Manulife Investments has announced:
that an accrued quarterly cash distribution in the amount of $0.08798 per Preferred Share of the Corporation will be included in the final redemption amount to be paid on or about June 6, 2011 to Preferred shareholders of record as of May 31, 2011. Such distribution will consist of $0.00443 of eligible Canadian dividends and $0.08355 return of capital and has been prorated to reflect the previously announced termination of the Corporation effective May 31, 2011. Class A shareholders are not entitled to this accrued cash distribution. It is not expected that the Corporation will declare any special capital gain dividends prior to the final redemption payment. As previously announced, at a special meeting held on April 4, 2011 the Corporation’s shareholders voted to terminate the Corporation effective May 31, 2011, in accordance with its constating documents. Shareholders need not take any action to receive the final redemption proceeds on termination of the Corporation. In advance of the termination of the Corporation, the Preferred Shares and the Class A Shares will be delisted from the Toronto Stock Exchange as at the close of trading on May 31, 2011.
The NAV of ASC.PR.A was 10.375 on 2011-5-6 – given the horrible credit quality of the preferreds, only a really, really stupid preferred shareholder would have voted in favour of the plan.
Preferred shareholders were victorious in the shareholder vote, despite a recommendation by the directors of the firm:
- Paul Lorentz
- Sheila Hart
- Jennifer Mercanti
- Warren Law
that they should vote in favour of the plan.
The plan, approved by the directors, was a really abusive piece of work.
I would note that although the “History” of the NAV which you referred to was last updated on May 6th with a value of $10.375 per unit, the most recent update on Friday, May 13th in the evening was a fair bit lower at $10.26, as shown here:
http://pricesandperformance.manulifemutualfunds.ca/manulife/ce/en/html/
Knowing this, I wonder how they can be so confident of being able to pay in full the final preferred dividend of $0.08798 for April and May; there were still two weeks of trading remaining for the holdings of this fund as of the time of the announcement. After all, the market can still go south and erase partially or even totally the thin margin of safety available on the preferreds. Or maybe they started liquidating the portfolio already in order to make sure that they will be able to redeem the preferred shares at par and pay the preferred dividend in whole.
My guess – guess! – would be that the portfolio has been basically liquidated by now and the eleven cent drop was the loss on liquidation. But who knows?
But they can pay a dividend and default on the principal; that’s not illegal. Actually, I would imagine that the constating documents for the fund require the dividend to be declared for any partial period on redemption.
Well, we’ll see. They might default – and it would serve them right.
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