There are now about 12.0-million shares of TRP.PR.F outstanding following a 57% conversion from TRP.PR.A.
TRP.PR.F is a FloatingReset, paying the three-month bill rate +192bp, reset quarterly. It is convertible back to TRP.PR.A on 2019-12-31 at the option of the holder.
This issue will be tracked by HIMIPref™ and is assigned to the FloatingReset subindex.
The Toronto Stock Exchange reports 37,925 shares trading on its debut in a range of 22.41-85 before closing at 22.26-75.
Vital statistics are:
| TRP.PR.F | FloatingReset | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.00 Evaluated at bid price : 22.26 Bid-YTW : 3.11 % |
The Pair Equivalency of TRP.PR.F to its FixedReset sibling TRP.PR.A shows it to be very rich at 22.26, compared to the 20.65 bid on the latter issue; but potential sellers in retail won’t have received access to their shares yet. At the bid prices, three-month bills will have to average 2.89% over the next five years to achieve equivalent total returns.
Click for Big
I must emphasize that the headline judgement of “extremely rich” applies only within the TRP.PR.A / TRP.PR.F pair: with a yield to perpetuity of 3.11%, the issue looks reasonably priced, if not a little cheap, against other investment-grade Floating Rate perpetuals (BAM.PR.B, BAM.PR.C, BAM.PR.K and PWF.PR.A). Note that the only other investment grade FloatingResets at this time are NVCC non-compliant banks; the presumption of a Deemed Maturity makes them not particularly comparable to TRP.PR.F.
So doesn’t that mean that TRP.A is even more cheap to the market that is the condition that should ultimately change (instead of further F weakness)?
In the short term, anything can happen.
The way I see it, TRP.PR.F can trade to be fairly priced against either:
i) Other FloatingResets, or
ii) TRP.PR.A
It started off by being fair against other FloatingResets, drifted down to be fair against TRP.PR.A, and is currently drifting back up again.
Ultimately, of course, it should be fair against both of them, as the prices of the two groups change, but how long that will take is anybody’s guess.
Could this one be added to PrefInfo please?
Done!