ABK.PR.C Considering Term Extension

Allbanc Split Corp. has announced:

The Company is scheduled to terminate on March 10, 2008. The Board of Directors is currently reviewing alternatives to termination, including a possible extension of the term of the Company, but there can be no assurance that any alternative will materialize.

Allbanc has been discussed here before and the same things previously written still apply: the NAV per Unit is $205.35 as of October 18, giving an asset coverage ratio of just under 3.4:1. Slightly more than half of the original issue has been retracted since their issuance in 2003; but a unit was worth only $102.81 back then.

Geez, the banks in their underlying portfolio have done well in the past five years, eh? DBRS continues to rate the issue as only Pfd-2; presumably the rating is constrained due to the focus on the financial sector, but the asset coverage suggests to me that Pfd-2(high) would be more appropriate.

The split-share vehicle has actually been around since 1998; after the first five year term they reorganized and:

redeemed all of its outstanding Capital and Preferred Shares for an aggregate redemption amount of approximately $92 million and has completed its public offering of Class A Preferred Shares, raising approximately $55 million through the issuance of 897,444 Class A Preferred Shares. The Class A Preferred Shares were offered to the public by a syndicate of agents led by Scotia Capital Inc.

Pursuant to a capital reorganization approved by shareholders on January 14, 2003, the holders of 897,444 Capital Shares converted such shares into 897,444 Class A Capital Shares on January 17, 2003. The Class A Preferred Shares were offered in order to fund in part, the redemption of Capital and Preferred Shares and to maintain the leveraged “split share” structure of the Company.

More details regarding the potential for another reorganization will be forthcoming. The capital unit-holders of long standing will be sitting on such ridiculously large unrealized capital gains that there will be a strong incentive for them to support a continuation of the company. Given that the preferreds pay a dividend of 5% of par, any extension might have to sweeten the deal a little to get preferred shareholder support, if current market levels persist until decision time.

2 Responses to “ABK.PR.C Considering Term Extension”

  1. […] So – the pondering that commenced October 25 has resulted in a proposed term-extension for the Capital Shares, but not for the preferreds – given that the NAVPU is $196.93 as of December 6, giving asset coverage of 3.23:1, they should be able to issue a larger amount of preferreds while maintaining asset coverage in the 2.2:1 area. […]

  2. […] consequences to the capital unit-holders for a termination won’t be all that terrible. The ABK.PR.C exchange/extension was a much easier call for those capital unitholders, given the enormous unrealized capital gains […]

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