PrefBlog

Groupe Aeroplan has announced:

that it has closed its previously announced bought deal public offering of 6,000,000 cumulative rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”) for gross proceeds of C$150 million, purchased by a syndicate of underwriters led by CIBC, RBC Dominion Securities Inc. and TD Securities Inc., acting as co-Bookrunners.

Groupe Aeroplan Inc. has also granted the underwriters an option to purchase up to an additional 900,000 Series 1 Preferred Shares to cover over-allotments, exercisable in whole or in part at any time up to 30 days following closing of the offering. If the over-allotment option is exercised in full, the aggregate gross proceeds to Groupe Aeroplan Inc. will be C$172.5 million.

The net proceeds of the issue will be used by Groupe Aeroplan Inc. to repay indebtedness, and for general corporate purposes.

This is the FixedReset 6.50%+375 issue announced January 12.

The issue traded 279,498 shares on the TMX in a range of 24.86-22 before closing at 25.09-10, 4×9.

Vital statistics are:

AER.PR.A is tracked by HIMIPref™ but is relegated to the Scraps subindex on credit concerns.

Brookfield Properties announced a FixedReset 6.15%+307 issue on January 11.

It will not have escaped notice that the initial fixed-rate period on this issue is six and a half years, just as was the slightly earlier BAM.PR.R new issue. In distinction to other commenters, I feel that the longer term has a lot more to do with the reset rate than the initial rate lock-in period … by extending term the reset can be set against the longer term Canadas rather than the five-year (or five-and-a-half year, as most of the banks did).

This is becoming a much more important consideration now that the chances that this and future issues will indeed be perpetual are increasing.

There’s no necessity for this: the banks have to calculate their reset in such a way or else OSFI will determine that a step-up exists and possibly disallow the issue as Tier 1 Capital. OSFI’s rules do not apply to BPO or BAM – they could set the reset to negative 20bp if they felt like it and thought it would sell – but presumably the dealers are trying to maintain the integrity of the FixedReset structure.

One way or the other, BPO.PR.N traded 333,903 shares on the TMX in a range of 24.90-09 before closing at 24.95-01, 25×30. Vital Statistics are:

BPO.PR.N is tracked by HIMIPref™ but is relegated to the Scraps subindex on credit concerns.

Assiduous Reader prefhound asks:

Any idea what is going on with POW.PR.C? It has gone up about $1 in the past two days. Is there some possibility of a call at $25.50?

If POW.PR.C, what about PWF.PR.I (currently callable at $25.75; $25.50 in April)? Is there a holding company vs sub difference here?

Both of these are nicely under the call price (unlike GWO.PR.X recently called while above the call price).

This is very strange. If we look at the POW PerpetualDiscount issues outstanding:

The yields don’t show a pattern – there should normally be an increase in yields with proximity to par to counterbalance negative convexity. POW.PR.A is somewhat less liquid than the others, but not by so much as to warrant more than a beep or two in yield.

Today’s trading is kind of interesting. Between 12:29 and and 13:09 there were ten trades on the TSX with total volume of 7,500 shares, starting with the low price of 25.38 and ending with the high price of 25.45, all with RBC as the buyer.

Then Nesbitt went nuts. Nesbitt was on the buy side for thirty-eight of the last forty trades of the day, taking the price up to 25.53 before it closed with a quote of 25.16-50. All of these trades were retail size – the biggest single transaction was 400 shares and Nesbitt bought a total of 11,600 shares on the day at an average price of $25.446 (data from PC Quote Canada Inc.).

Trading on Pure was relatively inoccuous, trading 5,100 shares with an afternoon high of 25.53 (100 shares, bought by Nesbitt) before closing at the aren’t-you-glad-there-are-market-makers-on-the-TSX quote of 25.30-27.99, 5×20.

To me, it looks like some retail broker has had a brilliant idea and executed it. But you’ll have to ask him what the idea was!

Update, 2010-1-20: New commenter to_be_frank reminds me that POW.PR.C was recently added to TXPR and suggests:

For the same reason, W.PR.J and ENB.PR.A have recently declined by a substantial amount, because those issues were removed from the index. These positions take time to unwind in a relatively illiquid market.

I have examined this hypothesis in the post TXPR Rebalaning Effect on Market.

BCE Inc. has announced:

that 592,772 of its 14,085,782 Cumulative Redeemable First Preferred Shares, Series AF (series AF preferred shares) have been tendered for conversion, on a one-for-one basis, into Cumulative Redeemable First Preferred Shares, Series AE (series AE preferred shares). In addition, 1,084,090 of its 1,914,218 series AE preferred shares have been tendered for conversion, on a one-for-one basis, into series AF preferred shares. Consequently, on February 1, 2010, BCE will have 1,422,900 series AE preferred shares and 14,577,100 series AF preferred shares issued and outstanding. The series AE preferred shares and the series AF preferred shares will continue to be listed on the Toronto Stock Exchange under the symbols BCE.PR.E and BCE.PR.F respectively.

The series AE preferred shares will continue to pay a monthly floating adjustable cash dividend for the five-year period beginning on February 1, 2010, as and when declared by the Board of Directors of BCE. The monthly floating adjustable dividend for any particular month will continue to be calculated using the Designated Percentage for such month representing the sum of an adjustment factor (based on the market price of the series AE preferred shares in the preceding month) and the Designated Percentage for the preceding month. The series AF preferred shares will pay on a quarterly basis, for the five-year period beginning on February 1, 2010, as and when declared by the Board of Directors of BCE, a fixed dividend based on an annual dividend rate of 4.541%.

This is a logical result (I recommended BCE.PR.F as the better of the pair), but is nevertheless unfortunate. The decline in BCE.PR.E outstanding will reduce its liquidity from already low levels and make swaps between them even harder to execute.

BCE.PR.F is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns. BCE.PR.E is not tracked by HIMIPref™.