BNS New Issue : 5.25% Perpetual

Scotia has announced:

a domestic public offering of 12 million, 5.25% non-cumulative preferred shares Series 16 (the “Preferred Shares Series 16”) at a price of $25.00 per share, for an aggregate amount of $300 million.
    The Bank has agreed to sell the Preferred Shares Series 16 to a syndicate of underwriters led by Scotia Capital Inc. on a bought deal basis. The Bank has granted to the underwriters an over allotment option to purchase up to an additional $45 million of the Preferred Shares Series 16 at any time up to 30 days after closing.
    Closing is expected to occur on or after October 12, 2007. This domestic public offering is part of Scotiabank’s ongoing and proactive management of its Tier 1 capital structure.

This will get the money into Tier 1 prior to Scotia’s year-end on October 31. I certainly don’t think Scotia’s in any trouble, but I suspect that all the banks will have seen their balance sheets bulk up over the past six weeks (as their sometime customers find it more difficult or too expensive to borrow on the money market) and who knows? We might even see some more issuance from those banks that have the room.

Come on TD! Let’s see a good big batch of TD Perps!


Size: 12-million shares (= $300-million), underwriters’ option for additional 1.8-million shares (= $45-million)

Issue Price: $25.00 

Dividend: 5.25% = $1.3125 p.a.  Paid on third-last business day of Jan, April, July, Oct. Long first dividend of $0.39195 anticipated, to be paid Jan 29.

Redemption: Redeemable commencing third-last business day in January, 2013, at $26.00. Redemption price declines by $0.25 p.a. until January 27, 2017; redeemable at $25.00 thereafter.

Seniority: On parity with all other preferred shares, senior to common, junior to everything else.

On the whole, the issue looks pretty good and I suspect that it will trade at an immediate premium:

Issue Fair Value
by HIMIPref™
Quote 9/24
BNS.PR.J 26.05 26.01-10
BNS.PR.K 24.29 24.67-73
BNS.PR.L 23.51 23.49-55
BNS.PR.M 23.51 23.51-57
Series 16 25.93 Not yet trading

The new issue has been added to the HIMIPref™ database with the securityCode P50013.

Update, after close: What a difference a day makes! As briefly discussed in the September 25 Review, the new issue appears to have been the cause (or at least the trigger!) for a mass repricing of perpetuals. A revised table of comparibles is:

Issue Fair Value
by HIMIPref™
Quote 9/25
BNS.PR.J 25.40 25.41-60
BNS.PR.K 24.03 24.09-20
BNS.PR.L 23.10 23.03-24
BNS.PR.M 23.10 22.85-90
Series 16 25.45 Not yet trading

Update, 2007-10-10: As of the close today, fair value is estimated as $24.52.

Update, 2007-10-11: As of the close today, fair value is estimated at $24.43.

4 Responses to “BNS New Issue : 5.25% Perpetual”

  1. […] Hot on the heels of the BNS 5.25% Perp New Issue comes a very similar offering from BMO! Bank of Montreal (TSX, NYSE: BMO) today announced a domestic public offering of $250 million of Non-Cumulative Perpetual Class B Preferred Shares Series 14 (the “Preferred Shares”). […]

  2. […] Readers will remember that when the recent new issues were announced, I liked both of them: the BNS 5.25% was worth $25.93 according to the prior day’s closing prices, although by the time the BMO 5.25% was announced both issues were worth more like $25.33. […]

  3. […] Well, TD responded to my plea for TD Perps, but I suppose I should have specified that I want a decent coupon! Come on, guys! 5.25% was a great coupon, back in the old days of late September when comparables were trading to yield 5%, but it doesn’t cut the mustard today. This issue, which joins the 5.25% BNS Perps and the 5.25% BMO Perps is expensive compared to comparables and cannot be recommended at the issue price, given the recent increase in market yields. […]

  4. […] The new BNS 5.25% Perp, announced September 25, which immediately caused a repricing in the market, held up well on opening day, closing at $24.81-82 on heavy volume. […]

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