Market Action

November 21, 2007

Menzie Chinn of Econbrowser wrote a good piece yesterday reviewing the dollar’s decline, noting:

So while there is a tremendous amount of inertia in a currency’s reserve role, what we might be seeing now is the interaction of cyclical factors (low U.S. interest rates and dollar depreciation) and structural factors (the strains on dollar pegs and consequent erosion of demand for dollar assets) which could lead to a substantial drop in the dollar’s value.

It’s always the way. Any kind of accident – whether in the financial markets or in everyday life – generally results from a confluence of factors … the one percent chance that you don’t look when crossing the street will sometime coincide with somebody else’s one percent chance of not checking carefully when making a turn. The comments to the post are quite good, but I confess I’m not looking forward to the next year … an economics discussion on the Internet about the US during an election year? The mind boggles.

In a related essay, Richard Baldwin writes an excellent review of a paper by Martin Feldstein that provides an intellectual framework for thinking about currency values:

Feldstein makes a bold simplification that helps him to think clearly about the messy world. He takes US savings and investment as primitives and views the value of the dollar as the variable that adjusts to make things fit. As he writes it: “This line of reasoning leads us to the low level of the U.S. saving rate as the primary cause of the high level of the dollar.”
…
If the US saving rate rises without a dollar drop, there is no narrowing of the trade gap to offset the closing saving/investment gap. Aggregate demand falls and we get a US recession or at least growth deceleration. More to the point facing us today, Feldstein notes that since a falling dollar stimulates net exports only with a lag, avoiding a slowdown in US aggregate demand growth would have required the dollar to fall before the saving rate rises, maybe a couple of quarters earlier. Or, as he puts it: “the domestic weakness will occur unless the dollar decline precedes the rise in saving.”

There was another insight into A Day in the Life of a Bond Guy on Accrued Interest; a discussion of an investment in Washington Mutual that the author is not prepared to support any more. After all the analysis, all the securities filings, all the worry … it all comes down to trust. In the comments section, AI floats the possibility of a takeover of WM … now that’s something that looks interesting. Every morning I rush to the newspaper, looking for the news that I am convinced will come in the near future: Major Canadian Bank Makes Massive Purchase in States.

The Canadian banks have balance sheets that are very strong by world standards – never mind just by comparison to US banks – AND we’re sitting on a hot currency AND the US financial sector is getting beat up beyond the bounds of rationality. If there was ever time to do something like this, it’s now. It doesn’t have to be another bank, or a big-name company like WaMu … it could be something like ACA Capital Holdings, which is not having a very nice time.

In more news of interest, yet another “enhanced yield” product was found to be in danger of breaking the buck and is getting a cash transfusion from Federated Investors. Note that Bear Stearns Cos.’ Enhanced Income Fund and General Electric Co.’s GEAM Trust Enhanced Cash Trust both broke the buck without support from their sponsors.

Readers will remember the concept of covered bonds and some will be aware that BMO is planning an issue. However, in addition to deterorating market conditions …

Abbey National Plc, the U.K. home lender owned by Banco Santander SA, became the third financial company to cancel an offering of covered bonds within a week today as investors demanded banks pay the highest interest premiums to sell bonds in the 12 years since Merrill Lynch & Co. began collecting the data.

“We are in a deteriorating situation,” Patrick Amat, chairman of the Brussels-based ECBC, said in a telephone interview. “A single sale can be like a hot potato. If repeated, this can lead to an unacceptable spread widening and you end up with an absurd situation.”

… there is now a recommendation from the trade association that:

“In light of the current market situation and in order to avoid undue over-acceleration in the widening of spreads, the 8-to-8 Market-Makers & Issuers Committee recommends that inter-bank marketmaking be suspended, temporarily, until Monday the 26th of November 2007. As this recommendation relates only to inter-bank trading, market-maker obligations to investors will remain unaffected.”

Fascinating. I have been advised that this recommendation only applies to extant market making agreements that commit the banks to calling a market in good size and is not a flat (unenforceable) prohibition of trades between two banks that want to trade. The Covered Bond Fact Book states:

Market Makers’ commitments define bid/offer spreads for sizes up to 15 million EUR for different maturities as follows:
> up to 4 years maturity – 5 cents;
> from 4 to 6 years – 6 cents;
> from 6 to 8 years – 8 cents;
> from 8 to 15 years – 10 cents;
> from 15 to 20 years – 15 cents; and
> from 20 years upwards – 20 cents.

I wrote about Fannie Mae and its accounting on November 16 … Accrued Interest has fleshed that out a little more (with the benefit of an American market background!) in a post about Freddie Mac.

Good volume for prefs today, and some of the more egregious silliness was smoothed away, but all in all performance was poor.

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.81% 4.81% 137,055 15.79 2 +0.0205% 1,045.4
Fixed-Floater 4.88% 4.85% 84,801 15.74 8 -0.1054% 1,043.4
Floater 4.65% 4.69% 59,618 15.96 3 -0.8663% 1,010.9
Op. Retract 4.86% 2.68% 77,362 3.52 16 -0.1088% 1,032.2
Split-Share 5.37% 5.86% 89,871 4.09 15 -0.3494% 1,009.4
Interest Bearing 6.33% 6.68% 64,499 3.49 4 -0.5718% 1,045.7
Perpetual-Premium 5.86% 5.65% 82,876 8.25 11 -0.0784% 1,005.2
Perpetual-Discount 5.61% 5.66% 335,883 14.41 55 -0.2357% 902.0
Major Price Changes
Issue Index Change Notes
BNA.PR.B SplitShare -4.3478% This issue was the topic of some comments regarding yesterday’s post. Asset coverage of just under 4.0:1 according to the company. Now with a pre-tax bid-YTW of 6.87% based on a bid of 22.00 and a hardMaturity 2016-3-25 at 25.00. Note BNA.PR.A yields 6.04% to 2010-9-30 and BNA.PR.C yields 7.99% to 2019-1-10.
FIG.PR.A InterestBearing -2.5432% Asset coverage of 2.1+:1 according to Faircourt. Now with a pre-tax bid-YTW of 7.23% (mostly as interest) based on a bid of 9.58 and a hardMaturity 2014-12-31 at 10.00.
HSB.PR.C PerpetualDiscount -2.1314% Now with a pre-tax bid-YTW of 5.76% based on a bid of 22.50 and a limitMaturity.
ELF.PR.G PerpetualDiscount -1.9155% Now with a pre-tax bid-YTW of 6.93% based on a bid of 17.41 and a limitMaturity.
FTU.PR.A SplitShare -1.7544% Asset coverage of 1.8+:1 according to the company. Now with a pre-tax bid-YTW of 7.92% based on a bid of 8.96 and a hardMaturity 2012-12-1.
BAM.PR.B Floater -1.6253%  
ACO.PR.A OpRet -1.5849% Now with a pre-tax bid-YTW of 4.45% based on a bid of 26.08 and a call 2009-12-31 at 25.50.
GWO.PR.G PerpetualDiscount -1.5666% Now with a pre-tax bid-YTW of 5.84% based on a bid of 22.62 and a limitMaturity.
CM.PR.H PerpetualDiscount -1.2556% Now with a pre-tax bid-YTW of 5.50% based on a bid of 22.02 and a limitMaturity.
IAG.PR.A PerpetualDiscount -1.1558% Now with a pre-tax bid-YTW of 5.95% based on a bid of 19.67 and a limitMaturity.
POW.PR.D PerpetualDiscount -1.1348% Now with a pre-tax bid-YTW of 5.82% based on a bid of 21.78 and a limitMaturity.
BAM.PR.K Floater -1.0430%  
BAM.PR.M PerpetualDiscount +1.1050% Now with a pre-tax bid-YTW of 6.62% based on a bid of 18.30 and a limitMaturity. The virtually identical BAM.PR.N is quoted at 18.16-20 … yesterday’s Assiduous Reader may be hoping to get on the merry-go-round again!
PIC.PR.A SplitShare +3.3496% Making up for some (but not all!) of yesterday’s losses. Asset coverage of 1.6+:1 according to Mulvihill. Now with a pre-tax bid-YTW of 6.39% based on a bid of 14.81 and a hardMaturity 2010-11-1 at 15.00.
Volume Highlights
Issue Index Volume Notes
TD.PR.M OpRet 678,300 Scotia did two crosses, 225,000 and 419,300, both at 26.10, just before the bell. Now with a pre-tax bid-YTW of 3.93% based on a bid of 26.10 and a softMaturity 2013-10-30 at 25.00.
IQW.PR.D Scraps (would be FixFloat but there are rather pressing and urgent credit concerns) 267,150 The company had to scrap a financing.
NTL.PR.F Scraps (would be Ratchet but there are credit concerns) 257,600 Scotia crossed 250,000 at 15.50 … somebody badly wanted to sell, it looks like they took out quite a few bids before being able to trade at the day’s low. Closed at 16.00-50, 5×20. What is this, Junk Day on Bay Street?
EPP.PR.A Scraps (would be PerpetualDiscount but there are credit concerns) 244,450 TD crossed 227,100 at 17.50 and, just as with NTL.PR.F, it looks like a few bids had to be taken out on the way to that price. Now with a pre-tax bid-YTW of 6.97% based on a bid of 17.75 and a limitMaturity.
CM.PR.G PerpetualDiscount 210,440 Scotia crossed 100,000 at 24.71, and 103,700 at 24.73 about two-and-a-half hours after that. Now with a pre-tax bid-YTW of 5.51% based on a bid of 24.70 and a limitMaturity.
IQW.PR.C Scraps (would be OpRet but there are rather pressing and urgent credit concerns) 140,828 See yesterday’s comments – I’m not writing all that muck out again! Now with a pre-tax bid-YTW of 183.54% (annualized) based on a bid of 17.80 and a softMaturity 2008-2-29 at 25.00. Now, this one qualifies as a Distressed Preferred!

There were thirty-seven other index-included $25.00-equivalent issues trading over 10,000 shares today.

HIMI Preferred Indices

HIMIPref™ Preferred Indices: October 2003

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 2003-10-31
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,368.7 1 2.00 2.99% 19.8 82M 3.00%
FixedFloater 2,113.0 8 2.00 2.95% 18.5 60M 5.29%
Floater 1,852.0 7 2.00 3.34% 18.5 88M 3.56%
OpRet 1,694.0 27 1.45 3.58% 3.7 122M 4.97%
SplitShare 1,651.1 9 1.78 3.91% 3.3 37M 5.52%
Interest-Bearing 2,066.0 9 2.00 3.56% 0.9 130M 7.55%
Perpetual-Premium 1,317.8 32 1.65 5.15% 6.3 140M 5.52%
Perpetual-Discount 1,510.6 1 2.00 5.54% 14.4 132M 5.58%

Index Constitution, 2003-10-31, Pre-rebalancing

Index Constitution, 2003-10-31, Post-rebalancing

HIMI Preferred Indices

HIMIPref™ Preferred Indices : September 2003

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 2003-9-30
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,376.9 1 2.00 2.40% 0.08 86M 3.19%
FixedFloater 2,095.6 8 2.00 3.18% 17.8 60M 5.30%
Floater 1,839.7 7 2.00 3.30% 18.3 98M 3.57%
OpRet 1,687.9 27 1.44 3.57% 3.8 130M 4.96%
SplitShare 1,632.7 9 1.78 3.63% 2.2 39M 5.57%
Interest-Bearing 2,052.3 9 2.00 4.37% 1.0 154M 7.60%
Perpetual-Premium 1,306.4 29 1.62 5.23% 6.5 172M 5.54%
Perpetual-Discount 1,498.3 3 2.00 5.52% 14.5 129M 5.62%

Index Constitution, 2003-09-30, Pre-rebalancing

Index Constitution, 2003-09-30, Post-rebalancing

Issue Comments

MIC.PR.A to be Redeemed

Manulife has announced:

it has exercised its right to redeem, on December 31, 2007, all of the 3,420,905 outstanding 6.10% Non-Cumulative Class A, Series 6 Preferred Shares (CUSIP No. 564835502) at $26.00 per preferred share plus declared and unpaid dividends to the date fixed for redemption. Formal notice of redemption has been delivered to the registered holder of the preferred shares in accordance with the terms and conditions of those shares.

MIC.PR.A is tracked by HIMIPref™ (securityCode A43270), but is not included in any of the indices due to volume concerns – the most recent removal from the indices was August 31, 2007.

Many thanks to the assiduous reader who brought this to my attention!

Issue Comments

DGS.PR.A Should Commence Trading Dec. 3

Brompton Group has announced:

that Dividend Growth Split Corp. has filed a final prospectus in respect of an initial public offering of class A and preferred shares for a maximum offering size of $100 million. The preferred shares have been provisionally rated Pfd-2 by Dominion Bond Rating Service Limited.Dividend Growth Split Corp. has been created to provide investors with an investment in 20 large capitalization Canadian equities that have demonstrated the highest dividend growth rates over a five year period and have a current dividend yield of at least 2% per annum, utilizing a split share structure on a low cost basis.

Class A shareholders will receive the benefits of monthly cash distributions targeted to be 8.0% per annum, low management fees and the opportunity for growth in net asset value. Preferred shareholders will receive attractive quarterly distributions of 5.25% per annum supported by the high credit quality of the underlying assets.

Asset coverage is 2.5:1 at the issue price – probably less after initial fees and expenses, but I haven’t even read as far as that in the prospectus! I do see that the wind-up date is November 30, 2014, with no intervening calls, and:

No distributions will be paid on the Class A Shares if (i) the distributions payable on the Preferred Shares are in arrears, or (ii) in respect of a cash distribution, after payment of the distribution by the Company, the NAV per Unit would be less than $15.00. In addition, it is intended that the Company will not pay distributions in excess of the targeted $0.10 per month, on the Class A Shares if, after payment of the distribution, the NAV per Unit would be less than $25.00 unless the Company has to make such distributions to fully recover refundable taxes.

No decision has been made as to whether to include these in the HIMIPref™ universe; I’m going to wait until I see how much they’re able to sell.

Interesting External Papers

Banks & Subordinated Debt

I ran across an interesting story today on the Cleveland Fed website: Credit Spreads and Subordinated Debt by by Joseph G. Haubrich and James B. Thomson.

Subordinated debt may be counted as part of Tier 2 capital by the banks, where it is senior to preferred shares (and everything else that’s in Tier 1) but junior to deposits.

One proposed means of injecting more market discipline into the banking sector is a subordinated debt requirement. It would compel banks to issue some debt that the government does not guarantee and that is paid off only after all depositors have been satisfied. A mandatory subordinated debt requirement was one of the reforms recommended in a 1986 study commissioned by the American Bankers Association. In addition, the Financial Modernization Act of 1999 requires that large banking companies have outstanding, at all times, at least one (though not necessarily a subordinated) debt issue rated by a commercial credit-rating agency.

Some experts argue that subordinated debt is unnecessary because equity capital already gives depositors and other bank creditors a layer of protection. But banks’ equity—that is, their stock—rises when their profits increase, so the prospect of higher equity can encourage them to take greater risks. Debt is more sensitive than equity to the loss aspect of risk because it lacks the upside inducement of higher profits. Subordinated debt thus gives a bank’s depositors and general creditors the same protection from losses as equity does, without creating the incentive to assume more risk.
…
Evidence on credit spreads and credit spread curves suggests that these sources of information could one day become useful to bank regulatory agencies. At this time, however, the evidence is too weak to justify imposing a mandatory subordinated debt requirement, especially if its purpose is to increase market discipline on banking companies and give bank supervisors better information about banks’ changing conditions. Before supervisors add credit spreads from subordinated debt to their dashboard of early warning signals of deteriorating bank conditions, much more work must be done on extracting useful, reliable risk indicators. So, despite some encouraging results, we need considerably more evidence on the value of credit spread information to regulators and markets before deciding to impose any new rule on how banks fund themselves.

By way of example, Royal Bank’s 2006 Annual Report shows $21.5-billion in Tier 1 Capital and $8.6-billion in Tier 2 Capital; the latter figure includes $7.1-billion in sub-debt.

Update, 2007-11-22: OFHEO is attempting to use sub-debt as a control feature on the GSEs, but it isn’t working out very well:

Those tests show that the market behavior of sub debt yields has changed as negative information has emerged about the Enterprises’ management and risks. However, the nature of the change has been to link sub debt yields more closely to Treasuries. That paradoxical development is consistent with investors having greater confidence that Fannie Mae and Freddie Mac or their federal regulator would reduce the Enterprises’ default risks, with greater liquidity in the Enterprise sub debt market in recent years, or with greater confidence in the value of the implicit federal guarantee associated with Enterprise debt.

Market Action

November 20, 2007

I do apologize … many things came up today, so you’ll just have to do your own literature review.

PerpetualDiscounts didn’t go down today!

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.81% 4.81% 141,286 15.78 2 -0.1224% 1,045.2
Fixed-Floater 4.87% 4.85% 84,046 15.75 8 +0.0158% 1,044.5
Floater 4.61% 4.65% 60,679 16.04 3 +0.5426% 1,019.7
Op. Retract 4.86% 2.66% 77,191 3.46 16 -0.0549% 1,033.3
Split-Share 5.35% 5.84% 89,330 4.12 15 -0.3884% 1,012.9
Interest Bearing 6.29% 6.56% 63,891 3.51 4 -0.3029% 1,051.7
Perpetual-Premium 5.86% 5.56% 82,527 7.09 11 -0.1332% 1,006.0
Perpetual-Discount 5.60% 5.64% 335,175 14.43 55 +0.1104% 904.1
Major Price Changes
Issue Index Change Notes
PIC.PR.A SplitShare -5.4125% Whoosh! It traded 10,558 shares in a range of 15.00-26, and then the bids disappeared, with Nesbitt taking out the last bids at about 3:30. Asset coverage of 1.6+:1 as of November 15, according to Mulvihill. Now with a pre-tax bid-YTW of 7.64% based on a bid of 14.33 and a hardMaturity 2010-11-1 at 15.00.
BAM.PR.M PerpetualDiscount -2.9491% Amazingly, it now has the same quote as the virtually identical BAM.PR.M. I know one assiduous reader who will be quite pleased with this symmetry! Now with a pre-tax bid-YTW of 6.69% based on a bid of 18.10 and a limitMaturity.
FTU.PR.A SplitShare -1.9355% Asset coverage of just over 1.8:1 according to the company. Now with a pre-tax bid-YTW of 7.50% based on a bid of 9.12 and a hardMaturity 2012-12-1 at 10.00.
ELF.PR.G PerpetualDiscount -1.3889% Now with a pre-tax bid-YTW of 6.79% based on a bid of 17.75 and a limitMaturity.
NA.PR.K PerpetualDiscount -1.2605% Now with a pre-tax bid-YTW of 6.27% based on a bid of 23.50 and a limitMaturity.
FFN.PR.A SplitShare -1.0967% Asset coverage of 2.3:1 as of November 15, according to the company. Now with a pre-tax bid-YTW of 5.47% based on a bid of 9.92 and a hardMaturity 2014-12-1 at 10.00.
BAM.PR.N PerpetualDiscount +1.0045% Yes! That is indeed a “+” sign in front of a BAM.PR.N return! Now with a pre-tax bid-YTW of 6.69% based on a bid of 18.10 and a limitMaturity. See BAM.PR.M, above.
POW.PR.B PerpetualDiscount +1.0292% Now with a pre-tax bid-YTW of 5.74% based on a bid of 23.56 and a limitMaturity.
POW.PR.D PerpetualDiscount +1.0550% Now with a pre-tax bid-YTW of 5.75% based on a bid of 22.03 and a limitMaturity.
BNA.PR.A SplitShare +1.3598% Ex-Dividend today. Asset coverage of just under 4.0:1 as of October 31 according to the company. Now with a pre-tax bid-YTW of 6.18% based on a bid of 25.00 and a hardMaturity 2010-9-30 at 25.00. Compare with BNA.PR.B at 6.20% (23.00 bid, 2016-3-25 maturity) and BNA.PR.C 7.89% (18.55 bid, 2019-1-10 maturity).
CM.PR.H PerpetualDiscount +1.3636% Now with a pre-tax bid-YTW of 5.43% based on a bid of 22.30 and a limitMaturity.
ELF.PR.F PerpetualDiscount +1.5625% Now with a pre-tax bid-YTW of 6.90% based on a bid of 19.50 and a limitMaturity.
BAM.PR.B Floater +1.6522%  
HSB.PR.D PerpetualDiscount +1.7352% Now with a pre-tax bid-YTW of 5.70% based on a bid of 22.28 and a limitMaturity.
Volume Highlights
Issue Index Volume Notes
GWO.PR.I PerpetualDiscount 284,750 Scotia bought 34,000 from Nesbitt at 20.20. Now with a pre-tax bid-YTW of 5.69% based on a bid of 20.10 and a limitMaturity.
IQW.PR.C Scraps (would be OpRet but there are rather pressing and urgent credit concerns) 144,000 The company had to scrap a financing today, perhaps because investors kept throwing up. Now with a pre-tax bid-YTW of 138.67% (annualized) based on a bid of 19.00 and a softMaturity 2008-2-29. Note that the soft maturity will entail some risk to the exerciser, since the common will be received and have to be exchanged. On the other hand, if you want Quebecor common – or hold some already – and you’re happy with that, it could be quite attractive. Unfortunately, it cannot be easily arbitraged, since if you short the common now, it might quintuple (hah!) between now and the time the conversion price gets set. But something must work … hmm … buy the prefs at $19, you’ll get $26 worth of common at the February price … OK! Buy the prefs at $19, short the common, buy a call on the common at 36% over current price … I think that works, and I suspect it has a good chance of profit. But check my work first!
SLF.PR.D PerpetualDiscount 87,243 Now with a pre-tax bid-YTW of 5.53% based on a bid of 20.11 and a limitMaturity.
RY.PR.D PerpetualDiscount 81,745 Now with a pre-tax bid-YTW of 5.51% based on a bid of 20.56 and a limitMaturity.
TD.PR.P PerpetualDiscount 80,475 Now with a pre-tax bid-YTW of 5.48% based on a bid of 24.15 and a limitMaturity.
MFC.PR.C PerpetualDiscount 78,600 Nesbitt crossed 51,000 at 21.00. Now with a pre-tax bid-YTW of 5.36% based on a bid of 21.00 and a limitMaturity.

There were thirty-three other index-included $25.00-equivalent issues trading over 10,000 shares today.

Issue Comments

BCE.PR.Y / BCE.PR.Z Conversion Results Announced

BCE has announced:

that 6,991,775 of its 8,852,620 Cumulative Redeemable First Preferred Shares, Series Z (“Series Z Preferred Shares”) have been tendered for conversion, on a one-for-one basis, into Cumulative Redeemable First Preferred Shares, Series Y (“Series Y Preferred Shares”). In addition, 12,825 of its 1,147,380 Series Y Preferred Shares have been tendered for conversion, on a one-for-one basis, into Series Z Preferred Shares. Consequently, on December 1, 2007, BCE will have 8,126,330 Series Y Preferred shares and 1,873,670 Series Z Preferred shares issued and outstanding.
…
The Series Y Preferred Shares will pay a monthly floating adjustable cash dividend for the five-year period beginning on December 1, 2007, as and when declared by the Board of Directors of BCE. The Series Z Preferred Shares will
pay on a quarterly basis, for the five-year period beginning on December 1, 2007, as and when declared by the Board of Directors of BCE, a fixed dividend based on an annual dividend rate of 4.331%.
…
Under and subject to the terms and conditions of the Definitive Agreement entered into by BCE Inc. in connection with its acquisition by an investor group led by Teachers’ Private Capital, the private investment arm of the Ontario Teachers’ Pension Plan, Providence Equity Partners Inc. and Madison Dearborn Partners, LLC, the purchaser has agreed to purchase all outstanding Series Y Preferred Shares for a price of $25.50 per share, together with accrued but unpaid dividends to the Effective Date (as such term is defined in the Definitive Agreement). The purchaser has also agreed, on and subject to the terms and conditions of the Definitive Agreement, to purchase all outstanding Series Z Preferred Shares for a price of $25.25 per share, together with accrued but unpaid dividends to the Effective Date.

 

 

Issue Comments

PFD.PR.A (Index Fund) to Redeem 38% of Holdings

A press release states:

JovFunds Management Inc., the manager of Charterhouse Preferred Share Index Corporation (the “Company”) (PFD.PR.A: TSX), announced today that the Company has received requests for redemption in respect of a total of 844,498 PSI Preferred Shares (“Shares”), representing approximately 38% of the outstanding Shares. Redeeming shareholders will be entitled to receive an amount equal to the net realized proceeds from that portion of the Index Portfolio that is sold to fund the redemption, together with any other net assets of the Company as at November 30, 2007. The redemption payment will be made on or before the tenth business day of the December, 2007.

I reviewed Charterhouse as part of my review of closed end funds.

Now … let’s work it out. 844,000 preferred shares outstanding … 38% are being redeemed … let’s say the NAV approximates the market price, say $20 …. that’s selling pressure of about maybe six to six-and-a-half million. Good thing it’s not a big fund!

Update: Oops! 844,000 preferred shares REPRESENTS 38% of the outstanding. So at $20, total selling pressure comes to about $16.9-million. This is much more serious!

Issue Comments

TFS.PR.A to be Redeemed 2008-3-31

The board of Thirty-Five Split Inc. has announced:

The Capital Shares and Preferred Shares will be redeemed by the Company on March 31, 2008 (the “Redemption Date”) in accordance with the redemption provisions of the shares. Pursuant to these provisions, the Preferred Shares will be redeemed at a price per share equal to the lesser of $25.00 and the Net Asset Value per Unit.

TFS.PR.A is tracked by HIMIPref™, but is not included in the SplitShare index due to volume concerns.