PrefBlog

Bank of Montreal has announced:

a Basel III-compliant domestic public offering of $250 million of Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 29 (the “Preferred Shares Series 29”). The offering will be underwritten on a bought-deal basis by a syndicate led by BMO Capital Markets. The Bank has granted to the underwriters an option to purchase up to an additional $50 million of the Preferred Shares Series 29 exercisable at any time up to two days before closing.

The Preferred Shares Series 29 will be issued to the public at a price of $25.00 per share. Holders will be entitled to receive non-cumulative preferential fixed quarterly dividends for the initial period ending August 25, 2019, as and when declared by the board of directors of the Bank, payable in the amount of $0.24375 per share, to yield 3.90 per cent annually.

Subject to regulatory approval, on or after August 25, 2019, the Bank may redeem the Preferred Shares Series 29 in whole or in part at par. Thereafter, the dividend rate will reset every five years to be equal to the 5-Year Government of Canada Bond Yield plus 2.24 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 29 into an equal number of Non-Cumulative Floating Rate Class B Preferred Shares Series 30 (“Preferred Shares Series 30”) on August 25, 2019, and on August 25 of every fifth year thereafter. Holders of the Preferred Shares Series 30 will be entitled to receive non-cumulative preferential floating rate quarterly dividends, as and when declared by the board of directors of the Bank, equal to the then 3-month Government of Canada Treasury Bill yield plus 2.24 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 30 into an equal number of Preferred Shares Series 29 on August 25, 2024, and on August 25 of every fifth year thereafter.

The anticipated closing date is June 6, 2014. The net proceeds from the offering will be used by the Bank for general corporate purposes.

They later announced:

that as a result of strong investor demand for its previously announced domestic public offering of $250 million of Non-Cumulative 5-year Rate Reset Class B Preferred Shares Series 29, the size of the offering has been increased to $400 million. As announced earlier today, the offering will be underwritten on a bought deal basis by a syndicate led by BMO Capital Markets.

The Implied Volatility calculation yields interesting results:

Click for Big

So the Implied Volatility is at its maximum reasonable value of 40%; this is far too low for NVCC-non-compliant issues and far too high for compliant ones, but the fit is reasonable anyway. Of interest is the fact that the two NVCC-compliant issues (BMO is the first to have two!) are well above the fitted line, which is as it should be.

This entry was posted on Wednesday, May 28th, 2014 at 6:58 pm and is filed under New Issues. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.