment on September 22, 2015. The holders of the remaining 1,138,286 Capital Shares will continue to enjoy the benefits of a leveraged participation in the capital appreciation of the Company’s portfolio of common shares of The Bank of Nova Scotia while potentially deferring any capital gains tax liability which would otherwise be realized on the redemption of their Capital Shares.
The Company’s Class B Preferred Shares, Series 1 will be redeemed by the Company on September 22, 2015 in accordance with the redemption provisions at a price per share equal to the lesser of $18.85 and the Net Asset Value per Unit. In order to maintain the leveraged “split share” structure of the Company, the Company intends to create and issue a new series of Class B Preferred Shares to be called the Series 2 Preferred Shares, which are expected to be issued immediately following this redemption.

BNS Split Corp. II is a mutual fund corporation created to hold a portfolio of common shares of The Bank of Nova Scotia. Capital Shares and Preferred Shares of BNS Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols BSC and BSC.PR.B respectively.

… and the new issue was assigned a provisional rating of Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today assigned a provisional rating of Pfd-2 (low) to the Class B Preferred Shares, Series 2 (the Preferred Shares) to be issued by BNS Split Corp. II (the Company). The Preferred Shares will be issued as part of a share capital reorganization, which permits holders of Class A Capital Shares (the Capital Shares) to extend their investment in the Company beyond the redemption date of September 22, 2015, for an additional five years to September 22, 2020. The Preferred Shares will be issued to maintain the leveraged split share structure of the Company, so that the number of issued and outstanding Capital Shares are twice the number of issued and outstanding Preferred Shares. The Preferred Shares and Capital Shares will be redeemed by the Company on September 22, 2020.

There is a preliminary short form prospectus available on SEDAR dated August 25, which I am not permitted to link to directly since the Canadian Securities Administrators think it’s bad enough that investor scum have any access at all to public documents and are doing their level best to make access inconvenient.

The critical bits of information, such as coupon rate, have not yet been filled in but there are some items of interest:

The Series 2 Preferred Shares may be surrendered for retraction at any time by the holders. Retraction payments for Series 2 Preferred Shares will be made on the 22nd day of a month or, where such day is not a business day, on the preceding business day (a “Retraction Payment Date”) provided the Series 2 Preferred Shares have been surrendered for retraction no later than the first business day before the 8th day of that month.

A holder who surrenders a Series 2 Preferred Share for retraction will receive on the Retraction Payment Date the amount, if any, by which 95% of the Unit Value exceeds the aggregate of (i) the average cost to the Company, including commissions, of purchasing two Capital Shares in the market; and (ii) $1.00.

That’s a pretty awful retraction price; it won’t support the preferred share value very much in the event of a crash in the underlying portfolio of BNS common.

Any Series 2 Preferred Shares still outstanding on the Redemption Date will be redeemed by the Company on the Redemption Date at a price per share equal to the lesser of the issue price of a Series 2 Preferred Share and the Unit Value. See “Description of the Securities Distributed – Attributes of the Series 2 Preferred Shares”.

In addition, the Company may also redeem Series 2 Preferred Shares on any Annual Retraction Payment Date (defined herein) at a price per share equal to the issue price of a Series 2 Preferred Share. The Company will only redeem Series 2 Preferred Shares in these circumstances to the extent that unmatched Capital Shares have been tendered for retraction under the Special Annual Retraction (defined herein). Where less than all the Series 2 Preferred Shares are to be so redeemed, Series 2 Preferred Shares shall be redeemed on a pro rata basis or in such other manner as is approved by the Board of Directors of the Company. The Company may also redeem Series 2 Preferred Shares in the circumstances described under “Changes Affecting Portfolio Securities.”

In addition to the annual redemption right as described above, Series 2 Preferred Shares may be redeemed by the Company at any time prior to the Redemption Date at a price (the “Premium Redemption Price”) which, until September 2016, will equal
the issue price of the Series 2 Preferred Shares multiplied by a premium which will initially be 4% and which will decline by 1% each year to nil after September 22, 2019.

And that’s a pretty onerous redemption condition. Split Shares which can be redeemed annually at par are rarely a good investment unless they’re pretty well discounted, since there’s a lot of uncertainty about redemption and less possibility of capital gain.

There is no NAV test for Capital Unit distributions, but according to the July Information Circular:

Holders of Class A Capital Shares are entitled to receive dividends as declared by the Board of Directors.

The policy of the Board of Directors is to only pay a dividend on the Class A Capital Shares provided that the Unit Value ras herein described) at the time of declaration of such dividend is, after giving effect to the dividend, greater than or equal to the original issue price of the Series 1 Preferred Shares. The current running yield on the Class A Capital Shares is 2.97% based on the closing price of the Class A Capital Shares of $19.85 on June 26, 2015.

Policies are nice things to have. Contractual obligations are better.

Canadian Utilities has announced:

it has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and RBC Capital Markets, and including TD Securities Inc., Scotiabank, CIBC, Canaccord Genuity Corp., and GMP Securities L.P. The underwriters have agreed to buy 5,000,000 5.25% Cumulative Redeemable Second Preferred Shares Series EE at a price of $25.00 per share for aggregate gross proceeds of $125,000,000. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.

Canadian Utilities Limited has granted the underwriters an option to purchase at the offering price an additional 2,000,000 Series EE Preferred Shares exercisable in whole or in part at any time up to 7:00 AM (Calgary time) on the date that is two business days prior to closing. Should the option be fully exercised, the total gross proceeds of the Series EE Preferred Share offering will be $175,000,000.

The Series EE Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable quarterly as and when declared by the Board of Directors of the Corporation at an annual rate of $1.3125 per share, to yield 5.25% annually. On or after September 1, 2020, the Corporation may redeem the Series EE Preferred Shares in whole or in part from time to time, at $26.00 per share if redeemed during the 12 months commencing September 1, 2020, at $25.75 per share if redeemed during the 12 months commencing September 1, 2021, at $25.50 per share if redeemed during the 12 months commencing September 1, 2022, at $25.25 per share if redeemed during the 12 months commencing September 1, 2023, and at $25.00 per share if redeemed on or after September 1, 2024.

The offering is being made only in the provinces of Canada by means of a prospectus supplement and the closing date of the issue is expected to be on or about August 7, 2015.

Implied Volatility theory suggests that this issue is somewhat expensive – the company has, as is often the case, priced the issue so that it yields the same as issues trading at a discount, thus assigning a value of zero to the ill effects of negative convexity.

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Bank of Montreal has announced:

a domestic public offering of $150 million of Non-Cumulative Perpetual Class B Preferred Shares, Series 35 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares”). The offering will be underwritten on a bought-deal basis by a syndicate of underwriters led by BMO Capital Markets. The Bank has granted to the underwriters an option to purchase up to an additional $50 million of the Preferred Shares exercisable at any time up to 48 hours before closing.

The Preferred Shares will be issued to the public at a price of $25.00 per share. Holders will be entitled to receive non-cumulative preferential fixed quarterly dividends as and when declared by the board of directors of the Bank, payable in the amount of $0.3125 per share, to yield 5.00 per cent annually. Subject to regulatory approval, on or after August 25, 2020, the Bank may redeem the Preferred Shares in whole or in part at a declining premium.

The anticipated closing date is July 29, 2015. The net proceeds from the offering will be used by the Bank for general corporate purposes.

It’s very nice to see another Straight Perpetual being issued!

The Royal Bank of Canada has announced:

a domestic public offering of Non-Cumulative, Preferred Shares Series BI.

Royal Bank of Canada will issue 6 million Preferred Shares Series BI priced at $25 per share to raise gross proceeds of $150 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 BI at the same offering price.

The Preferred Shares Series BI will yield 4.90 per cent annually, payable quarterly, as and when declared by the Board of Directors of Royal Bank of Canada.

Subject to regulatory approval, on or after November 24, 2020, the bank may redeem the Preferred Shares Series BI in whole or in part at a declining premium.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is July 22, 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.

It’s very nice to see another Straight Perpetual coming out, but disappointing that it has the same coupon as RY.PR.W and RY.PR.N!

TD Bank has announced:

a domestic public offering of Non-Cumulative Fixed Rate Preferred Shares (non-viability contingent capital (NVCC)), Series 11 (the “Series 11 Shares”).

TD has entered into an agreement with a group of underwriters led by TD Securities Inc. to issue, on a bought deal basis, 6 million Series 11 Shares at a price of $25.00 per share to raise gross proceeds of $150 million. TD has also granted the underwriters an option to purchase, on the same terms, up to an additional 2 million Series 11 Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing of the offering.

The Series 11 Shares will yield 4.90% annually, with dividends payable quarterly, as and when declared by the Board of Directors of TD. The Series 11 Shares will be redeemable in whole or in part by TD on or after October 31, 2020, subject to regulatory consent, at a declining premium.

The expected closing date is July 21, 2015. TD will make an application to list the Series 11 Shares as of the closing date on the Toronto Stock Exchange. The net proceeds of the offering will be used for general corporate purposes.

It’s nice to see another Straight Perpetual on the market!