GWO.PR.N / GWO.PR.O: 15% Conversion to FloatingReset

Great-West Lifeco Inc. has announced:

that holders of 1,475,578 Lifeco Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) have elected to convert their Series N Shares on a one-for-one basis into Non-Cumulative Floating Rate First Preferred Shares, Series O (the “Series O Shares”) on December 31, 2015.

Consequently, on December 31, 2015, Lifeco will have 8,524,422 Series N Shares and 1,475,578 Series O Shares issued and outstanding. The Series N Shares and Series O Shares will be listed on the Toronto Stock Exchange under the symbols GWO.PR.N and GWO.PR.O respectively.

It will be recalled that I recommended against the conversion and

GWO.PR.N will reset to 2.176% effective December 31. Holders of GWO.PR.N have the option to convert to FloatingResets, which will pay 3-month bills plus 130bp, reset quarterly.

This entry was posted on Friday, December 18th, 2015 at 10:56 pm 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.

6 Responses to “GWO.PR.N / GWO.PR.O: 15% Conversion to FloatingReset”

  1. fed says:
    December 19, 2015 at 8:27 am

    I must be getting wrong information here. I see the GoC5y to be 0.78 (http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/) and 1.30+0.78=2.08. How did they get 2.176?

  2. gsp says:
    December 19, 2015 at 8:48 am

    It’s not yesterday’s rate that matters. Check the prospectus or James’ previous post announcing both rates.

  3. jiHymas says:
    December 19, 2015 at 10:19 pm

    It’s not yesterday’s rate that matters.

    Yes. From the press release quoted in the post GWO.PR.N To Reset To 2.176%:

    The annual fixed dividend rate for the five-year period commencing on December 31, 2015 and ending on December 30, 2020 applicable to any Series N Shares that remain outstanding on December 31, 2015 will be 2.176% per annum (or $0.136 per Series N Share per quarter), which rate is equal to the sum of the Government of Canada Yield (as defined in the Series N Share Conditions) on December 1, 2015 plus 1.30%.

  4. fed says:
    December 21, 2015 at 3:47 pm

    Ok, so the GoC5y is 0.86 on Dec 1, 2016 at:
    http://www.bankofcanada.ca/rates/interest-rates/lookup-bond-yields/?rangeType=dates&rangeValue=1&rangeWeeklyValue=1&rangeMonthlyValue=1&lP=lookup_bond_yields.php&sR=2005-12-21&se=L_V39053&dF=2015-11-21&dT=2015-12-21

    Is that the right place to look it up?

    I can’t find the prospectus, so I assume their formula is more complex than just 1.30 + the GoC5y on dec 1, because then the reset would be a 2.16, but it is 2.176

    Thanks again for you help.

  5. nebulousanalyst says:
    December 21, 2015 at 4:52 pm

    Most resets have a line in their prospectus that states exactly how they determine the 5 year rate for the reset. It is usually by calling a specific Bloomberg command on a specific date and time. In this case, the rate is taken at 10 am ‘Toronto’ time. The 5 year has been having multi basis point daily ranges for months, so its not surprising their rate was 1.6 bps off from the end of day GOC posted rate.

  6. jiHymas says:
    December 27, 2015 at 1:21 am

    The prospectus is available on SEDAR via searching for “Great-West Lifeco Inc. Nov 16 2010 11:01:39 ET Prospectus supplement – English PDF 347 K”

    “Bloomberg Screen GCAN5YR Page” means the display designated as page “GCAN5YR” on the Bloomberg Financial L.P. service (or such other page as may replace the GCAN5YR page on that service) for purposes of displaying Government of Canada bond yields.

    “Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.

    “Government of Canada Yield” on any date means the yield to maturity on such date (assuming semi-annual compounding) of a Canadian dollar denominated non-callable Government of Canada bond with a term to maturity of five years as quoted as of 10:00 a.m. (Toronto time) on such date and which appears on the Bloomberg Screen GCAN5YR Page on such date; provided that, if such rate does not appear on the Bloomberg Screen GCAN5YR Page on such date, the Government of Canada Yield will mean the average of the yields determined by two registered Canadian investment dealers, selected by Great-West Lifeco, as being the yield to maturity on such date (assuming semi-annual compounding) which a Canadian dollar denominated non-callable Government of Canada bond would carry if issued in Canadian dollars at 100% of its principal amount on such date with a term to maturity of five years.

    For a thorough discussion, see the post What’s The Benchmark Five-Year?

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