Rona Inc. has announced:
that it has closed its previously announced bought deal public offering of Cumulative 5 Year Rate Reset Series 6 Class A Preferred Shares (the “Series 6 Class A Preferred Shares”) at a price of $25.00 per Series 6 Class A Preferred Share purchased by a syndicate of underwriters led by National Bank Financial Inc. and BMO Capital Markets, acting as joint bookrunners. The offering results in a total of 6,000,000 Series 6 Class A Preferred Shares being issued today by RONA for gross proceeds of $150,000,000. The underwriters have an over-allotment option to purchase up to an additional 900,000 Series 6 Class A Preferred Shares at a price of $25.00 per Series 6 Class A Preferred Share, exercisable for a period of 30 days from closing on the same terms and conditions as the offering. If the over-allotment option is exercised in full, the total gross proceeds to RONA will be $172,500,000.
RON.PR.A is a FixedReset, 5.25%+265, announced February 1. The issue traded 454,407 shares today in a range of 25.10-35 before closing at 25.13-15, 2×3.
Vital Statistics are:
| RON.PR.A | FixedReset | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : 5.17 % |
RON.PR.A will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.
I might buy some of those for my mother. The days of sterling issues are over. All the banks resetable will be bought back at their first opportunity and quite frankly, the new OFSI rule will turn new banking prefs into disguised commons without the growth a banks common share normally gives. As a matter of fact, if I were DBRS or S&P, I would feel forced to downgrade future new bank prefs issues a few notches because of their conversion into commons in case of “TARP-like” governmental injections if I am correct that, in such case, the bank prefs (may) be converted into commons.
quite frankly, the new OFSI rule will turn new banking prefs into disguised commons without the growth a banks common share normally gives
I think you’re a bit gloomy on that – bank preferred shares will still provide a great deal of first-loss protection because if the bank loses, say, half its capital then the rights of the preferred shareholders will not change (given the minimal NVCC conversion conditions). It is only when the bank gets wiped out that they will convert and, as preferred shareholders, we’re used to the idea that in that case we’re going to lose all our money anyway.
As a matter of fact, if I were DBRS or S&P, I would feel forced to downgrade future new bank prefs issues a few notches because of their conversion into commons in case of “TARP-like” governmental injections if I am correct that, in such case, the bank prefs (may) be converted into commons.
Yes, a downgrade of a notch or two would not be surprising. But, I claim, since they still have significant first-loss protection, they’re still fixed income and should still get ratings. That’s all pretty much up in the air right now … we’ll have to see how a standard pref structure unfolds in Canada.