Category: Data Changes

The 5Banc Split Inc. new issue has been added to the HIMIPref™ database.

The anticipated closing date is 2006-12-15; it pays 4.75% as a cumulative dividend; it’s provisionally rated Pfd-2 by DBRS; and it’s a split share backed by … (wait for it) … five banks! BMO, BNS, CM, RY & TD are the portfolio shares.

I had a hard time deciding whether or not to include this issue in the database. It’s redeemable annually at the $10 issue price and I don’t like that. It means, for one thing, that the YTW will almost always be based on a call at the next annual date (assuming it trades at a premium, which, with a 4.75% dividend, seems likely for the forseeable future). I like the system whereby a declining schedule is put in place … like, f’rinstance, BSD.PR.A has. I’d be prepared to give up a little coupon for such a feature (how much? Consultancy can be easily arranged at a moderate fee).

In the end, I decided – sure, let’s include it. After all, it’s just replacing the FBS.PR.A and given that I expect a lot of redemptions over the next few years, I’d like to ensure I have a lot of issues with some history at all times, just to maintain continuity of the calculations.

The annual no-fee no-pain redemption feature for the capital units just creates a lot of churn (which may be the point, given that the selling commission is 3% on the prefs, 6% on the capital units.). This is a refinancing for 5Banc, with the old capital units eligible for tax-free conversion into the new capital units; the historical units outstanding have been:

The dividend is certainly attractive and the issue should go to a premium immediately after issue – and the underwriters are selling the prefs separately. The upside is limited by the very onerous redemption schedule, though, and I calculate a curvePrice of $10.26 (excluding liquidity considerations). One thing to remember about this kind of issue is that redemption will be driven by Capital Unitholders trying to cash in on the Next Big Thing – it will not necessarily have anything to do with prevailing interest rates. You could get redeemed (and receive the $10 par value) if rates are at 10% and the prefs are trading at $7.50. I can’t model that possibility though, and I wouldn’t count on it!

The preIssue securityCode for this issue is P50008.

Well, it didn’t take long for CIBC to replace the capital lost via the redemption of CM.PR.B! They announced a new issue (with a headline announcing a redemption!) that will close on November 15.

 Terms of the issue (Class A Series 31) are:

Dividend: Non-cumulative, 4.7% on $25.00 p.v. is $1.1750

Callable:

• $26.00, 2012-1-31 – 2013-1-30
• $25.75, 2013-1-31 – 2014-1-30
• $25.50, 2014-1-31 – 2015-1-30
• $25.25, 2015-1-31 – 2016-1-30
• $25.00, 2016-1-31 +

DBRS: Pfd-1 (low)

S&P: P-1 (low)

There will be 16-million shares outstanding; underwriters have a greenshoe option for an additional 2-million shares. It’s a bought deal.

The terms of this issue make it a reasonably close match to CM.PR.H, issued 2005-3-10, paying $1.20, call schedule commencing 2001-3-30, closing 2006-11-3 at $25.80-89

Basically, the thing looks pretty good … priced to move! I’ll also note that it yields 10bp more (at issue) than the recently issued RY.PR.C, in terms of PRE-TAX DIVIDENDS, which is about right considering that the credit spread for “Low” is 11bp AFTER TAX.

This issue has been entered into HIMIPref™ with the temporary security code P50007.