SLF.PR.G Plunges on Opening

Sun Life Financial has announced:

the successful completion of a Canadian public offering of $280 million of Class A Non-Cumulative Rate Reset Preferred Shares Series 8R (the “Series 8R Shares”) at a price of $25.00 per share and yielding 4.35 per cent annually. The offering, initially for $250 million of Series 8R Shares, was increased to $280 million following exercise by the underwriting syndicate, co-led by Scotia Capital Inc., RBC Dominion Securities Inc. and TD Securities Inc., of an option to purchase an additional $30 million of Series 8R Shares.

The Series 8R Shares were issued under a prospectus supplement dated May 13, 2010, which was issued pursuant to a short form base shelf prospectus dated April 1, 2009. Copies of those documents are available on the SEDAR website for Sun Life Financial Inc. at The Series 8R Shares are listed on the Toronto Stock Exchange under the ticker symbol SLF.PR.G.

The issue was announced on May 14. The greenshoe was for $50-million worth, so it wasn’t completely taken up, but to exercise at all indicates a very creditable effort by the underwriters (less creditable for the brokers who actually advised clients to buy them) given the expensiveness of the issue.

The issue traded 448,345 shares in a range of 24.35-75 before closing at 24.22-35, 30×12.

Vital statistics are:

Maturity Type : Limit Maturity
Maturity Date : 2040-05-25
Maturity Price : 24.18
Evaluated at bid price : 24.22
Bid-YTW : 4.03 %

Given the very low Issue Reset Spread and the discount to par, this may be thought of as a perpetual, with perpetual credit risk: as things stand, one must assign a relatively low weight to the potential for a call in five years.

The Sun Life Straights (SLF.PR.A / B / C / D / E) are all trading to yield about 6.50% at present, so it appears that the market is prepared to pay a 250bp premium for the reset feature. Incredible.

This issue is tracked by HIMIPref™ and has been assigned to the FixedResets index. When I get enough investment grade issues trading at a discount, I’ll split the index into Premium and Discount components, probably on a backdated basis.

One Response to “SLF.PR.G Plunges on Opening”

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