FAL.PR.B : Correction to PrefInfo

It has been brought to my attention that the redemption provisions for FAL.PR.B as listed on PrefInfo are incorrect. The following description is provided in the Falconbridge Annual Report for 2004, available on SEDAR, filing date March 23, 2005:

Holders of Preferred Share Series 3 are entitled to fixed cumulative preferential cash dividends, as and when declared by the Board of Directors, which accrue from March 1, 2004. The dividends are payable quarterly on the first day of March, June, September, and December in the amount of Cdn$0.2863 per share or Cdn$1.1452 per share per annum until March 1, 2009. The Preferred Share Series 3 are not redeemable prior to March 1, 2009. The Preferred Share Series 3 will be redeemable on March 1, 2009 and on March 1 every fifth year thereafter, in whole but not in part, at the Corporation’s option, at Cdn$25.00 per share, together with accrued and unpaid dividends up to but excluding the date of redemption. Holders of Preferred Share Series 3, upon giving notice, will have the right to convert on March 1, 2009, and on March 1 in every fifth year thereafter, their shares into an equal number of Preferred Share Series 2, subject to the automatic conversion provisions.

PrefInfo will be corrected shortly.

Update: PrefInfo has been corrected. Note that it is listed as having a potential redemption at par 2009-3-1, and a redemption forever afterwards at 25.50. This is not strictly correct, but it is the best representation I can think of for analytical purposes: the assumption is made that on reset date, the five-year fixed rate is so awful, conversion into the floater is effectively forced – this is reflected in the presumed post-reset dividend rate. The floater (FAL.PR.A) is always redeemable at 25.50.

As has been previously noted, FAL.PR.A and FAL.PR.H will soon be redeemed. FAL.PR.B will remain outstanding, but redemption of FAL.PR.A implies that Xstrata intends to redeem it next March 1. Intends. Implies. My interpretation carries no guarantees.

Update: See also previous post regarding FAL.PR.B

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