FN.PR.A To Be Extended

First National Financial Corporation has announced:

that it does not intend to exercise its right to redeem the currently outstanding 4,000,000 cumulative 5-year rate reset Class A Preference Shares, Series 1 of First National (“Series 1 Preference Shares”) on March 31, 2016.

As a result, subject to certain conditions, the holders of Series 1 Preference Shares have the right to convert all or part of their Series 1 Preference Shares on a one-for-one basis into cumulative floating rate Class A Preference Shares, Series 2 of First National (“Series 2 Preference Shares”) on March 31, 2016. Holders who do not exercise their right to convert their Series 1 Preference Shares into Series 2 Preference Shares on such date will retain their Series 1 Preference Shares.
The foregoing conversions are subject to the conditions that: (i) if First National determines that there would be less than 1,000,000 Series 1 Preference Shares outstanding on March 31, 2016, then all remaining Series 1 Preference Shares will automatically be converted into Series 2 Preference Shares on a one-for-one basis on March 31, 2016, and (ii) alternatively, if First National determines that there would be less than 1,000,000 Series 2 Preference Shares outstanding on March 31, 2016, no Series 1 Preference Shares will be converted into Series 2 Preference Shares. In either case, First National shall give a written notice to that effect to holders of Series 1 Preference Shares no later than March 24, 2016.

The dividend rate applicable to the Series 1 Preference Shares for the five-year period commencing on April 1, 2016, and ending on March 31, 2021, and the dividend rate applicable to the Series 2 Preference Shares for the three-month period commencing on April 1, 2016, and ending on June 30, 2016, will be determined in accordance with the terms of the respective classes of preference shares and announced by way of a news release on March 2, 2016.

Beneficial owners of Series 1 Preference 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. (Toronto time) on March 16, 2016.

This is not a big surprise. FN.PR.A is a FixedReset, 4.65%+207, that commenced trading 2011-1-25 after being announced 2011-1-17.

The issue is tracked by HIMIPref™ but relegated to the scraps index on credit concerns.

I will post information regarding the reset rate when it is available March 2 and intend to post a recommendation regarding conversion on March 11.

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