As previously discussed, LCS.PR.A approved a term extension to April 29, 2019, last spring, together with a big fat dividend of 0.575 p.a., paid quarterly. At that time, Brompton also clearly signalled its intent to grow the fund by announcing a treasury offering.
On August 18, 2014, Brompton Funds announced:
it has filed a preliminary short form prospectus with respect to a treasury offering of class A shares and preferred shares.
The Company invests in a portfolio, on an approximately equal weight basis, of common shares of Canada’s four largest publicly-listed life insurance companies: Great-West Lifeco Inc., Industrial Alliance Insurance and Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.
The investment objectives of the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.075 per class A share and to provide the opportunity for growth in net asset value per class A share.
The investment objectives of the preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.575 per annum and to return the original issue price ($10.00) to holders of preferred shares on the maturity date of the Company, April 29, 2019.
The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC, and Scotiabank, and includes BMO Capital Markets, National Bank Financial Inc., GMP Securities L.P., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., Dundee Securities Ltd., Industrial Alliance Securities Inc., Mackie Research Capital Corporation, and Manulife Securities Incorporated.
On August 25, 2014, Brompton Funds announced:
that the Company’s treasury offering of class A and preferred shares has been priced at $7.55 per class A share and $10.05 per preferred share. The final class A share and preferred share offering prices were determined so as to be non-dilutive to the net asset value per unit of the Company on August 22, 2014, the most recently calculated net asset value, as adjusted for dividends and certain expenses accrued prior to or upon settlement of the offering.
…
The Company intends to file a final prospectus in each of the provinces and territories of Canada in connection with the offering. The offering is expected to close on or about September 3, 2014 and is subject to customary closing conditions including approvals of applicable securities regulatory authorities and the Toronto Stock Exchange.
On September 3, 2014, Bromption Funds announced:
that it has completed a treasury offering of 2,850,000 class A shares and 2,850,000 preferred shares for aggregate gross proceeds of approximately $50.2 million. The class A shares and preferred shares will continue to trade on the Toronto Stock Exchange under the existing symbols LCS and LCS.PR.A, respectively.
The Company’s treasury offering was priced at $7.55 per class A share and $10.05 per preferred share. The final class A share and preferred share offering prices were determined so as to be non-dilutive to the most recent calculated net asset value per unit of the Company on the date of pricing of the offering, August 22, 2014, as adjusted for dividends and certain expenses accrued prior to or upon settlement of the offering.
and finally, on September 16, 2014, Brompton Funds announced:
that it has completed the issuance of 84,000 class A shares and 84,000 preferred shares for gross proceeds of approximately $1.5 million. This issuance was pursuant to the exercise of the over-allotment option granted to the agents in connection with the Company’s recently completed treasury offering. Following the exercise of the over-allotment option, total gross proceeds raised pursuant to this offering are approximately $51.6 million.
So that was a very nice offering and brought the fund up to a total size of over $90-million, with over 5.6-million units outstanding; so the fund is now of sufficient size that adding it to the investable universe is not guaranteed to be a complete waste of time.
As previously discussed, DBRS upgraded the preferreds to Pfd-4(high) in December 2013, and this rating has just been confirmed, although the ‘Positive Trend’ has been dropped:
As part of the term extension, the fixed cumulative quarterly distributions to the Preferred Shares will be increased to $0.14375 per preferred share starting May 1, 2014, yielding 5.75% annually on their issue price of $10.00 per share (up from 5.25% previously). Holders of the Class A Shares are expected to continue receiving regular monthly targeted cash distributions of $0.075 per share, yielding 6% annually on their issue price of $15.00 per share. Class A Share distributions were suspended in March 2011 because the Company’s net asset value fell below $15.00 per unit (i.e., 33% downside protection), but were reinstated in July 2013. On April 21, 2014, DBRS placed the ratings of the Preferred Shares Under Review with Positive Implications. Since then, the performance of the Company has been volatile, with downside protection dropping to 34.8% as of October 17, 2014, from 37.2% as of April 10, 2014. Because of the volatility and recent negative trend, the rating of the Preferred Shares has been confirmed and removed from Under Review with Positive Implications.
A nice feature of the preferreds is that they have a decent monthly retraction feature, as explained in the prospectus:
Except as noted below, holders of Preferred Shares whose Preferred Shares are surrendered for retraction will be entitled to receive a retraction price per Preferred Share equal to 96% of the lesser of (i) the NAV per Unit determined as of such Retraction Date, less the cost to the Company of the purchase of a Class A Share for cancellation; and (ii) $10.00. For this purpose, the cost of the purchase of a Class A Share will include the purchase price of the Class A Share, and commission and such other costs, if any, related to the liquidation of any portion of the Portfolio to fund the purchase of the Class A Share. If the NAV per Unit is less than $10.00, plus any accrued and unpaid distributions on the Preferred Shares, the retraction price of a Class A Share will be nil. Any declared and unpaid distributions payable on or before a Retraction Date in respect of Preferred Shares tendered for retraction on such Retraction Date will also be paid on the Retraction Payment Date.
This feature was found to be supportive of market prices during the worst depths of the Credit Crunch.
The inclusion of this issue into the database has been backdated to May 1, 2014; this is the first date following the exercise of the Special Retraction Right offered to shareholders after the term extension. The issue with the prior terms has not been incorporated into the database since it was too small; but by adding as of May 1 I can get at least some relevant history.
This entry was posted on Saturday, October 25th, 2014 at 12:27 am and is filed under Data Changes, Issue Comments. 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.
LCS.PR.A Added to HIMIPref™ Database
As previously discussed, LCS.PR.A approved a term extension to April 29, 2019, last spring, together with a big fat dividend of 0.575 p.a., paid quarterly. At that time, Brompton also clearly signalled its intent to grow the fund by announcing a treasury offering.
On August 18, 2014, Brompton Funds announced:
On August 25, 2014, Brompton Funds announced:
On September 3, 2014, Bromption Funds announced:
and finally, on September 16, 2014, Brompton Funds announced:
So that was a very nice offering and brought the fund up to a total size of over $90-million, with over 5.6-million units outstanding; so the fund is now of sufficient size that adding it to the investable universe is not guaranteed to be a complete waste of time.
As previously discussed, DBRS upgraded the preferreds to Pfd-4(high) in December 2013, and this rating has just been confirmed, although the ‘Positive Trend’ has been dropped:
A nice feature of the preferreds is that they have a decent monthly retraction feature, as explained in the prospectus:
This feature was found to be supportive of market prices during the worst depths of the Credit Crunch.
The inclusion of this issue into the database has been backdated to May 1, 2014; this is the first date following the exercise of the Special Retraction Right offered to shareholders after the term extension. The issue with the prior terms has not been incorporated into the database since it was too small; but by adding as of May 1 I can get at least some relevant history.
This entry was posted on Saturday, October 25th, 2014 at 12:27 am and is filed under Data Changes, Issue Comments. 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.