PrefBlog

Down 3.73% on the day (bid/bid), but those unimpressed by headlines will be quick to point out that yesterday’s quote of 27.06-62 was an aberration. They’d be right, too, as a quick look at the graph of flatBidPrice shows.

The new issue announced today puts the future of BNA.PR.A in some doubt and should be causing some investors to look very carefully at the negative yield-to-worst on this issue of –5.36%. The pseudoPortfolioReportBox shows us the following optionCalculationList:

The above calculations are based only on price and leave a lot to be desired. I work at improving the algorithm (and there will be a rather interesting idea announced shortly, provided the results of testing are what I think they might be), but the main things to bear in mind are:

• BNA.PR.A pays $1.5624
• BNA.PR.A is callable right now at 25.75
• The new issue is supposed to closed 2007-1-10
• The new issue pays $1.0875

I suspect that BNA.PR.A’s days are numbered!

Besides the graph above, I’ve uploaded graphs of Yield-toWorst and Modified-Duration-to-Worst.

Update! Always check the prospectus! The original prospectus, dated August 24, 2001, states:

Preferred Shares may be redeemed by the Company at any time prior to the Redemption Date at a price (the ‘‘Preferred Share Redemption Price’’) which, until September 30, 2002 will equal $26.20 and which will decline by $0.20 each year to be equal to $25.00 after September 30, 2007. All Preferred Shares outstanding on the Redemption Date will be redeemed for the Preferred Share Redemption Price, equal to the lesser of $25.00 and Net Asset Value per Unit. The Company will only redeem Preferred Shares prior to the Redemption Date if Capital Shares have been retracted or if there is a take-over bid for the Brascan Shares and the Board of Directors determines that such bid is in the best interest of the holders of the Capital Shares.

However, as has been previously noted, the terms of this issue changed 2003-8-21:

The Corporation’s right to redeem the Preferred Shares prior to maturity will be amended to permit the redemption of the Preferred Shares at the then applicable redemption price, including any premium, using the net proceeds of an issuance of a new series or class of preferred shares. The Corporation has no current intention to redeem the Preferred Shares.

Well, it’s not exactly the biggest surprise in the world … Enbridge announced today (via CCN Matthews) that:

Enbridge Inc. (TSX:ENB)(NYSE:ENB) announced today its intention to redeem all 8,000,000 of its outstanding 7.80% preferred securities, at a price of $25.00 each plus accrued interest of $0.2458 per security, for the period following the previously announced December 31, 2006 interest payment date. The redemption date is February 15, 2007, for all of the 7.80% preferred securities, originally issued in February 2002.

So there goes another one of the lovely high-coupon preferred securities!