L.PR.A Goes Stale on Shelf

Loblaw’s has announced:

the completion today of the sale of 9.0 million cumulative redeemable convertible Second Preferred Shares, Series A, to yield 5.95% per annum, to a syndicate of underwriters co-led by RBC Dominion Securities Inc. and CIBC World Markets Inc. for distribution to the public. The aggregate gross proceeds of the sale were $225 million. The Preferred Shares, Series A have been listed and posted to trade on the Toronto Stock Exchange under the symbol “L.PR.A”.

The announcement of this issue was reported on PrefBlog with the opinion:

This issue looks expensive.

It would appear the market agrees! The terms of the greenshoe were that the option had to be exercised prior to closing; but the size shown in the current press release indicates that the extra shares have not been issued.

It was a thoroughly pathetic opening day, with 4,448 shares trading in a range of 24.70-90, closing at 24.00-70, 10×52. The underwriters didn’t pretend to support the issue; at one point today the bid was 23.00.

More later.

Later, more:At $24.00, it doesn’t look so bad … but it’s scarcely an inventory blow-out sale!

Bear in mind that Pfd-3 issues (regardless of modifier) are considerably less liquid than they would be if they were higher grade. They will also tend to trade with higher correlation to the company’s common than they would otherwise; they are more equity-like than higher grade issues, both in theory and practice. I do not recommend a weighting of more than 10% total Pfd-3 issues in a diversified preferred share portfolio, with no more than 5% in any one name; have more than this if you like, but I will consider your portfolio to be “equity-substitute” rather than “fixed-income”.

Loblaw New Issue
and Some Comparators
Ticker DBRS
(at bid)
L.PR.A Pfd-3 24.00-70 2015-7-30

BPO.PR.K Pfd-3(high) 22.60-69 2016-12-30 6.72%
YPG.PR.B Pfd-3(high) 20.30-85 2017-6-29 8.00%
DW.PR.A Pfd-3 22.00-24 2017-3-12 6.60%

2 Responses to “L.PR.A Goes Stale on Shelf”

  1. […] They had to announce it, otherwise nobody would have noticed: the new issue traded 4,250 shares today, all at 24.50, closing at 24.50-55, 1×10. There were seven trades in the most sluggish opening day since … er … the last one. […]

  2. […] was last mentioned on PrefBlog in the post L.PR.A Goes Stale on Shelf … it had a difficult underwriting in June […]

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