E-L Financial New Issue!

E-L Financial has announced a new perpetual issue. See CCN Mathews for the press release … the actual press releases cannot be linked, but were timestamped 9:47 & 9:48 am, ET, today.

No prospectus is yet available on SEDAR, but informal information available to me indicates that it can be described as follows:

Dividend: 4.75%, or $1.1875 p.a. per share, non-cumulative

Redemption: $26.00 commencing October 17, 2011, declining by $0.25 p.a. until it’s redeemable at $25.00 at any time on or after October 17, 2015. The company has the right to force conversion into stock, using the applicable redemption price and the greater of $1.00 or 95% of the average common price (as defined) to determine the exchange ratio.

Rating: A preliminary rating of P-2(high) from Standard & Poors has been claimed. I have no information regarding a DBRS rating but, for analytical purposes, have assumed a Pfd-2(low) rating, the same as the existing ELF.PR.F.

It’s a bought deal via RBC-DS.

Preliminary analysis using a taxable yield curve indicates the following:

Curve Attribute ELF.PR.? RY.PR.B
Price due to base-rate 23.61 23.57
Price due to short-term 0.08 0.07
Price due to long-term 0.70 0.75
Price due to Credit Spread (2) -0.72 N/A
Price due to error 0.02 -0.01
Price due to Credit Spread (Low) -0.33 -0.38
Total Intrinsic 23.35* 24.00*
Price due to Liquidity 1.44 1.44
Total Curve Price 24.79* 25.45*
*Note Rounding Error

The “Price due to Liquidity” for the ELF.PR.? is a little fishy. As with all new issues, the analysis assumes maximal liquidity, but on the other hand, the ELF is only a $100-million dollar issue. $1.44 liquidity value seems a little steep!

Another way to say the same thing is: I think the EL new issue should be priced at less than the RY.PR.B by the sum of:

  • $0.72 for the credit spread
  • Somewhere between $0.00 and $1.44 for the liquidity

Well, I won’t be rushing to pull out my chequebook for this one! Seems to me that, like the Fortis new issue, the underwriters are pricing this deal according to the trading levels of all the Pfd-1(low) bank perps and hoping nobody notices the credit difference.

This new issue has been added to the HIMIPref™ database with the symbol ELF.PR.?.

4 Responses to “E-L Financial New Issue!”

  1. […] Volume of 4,750 shares. Perhaps this price move is a result of the new issue? This issue now has a pre-tax YTW of 4.82%, based on a bid price of 26.03 and a call in 2013. They still look expensive to me. […]

  2. […] Nesbitt crossed 100,000 @ $26.25. This issue has a YTW of 4.57% based on a call in 2013, but since it’s only rated Pfd-2(low) by DBRS, it seems expensive at the closing quote of 26.10-41, especially since the new issue comes with a coupon of 4.75%. […]

  3. […] Somewhat to my surprise, the E-L Financial new issue was able to show some strength on its opening day, closing at 25.15-22 on volume of 135,325 shares. […]

  4. […] RBC crossed 75,000 at the opening at $25.15, then 100,000 @ $25.12, followed by 56,000 @ $25.13. Since this was a recent RBC bought deal, one may speculate that this was the clearance sale for this issue. […]

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