MAPF

MAPF Portfolio Composition: February 2010

Turnover declined dramatically in February to about 18%. Such decline in trading happens occasionally – I remember one period of about three month’s duration during which so few trades were done I was afraid the system was broken and spent a lot of time feverishly checking the code and the results. But one of the great constants in financial markets is a demand for liquidity and the fund is ready to meet that demand at a moment’s notice.

Trades were, as ever, triggered by a desire to exploit transient mispricing in the preferred share market (which may the thought of as “selling liquidity”), rather than any particular view being taken on market direction, sectoral performance or credit anticipation.

MAPF Sectoral Analysis 2010-2-26
HIMI Indices Sector Weighting YTW ModDur
Ratchet 0% N/A N/A
FixFloat 0% N/A N/A
Floater 0% N/A N/A
OpRet 0% N/A N/A
SplitShare 4.0% (-0.2) 7.82% 7.04
Interest Rearing 0% N/A N/A
PerpetualPremium 0.0% (0) N/A N/A
PerpetualDiscount 77.5% (+0.8) 6.03% 13.88
Fixed-Reset 13.6% (-0.8) 3.75% 3.84
Scraps (OpRet) 0% (-2.4) N/A N/A
Scraps (FixedReset) 4.8% (+2.3) 7.17% 12.18
Cash 0.0% (+0.1) 0.00% 0.00
Total 100% 5.84% 12.15
Totals and changes will not add precisely due to rounding. Bracketted figures represent change from January month-end. Cash is included in totals with duration and yield both equal to zero.

The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.

The most significant change was a swap from YPG.PR.B to YPG.PR.D, completing the process mentioned in the January performance report. The latter issue yields less, but is cheaper relative to other FixedResets than the former is cheap to OperatingRetractibles – although, mind you, both issues are pretty cheap according to me!

Credit distribution is:

MAPF Credit Analysis 2010-2-26
DBRS Rating Weighting
Pfd-1 0 (0)
Pfd-1(low) 75.7% (0)
Pfd-2(high) 9.3% (-0.5)
Pfd-2 0 (0)
Pfd-2(low) 10.1% (+0.3)
Pfd-3(high) 4.8% (-0.1)
Cash 0.0% (+0.1)
Totals will not add precisely due to rounding. Bracketted figures represent change from January month-end.

Liquidity Distribution is:

MAPF Liquidity Analysis 2010-2-26
Average Daily Trading Weighting
<$50,000 0.0% (0)
$50,000 – $100,000 0.0% (0)
$100,000 – $200,000 24.0% (-2.6)
$200,000 – $300,000 42.7% (+11.7)
>$300,000 33.3% (-9.2)
Cash 0.0% (+0.1)
Totals will not add precisely due to rounding. Bracketted figures represent change from January month-end.

MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. A “unit trust” is like a regular mutual fund, but is sold by offering memorandum rather than prospectus. This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission) and those who subscribe for $150,000+. Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.

A similar portfolio composition analysis has been performed on the Claymore Preferred Share ETF (symbol CPD) as of August 17 and published in the September PrefLetter. When comparing CPD and MAPF:

  • MAPF credit quality is better
  • MAPF liquidity is a little better
  • MAPF Yield is higher
  • Weightings in
    • MAPF is much more exposed to PerpetualDiscounts
    • MAPF is much less exposed to Operating Retractibles
    • MAPF is more exposed to SplitShares
    • MAPF is less exposed to FixFloat / Floater / Ratchet
    • MAPF weighting in FixedResets is much lower
Interesting External Papers

BIS Releases 1Q10 Quarterly Review

The Bank for International Settlements has released the BIS Quarterly Review, March 2010, with articles:

  • Overview: sovereign risk jolts markets
  • Highlights of international banking and financial market activity
  • The architecture of global banking: from international to multinational?
  • Exchange rates during financial crises
  • The dependence of the financial system on central bank and government support
  • The term “macroprudential”: origins and evolution

They put the tempest in the teapot regarding sovereign CDS in context:


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Activity in the CDS market for developed country sovereign debt increased significantly as investors adjusted their exposure to sovereign risk. This market was virtually non-existent only a few years back, when sovereign CDS were mostly on emerging market economies, but has since grown rapidly. This increase in activity resulted in significantly higher outstanding volumes of CDS contracts (Graph 5, left-hand panel). Nevertheless, the amount of sovereign risk which is actually reallocated via CDS markets is much more limited than the gross outstanding volumes would suggest. The sovereign reallocated risk is captured by the net outstanding amount of CDS contracts, which takes into account that many CDS contracts offset each other and therefore do not result in any actual transfer of credit risk. Net CDS positions on Portugal amounted to only 5% of outstanding Portuguese government debt. For other countries, including Greece, the ratio of sovereign CDS contracts to government debt was even lower (Graph 5, right-hand panel).

Another item of interest is the long-dated paper in the GBP market:

Borrowers adjusted their debt profile to lock in cheap funding costs. They repaid money market instruments (with maturities of less than one year) and floating rate bonds and notes by $141 billion and $71 billion, respectively. Meanwhile, they issued fixed rate bonds and notes to the tune of $492 billion. The average maturity of fixed rate bonds and notes rose from a low of 6.3 years in the first quarter of 2009 to 9.8 years in the third. It then declined slightly to 9.3 years in the final quarter. This, however, was entirely due to the extraordinarily high average maturity of sterling-denominated bonds issued in the third quarter (Graph 7, left-hand panel), when the UK government and a various special purpose vehicles securitising mortgages issued a number of very large bonds with maturities of up to 57 years. In the fourth quarter, sterling-denominated bonds still had longer maturities on average than those in other currencies, perhaps reflecting the high appetite for such paper by UK pension funds, forced to match their assets and liabilities on a mark to market. basis.[footnote] Governments in particular lengthened the maturities of their debt, to almost 20 years (Graph 7, right-hand panel).

Footnote: This issue is explored in some detail in the box on page 7 of the March 2006 BIS Quarterly Review.


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Regulation

OSFI Becoming Even More Secretive?

Tara Perkins of the Globe & Mail claims:

Canada’s financial regulator has told banks and insurance companies they must finance any big takeovers by issuing new shares, making major acquisitions more difficult just as the country’s banks are at the height of their international prowess.
…
OSFI did not issue a written notice of its edict, but has been quietly advising the banks and insurers of the requirement. OSFI has told the financial institutions it oversees that it expects them to “finance material acquisitions through new equity,” spokesman Rod Giles said. “This is primarily because capital requirements are subject to significant change.”
…
Analysts who cover the banks say they were not aware that the regulator had told the institutions to pay for deals with new equity, but it’s likely the market would demand the same thing for any major deal because investors realize how important capital will be in the future.

Such secretiveness and back-door regulation is a disgrace if true – and OSFI has often demonstrated its contempt for investors – who are supposed to be the “third pillar” supporting bank safety.

Contingent Capital

Payoff Structure of Contingent Capital with Trigger = Conversion

As Assiduous Readers will know, I advocate that contingent capital be issued by banks with the conversion trigger being the decline of the common stock below a certain price; should conversion be triggered, the conversion into equity of the preferreds / Innovative Tier 1 Capital / Sub Debt should be at that same price.

The Conversion/Trigger price should be set at issue-time of the instrument and, I suggest, be one-half the issue-time price of the common in the case of Tier 1 Capital, with a factor of one-quarter applied for Tier 2 capital. Note that in such a case, Tier 2 capital will not be “gone concern” capital; it will be available to meet losses on a going-concern basis, but the small probability of the issuer’s common losing three-quarters of its value should make it easier, and cheaper, to sell.

Anyway, one nuance to this idea is that the conversion feature will be supportive of the preferreds price in times of stress, since the preferred will convert at face value into current market price of common.

In other words, say the price of both common and preferred has nearly, but not quite, halved, but the situation appears to be stabilizing. In such an event, some investors will buy the preferreds in the hope that conversion will be triggered since they will be paid full face value for the preferred in market value of the common. Therefore, the preferreds will be bid up – at least to some extent – in times of stress.

Let us say that issues exist such that the conversion/trigger price is $25, but the price of the preferreds has declined such that the effective conversion price is $20. The payoff diagram in terms of the common stock price then looks like this:


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This diagram assumes that the conversion/strike price is $25, and that the preferreds are trading for 80% of face value.

Thus, an investor contemplating the purchase of the preferreds at 80% of face value will make $5 per share if the common dips just below the trigger price and stays there; he will only realize a loss if the price of the common goes below 80% of the conversion price. This is in addition to any calculations he might make as to the intrinsic value of the preferred if it doesn’t convert, of course.

This payoff diagram can be analyzed into component options:


Click for Big

In this diagram, I have offset the payoff diagrams for the options slightly in order that they be more readily distinguished.

It may be seen that the payoff structure can be replicated with three options:

  • Long Call, strike $20
  • Short Put, strike $20
  • Short Call, strike $25

What’s the point? Well, there isn’t one, really. But I wanted to point out the supportive effect of the conversion feature on the preferreds – even in times of stress! – and show how the payoffs could be replicated or hedged in such a case. Doubtless, more mulling over this dissection will lead to more conclusions being drawn about the relative behaviour of preferred and common prices in such a scenario of extreme stress.

Miscellaneous News

RBS May Buy Back Preferreds

According to Reuters:

Royal Bank of Scotland is considering a liability management exercise that could see it buy back or convert part of a 14 billion pound pile of preference shares and innovative securities to boost its core capital.

Analysts have said the move could help part-nationalised RBS take advantage of discounted prices in the secondary market to generate a bumper equity gain and boost its core Tier 1 ratio, a key measure of capital strength.

As a simplified example of how this works, we can look at simplified bank balance sheets:

Bank Balance Sheet
Before Preferred Buy-Back
Assets Liabilities
Cash $10 Deposits $80
Loans $90 Preferreds $10
  Equity $10

Assume the preferreds are bought back for half of face value. Then:

Bank Balance Sheet
After Preferred Buy-Back
Assets Liabilities
Cash $5 Deposits $80
Loans $90  
  Equity $15

If we further assume that the “Loans” have a Risk-Weight of 1, then:
a) The Tangible Common Equity Ratio has increased from 11% to 17%
b) The Tier 1 Ratio has declined from 22% to 17%
c) The bank has booked a profit of $5

Contingent Capital

Contingent Capital Criticized

The Telegraph recently published a story Mervyn King’s plan for bank capital ‘will backfire’:

Bankers and shareholders, however, fear that the act of converting cocos into equity would be a “red flag” to the market, prompting counterparties to withdraw funds and sparking a liquidity crisis like those at Lehman Brothers and Northern Rock. They say it would act as an “accelerator into distress”.

One senior bank executive said: “The point of conversion would kill the bank. Everyone would pull their liquidity out.” The sentiment was echoed by a leading institutional shareholder, who said: “Institutions don’t like them. If cocos ever converted, that bank would be toast.” Among investors, cocos are colloquially known as “death spiral convertibles”.

I agree that this is the case if there is any discretion at all in the conversion decision, whether this discretion is exercised by the regulators or the issuer. I will also agree that it may very well be the case if some degree of discretion is exercised – which would be the case if regulatory capital triggers are used. If a bank announces in its quarterly results enough losses and provisions to result in ratios being just under or just over the trigger point, there will be an immediate suspicion of jiggery-pokery.

However, I am more dubious about the potential for self-feeding collapse if the trigger I advocate – the price of the common stock – is utilized.

Bankers have also identified a second cause for concern, which they term “negative convexity”. They say coco holders would hedge their position by shorting the bank’s shares as capital ratios fell close to the conversion level.

Paul Berry, from Santander’s global banking and markets’ division, has explained: “As the share price falls, the likelihood increases of conversion. Holders, who do not wish to have any exposure to the share, sell shares to hedge this risk. This selling sends the stock lower, resulting in further stock selling.

“This will send the share price into a terrible self-reinforcing spiral downwards.”

Geez, it’s nice to see the phrase “negative convexity” used in a daily general interest newspaper! Negative convexity is indeed a problem; but one that can be minimized by ensuring that the trigger price is equal to the conversion price. I will certainly agree that the poorly structured Lloyds bank deal, which provides no first-loss protection to the noteholders on conversion, will definitely have that effect.

If structured properly and present in good quantity, contingent capital will simply replace the fire-sales of common shares that were common during the crisis. For instance:
1) Royal Bank sells contingent capital when their stock is trading at $50. In such a situation, I suggest that the conversion and trigger price for Tier 1 Capital (preferred shares and Innovative Tier 1 Capital) be $25.00 (one-half the issue-time price of the common; for Tier 2 Capital the conversion/trigger would be one-quarter of this price)
2) Royal Bank gets into trouble.
3) Share price drops to $25.
4) Royal Bank doesn’t need to sell equity. Instead, the previously issued Tier 1 Capital converts (at $25). They can sell new Tier 1 Capital with a conversion/trigger price of $12.50, instead.

It is, of course, certain that there will be selling pressure on the common when it’s at $30 from the Tier 1 Capital holders (directly and through the options market). However, in the absence of the convertible instruments, there will also be selling pressure based on expectations of new issuance. I suggest that the presence of Contingent Capital structured in this manner will reduce uncertainty, which is the vital thing.

I recently published an opinion piece on Contingent Capital.

Index Construction / Reporting

HIMIPref™ Index Rebalancing: February 2010

HIMI Index Changes, February 26, 2010
Issue From To Because
ENB.PR.A PerpetualPremium PerpetualDiscount Price
RY.PR.H PerpetualPremium PerpetualDiscount Price
IAG.PR.E PerpetualDiscount PerpetualPremium Price
IGM.PR.B PerpetualDiscount PerpetualPremium Price

There were the following intra-month changes:

HIMI Index Changes during February 2010
Issue Action Index Because
FFH.PR.E Add Scraps New Issue
IAG.PR.F Add Perpetual-Discount New Issue
Issue Comments

Best & Worst Performers: February 2010

These are total returns, with dividends presumed to have been reinvested at the bid price on the ex-date. The list has been restricted to issues in the HIMIPref™ indices.

February 2010
Issue Index DBRS Rating Monthly Performance Notes (“Now” means “February 26”)
NA.PR.L Perpetual-Discount Pfd-2 -5.42% Now with a pre-tax bid-YTW of 5.90% based on a bid of 20.76 and a limitMaturity.
ELF.PR.G Perpetual-Discount Pfd-2(low) -3.47% The fifth-best performer in January, so this loss is largely bounce-back. Now with a pre-tax bid-YTW of 6.67% based on a bid of 18.10 and a limitMaturity.
PWF.PR.K Perpetual-Discount Pfd-1(low) -3.18% Now with a pre-tax bid-YTW of 6.05% based on a bid of 20.72 and a limitMaturity.
BNS.PR.K Perpetual-Discount Pfd-1(low) -3.17% Now with a pre-tax bid-YTW of 5.77% based on a bid of 21.05 and a limitMaturity.
CIU.PR.A Perpetual-Discount Pfd-2(high) -3.09% The third-best performer in January so this is largely bounce-back. Now with a pre-tax bid-YTW of 5.76% based on a bid of 20.08 and a limitMaturity.
… … … … …
BAM.PR.G FixedFloater Pfd-2(low) +6.15% Strong Pair with BAM.PR.E
PWF.PR.A Floater Pfd-1(low) +7.32%  
BAM.PR.B Floater Pfd-2(low) +12.83% The best performer in January and the second-best performer in December.
BAM.PR.K Floater Pfd-2(low) +14.41% The second-best performer in January and the fourth best performer in December. Momentum rules!
BAM.PR.E Ratchet Pfd-2(low) +14.57% Strong Pair with BAM.PR.G
Market Action

February 26, 2010

A nugget of information about Credit Default Swaps on sovereigns is being circulated:

The credit-default swaps traders being blamed by German and French leaders for fueling fears of sovereign debt crises would be doing so with less than 1 percent of the governments’ outstanding debt being wagered.

The CHART OF THE DAY shows the net notional value of credit swaps on 10 European countries including Greece, Spain, Italy and Portugal, as reported by the Depository Trust & Clearing Corp. The $108 billion figure, which is the maximum amount on the line if all of the countries were to default, is 0.98 percent of the $11 trillion in outstanding debt of those countries. In Greece, where the heaviest complaints about credit-swaps trading have been leveled, bets of $9 billion compare with $267 billion of debt.
…
European leaders have said trading in the contracts fuels speculation that can distort perceptions and have warned hedge funds about trying to profit from the problems on the continent.

The last line quoted is the scary part. Remember September 25, 1992? The politicians don’t like it when the market says, instantly, that they’re being stupid. It is infinitely preferable to allow the stupidity to continue until it distorts the real economy and winds up on the backs of the electorate – who, it is assumed, will have long ago forgotten who’s to blame.

Remember Flash orders? There’s a really good explanation of the viewpoint of exchanges offering this order type from William Brodsky of the CBOE – dated 2009-11-18.

Fannie Mae needs more money:

Fannie Mae, the mortgage-finance company under federal conservatorship, said it will seek $15.3 billion in aid from the U.S. Treasury after posting a 10th straight quarterly loss.

A fourth-quarter net loss of $16.3 billion, or $2.87 a share, pushed the company to request its fifth draw on an unlimited lifeline from the government, Washington-based Fannie Mae said in a filing today with the Securities and Exchange Commission.

Fannie Mae, which posted $120.5 billion in losses over the previous nine quarters, has taken $59.9 billion in federal aid since April. Its shares, which peaked at $87.81 in December 2000, closed at 99 cents today in New York Stock Exchange composite trading. The Treasury owns 79.9 percent of Fannie Mae’s outstanding common shares.
…
The fair value of Fannie Mae’s assets was negative $98.8 billion last quarter, compared with negative $90.4 billion at the end of September.

Banks can screw up, certainly, and must bear a lot of the blame for the credit crunch. It’s not as if working for a bank transforms you into a genius – quite the opposite, as far as I’ve ever been able to tell. But for horrific blunders of stupefying dimensions, you need a politician. Funny how all the “Too Big To Fail” handwringing always concerns JPMorgan et al. and not Fannie & Freddie, huh?

Finally something of a (dead cat?) bounce in the preferred share market today, with PerpetualDiscounts gaining 19bp and FixedResets down 1bp, with no losers at all in the performance highlights. Volume was off a bit, but still quite healthy.

PerpetualDiscounts now yield 5.90%, equivalent to 8.26% interest at the standard equivalency factor of 1.4x. Long Corporates yield about 5.9%, so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 235bp, which is where it was on February 24.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 2.78 % 2.95 % 35,737 20.48 1 0.2469 % 1,986.2
FixedFloater 5.30 % 3.40 % 41,842 19.70 1 0.0000 % 2,981.8
Floater 1.94 % 1.68 % 47,660 23.35 4 -0.0370 % 2,364.6
OpRet 4.88 % 1.33 % 107,041 0.25 13 0.0922 % 2,308.6
SplitShare 6.39 % 6.39 % 131,682 3.74 2 0.3761 % 2,135.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0922 % 2,111.0
Perpetual-Premium 5.77 % 5.58 % 80,890 5.88 7 0.0736 % 1,896.3
Perpetual-Discount 5.86 % 5.90 % 175,775 14.05 70 0.1864 % 1,801.8
FixedReset 5.42 % 3.62 % 325,418 3.74 42 -0.0105 % 2,183.7
Performance Highlights
Issue Index Change Notes
POW.PR.D Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-26
Maturity Price : 20.83
Evaluated at bid price : 20.83
Bid-YTW : 6.10 %
BMO.PR.O FixedReset 1.08 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-24
Maturity Price : 25.00
Evaluated at bid price : 28.10
Bid-YTW : 3.46 %
MFC.PR.A OpRet 1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-07-19
Maturity Price : 26.25
Evaluated at bid price : 26.30
Bid-YTW : 2.83 %
NA.PR.O FixedReset 1.20 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-17
Maturity Price : 25.00
Evaluated at bid price : 27.85
Bid-YTW : 3.66 %
HSB.PR.C Perpetual-Discount 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-26
Maturity Price : 22.49
Evaluated at bid price : 22.66
Bid-YTW : 5.72 %
TD.PR.O Perpetual-Discount 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-26
Maturity Price : 21.63
Evaluated at bid price : 21.98
Bid-YTW : 5.56 %
PWF.PR.G Perpetual-Discount 3.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-26
Maturity Price : 24.25
Evaluated at bid price : 24.55
Bid-YTW : 6.07 %
Volume Highlights
Issue Index Shares
Traded		 Notes
ELF.PR.F Perpetual-Discount 77,500 TD crossed 73,500 at 20.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-26
Maturity Price : 20.09
Evaluated at bid price : 20.09
Bid-YTW : 6.71 %
CM.PR.K FixedReset 76,379 RBC crossed 50,000 at 26.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 26.55
Bid-YTW : 3.92 %
IAG.PR.F Perpetual-Discount 72,800 New issue settled today.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-26
Maturity Price : 24.35
Evaluated at bid price : 24.55
Bid-YTW : 6.04 %
TD.PR.I FixedReset 36,636 Nesbitt crossed 30,000 at 27.90.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.87
Bid-YTW : 3.62 %
TD.PR.C FixedReset 29,205 RBC crossed 20,000 at 26.90.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.95
Bid-YTW : 3.60 %
TRP.PR.A FixedReset 25,621 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.84
Bid-YTW : 3.76 %
There were 39 other index-included issues trading in excess of 10,000 shares.
Issue Comments

IAG.PR.F Drops on Poor Opening-Day Volume

Industrial Alliance Insurance and Financial Services Inc. has announced:

the closing of its previously announced offerings of 2,950,000 Common Shares (the “Common Shares”) at a price of $34.00 per Common Share representing aggregate gross proceeds of $100 million, and 4,000,000 5.90% Non-Cumulative Class A Preferred Shares Series F (the “Series F Preferred Shares”) at a price of $25.00 per Series F Preferred Share, representing aggregate gross proceeds of $100 million.

The offerings were underwritten, on a bought deal basis, by a syndicate of underwriters co-led by BMO Nesbitt Burns Inc. and RBC Dominion Securities Inc. and which includes National Bank Financial Inc., Scotia Capital Inc., CIBC World Markets Inc., TD Securities Inc., Desjardins Securities Inc., Casgrain & Company Limited, Dundee Securities Corporation, HSBC Securities (Canada) Inc., Industrial Alliance Securities Inc. and Laurentian Bank Securities Inc.

These offerings were made under the terms of prospectus supplements dated February 19, 2010 to the short form base shelf prospectus dated April 30, 2009. The prospectus supplements are available on the SEDAR website at www.sedar.com and on the Company’s website at www.inalco.com.

The issue was announced on February 17.

Today it traded 72,800 shares in a range of 24.41-88 before closing at 24.55-60, 15×126.

Vital statistics are:

IAG.PR.F Perpetual-Discount YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-26
Maturity Price : 24.35
Evaluated at bid price : 24.55
Bid-YTW : 6.04 %

IAG.PR.F has been added to the PerpetualDiscount index.