Issue Comments

BCE.PR.T Reset Rate Announced

BCE has announced that the dividend rate on BCE.PR.T will be reset to 4.502% (or $1.1255 p.a. on a $25 par value share).

This issue is not currently outstanding, but is being offered in exchange for BCE.PR.S, a ratchet-rate issue.

BCE is currently contemplating reorganizing into an income trust and in connection with this is offering to purchase all outstanding preferred shares. They are offering $25.60 for BCE.PR.S and $25.75 for BCE.PR.T.

 BCE.PR.S closed on October 11 at $25.10-15. From a strictly yield-curve-comparative perspective, this issue is considered expensive by HIMIPref™ but, of course, it’s awfully tempting to buy all one can at these levels, convert to BCE.PR.T and await execution of all of BCE’s plans. Given that all this is event-driven, however, I will not state my views publicly at this time.

Market Action

October 11, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.18% 4.04% 46,829 10.62 2 0.9604% 1,025.2
Fixed-Floater 4.97% 3.85% 201,040 6.66 7 0.6456% 1,024.6
Floater 4.53% -18.28% 77,160 6.51 5 0.0718% 1,018.3
Op. Retract 4.69% 2.09% 88,814 2.42 17 -0.0501% 1,016.2
Split-Share 4.93% 3.69% 62,648 3.03 10 -0.2360% 1,015.5
Interest Bearing 6.87% 4.56% 54,878 2.04 7 0.1576% 1,025.8
Perpetual-Premium 5.11% 3.91% 173,541 4.30 46 0.0939% 1,031.8
Perpetual-Discount 4.59% 4.61% 608,834 16.19 7 0.0009% 1,033.0
Major Price Changes
Issue Index Change Notes
PIC.PR.A SplitShares -1.1077% Goes ex on 10/12 … I suspect that nobody bothered to put in a cum-dividend bid on the last cum-dividend day
BCE.PR.S Ratchet +1.0060% Closed at 25.10-15, 4×10. The potential tender is at $25.60
BAM.PR.G FixedFloater +1.0454% Scarcity Value? If the BCE transaction closes, these may be the only liquid issue that converts (and will by that time have converted) to Ratchets
BC.PR.B FixedFloater +1.8327% Closed at 25.56-84, 5×5. The potential tender is at $25.95
BCE.PR.Y Scraps +3.2787% Closed at 25.20-50, 10×5. The potential tender is at $25.60
Volume Highlights
Issue Index Volume Notes
BC.PR.E Ratchet 82,000 Mr. “Anonymous” sold a lot of shares today! RBC bought 25,000 @ 25.31 and two tranches of 10,000 each at 25.32; Scotia bought 15,000 @ 25.31 in two lots, then another 15,000 @ 25.32 in another two lots. Closed at 25.36-54, 20×10. The potential tender is at $25.60
POW.PR.A PerpetualPremium 34,133 National crossed 32,100 @ 25.72. Currently callable at $25.50, declining by $0.25 every June. It pays $1.40 … therefore the company has a net cost per annum of $1.15 to keep it outstanding, so that’s what they’re doing and saving issuance costs. YTW is currently negative, but will have been 3.99% if the issue remains alive until a call at $25.00 in 2008. This is an expensive perpetual, but a cheap retractible! Somebody’s betting on low rates continuing for another two years!
GWO.PR.I PerpetualDiscount 19,335 Comparable quality to SLF.PR.C and SLF.PR.D, but pays a little more!
SLF.PR.D PerpetualDiscount 15,800 Holding its own, anyway!
MFC.PR.B PerpetualPremium 11,750  

There was only one other index-included issue trading over 10,000 shares today.

Index Construction / Reporting

Effect of BCE / BC offer on indices

As noted earlier in the post BCE to Make Offer for All BCE / BC Preferred Shares, there is a distinct possibility that a large number of preferred share issues will disappear in a few months’ time:

Indices Affected by BCE / BC Plan
Index Number of Issues Currently Included Number of Included Issues Affected Issues
RatchetRate 2 2 BCE.PR.S, BC.PR.E
FixedFloater 7 6 BC.PR.B, BCE.PR.A, BCE.PR.R, BC.PR.C, BCE.PR.Z, BCE.PR.C

Even if the offers don’t succeed totally, sufficient shares may be taken up and cancelled that any given issue may shrivel away and be eliminated from the index on volume considerations.

Should all current constituents of an index suffer such a fate (so that there are no issues in the HIMIPref™ universe that meet the conditions for inclusion), then performance numbers for each of these two indices will be computed from the “FloatingRate” index.

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?

Issue Comments

BCE to Make Offer for All BCE / BC Preferred Shares

According to a news release issued today, BCE will “eliminate its holding company operations and convert Bell Canada into an income trust.”

As part of this transaction “BCE and Bell Canada to make cash offer to repurchase all of their outstanding preferred shares”, specifically:

BCE and Bell Canada expect that the cash offer prices for the preferred shares will be as follows (information from linked press release)

    – $26.05 per share for the Series R First Preferred Shares of BCE (BCE.PR.R closed 10/10 @ 25.45-79)
    – $25.60 per share for the currently redeemable Series S First Preferred Shares of BCE (BCE.PR.S closed 10/10 @ 24.85-05)
    – $25.60 per share for the currently redeemable Series Y First Preferred Shares of BCE (BCE.PR.Y closed 10/10 @ 24.40-54)
    – $25.75 per share for the Series Z First Preferred Shares of BCE (BCE.PR.Z closed 10/10 @ 25.50-59)
    – $25.65 per share for the Series AA First Preferred Shares of BCE (BCE.PR.A closed 10/10 @ 25.39-59)
    – $25.85 per share for the Series AC First Preferred Shares of BCE (BCE.PR.C closed 10/10 @ 25.65-72)
    – $25.60 per share for the currently redeemable Series 15 Class A Preferred Shares of Bell Canada (not tracked by HIMIPref™)
    – $26.05 per share for the Series 16 Class A Preferred Shares of Bell Canada (not tracked by HIMIPref™)
    – $25.95 per share for the Series 17 Class A Preferred Shares of Bell Canada (BC.PR.B closed 10/10 @ 25.10-24)
    – $25.60 per share for the currently redeemable Series 18 Class A Preferred Shares of Bell Canada (BC.PR.E closed 10/10 @ 25.13-25)
    – $26.25 per share for the Series 19 Class A Preferred Shares of Bell Canada (BC.PR.C closed 10/10 @ 25.46-51)

“BCE also intends to directly or indirectly make an offer to acquire any Series T First Preferred Shares of BCE that may be issued on conversion of the currently outstanding Series S First Preferred Shares.”

Market Action

October 10, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.23% 4.18% 44,182 10.56 2 -0.2983% 1,015.5
Fixed-Floater 4.99% 4.02% 205,195 10.13 7 0.0741% 1,018.0
Floater 4.53% -17.21% 77,308 6.53 5 0.0720% 1,017.6
Op. Retract 4.68% 2.11% 89,612 2.42 17 -0.0327% 1,016.8
Split-Share 4.92% 3.26% 62,615 3.03 10 -0.0004% 1,017.9
Interest Bearing 6.88% 4.63% 55,354 2.03 7 0.0679% 1,024.2
Perpetual-Premium 5.12% 3.73% 174,559 4.30 46 0.0575% 1,030.8
Perpetual-Discount 4.59% 4.61% 622,381 16.19 7 -0.3472% 1,033.0
Major Price Changes
Issue Index Change Notes
There were no index-included issues with major price moves today (unless you count SLF.PR.D)
Volume Highlights
Issue Index Volume Notes
SLF.PR.A PerpetualPremium 90,750 Scotia crossed 40,000 @ $25.41, then another 42,000 at the same price. This issue looks rather expensive at the closing bid of 25.55 … pre-tax YTW of 4.45% based on a call in 2014. This is just a penny less than the SLF.PR.B, which pays $0.0125 more p.a. with a similar call schedule … and is more liquid.
GWO.PR.X OpRet 51,869 Scotia crossed 50,000 @ 27.40. Another issue considered rather expensive by HIMIPref™ given its closing bid of $27.40 – Pre-Tax YTW of 2.83% based on a 2009 call; the pre-tax-curve price is $26.54.
W.PR.J PerpetualPremium 51,830 Scotia crossed 28,000 @ 25.30, then bought 18,000 from Nesbitt at the same price. Currently callable at $25.50, declining by $0.25 every July … an attractive issue, I’d say, paying $1.40 for a pre-tax YTW of 4.93% based on a 2008 call.
BSD.PR.A InterestBearing 45,849 Pre-tax YTW of 5.94% INTEREST based on a 2015 maturity.
BNS.PR.K PerpetualPremium 40,350 Nesbit bought 31,400 in three quick trades at 25.93; 28,400 from Scotia, 3,000 from RBC.

There were fourteen other index-included issues trading over 10,000 shares today.

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.