FFH.PR.M Soft On Moderate Volume

Fairfax Financial Holdings Limited has announced that it:

has completed its previously announced bought deal financings for Subordinate Voting Shares, Preferred Shares, Series M (“Series M Shares”) and Senior Notes due 2025 (“Notes”). As a result of the underwriters’ exercising their over-allotment option to purchase an additional 150,000 Subordinate Voting Shares, at a price of $650.00 per Subordinate Voting Share, Fairfax has issued 1,150,000 Subordinate Voting Shares for gross proceeds of $747,500,000 (the “Subordinate Voting Share Offering”). The underwriters for the offering of Series M Shares (the “Preferred Share Offering”) also exercised their option to purchase an additional 1,200,000 Series M Shares at a price of $25.00 per share. As a result, Fairfax has issued 9,200,000 Series M Shares for gross proceeds of $230 million pursuant to the Preferred Share Offering. In addition, Fairfax has completed its previously announced offering of Notes in an aggregate principal amount of $350 million (the “Notes Offering”). The total gross proceeds of the Subordinate Voting Share Offering, Preferred Share Offering and Notes Offering are approximately $1.325 billion.

The Series M Shares were sold through a syndicate of Canadian underwriters led by BMO Capital Markets, RBC Capital Markets and Scotiabank and that also included CIBC World Markets Inc., National Bank Financial Inc., TD Securities Inc., Canaccord Genuity Corp., Desjardins Securities Inc., GMP Securities L.P. and Cormark Securities Inc.

Fairfax intends to use the net proceeds of the Subordinate Voting Share Offering, the Preferred Share Offering and the Notes Offering to partially fund the previously announced proposed acquisition of all of the issued and to be issued shares of Brit plc. There can be no assurance that such acquisition will be completed. If the acquisition is not successfully completed, Fairfax intends to use the net proceeds from the offerings to augment its cash position, to increase short-term investments and marketable securities held at the holding company level, to refinance or retire outstanding debt and other corporate obligations of Fairfax and its subsidiaries from time to time, and for general corporate purposes.

FFH.PR.M is a FixedReset, 4.75%+398, announced February 20. It will be tracked by HIMIPref™ and will be assigned to the Scraps index on credit concerns.

The issue traded 774,812 shares today (consolidated exchanges) in a range of 24.63-75 before closing at 24.65-74. Vital Statistics are:

FFH.PR.M FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-03
Maturity Price : 23.03
Evaluated at bid price : 24.65
Bid-YTW : 4.74 %

Implied Volatility theory provides a very poor fit to the data:

impVol_FFH_150303
Click for Big

According to this FFH.PR.M, resetting at +398bp on 2020-3-31, is $0.85 cheap at its bid of 24.65..

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