Sun Life Financial Inc. has announced:
that it does not intend to exercise its right to redeem its currently outstanding Class A Non-Cumulative Rate Reset Preferred Shares Series 8R (the “Series 8R Shares”) on June 30, 2015. As a result, subject to certain conditions, the holders of Series 8R Shares have the right to convert all or part of their Series 8R Shares on a one-for-one basis into Class A Non-Cumulative Floating Rate Preferred Shares Series 9QR of Sun Life Financial (the “Series 9QR Shares”) on June 30, 2015. Holders of Series 8R Shares who do not exercise their right to convert their Series 8R Shares into Series 9QR Shares on such date will retain their Series 8R Shares.
The foregoing conversions are subject to the conditions that: (i) if Sun Life Financial determines that there would be less than one million Series 8R Shares outstanding after June 30, 2015, then all remaining Series 8R Shares will automatically be converted into Series 9QR Shares on a one-for-one basis on June 30, 2015, and (ii) alternatively, if Sun Life Financial determines that there would be less than one million Series 9QR Shares outstanding after June 30, 2015, no Series 8R Shares will be converted into Series 9QR Shares. In either case, Sun Life Financial will give a written notice to that effect to any registered holder affected by the preceeding minimums on or before Monday, June 22, 2015.
The dividend rate applicable to the Series 8R Shares for the five-year period commencing on June 30, 2015 and ending on June 29, 2020, and the dividend rate applicable to the Series 9QR Shares for the three-month period commencing on June 30, 2015 and ending on September 29, 2015, will be determined on Monday, June 1, 2015 and will be announced in a news release on Monday, June 1, 2015.
Beneficial owners of Series 8R Shares who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to ensure that they meet the deadline to exercise such right, which is 5:00 p.m. (ET) on Monday, June 15, 2015.
Subject to regulatory approval, Sun Life Financial may redeem the Series 8R Shares and the Series 9QR Shares in whole or in part on June 30, 2020 and on the 30th of June in every fifth year thereafter.
An application will be made to list the Series 9QR Shares on the Toronto Stock Exchange.
SLF.PR.G is a FixedReset, 4.35%+141, that commenced trading 2010-5-25 after being announced 2015-5-13.
There can be no surprise regarding the extension seeing that it has been trading below $25.00 for some time and has lost considerable ground vs. SLF.PR.D over the past year. Today it is bid at $18.01, against $22.90 for SLF.PR.D, a spread of $4.89 – this may be compared to $6.25 at April month-end, $2.16 at 2014 year-end and ($1.29) [that is, a pay-up] at 2013 year-end.
As noted in the press release, the new dividend rate will be determined June 1 and announced later that day; if we use today’s GOC-5 rate of 1.09%, the new rate will be 1.09%+141bp = 2.50%, a stunning 43% reduction from its initial dividend.
Given current conditions for Strong Pairs, I expect that I will eventually recommend that the FixedReset be held rather than converted.
| Estimate of SLF.PR.? FloatingReset Trading Price In Current Conditions Assuming Reset to 2.50% for SLF.PR.G FixedReset |
| |
Assumed FloatingReset
Price if Implied Bill
is equal to |
| FixedReset |
Bid Price |
Spread |
0% |
+0.30% |
+0.60% |
| SLF.PR.G |
18.01 |
141bp |
16.82 |
17.15 |
17.48 |
These various scenarios for the Implied Average Bill Yield can be compared with the current state of affairs for FixedReset / FloatingReset pairs:
Click for BigSo, given current market conditions, it is reasonable to expect that the new FloatingReset issue (if it is issued) will be trading significantly lower than the continuing FixedReset issue (assuming there is enough of it left that the company does not force conversion) and thus those who really want the FloatingReset will be able to trade on the market on better terms than available through conversion. But there’s still a lot of time left before a decision has to be made, and the actual dividend rate for the next five years for SLF.PR.G isn’t even known yet. So regard these musings as tentative!
This entry was posted on Wednesday, May 20th, 2015 at 1:09 am and is filed under 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.
SLF.PR.G To Be Extended
Sun Life Financial Inc. has announced:
SLF.PR.G is a FixedReset, 4.35%+141, that commenced trading 2010-5-25 after being announced 2015-5-13.
There can be no surprise regarding the extension seeing that it has been trading below $25.00 for some time and has lost considerable ground vs. SLF.PR.D over the past year. Today it is bid at $18.01, against $22.90 for SLF.PR.D, a spread of $4.89 – this may be compared to $6.25 at April month-end, $2.16 at 2014 year-end and ($1.29) [that is, a pay-up] at 2013 year-end.
As noted in the press release, the new dividend rate will be determined June 1 and announced later that day; if we use today’s GOC-5 rate of 1.09%, the new rate will be 1.09%+141bp = 2.50%, a stunning 43% reduction from its initial dividend.
Given current conditions for Strong Pairs, I expect that I will eventually recommend that the FixedReset be held rather than converted.
Price if Implied Bill
is equal to
These various scenarios for the Implied Average Bill Yield can be compared with the current state of affairs for FixedReset / FloatingReset pairs:
Click for Big
So, given current market conditions, it is reasonable to expect that the new FloatingReset issue (if it is issued) will be trading significantly lower than the continuing FixedReset issue (assuming there is enough of it left that the company does not force conversion) and thus those who really want the FloatingReset will be able to trade on the market on better terms than available through conversion. But there’s still a lot of time left before a decision has to be made, and the actual dividend rate for the next five years for SLF.PR.G isn’t even known yet. So regard these musings as tentative!
This entry was posted on Wednesday, May 20th, 2015 at 1:09 am and is filed under 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.