Archive for April, 2010

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XCM.PR.A Reorg Completed

Tuesday, April 6th, 2010

This one is complex. Assiduous Readers will recall that the former XCM has been reorganized into two parts: Original Commerce Split Corp. and New Commerce Split Fund, which are what one might call “virtual” funds sharing the same set of books (rather like different classes of mutual fund units).

As the website states:

Original Commerce Split Corp. offers two types of shares, a Class A (YCM.X) and a Priority Equity (YCM.PR.X).

New Commerce Split Corp. offers three types of shares, a Capital share (YCM), a Class I Preferred (YCM.PR.A) and a Class II Preferred (YCM.PR.B).

The Reorg Summary is (emphasis added):

At the opening of trading on March 26, 2010:

Holders of Priority Equity Shares (Symbol: XCM.PR.A) that did not elect to remain in the Original Commerce Split Fund will have each of the Priority Equity Shares that they hold converted into the following new securities in the New Commerce Split Fund:

  • 1. One $5.00 Class I Preferred Share (Symbol: YCM.PR.A) (the “Class I Preferred Share”);
  • 2. One $5.00 Class II Preferred Share (Symbol: YCM.PR.B) (the “Class II Preferred Share”);
  • 3. One half 2011 Warrant (Symbol: YCM.WT); and
  • 4. One 2012 Warrant (Symbol: YCM.WT.A).

Holders of Priority Equity Shares (Symbol: XCM.PR.A) that did elect to remain in the Original Commerce Split Fund will have each of the Priority Equity Shares that they hold converted into the following new security in the Original Commerce Split Fund:

  • 1. One Priority Equity Share 2010 (Symbol: YCM.PR.X).

Holders of Class A Shares (Symbol: XCM) that did not elect to remain in the Original Commerce Split Fund will have each of the Class A Shares that they hold converted into the following securities (in order to achieve the required balancing objectives as previously discussed in the March 10, 2010 press release):

  • 1. 0.7167721 of a Capital Share in the New Commerce Split Fund (Symbol: YCM); and
  • 2. 0.283228 of a Class A Share 2010 in the Original Commerce Split Fund (Symbol: YCM.X)

Holders of existing Class A Shares (Symbol: XCM) who elected to remain in the Original Commerce Split Fund will have each of the Class A Shares that they hold converted into the following security in the Original Commerce Split Fund:

  • 1. One Class A Share 2010 (Symbol: YCM.X)

Original Commerce Split Corp states:

that the opening net asset value per unit for the newly reorganized Original Commerce Split Fund was $9.36 as of the close of business on March 25, 2010. There were 1,707,491 units outstanding for total net assets of $16.0 million as at March 25, 2010. The net assets of the Original Commerce Split Fund are currently allocated approximately 82.7% to the Priority Equity Portfolio Protection Plan and approximately 17.3% to CIBC common shares. The Original Commerce Split Fund will continually rebalance the portfolio between the requirements of the Priority Equity Protection Plan and maintaining direct exposure to CIBC common stock.

The following is a summary of some of the principal provisions of the Priority Equity Shares 2010 and Class A Shares 2010 of the Original Commerce Split Fund. In general, these two classes of shares will retain the same characteristics as the existing Priority Equity and Class A Shares.

Priority Equity Shares 2010
Priority Equity Shares 2010 (Symbol YCM.PR.X) will continue to have the repayment target of $10 per share on December 1, 2014 as the primary investment objective. The Fund will continue to implement the Priority Equity Portfolio Protection Plan described in the original prospectus. Dividends are anticipated to remain suspended for the foreseeable future in order to preserve cash and to assist in rebuilding the net asset value of the Original Commerce Split Fund. Since the dividends on the Priority Equity Shares are cumulative, the suspended dividends (and all subsequent dividends not paid) will be accrued and are recorded as a liability in determining the net asset value of the Original Commerce Split Fund. The current amount of accrued dividends is $0.5688 per share representing 13 months of suspended dividends.

Class A Shares 2010
Class A Shares 2010 (Symbol: YCM.X) will continue to participate in any net asset value growth over $10.00 per Unit and dividends would be reinstated only if and when the net asset value per Unit exceeds $12.50. Each “Unit” consists of one Priority Equity Share 2010 and one Class A Share 2010.

New Commerce Split Fund has announced:

that the opening net asset value per unit for the newly reorganized New Commerce Split Fund was approximately $9.94 as of the close of business on March 25, 2010. There were 3,824,009 units outstanding for total net assets of approximately $38.0 million as at March 25, 2010. The New Commerce Split Fund will now begin to initiate its full investment plan and increase its investment in CIBC common shares and its supplemental covered call writing program.

The following is a summary of some of the principal provisions of the Class I Preferred Shares, Class II Preferred Shares, 2011 Warrants, 2012 Warrants and Capital Shares of the New Commerce Split Fund:

Class I Preferred Shares
Each Class I Preferred Share (Symbol: YCM.PR.A) pays fixed cumulative preferential monthly dividends to yield 7.50% per annum on the $5.00 notional issue price and has a repayment objective on December 1, 2014 or such other date as the Company may be terminated (the “Termination Date”) of $5.00. The dividend payable in respect of the month of March 2010 will be accrued and is expected to be paid with the April 2010 dividend, payable May 10, 2010 to shareholders of record on April 30, 2010.

Class II Preferred Shares
Each Class II Preferred Share (Symbol: YCM.PR.B) pays distributions to yield 7.50% per annum on the $5.00 notional issue price if and when the net asset value per Unit exceeds $12.50 and has a repayment objective on the Termination Date of $5.00. Each “Unit” consists of one Class I Preferred Share, one Class II Preferred Share and one Capital Share. As the net asset value per Unit is currently less than $12.50, no dividends will initially be paid on the Class II Preferred Shares.

2011 Warrant
Each whole 2011 Warrant (Symbol: YCM.WT) can be exercised to purchase one Unit for an exercise price of $10.00 per Unit at specified times until February 28, 2011.

2012 Warrant
Each 2012 Warrant (Symbol: YCM.WT.A) can be exercised to purchase one Unit for an exercise price of $12.50 per Unit at specified times until February 28, 2012.

Capital Shares
Capital Shares (Symbol: YCM) will continue to participate in any net asset value growth over $10.00 per Unit and dividends would be reinstated only if and when the net asset value per Unit exceeds $15.00. The dividend rate on the Capital Shares will be set by the Board of Directors of the Company at its discretion, based on market conditions. No dividend payments will be made on the Capital Shares unless all dividends on the Class I Preferred Shares and, if applicable, Class II Preferred Shares have been declared and paid.

XCM.PR.A was last mentioned on PrefBlog when reorg details were announced. XCM.PR.A was not tracked by HIMIPref™; there are no plans to commence tracking YCM.PR.X, YCM.PR.A or YCM.PR.B.

Posted in Issue Comments | 1 Comment »

XMF.PR.A Reorg Completed

Tuesday, April 6th, 2010

M Split Corp has announced (on March 23, so I’m a little late with this):

the opening net asset value per unit for the newly reorganized Company was $9.01 per unit as of the close of business on March 22, 2010. There were 2,846,795 units outstanding for total net assets of $25.6 million as at March 22, 2010. The Company will begin to initiate its full investment plan and increase its investment in Manulife common shares and its supplemental covered call writing program. Trading will begin today on the TSX under the following new stock symbols listed below:

XMF.PR.B – the Class I Preferred Share
XMF.PR.C – the Class II Preferred Share
XMF.WT – the 2011 Warrant
XMF.WT.A – the 2012 Warrant
XMF.A – the Capital Share

The following is a summary of some of the principal provisions of the Class I Preferred Shares, Class II Preferred Shares, 2011 Warrants, 2012 Warrants and Capital Shares:

Class I Preferred Shares
Each Class I Preferred Share (Symbol: XMF.PR.B) pays fixed cumulative preferential monthly dividends to yield 7.50% per annum on the $5.00 notional issue price and having a repayment objective on December 1, 2014 or such other date as the Company may be terminated (the “Termination Date”) of $5.00.

Class II Preferred Shares
Each Class II Preferred Share (Symbol: XMF.PR.C) pays distributions to yield 7.50% per annum on the $5.00 notional issue price if and when the net asset value per Unit exceeds $12.50 and having a repayment objective on the Termination Date of $5.00. Each “Unit” consists of one Class I Preferred Share, one Class II Preferred Share and one Capital Share.

2011 Warrant
Each 2011 Warrant (Symbol: XMF.WT) can be exercised to purchase one Unit for an exercise price of $10.00 per Unit at specified times until February 28, 2011.

2012 Warrant
Each 2012 Warrant (Symbol: XMF.WT.A) can be exercised to purchase one Unit for an exercise price of $12.50 per Unit at specified times until February 28, 2012.

Capital Shares
Capital Shares (Symbol: XMF.A) will continue to participate in any net asset value growth over $10.00 per Unit and dividends would be reinstated only if and when the net asset value per Unit exceeds $15.00. The dividend rate on the Capital Shares will be set by the Board of Directors of the Company at its discretion, based on market conditions. No dividend payments will be made on the Capital Shares unless all dividends on the Class I Preferred Shares and, if applicable, Class II Preferred Shares have been declared and paid.

For additional information regarding the provisions attached to the Class I Preferred Shares, Class II Preferred Shares, 2011 Warrants, 2012 Warrants and Capital Shares, reference should be made to the Company’s Management Information Circular dated December 23,2009.

The effective date and a reminder of the terms of the reorg were announced March 19:

At the opening of trading on March 23, 2010, holders of Priority Equity Shares (Symbol: XMF.PR.A) will have received the following securities in exchange for each Priority Equity Share held:

1. One $5.00 Class I Preferred Share (Symbol: XMF.PR.B) (the “Class I Preferred Share”);
2. One $5.00 Class II Preferred Share (Symbol: XMF.PR.C) (the “Class II Preferred Share”);
3. One 2011 Warrant (Symbol: XMF.WT); and
4. One 2012 Warrant (Symbol: XMF.WT.A).

As previously announced, since more Priority Equity Shares were tendered for retraction under the special retraction right than Class A Shares, the outstanding Class A Shares will effectively be consolidated (the “Consolidation”) through an adjustment to the number of Capital Shares to be issued to holders of Class A Shares in the Reorganization. The Consolidation will be implemented so that following the Reorganization, there will be an equal number of Capital Shares, Class I Preferred Shares and Class II Preferred Shares outstanding.

As a result of the Reorganization and the Consolidation, holders of Class A Shares (Symbol: XMF) will receive 0.944808 of a Capital Share (Symbol: XMF.A) in exchange for each Class A Share held.

XMF.PR.A was last mentioned on PrefBlog in the post XMF.PR.A Announces Reorg Details. XMF.PR.A was not tracked by HIMIPref™; there are no current plans to track XMF.PR.B or XMF.PR.C.

Posted in Issue Comments | 1 Comment »

April 5, 2010

Monday, April 5th, 2010

The jobs number on Friday was encouraging:

Payrolls rose by 162,000 workers last month, the third gain in the past five months and the most since March 2007, figures from the Labor Department showed today in Washington.
…
Among the top indicators the group uses is payrolls, according to its Web site. The government revised the January and February job count up by a combined 62,000, putting the March gain at 224,000 after including the updated data.

This knocked Treasuries for loop:

Government securities fell for a second consecutive week ahead of the Treasury’s scheduled offering of $82 billion of notes and bonds next week, including a record-tying $40 billion sale of three-year securities.
…
The 10-year note yield rose 9 basis points, or 0.09 percentage point, to 3.94 percent, according to BGCantor Market Data. The yield touched the highest this week since it reached 4 percent on June 11. Two-year note yields rose 6 basis points to 1.1 percent. Thirty-year bond yields increased to as high as 4.81 percent, also the most since June.

… and over the weak, investors decided that German debt is better than EU promises:

The yield on Germany’s 10-year bund, Europe’s benchmark government security, fell 7 basis points in the week to 3.09 percent as of 5:30 p.m. in London yesterday. It dropped to 3.05 percent on March 23, the lowest this year. The two-year note yield slipped 5 basis points to 0.95 percent.

The Greek 10-year yield advanced 33 basis points to 6.56 percent, and the two-year yield soared 69 basis points to 5.28 percent.

The New York Times has an editorial on taxation of hedge fund fees:

To add insult to injury, some hedge fund managers and, more commonly, private equity fund managers are able to pay a much lower rate of tax than the typical working professional.

The tax disparity results from an outdated rule that lets a money manager in a private partnership treat a chunk of his fees as if they were long-term capital gains, taxed at a special low rate of 15 percent. Fees for managing someone else’s money should be taxed as ordinary income, like wages and salary, at rates as high as 35 percent.

President Obama has included a provision to end that special treatment in his most recent budget. For three years running, the House has passed a bill to close the loophole. In the Senate both Democrats and Republicans have resisted, all for fear of losing lucrative campaign donations.

This has been an issue for quite some time I remember commenting on the issue on the old “Captain’s Quarters” blog (the principal, Ed Morrisey, has now moved to Hot Air) … the idea of fixing the loophole by other commenters as a tax increase. By me, it’a a loophole. Preferential taxation of capital gains – regardless of what it may actually accomplish – should be restricted to those who have skin in the game. A hedge fund manager who achieves a total return of -100% will suffer a loss of capital only to the extent he has invested in the fund: capital gains tax rates should apply only to his earnings on that capital at risk.

Assiduous Reader GAndreone sends in this chart of Exchange Market Share for MFC.PR.C for your edification:


Click for Big

An interesting trend is corporate bonds that step-up on downgrades:

Bonds with built-in protection against rating cuts are making up a record share of debt issues as investors hedge against a slowdown in the economic recovery.

Anheuser-Busch InBev NV, the brewer of Budweiser and Stella Artois, is among companies issuing so-called step-up bonds, whose interest increases if a borrower is downgraded. Sales surged to $37.3 billion in March, or 12.4 percent of all debt issued, according to data compiled by Bloomberg. Most of the notes are sold in the U.S., where almost half of bonds rated as so-called junk or on the cusp of non-investment grade include the protection.
…
Anheuser-Busch InBev, the world’s largest brewer, sold $3.25 billion of bonds with a step-up coupon on March 24, Bloomberg data show. The conditions require the Leuven, Belgium- based company to pay 25 basis points more in interest for every one rating notch it’s cut below investment grade, up to a maximum of 200 basis points, according to Bloomberg data. The brewer is rated Baa2 by Moody’s and one level higher at BBB+ by S&P.

It’s an interesting problem due to the potential for a cascading decline in credit quality. Quick! You’re the Grand Pooh-Bah of Financial Stability! Can you do anything? Should you do anything?

It has taken over a year, but finally the world is noticing the sheer brilliance and uncanny accuracy of PrefBlog’s commentary. Assiduous Readers will remember that I support internal management for large pension funds; not because of cost but because internal management has a captive customer, can concentrate of achieving good returns and doesn’t have to spend time, effort, and client portfolio positioning on the necessity of bringing in the Assets Under Management. As best as I can recall, I last discussed this on March 31, 2009. Janet McFarland has written a feature for the Globe, Canada’s Pension Funds: stronger returns, at a cost:

Despite the higher salary costs in Canada, internal management has been a bigger advantage than it has been a cost, said pension specialist Keith Ambachtsheer, director of the International Centre for Pension Management at the University of Toronto.

Research shows internal teams not only save money by cutting high external money management fees, but also perform better as investors because they are more closely aligned to the mission of the pension fund, he said.

According to data from CEM Benchmarking, internal management improves returns by 0.5 per cent annually over external management, Mr. Ambachtsheer said.

It is disappointing that the article followed fashionability to the extent it did, by focussing almost exclusively on the aspect of fees. It is far more interesting, and far more important for public policy purposes, to consider the aspect of the effects of structure on gross investment return.

The Globe also had an astonishingly patronizing editorial in today’s print edition (it does not appear to be available on-line) titled “The next complexity”:

The challenge for the future, however, is how to formulate rules that will cover the new mind-bending products that will emerge in the next wave of irrational exuberance and excessive financial ingenuity. In other words, legislators and regulators will need to decide what is too complex for unsophisticated investors.

I have some succinct advice for the Globe’s editorial board: shove it. While wearing my hat as a retail investor, I don’t want any pandering politician or smarmy regulator deciding what is and what is not too complex for unsophisticated investors who haven’t been annointed. Show me somebody – anybody – who got seriously hurt by ABCP and I’ll show you a fool. Canadian ABCP was a good product, of very good credit quality. The market was done in by lack of liquidity, not credit; and the only people who were badly hurt by it were the ones who were overexposed. Ain’t nothing gonna protect anybody from the downside of overexposure, whether it’s to ABCP or securities that have been blessed by the really, really savvy investors on the Globe’s editorial board.

I haven’t been able to find a copy of the report itself on-line. This may mean I’m insufficiently sophisticated at finding things, but it wouldn’t surpise me to learn that access to the report has been restricted to those smart enough to agree with the committee’s conclusions.

What the ABCP and Lehman crises showed was simply that the implicit sponsor guarantee on Money Market Funds needs to become explicit. Full stop.

Crash! Bang! Smash ’em up! PerpetualDiscounts got hit severely today, losing 76bp to bring median yield to 6.22%, while FixedResets were almost precisely flat. The performance highlights indicate that it was the major, high quality banks that bore the brunt of the sell off, although there are a few familiar names amongst the losers. Volume continued to be quite heavy and FixedResets scored a shut-out on the volume highlights table.

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 2.56 % 2.62 % 55,977 20.96 1 -0.2268 % 2,157.2
FixedFloater 4.88 % 3.00 % 48,787 20.16 1 1.0879 % 3,242.0
Floater 1.90 % 1.67 % 46,110 23.42 4 -0.0242 % 2,422.6
OpRet 4.86 % 2.37 % 108,247 0.15 10 0.0814 % 2,310.9
SplitShare 6.37 % -0.80 % 137,257 0.08 2 0.1100 % 2,142.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0814 % 2,113.1
Perpetual-Premium 5.75 % 3.11 % 35,074 0.64 2 -0.0795 % 1,862.4
Perpetual-Discount 6.16 % 6.22 % 176,015 13.60 76 -0.7632 % 1,722.9
FixedReset 5.39 % 3.58 % 412,656 3.65 43 0.0009 % 2,195.3
Performance Highlights
Issue Index Change Notes
BNS.PR.N Perpetual-Discount -2.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 21.17
Evaluated at bid price : 21.17
Bid-YTW : 6.22 %
BMO.PR.K Perpetual-Discount -2.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 21.09
Evaluated at bid price : 21.09
Bid-YTW : 6.32 %
TD.PR.P Perpetual-Discount -2.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 21.90
Evaluated at bid price : 22.00
Bid-YTW : 6.08 %
TD.PR.R Perpetual-Discount -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 22.99
Evaluated at bid price : 23.15
Bid-YTW : 6.17 %
BNS.PR.L Perpetual-Discount -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 18.58
Evaluated at bid price : 18.58
Bid-YTW : 6.07 %
BAM.PR.N Perpetual-Discount -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 16.91
Evaluated at bid price : 16.91
Bid-YTW : 7.09 %
BNS.PR.J Perpetual-Discount -1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 21.60
Evaluated at bid price : 21.60
Bid-YTW : 6.09 %
BMO.PR.H Perpetual-Discount -1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 21.91
Evaluated at bid price : 22.21
Bid-YTW : 6.04 %
TCA.PR.X Perpetual-Discount -1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 45.63
Evaluated at bid price : 47.65
Bid-YTW : 5.84 %
POW.PR.A Perpetual-Discount -1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 21.75
Evaluated at bid price : 22.00
Bid-YTW : 6.39 %
BNS.PR.O Perpetual-Discount -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 22.90
Evaluated at bid price : 23.06
Bid-YTW : 6.08 %
BAM.PR.M Perpetual-Discount -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 16.87
Evaluated at bid price : 16.87
Bid-YTW : 7.11 %
BNS.PR.M Perpetual-Discount -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 6.03 %
TD.PR.O Perpetual-Discount -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 20.52
Evaluated at bid price : 20.52
Bid-YTW : 6.03 %
POW.PR.D Perpetual-Discount -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 19.58
Evaluated at bid price : 19.58
Bid-YTW : 6.42 %
RY.PR.C Perpetual-Discount -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 19.08
Evaluated at bid price : 19.08
Bid-YTW : 6.12 %
RY.PR.B Perpetual-Discount -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 19.52
Evaluated at bid price : 19.52
Bid-YTW : 6.12 %
PWF.PR.G Perpetual-Discount -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 23.49
Evaluated at bid price : 23.75
Bid-YTW : 6.33 %
BMO.PR.J Perpetual-Discount -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 19.11
Evaluated at bid price : 19.11
Bid-YTW : 5.98 %
CM.PR.I Perpetual-Discount -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 18.72
Evaluated at bid price : 18.72
Bid-YTW : 6.29 %
TD.PR.Q Perpetual-Discount -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 23.15
Evaluated at bid price : 23.32
Bid-YTW : 6.12 %
MFC.PR.B Perpetual-Discount -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 18.41
Evaluated at bid price : 18.41
Bid-YTW : 6.39 %
PWF.PR.I Perpetual-Discount -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 23.94
Evaluated at bid price : 24.30
Bid-YTW : 6.29 %
SLF.PR.D Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 17.63
Evaluated at bid price : 17.63
Bid-YTW : 6.37 %
BAM.PR.G FixedFloater 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 25.00
Evaluated at bid price : 22.30
Bid-YTW : 3.00 %
HSB.PR.C Perpetual-Discount 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-05
Maturity Price : 20.84
Evaluated at bid price : 20.84
Bid-YTW : 6.17 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TD.PR.E FixedReset 311,050 Nesbitt crossed 300,000 at 28.10. Nice ticket!
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 28.11
Bid-YTW : 3.39 %
RY.PR.T FixedReset 247,850 Nesbitt bought 13,200 from CIBC at 28.05 and crossed 120,000 at the same price. Nesbitt then crossed 100,000 at 28.06.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 28.05
Bid-YTW : 3.51 %
RY.PR.X FixedReset 116,486 TD crossed 30,000 at 28.00; RBC crossed 35,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 28.01
Bid-YTW : 3.56 %
RY.PR.Y FixedReset 77,325 National crossed 15,000 and Nesbitt crossed 30,000, both at 28.00; National crossed 15,000 at 28.03.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 28.00
Bid-YTW : 3.54 %
TD.PR.K FixedReset 54,627 Nesbitt crossed 25,000 at 28.25 and bought 11,000 from anonymous at 28.20.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 28.20
Bid-YTW : 3.40 %
TD.PR.G FixedReset 52,432 Nesbitt bought 12,500 from CIBC at 28.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 28.07
Bid-YTW : 3.43 %
There were 51 other index-included issues trading in excess of 10,000 shares.

Posted in Market Action | No Comments »

DGS.PR.A To Get Bigger

Monday, April 5th, 2010

Dividend Growth Split Corp. has announced (via SEDAR; press release dated 2010-4-1; management’s too lazy to put it on their web site [Update: But see the comments!]):

it has filed a preliminary short form prospectus with respect to a treasury offering of preferred shares and class A shares.

Dividend Growth Split Corp. invests in a portfolio of common shares of high quality, large capitalization companies, which have among the highest dividend growth rates of those companies included in the S&P/TSX Composite Index. Subsequent to the closing of this offering, the portfolio will consist of common shares of the following 20 companies:
…
The preferred shares will be offered at a price of $10.00 per share. The closing price of the preferred shares on the TSX on March 31, 2010 was $10.32. The investment objectives for the preferred shares are to provide their holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.13125 per preferred share to yield 5.25% per annum on the original issue price, and to return the original issue price to holders of preferred shares at the time of redemption on November 30, 2014.

The class A shares will be offered at a price of $9.75 per share. The closing price of the class A shares on the TSX on March 31, 2010 was $9.95. The investment objectives for the class A shares are to provide their holders with regular monthly cash distributions targeted to be $0.10 per class A share, and to provide the opportunity for growth in net asset value per class A share.

The red-herring prospectus filed on SEDAR does not specify a closing date.

DGS.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-3 by DBRS. It is not tracked by HIMIPref™ as it is too small an issue to trade efficiently (slightly over 2-million shares outstanding on 2009-12-31, according to the 2009 Annual Report … but that could change!

Posted in Issue Comments | 6 Comments »

Index Performance: March 2010

Sunday, April 4th, 2010

Performance of the HIMIPref™ Indices for March, 2010, was:

Total Return
Index Performance
March 2010		 Three Months
to
March 31, 2010
Ratchet +8.85%* +32.94%*
FixFloat +7.56% +17.20%
Floater +3.04% +19.91%
OpRet +0.09% -0.99%
SplitShare +0.13% +1.88%
Interest +0.09%**** -0.99%****
PerpetualPremium -1.96% -1.70%
PerpetualDiscount -3.33% -3.51%
FixedReset +0.57% +0.89%
* The last member of the RatchetRate index was transferred to Scraps at the February, 2009, rebalancing; subsequent performance figures are set equal to the Floater index

Independent measurement was resumed when an issue qualified for inclusion (transferred from Scraps) at the February January, 2010, rebalancing.
**** The last member of the InterestBearing index was transferred to Scraps at the June, 2009, rebalancing; subsequent performance figures are set equal to the OperatingRetractible index
Passive Funds (see below for calculations)
CPD -0.96% -1.31%
DPS.UN +1.74% +1.22%
Index
BMO-CM 50 -0.66% +0.33%
TXPR Total Return -0.86% -0.95%

The pre-tax interest equivalent spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at +285bp, a sharp increase from the +235bp recorded at February month-end. The decline in the PerpetualDiscount index was entirely due to an increase in the spread over corporates, since yields on long corporates actually declined from 5.9% to 5.8%.


Click for big

The Seniority Spread is now the largest component of PerpetualDiscount Interest-Equivalent yields:


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The seniority spread is at a one-year high:


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And the Seniority Spread is well above long-term levels:


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The relative returns on Floaters over the past year continues to impress:


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But one must remember how they got there:


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FixedReset volume picked up during the month. Volume may be under-reported due to the influence of Alternative Trading Systems (as discussed in the November PrefLetter), but I am biding my time before incorporating ATS volumes into the calculations, to see if the effect is transient or not.


Click for big

As discussed in February, the impressive returns of the past year cannot continue indefinately. The long term return on a fixed income instrument is its yield – 6.2% for a PerpetualDiscount, and about 3.6% to the call date for a FixedReset, as of April 1. The FixedReset index set a new low yield in March, highlighted by RY.PR.R’s brief flirtation with sub-3% levels.

Compositions of the passive funds were discussed in the September edition of PrefLetter.

Claymore has published NAV and distribution data (problems with the page in IE8 can be kludged by using compatibility view) for its exchange traded fund (CPD) and I have derived the following table:

CPD Return, 1- & 3-month, to March 31, 2010
Date NAV Distribution Return for Sub-Period Monthly Return
December 31, 2009 16.89      
January 29 16.80     -0.53%
February 26, 2010 16.83     +0.18%
March 26 16.64 0.21 +0.12% -0.96%
March 31, 2009 16.46 0.00 -1.08%
Quarterly Return -1.31%

Claymore currently holds $435,437,774 (advisor & common combined) in CPD assets, up about $15-million from the $420,750,223 reported last month and up about $62-million from the $373,729,364 reported at year-end.

The DPS.UN NAV for March 31 has been published so we may calculate the approximate March returns. On March 29, it went ex-Dividend for $0.30 according to the TMX.

DPS.UN NAV Return, March-ish 2010
Date NAV Distribution Return for sub-period Return for period
February 24, 2010 19.91      
March 29, 2010 20.09 ** 0.30 +2.41% +1.59%
March 31, 2010 19.93   -0.80%
Estimated February Ending Stub -0.12% *
Estimated March Return +1.47% ***
*CPD had a NAVPU of 16.81 on February 24 and 16.83 on February 26, hence the total return for the period for CPD was +0.12%. The return for DPS.UN in this period is presumed to be equal.
** The March 31 NAVPU was $19.93. CPD had a NAV of 16.46 on March 31 and 16.59 on March 29. Thus, a NAVPU of 20.09 for DPS on March 29 has been estimated
*** The estimated February return for DPS.UN’s NAV is therefore the product of three period returns, +2.41%, -0.80% and -0.12% to arrive at an estimate for the calendar month of +1.47%

Now, to see the DPS.UN quarterly NAV approximate return, we refer to the calculations for January and February:

DPS.UN NAV Returns, three-month-ish to end-March-ish, 2010
January-ish +1.39%
February-ish -1.61%
March-ish +1.47%
Three-months-ish +1.22%

Posted in Index Construction / Reporting | 5 Comments »

Critchley: Is this the end for rate resets?

Saturday, April 3rd, 2010

Barry Critchley wrote a column in the Financial Post on April 1 titled Is this the end for rate resets?

The trigger for his column was (besides the obligation to bang out another 750 words, I mean!) the BNS 3.85%+100 new issue. Mr. Critchley believes that such skimpy yields will have the effect of pushing income investors back into common shares.

He concludes with a quote from John Nagel:

So what’s the outlook? John Nagel, a vice-president and director at Desjardins Securities and one of the architects of rate-reset pref shares, said that despite the low yield, there is still a market for the security, in part because investors continue to demonstrate that they don’t want to purchase “straight perpetual pref shares,” or securities that offer no chance of a change of dividend.

“The straight pref share marker is doing nothing but going straight down because investors are very nervous about higher interest rates,” he said, noting that more than $15.5-billion of rate-reset pref shares have been issued over the past two years. Accordingly that sector of the market is larger than the straight pref share market.

Despite the low yields, Nagel says the regulatory authorities have given their approval for rate resets to continue to count as Tier 1 capital. But he said the authorities have not been as kind for continued issues of so-called innovative Tier 1 securities.

It’s my understanding that the BNS issue sold out just as fast as all the other ones, despite its extreme richness vs. BNS Straights.

What do I think? Well, first of all, I think that forecasting investor tastes in new issues has much the same chance of success as forecasting young women’s tastes in new outfits. Some shops, who spend a lot of money on market research and take an intelligent approach to interpreting the data, can be right just often enough to pay for the times their wrong and make a great deal of money – but they’re still left holding the bag every now and then.

Second, I think that FixedResets have been grossly overemphasized in the marketplace through the course of their existence. The banks have been driven to inflate their Tier 1 capital at a time when bank money is pretty expensive. The allure of FixedReset issuance hasn’t been so much the reset provision (although that’s the hook for retail) as the five year call; which fixed income investors in most other markets will simply not allow.

Third, I don’t think the acid test of FixedResets continued existence is low issue yield – which is surely more a sign of fashionability rather than otherwise. I can think of two critical tests:

  • The first wave of redemptions: It is not entirely clear that investors have really thought through the implications of the five-year call and will be most upset when such a call lands most secondary market buyers with a big capital loss and the need to reinvest in a (probably) lower yield environment.
  • The first few downgrades & defaults: Nortel & Quebecor World defaulted on their FixedFloaters; BCE and Bombardier were downgraded. All remaining issues are trading well below par. How will the FixedReset market react when it becomes apparent that interest rate risk is only one of the problems facing fixed income investors?

Straights will always be the little black dress of the preferred share world, but FixedResets have the advantage of allowing the issuer to assume the inflation risk, just like RRBs; there will always be a significant number of new issue investors eager to accept low yields for the chance of offloading that risk. FixedResets have the chance of becoming a permanent feature of the new issue shop.

Posted in Miscellaneous News | 5 Comments »

NXY.PR.U Particulars

Friday, April 2nd, 2010

With an eMail headed NXY.PR.U, I was asked:

Can you please comment on how to classify the subject preferred shares ? How would you rate the credit risk ?

NXY.PR.U is more formally referred to as Nexen 7.35% Subordinated Notes due 2043, which were issued pursant to a Prospectus Supplement dated October 28, 2003, which is available on SEDAR.

The prospectus states:

Our unsecured subordinated debentures due November 1, 2043 (the ‘‘Subordinated Notes’’) will bear interest, payable in U.S. dollars, at an annual rate of 7.35%, accruing from November 4, 2003 and payable quarterly in arrears on February 1, May 1, August 1 and November 1 of each year, commencing February 1, 2004.

The Subordinated Notes will be subordinated to all our present and future senior indebtedness and will be effectively subordinated to all liabilities of our subsidiaries, including partnerships.

This deep subordination means that the only thing they are senior to is equity – which will include preferred equity if Nexen ever issues some. However, they are on the right side of the bond/equity line, which means there are events of default. These events of default are specified on page 32 of the Shelf Prospectus, dated October 22, 2003, and are not over-ridden (as they might be) by the Prospectus Supplement for this particular series. This means that in the event of a missed interest payment, the holders of NXY.PR.U may declare the principal immediately due and payable, effectively placing the company in bankruptcy. This is significantly more protection than is available with preferred shares, although in practice holders of the sub-debt might wish to keep the company out of bankruptcy since they’ll be totally out-gunned and subordinated to the Senior Debt Holders in bankruptcy court.

However, if matters were to become sufficiently dire that the company could not meet its obligation to pay interest, they have the option to forestall such a move by redeeming the issue for common shares. This issue is currently redeemable at par:

We may redeem the Subordinated Notes, in whole or in part, at any time and from time to time on or after November 4, 2008 at a redemption price equal to 100% of the principal amount of the Subordinated Notes to be redeemed plus any accrued and unpaid interest to the date of such redemption.
…
We may satisfy our obligation to pay the applicable redemption price (excluding any accrued and unpaid interest) or principal amount of the Subordinated Notes by delivering to the Trustee (as defined herein) Common Shares (as defined herein), in which event the holders of the Subordinated Notes shall be entitled to receive cash payments equal to the applicable redemption price (excluding any accrued and unpaid interest) or principal amount from the proceeds of the sale of the requisite Common Shares by the Trustee.

The noteholders will not actually get the shares; they will be sold by the Trustee and the proceeds deposited in trust (see “Common Shares Payment Election” in the Prospectus Supplement). Another wrinkle is that there is no set number of Common Shares that must be delivered:

Notwithstanding the foregoing, we will not be permitted to satisfy our obligations to pay the redemption price (excluding any accrued and unpaid interest) or principal amount of the Subordinated Notes through the delivery of Common Shares if, on the Common Shares Delivery Date, the Common Shares are not then listed on a significant stock exchange in Canada or the United States. Neither our making of the Common Shares Payment Election nor the consummation of sales of Common Shares on the Common Shares Delivery Date will:

) result in the holders of the Subordinated Notes not being entitled to receive cash in an aggregate amount equal to the redemption price or principal amount of the Subordinated Notes plus, in each case, accrued and unpaid interest and other amounts, if any, thereon on the Maturity Date; or

) entitle or oblige such holders to receive any Common Shares in satisfaction of our obligation to pay the redemption price or principal amount of the Subordinated Notes.

So the Common Share Payment Election is a death-spiral conversion. I suspect the company would, 99 times in a hundred, prefer to go bankrupt.

The income distributions (7.35%, remember) are payable quarterly and are taxed as interest.

As far as credit quality is concerned … well, there’s a limit to what I’m going to do for free! DBRS rates them BBB(low), which maps to about maybe Pfd-2(low) / Pfd-3(high), somewhere around there.

There was something of a craze for issues of this nature back in the old days, when men were men.

Preferred Securities
CAD denominated
Ticker Issue Date Redemption Date
AEC.PR.A / ECA.PR.A 1999-8-9 2004-8-10
BNN.PR.S / BAM.PR.S 2001-12-20 2007-1-2
BNN.PR.T / BAM.PR.T 2002-4-22 2007-7-3
ENB.PR.B 1999-7-8 2004-12-16
ENB.PR.C 1999-10-21 2004-12-16
ENB.PR.D 2002-2-15 2007-2-15
MG.PR.A 1999-9-21 2004-10-1
SU.PR.A 1999-3-15 2004-3-15
TA.PR.A 1999-4-13 2005-2-16
TA.PR.B 1999-12-22 2005-2-16
TA.PR.C 2001-11-30 2007-1-2

Given the preponderance of of utilities in the above list, I suspect that this was a mechanism whereby the companies could gain the advantages of preferred shares (better credit ratios on their senior debt) without running afoul of contemporary regulatory restrictions on the issue of preferreds. But I have no definitive information on that point.

It was a nice market, hopelessly inefficient. Then, unfortunately, they continued to trade at enormous premia even as the first redemption date approached, yields declined to derisory (and even negative) levels and when they were called poor old retail got left holding the bag. I discussed the asset class in an article titled Interest Bearing Preferreds.

NXY.PR.U has not been previously discussed on PrefBlog. It is not tracked by HIMIPref™ since it is USD denominated.

Posted in Issue Comments, Reader Initiated Comments, US Pay | 1 Comment »

April 1, 2010

Thursday, April 1st, 2010

DBRS has concluded that the Brookfield Asset Management / General Growth Properties deal, as confirmed, continues to be credit-neutral. The original PrefBlog post on this issue has been updated with the link.

Volume continued to be elevated and the Canadian preferred share market continued to get hit, with PerpetualDiscounts down 32bp on the day and FixedResets losing 7bp.

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 2.56 % 2.61 % 58,083 20.98 1 0.0000 % 2,162.1
FixedFloater 4.93 % 3.05 % 49,418 20.10 1 0.0000 % 3,207.1
Floater 1.90 % 1.67 % 47,936 23.42 4 -0.5411 % 2,423.2
OpRet 4.87 % 1.96 % 109,523 0.16 10 -0.0741 % 2,309.0
SplitShare 6.38 % -1.25 % 137,805 0.08 2 0.0880 % 2,139.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0741 % 2,111.4
Perpetual-Premium 5.74 % 3.06 % 36,513 0.65 2 0.2591 % 1,863.8
Perpetual-Discount 6.12 % 6.19 % 177,444 13.66 76 -0.3214 % 1,736.2
FixedReset 5.39 % 3.57 % 392,427 3.66 43 -0.0692 % 2,195.2
Performance Highlights
Issue Index Change Notes
PWF.PR.M FixedReset -1.88 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 27.18
Bid-YTW : 3.89 %
MFC.PR.A OpRet -1.58 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 25.59
Bid-YTW : 3.68 %
PWF.PR.H Perpetual-Discount -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-01
Maturity Price : 23.10
Evaluated at bid price : 23.38
Bid-YTW : 6.26 %
CIU.PR.A Perpetual-Discount -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-01
Maturity Price : 19.26
Evaluated at bid price : 19.26
Bid-YTW : 6.05 %
POW.PR.B Perpetual-Discount -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-01
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 6.40 %
TRI.PR.B Floater -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-01
Maturity Price : 23.48
Evaluated at bid price : 23.75
Bid-YTW : 1.62 %
BNS.PR.O Perpetual-Discount -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-01
Maturity Price : 23.23
Evaluated at bid price : 23.41
Bid-YTW : 5.98 %
IAG.PR.E Perpetual-Discount -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-01
Maturity Price : 23.87
Evaluated at bid price : 24.06
Bid-YTW : 6.27 %
NA.PR.K Perpetual-Discount -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-01
Maturity Price : 23.85
Evaluated at bid price : 24.20
Bid-YTW : 6.13 %
GWL.PR.O Perpetual-Premium 1.20 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-11-30
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 3.06 %
BAM.PR.J OpRet 1.56 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 4.79 %
Volume Highlights
Issue Index Shares
Traded		 Notes
RY.PR.T FixedReset 48,565 TD sold 10,000 to Nesbitt at 28.06 and 12,000 to anonymous at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 28.00
Bid-YTW : 3.54 %
TD.PR.I FixedReset 47,441 TD crossed 26,000 at 28.22.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 28.22
Bid-YTW : 3.37 %
W.PR.J Perpetual-Discount 43,573 Nesbitt crossed 40,000 at 21.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-01
Maturity Price : 21.44
Evaluated at bid price : 21.70
Bid-YTW : 6.47 %
TD.PR.G FixedReset 42,555 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.96
Bid-YTW : 3.52 %
TD.PR.E FixedReset 40,330 RBC sold 10,000 to anonymous at 28.10.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 28.10
Bid-YTW : 3.38 %
TD.PR.K FixedReset 35,927 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 28.08
Bid-YTW : 3.50 %
There were 50 other index-included issues trading in excess of 10,000 shares.

Posted in Market Action | 3 Comments »

HIMIPref™ Index Rebalancing: March 2010

Thursday, April 1st, 2010
HIMI Index Changes, March 31, 2010
Issue From To Because
CM.PR.R OpRet Scraps Volume
CL.PR.B PerpetualPremium PerpetualDiscount Price
CU.PR.A PerpetualPremium PerpetualDiscount Price
CU.PR.B PerpetualPremium PerpetualDiscount Price
IAG.PR.E PerpetualPremium PerpetualDiscount Price
IGM.PR.B PerpetualPremium PerpetualDiscount Price

As a result of the migration from PerpetualPremium to PerpetualDiscount due to price declines, the PerpetualPremium index has only two remaining members: GWL.PR.O, a chimerical issue which can sometimes be a straight, sometimes a FixedFloater, depending on where Prime is, and NA.PR.M.

There were the following intra-month changes:

HIMI Index Changes during March 2010
Issue Action Index Because
GWO.PR.M Add Perpetual-Discount New Issue
BRF.PR.A Add Scraps New Issue
TRP.PR.B Add FixedReset New Issue
HPF.PR.A Delete Scraps Redeemed
HPF.PR.B Delete Scraps Redeemed
ACO.PR.A Delete OpRet Redeemed

Posted in Index Construction / Reporting | No Comments »

GWL.PR.O Particulars

Thursday, April 1st, 2010

This is very old news indeed, but should be recorded for easy access to the information.

There’s no prospectus for the issue, since it came into being via the

OFFER TO PURCHASE
all of the outstanding Non-Cumulative Preferred Shares, Series L
of
THE GREAT-WEST LIFE ASSURANCE COMPANY
not already held directly or indirectly by Great-West Lifeco Inc.
in exchange, at the option of the holder, for
$23.00 cash
or
One Non-Cumulative Preferred Share, Series O (a “Series O Share”) of
The Great-West Life Assurance Company (“GWL”)
for each Non-Cumulative Preferred Share, Series L (a “Series L Share”) of GWL

This document is available on SEDAR, as “The Great-West Life Assurance Company Dec 14 2000 Issuer bid circular – English
PDF 314K”

Series O Dividends

Until October 31, 2010 (the “Fixed Dividend Rate Period”), the holders of the Series O Shares will be entitled to receive quarterly non-cumulative cash dividends, as and when declared by the board of directors of GWL, payable on the last day of January, April, July and October in each year at a rate equal to $0.346875 per share to initially yield 5.55%. The first such dividend, if declared, will be payable on January 31, 2001 in an amount equal to $0.346875 per share.

From October 31, 2010 (the “Floating Dividend Rate Period”), the holders of the Series O Shares will be entitled to receive non-cumulative cash dividends, as and when declared by the board of directors of GWL, payable on the last day of January, April, July and October in each year at a floating rate in respect of each quarterly dividend period equal to one quarter of the greater of (a) 4.75% and (b) 80% of Prime.

Series O Redemption

The Series O Shares will not be redeemable prior to October 31, 2010. Subject to the provisions described under “Restrictions on Dividends and Retirement of Series O Shares” and “Regulatory Approvals”, GWL may redeem on October 31, 2010 and on the last day of every successive period of five years plus one day thereafter, all or any part of the then outstanding Series O Shares. Such redemption may be made upon payment in cash of the amount of $25.00 per share together with an amount equal to all declared and unpaid dividends thereon to but excluding the date on which such shares are redeemed. GWL will provide not less than 30 nor more than 60 calendar days’ notice of such redemption to each holder of Series O Shares to be redeemed.

On October 31, 2010 and every five years thereafter, Series O is exchangeable at the holder’s option (subject to the usual restrictions on shares left outstanding) to and from Series P.

Series P Dividends

The holders of the Series P Shares will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of GWL, in an amount per share per annum determined by the Board of Directors of GWL payable quarterly on the last day of January, April, July and October in each year. The first such dividend, if declared, will be payable on January 31, 2011.

The annual dividend rate determined by the Board of Directors of GWL in respect of a Dividend Period will not be less than 85% of the Government of Canada Yield prevailing at the time the dividend rate is set.

Series P Redemption

The Series P Shares will not be redeemable prior to November 1, 2015. Subject to the provisions described under “Restrictions on Dividends and Retirement of Series P Shares” and “Regulatory Approvals”, GWL may redeem on November 1, 2015 and on the last day of every successive period of five years plus one day thereafter, all or any part of, the outstanding Series P Shares. Such redemption may be made upon payment in cash in the amount of $25.00 for each Series P Share together with an amount equal to all declared and unpaid dividends thereon to but excluding the date on which such shares are redeemed.

GWL.PR.O is not currently listed on PrefInfo. When I get around to updating the information, it will be summarized as:

  • GWL.PR.O

  • Great-West Life Pr O
  • Great-West Life Assurance Co Pr Ser ‘O’ (The)
 1.3875

  • Floating Rate Start Date : 2010-10-31
  • Floating Rate Index ID : Canada Prime
  • FR Formula : Greater of 80% of index and Flat Rate 4.75% (#80)
  • Redemption 2010-10-31 2010-10-31 25.000000
  • Redemption 2015-10-31 2015-10-31 25.000000
  • None
  • Payments are Dividends : Yes
  • Cumulative Dividends : No
  • SplitShare Corp : No

Posted in Issue Comments | 7 Comments »

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