Royal Bank of Canada has announced:
it has closed its domestic public offering of Non-Cumulative, 5-Year Rate Reset Preferred Shares Series BB. Royal Bank of Canada issued 20 million Preferred Shares Series BB at a price of $25 per share to raise gross proceeds of $500 million.
The offering was underwritten by a syndicate led by RBC Capital Markets. The Preferred Shares Series BB will commence trading on the Toronto Stock Exchange today under the ticker symbol RY.PR.H.
The Preferred Shares Series BB were issued under a prospectus supplement dated May 27, 2014 to the bank’s short form base shelf prospectus dated December 20, 2013.
RY.PR.H is a FixedReset, 3.90%+226, NVCC-Compliant issue announced May 23. The issue will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex. It is regrettable that the Toronto Exchange has recycled the ticker of the previous RY.PR.H, redeemed less than a year ago.
The issue traded a healthy 1,328,901 shares today in an unusually wide range of 24.64-99 before closing at 24.86-88, 37×72. The issue was affected by a late-afternoon collapse in the market; it was trading firmly in the 90s prior to 3pm, as reflected in the Volume Weighted Average Price: 24.944985. Vital Statistics are:
| RY.PR.H | FixedReset | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-06-03 Maturity Price : 23.10 Evaluated at bid price : 24.86 Bid-YTW : 3.75 % |
The two NVCC-compliant issues are priced comparatively with their non-compliant cousins according to Implied Volatility Theory:
Click for Big
What do your statistics boxes mean:
RY.PR.H FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-06-03
Maturity Price : 23.10
Evaluated at bid price : 24.86
Bid-YTW : 3.75 %
so how do you get 6/3/2044 maturity and maturity price of 23.10???
are you estimating that this issue has characteristics that fit the maturity and maturity price of a hypothetical pref with these statistics?? similar duration, etc?
if not then a bit confused??? don’t these new fix resets that are nvcc compliant have no stated maturity date????
reikreik
so how do you get 6/3/2044 maturity
It’s what I call a “Limit Maturity” – thirty years following the calculation date. It’s used as a computational convenience. According to HIMIPref™, “Forever” = “Thirty Years”
and maturity price of 23.10
Given that the valuation model uses an end-date, it must also have an end-price, which is calculated by HIMIPref™.
For instruments trading near their call price, this algorithm almost always results in an end-price that is lower than the current bid, on the grounds that if we have good times, the calls will be exercised; therefore, if the instrument is still extant on the end-date, we must be in bad times; therefore the price will be lower.
It seems to work OK.
If you don’t like my assumptions, you can always plug in your own using the Yield Calculator for FixedResets.