On 2015-10-8, The Bank of Nova Scotia announced:
Allbanc Split Corp. II (the “Company”) announced today that its Board of Directors has approved a proposal to reorganize the Company. Scotiabank has been retained to advise the Company on the reorganization which will permit holders of Capital Shares to extend their investment in the Company beyond the scheduled redemption date of February 28, 2016 for an additional five years. The Preferred Shares will be redeemed on the same terms originally contemplated in their share provisions. Holders of Capital Shares who do not wish to extend their investment and all holders of Preferred Shares will have their shares redeemed on February 28, 2016.
The reorganization will involve (i) the extension of the originally scheduled redemption date, (ii) a special retraction right to enable holders of Capital Shares to retract their shares as originally contemplated should they not wish to extend their investment and (iii) the issuance of new preferred shares in order to provide continuing leverage for the Capital Shares. The Company may also offer additional Capital Shares at the time of the preferred share offering.
A special meeting of holders of the Capital Shares will be called to consider and vote upon the proposed reorganization. Details of the proposed reorganization will be outlined in an information circular to be prepared and delivered to holders of Capital Shares in connection with the special meeting and will be available on www.sedar.com. Implementation of the proposed reorganization will also be subject to applicable regulatory approval including the Toronto Stock Exchange.
Allbanc Split Corp. II is a mutual fund corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. Capital Shares and Preferred Shares of Allbanc Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols ALB and ALB.PR.B respectively.
On 2015-10-27, they announced:
A special meeting of holders of the Capital Shares has now been called and will be held on December 11, 2015 to consider and vote upon the proposed reorganization. Details of the proposed reorganization will be outlined in an information circular to be prepared and delivered to holders of Capital Shares of record on November 5, 2015 in connection with the special meeting. Implementation of the proposed reorganization will also be subject to applicable regulatory approval including the Toronto Stock Exchange.
On 2015-12-11, they announced:
Allbanc Split Corp. II (the “Company”) announced today that holders of its Class A Capital Shares (“Capital Shares”) have overwhelmingly approved a share capital reorganization (the “Reorganization”) allowing holders of Capital Shares, at their option, to retain their investment in the Company after the redemption date of February 26, 2016. The Reorganization will permit holders of Capital Shares to extend their investment in the Company beyond the redemption date of February 26, 2016 for an additional five years. The Class B Preferred Shares, Series 1 will be redeemed on the same terms originally contemplated in their share provisions on February 26, 2016. In order to maintain the leveraged “split share” structure of the Company, the Company expects to create and issue a new series of Class B preferred shares on or about February 26, 2016.
… and on 2015-12-30, they announced:
Allbanc Split Corp. II (the “Company”) announced today that the final condition required to extend the term of the Company for an additional five years to February 28, 2021, has been met as holders of approximately 85% of Class A Capital Shares (“Capital Shares”) have elected to extend. Holders of Capital Shares previously approved the extension of the term of the Company provided a minimum of 1,000,000 Capital Shares remain outstanding after giving effect to the special retraction right (the “Special Retraction Right”).
Under the Special Retraction Right, 243,022 Capital Shares were tendered to the Company for payment on February 26, 2016. The holders of the remaining 1,375,134 Capital Shares will continue to enjoy the benefits of a leveraged participation in the capital appreciation of the Company’s portfolio while potentially deferring any capital gains tax liability which would
otherwise be realized on the redemption of their Capital Shares.The Company’s Class B Preferred Shares, Series 1 will be redeemed by the Company on February 26, 2016 in accordance with the redemption provisions at a price per share equal to the lesser of $21.80 and the Net Asset Value per Unit. In order to maintain the leveraged “split share” structure of the Company, the Company intends to create and issue a new series of Class B Preferred Shares to be called the Series 2 Preferred Shares, which are expected to be issued immediately following
this redemption.
A provisional rating of Pfd-2(low) has been assigned by DBRS to the new issue:
The initial downside protection available to the holders of the Preferred Shares is expected to be greater than 54% (after offering expenses). Downside protection available to the Pre¬ferred Shares consists of the NAV of the Capital Shares. Upon maturity, the holders of the Preferred Shares will be en¬titled to the value of the Portfolio Shares, up to the face value of the Preferred Shares, in priority to the holders of the Capital Shares. The holders of the Capital Shares will be entitled to the distribu¬tion in the excess of dividend income on the Portfolio Shares beyond what is required to pay the holders of the Preferred Shares, as well as all capital appreciation.
The provisional Pfd-2 (low) rating of the Preferred Shares is primarily based on the expected level of downside protection and dividend coverage available to holders of the Preferred Shares, as well as the credit quality and consistency of dividend distributions of the Portfolio holdings.
Details of the refunding issue will be reported when available.
The new Series 2 shares are being offered via a preliminary prospectus, and the provisional offering price (as indicated by Scotia) is $24.50.
How can the (preliminary) offering price be so much higher than the current trading price of ALB.PR.B ?
The preliminary prospectus is available on SEDAR at “Allbanc Split Corp. II Jan 22 2016 16:20:03 ET Preliminary short form prospectus – English PDF 253 K ”
I don’t see a price or par value on the preliminary prospectus, but there’s no reason why the offering price shouldn’t bee $24.50.
The Net Asset Value Per Unit is $55.85; so when they pay the $21.80 due to each share of ALB.PR.B, only the Capital Units will be left, with a value of $34.05. Note that there are two Capital Units per Whole Unit.
If they issue one new preferred share per unit at $24.50, the Whole Unit Value will be $58.55 and the Asset Coverage Ratio will be 2.4-:1, which is quite good.
Remember that the purpose of the offering is not simply to replace the value of the extant preferreds but to re-lever the portfolio to their desired level.
The preliminary prospectus states:
Using the figures above, the Capital units will be worth $34.05 of the Whole Unit Value of $58.55, which is leverage of 1.7+:1, pretty close to the desired figure … the discrepancy is probably due to the market’s lousy performance recently, particularly when considering something called ‘Allbanc’!