Quebecor has announced:
the fixed dividend rate for its Series 3 Cumulative Redeemable First Preferred Shares (TSX:IQW.PR.D) (the “Series 3 Preferred Shares”) will be equal to 150% of the yield on five-year non-callable Government of Canada bonds to be determined on November 9, 2007.
150%! Given that 5-year Canadas are now yielding about 4.40%, that implies that – in the absence of market movement in the next three weeks – the reset rate will be 6.6%, or $1.65, an increase from the current level of $1.538.
It appears that Quebecor would really prefer its IQW.PR.D holders to continue to elect fixed-rate, and not to exercise their right to convert to the ratchet-rate issue … which may be expected to pay 100% of prime for the next five years, given their recent downgrade to ‘deep junk’.
The rate will be set November 9. I’ll post more then; but for now it looks as if fixed-rate is the way to go on this pair.
[…] It would seem that the market emphatically agrees with my assessment that the fixed-rate was the way to go for the next five years! […]