DFN.PR.A To Get Bigger In Overnight Secondary Offering

Quadravest Capital Management Inc. has announced:

Dividend 15 Split Corp. (the “Company”) is pleased to announce that it has filed a short form prospectus in each of the provinces of Canada with respect to an additional offering of Preferred Shares and Class A Shares. The offering will be co-led by National Bank Financial, CIBC World Markets and RBC Capital Markets.

The Class A shares will be offered at a price of $10.75 per share to yield 11.16% and the Preferred Shares will be offered at a price of $10.00 per share to yield 5.25%. The closing price of the Class A Shares on September 23, 2013 on the TSX was $11.32 and the closing price of the Preferred Shares on September 23, 2013 on the TSX was $10.25. Since the Company commenced on March 16, 2004, it has exceeded its distribution objectives. The aggregate dividends paid on Class A shares have been $14.80 per share, representing 113 regular consecutive monthly distributions, plus six special distributions. The Preferred Shares have received a total of $4.96 per share for a combined total distribution of $19.76 per unit paid by the Company. All distributions have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The proceeds of the secondary offering, net of expenses and the Agents’ fee, will be used by the Company to invest in an actively managed portfolio of dividend-yielding common shares which includes each of the 15 Canadian companies listed below. These are currently among the highest dividend-yielding securities in the S&P/TSX 60 Index:

Bank of Montreal Enbridge Inc. TELUS Corporation
The Bank of Nova Scotia Manulife Financial Corp. Thomson-Reuters Corporation
BCE Inc. National Bank of Canada The Toronto-Dominion Bank
Canadian Imperial Bank of Commerce Royal Bank of Canada TransAlta Corporation
CI Financial Corp. Sun Life Financial Inc. TransCanada Corporation

The Company’s investment objectives are:
Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends in the amount of $0.04375 per Preferred Share to yield 5.25% per annum on the original issue price; and
ii. on or about December 1, 2019, to pay the holders of the Preferred Shares the original issue price of those shares.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends initially targeted to be $0.10 per Class A; and
ii. on or about December 1, 2019, to pay the holders of Class A Shares at least the original issue price of those shares.

The sales period of this overnight offering will end at 8:30 a.m. EST on September 25, 2013.

A copy of the preliminary short form prospectus is available from National Bank Financial, CIBC World Markets and RBC Capital Markets.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Investors should read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

$10.75 for the capital units looks very rich considering that the September 13 NAVPU was $19.34, which gives the capital units an intrinsic value of $9.34. Still, the closing price of DFN today was indeed $11.40, so fools who believe that greater fools will be around tomorrow will find this offering of great interest.

The preferred shares are incredibly attractive at the indicated price of $10.00, but I’ll bet a nickel nobody other than the underwriters actually buys at that level; however, at today’s closing quote of 10.20-25 they are still very attractive and many will find them of interest particularly if they decline with the additional supply.

DFN.PR.A is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns. It was recently confirmed at Pfd-3 by DBRS. Income Coverage in 13H1 was 85%.

5 Responses to “DFN.PR.A To Get Bigger In Overnight Secondary Offering”

  1. prefQC says:

    Do these newly issued shares immediately go ex-dividend on Sep 26? A nice welcome bonus!

  2. prefQC says:

    “The sales period of this overnight offering will end at 8:30 a.m. EST on September 25, 2013. ” Did Quadravest forget to change their clocks from EST to EDT in the spring? Does this mean sales close at 9:30am EDT? 🙂

  3. cowboylutrell says:

    If Quadravest is successfull in its attempt to sell these new shares of DFN and DFN.PR.A, I hope they, as well as their competitors, will eventually consider creating brand new split companies. The split share area of the market has been shrinking fast since the financial crisis. I’ve been hoping for a renaissance for years.

  4. jiHymas says:

    Do these newly issued shares immediately go ex-dividend on Sep 26?

    From the Preliminary Short Form Prospectus available on SEDAR – but not linked due to CDS abuse of their monopoly – it would appear not:

    Closing of this Offering is expected to take place on October ●, 2013, but in any event no later than ●, 2013.

    Did Quadravest forget to change their clocks from EST to EDT in the spring? Does this mean sales close at 9:30am EDT? 🙂

    You’ve got me! Good catch – and an amusing one!

    I hope they, as well as their competitors, will eventually consider creating brand new split companies.

    I would like to see a few more too, but it largely depends on whether enough suckers can be lined up to buy capital units.

    So far this year, we’ve seen GCS.PR.A and CGI.PR.D come out – both of them quite good issues – but those have come from issuers who have already sold the capital units (in the case of GCS.PR.A, to themselves, which gives them lots of incentive to keep costs down and cash drag to a minimum). So I don’t think we’re doing too badly this year.

  5. […] The overnight offering was reported on PrefBlog yesterday. […]

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