PrefBlog

As we all know, YLO.PR.A is convertible at the option of the company into common commencing March 31. We also know that YLO.PR.B is similarly convertible (with a premium) commencing June 30.

But Assiduous Reader JY tells me:

The other bigger issue is that it appears to us that they cannot convert the preferred series 1 to either common or a similar financial instrument (IR’s words and as of a few weeks ago this was still on the table according to [redacted]). The roadblock is that they have to pay at least the one dividend on the preferred A’s either in cash or shares. The issue then becomes since the preferreds are pari-pasu or equal then pay one, you have to pay all 4 series. As you are probably aware they have to do this before the end of the year. The one possible way out is if they can somehow say that the dividend is not a dividend but additional shares. Our feeling is that is a bit of a stretch but given how this situation has gone; perhaps a sharp lawyer can get them around this.

So the idea is: the conversion value of the preferreds includes accrued but unpaid dividends; therefore, conversion of YLO.PR.A will involve giving value for the accrued but unpaid dividends; therefore, they won’t be able to convert YLO.PR.A or YLO.PR.B without bringing the dividends on YLO.PR.C and YLO.PR.D up to date.

However, there’s a section in the 2009-9-15 prospectus for YLO.PR.D (and probably the others as well – I didn’t check) that states:

Unless all accrued and unpaid dividends on outstanding Series 3 Preferred Shares and Series 4 Preferred Shares and all accrued and unpaid dividends on all other outstanding shares ranking senior to or on parity with the Series 3 Preferred Shares and Series 4 Preferred Shares have been declared and paid or set apart for payment, YPG Holdings will not, without the approval of the holders of outstanding Series 3 Preferred Shares and Series 4 Preferred Shares, in each case voting as a series: … declare, pay or set apart for payment any dividends on any of its shares ranking as to dividends on parity with or junior to the Series 3 Preferred Shares or Series 4 Preferred Shares, as applicable (other than stock dividends payable in shares of YPG Holdings ranking as to dividends and capital junior to the Series 3 Preferred Shares or Series 4 Preferred Shares, as applicable);

So … given that there’s an exemption available for “stock dividends”, which is not a defined term, could YLO claim that paying the conversion price in common shares make the dividend count as a stock dividend, which will not trigger mandatory payment of the other outstanding dividends? I will leave that one for the lawyers.

The YLO preferreds (YLO.PR.A, YLO.PR.B, YLO.PR.C & YLO.PR.D) were last mentioned on PrefBlog when S&P downgraded them to C. All the issues are tracked by HIMIPref™ but are relegated to the Scraps index on credit concerns.

R Split III Corp. has announced:

that holders of its Class A Capital Shares (“Capital Shares”) have overwhelmingly approved a share capital reorganization (the “Reorganization”) allowing holders of Capital Shares, at their option, to retain their investment in the Company after the scheduled redemption date of May 31, 2012. The Reorganization will permit holders of Capital Shares to extend their investment in the Company beyond the redemption date of May 31, 2012 for up to an additional 5 years. The Class A Preferred Shares will be redeemed on the same terms originally contemplated in their share provisions and have been called for redemption on May 31, 2012. In order to maintain the leveraged “split share” structure of the Company, the Company expects to create and issue a new series of Class B preferred shares on or about May 31, 2012.

Holders of Capital Shares electing to retain their investment in the Company will continue to enjoy the benefit of a leveraged participation in the capital appreciation of the Company’s portfolio of common shares (the ‘‘Royal Bank Shares’’) of Royal Bank of Canada (‘‘Royal Bank’’).

Holders of Capital Shares who do not wish to continue their investment in the Company after May 31, 2012 must give notice that they wish to exercise their special retraction right and how they wish to be paid for their shares on or prior to April 3, 2012. Holders of Capital Shares who retract their Capital Shares will be paid on May 31, 2012. The Reorganization will become effective provided that holders of at least 1,405,000 Capital Shares retain their Capital Shares and do not exercise the special retraction right.

RBS.PR.A was last mentioned on PrefBlog when the reorganization proposal was announced. RBS.PR.A is not tracked by HIMIPref™.

Brookfield Asset Management has announced:

the completion of its previously announced Class A Preference Shares, Series 32 issue in the amount of CDN$300,000,000. The offering was underwritten by a syndicate led by RBC Dominion Securities Inc., CIBC World Markets Inc., Scotia Capital Inc. and TD Securities Inc.

Brookfield issued 12,000,000 Series 32 Shares at a price of CDN$25.00 per share, for aggregate gross proceeds of CDN$300,000,000. Holders of the Series 32 Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.50% annually for the initial period ending September 30, 2018. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 2.90%. The Series 32 Shares will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BAM.PF.A.

Brookfield intends to use the net proceeds of the issue of Series 32 Shares to redeem its Class A Preference Shares, Series 10 and for general corporate purposes.

Doubtless you are wondering: What’s all this “.PF” guff? I wondered too:

In response to your inquiry – Brookfield Asset Management has issued so many pref share series that they had to use the “PF.A” extension. The Company could have re-used some old extensions for series that are no longer listed but decided to use the new extension to prevent confusion with the old series.

I have a vague recollection that at one time there was an explicit rule at the Toronto Exchange that you couldn’t have a “.PR” extension unless staff had determined to its satisfaction that the issue was, in fact, preferred over common. Now, while I wish to make it clear that there is no doubt whatsoever in my mind that these shares are ‘preferred’, I’m just wondering if the same policy or rule is still in place.

Now, as far as I’m concerned, it’s not really a big deal. When I buy something, I like to know what I’m buying and I don’t rely on the TMX’s “.PR.” extension, or the IOSCO “(sf)” or “(hyb)” suffix on credit ratings to give me an excuse not to look at the prospectus. But … if I am remembering correctly, there was at one time a formal commitment from the Exchange that they wouldn’t just go around slapping a “.PR” extension on just anything. I don’t know if this still applies, or if it now applies to the brand-new “.PF” extension. I can’t find anything relevant in the Company Handbook or TMX Rulebook.

To tell you the truth, I’m rather annoyed by this. I’m tracking 265 preferred shares. I’m sure there are at least 35 more that are too small for me, or otherwise not tracked. So that’s at least 300 preferred share issues trading on the Exchange. Until yesterday, every single one had a “.PR” extension. So they add a new extension – that’s OK, times change, I can deal with that. But does it occur to anybody – the company, the Exchange, anybody at all, to make a note of that and add a brief explanation? Anything at all, just to let the ultimate customers – that’s you and me, buddies – know what’s going on? Hell no, this is Canada. Fuck the customer, we’re in a meeting.

BAM.PF.A is a FixedReset, 4.50%+290, announced March 5. The issue will be tracked by HIMIPref™ and assigned to the FixedReset index. The issue is rated Pfd-2(low) by DBRS.

BAM.PF.A traded 487,690 shares today in a range of 24.90-05 before closing at 24.85-90, 50×4. Vital statistics are: