Category: HIMIPref News

Data Changes

RY.PR.C Off to a Fine Start!

The new Royal Bank 4.6% perpetuals were off to a good start today, trading 239,875 shares in a range of 25.15-25 to close at $25.16-18, 3×13.

The reorg entry has been processed on HIMIPref™: the pre-issue code was P50006, the new security code is A45012.

I’ll update this post with some comments about valuation when I update HIMIPref™ with today’s closing quotations later tonight.

Update : The issue still looks attractive at the closing quotation. Consider the YTWs of the other Royal Perpetual issues that are outstanding (except for the soon to be redeemed RY.PR.O:

Issue Pre-tax YTW Quote “Taxable Curve” Price
RY.PR.A 4.47% 24.84-91 24.97
RY.PR.B 4.30% 25.70-75 25.83
RY.PR.C 4.54% 25.16-18 25.59
RY.PR.W 4.07% 26.27-55 25.89

So, it’s my guess there’s still a little value left in this issue!

Data Changes

DBRS Upgrades Canadian Utilities!

DBRS announced today that they are upgrading the Canadian Utilities Limited preferred shares Series O, T, W & X from Pfd-2 to Pfd-2(high), where they will now match the series Q, R, S, U & V.

HIMIPref™ tracks four of these issues:

CU Issues & HIMIPref™
Series Symbol Status
Q CU.PR.T Unchanged
R CU.PR.V Unchanged
W CU.PR.A Upgraded
X CU.PR.B Upgraded

I do not anticipate much excitement to result from this upgrade. The two issues affected are high-dividend perpetuals with a short period until their YTW call. Due to the shortness of their expected term, NONE of the CU issues are eligible for purchase recommendations from HIMIPref™.

And anyway, as far as I can tell, the market isn’t putting much of a premium on “High” modifiers anyway!

The HIMIPref™ credit rating adjustment will take effect commencing October 31.

Data Changes

ELF.PR.G Holds its Own!

Somewhat to my surprise, the E-L Financial new issue was able to show some strength on its opening day, closing at 25.15-22 on volume of 135,325 shares.

Curve Price Analysis of ELF.PR.G
Component Taxable Curve Non-taxable Curve
Base-Rate 23.87 23.71
Short-Term 0.10 0.92
Long-Term 0.54 0.02
Credit Spread (2) -0.52 -0.68
Credit Spread (Low) -0.52 -0.68
Error 0.06 0.08
Intrinsic Price 23.53 23.37
Liquidity 1.51 1.50
Total Curve Price 25.04 24.87

This one looks fully priced – and that’s fully priced at best, because there’s a big chunk of liquidity value in the analysis. I suspect that as liquidity goes away, the market value of the shares will decrease, as the market comes to realize that a Pfd-2(low) [DBRS] issue should not be trading a mere 7bp yield higher than, for example, POW.PR.D.

This issue has been added to the HIMIPref™ database with a security code of A43087, replacing the Pre-Issue code of P25002. It has also been added to the PerpetualPremium Index.

Data Changes

Strong Opening for LBS.PR.A

As readers of my earlier post may have expected, LBS.PR.A had a very strong opening day, with 1,671,290 shares trading and closing at 10.55-59.

There may be more to come, as the following HIMIPref™ analysis indicates:

Curve Price Analysis of LBS.PR.A
Component Taxable Curve Non-taxable Curve
Base-Rate 10.35 10.26
Short-Term 0.13 0.56
Long-Term 0.33 0.01
Split-Share -0.26 -0.32
Retractible 0.34 0.44
Credit Spread (2) -0.08 -0.11
Error -0.01 0.00
Intrinsic Price 10.80 10.84
Liquidity 0.23 0.25
Total Curve Price 11.03 11.09

The estimate for the liquidity value is, as with all new issues, a little dicey – especially for a split-share issue, there is no guarantee that a huge liquidity premium will be sustained in the long run … in fact, there is a strong possibility of the opposite! But with an intrinsic value in the neighborhood of $10.80, it would appear there’s still some value left in the issue.

For those interested in more traditional measures, the pre-tax YTW of this issue is 4.34%, with a modified duration of 5.97, both measurements based on a maturity on 2013-11-29.

The issue has been added to the HIMIPref™ database with a security code of A47800, replacing the pre-issue code of P50004. It has also been added to the SplitShare Index.

Data Changes

BAM.PR.G Reset Rate Announced

Brookfield has announced that the rate to be paid from Nov. 1, 2006 to October 31, 2011 on BAM.PR.G will be 4.35%, or $1.0875 per share per annum … something of a haircut from the 5.63% they’ve been paying for the last five years!

As previously noted, this issue is exchangeable into BAM.PR.E. The deadline for converting is Wednesday October 18.

BAM.PR.E closed 10/13 at 25.05-45; BAM.PR.G closed 10/13 at 25.00-15.

Programme Changes

HIMIPref™ Release : 2006-10-11

There’s a new release of HIMIPref™ available for download at the usual place.

If you choose to install this upgrade, please, PLEASE remember to back-up your user data prior to re-installation!

This isn’t a very exciting upgrade, frankly – it is only made available to ensure that the Institutional and Administrative versions of the programme are kept synchronized – the major part of the upgrade was to the Administrative version and now, thanks to the miracle of modern automation, I will be able to commence a systematic computation of my FINAL preferred share indices!

There is no absolute necessity for Institutional users to install the new version – any old version that worked yesterday will continue to work today. There is the consideration that, in the unlikely event that (i) You find a bug, and (ii) the effect of this bug is different in the two versions, it will be much easier track down the error if we’re all singing from the same hymnbook.

Update, an hour later : Well, you’ll all be thrilled to know, I did remember an upgrade that will be noticable by institutional users: the appearance of the portfolioEvaluationReportContextMenu|Columns has been improved, with the choices organized a little more logically than “the order I did the programming” and separator lines. How’s that for vital?

Data Changes

Quiet Disaster for SLF.PR.D

Readers will be familiar with my earlier comments on this issue … price-wise, things worked out much as expected – the closing quotation was $24.50-55, 14×61. The volume was a surprise, however, with only 12,300 shares trading on its first day out, which can be interpreted in a number of ways.

 I suspect that the correct interpretation is simply that the issue got sold in large chunks to long term investors (e.g., Balanced and Dividend funds run by the big fundcos), who don’t care what price they pay, as long as they can put eight-figures “to work” on a single ticket – and probably all committed before the issue was even thought about! But who knows? We’ll just have to see how this thing looks going forward.

 I never did issue the press release I had been intending. After some thought, I decided that given the presence of such a close comparable as SLF.PR.C (which closed at $24.64-70, 9×70, on volume of 6,300) made the HIMIPref™ evaluation of the new issue as expensive somewhat less than startling news.

SLF.PR.D has been set up on HIMIPref™ and will be added to “PerpetualDiscount” index and prefInfo in the very near future. The Preissue Security Code was P50005; the permanent code is A48983.

The price is actually quite reasonable at 24.50-55 … Now that the Street has given Sun Life it’s $6-million gift (12-million shares, overpriced by about $0.50, according to the first day of trading, if nothing else), the issue is looking like a much more reasonable investment.