BCE.PR.M To Reset At 2.764%

BCE Inc. has announced:

Beginning on March 1, 2016 and ending on March 16, 2016, holders of Series AM Preferred Shares will have the right to choose one of the following options with regards to their shares:
1. To retain any or all of their Series AM Preferred Shares and continue to receive a fixed quarterly dividend; or
2. To convert, on a one-for-one basis, any or all of their Series AM Preferred Shares into BCE Inc. Cumulative Redeemable First Preferred Shares, Series AN (the “Series AN Preferred Shares”) and receive a floating quarterly dividend.

In order to convert your shares, you must exercise your right of conversion during the conversion period, which runs from March 1, 2016 to March 16, 2016, inclusively. Should Series AN Preferred Shares be issued following the conversion on March 31, 2016 of Series AM Preferred Shares, the Series AN Preferred Shares so issued will begin trading under the symbol BCE.PR.N. Should any Series AM Preferred Shares remain outstanding after March 31, 2016, they will continue to trade under symbol BCE.PR.M.

Holders of both the Series AM Preferred Shares and the Series AN Preferred Shares will have the opportunity to convert their shares again on March 31, 2021, and every five years thereafter as long as the shares remain outstanding.

As of March 31, 2016, the Series AM Preferred Shares will, should they remain outstanding, pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on a fixed rate equal to the sum of: (a) the yield to maturity compounded semi-annually (the “Government of Canada Yield”), computed on March 1, 2016 in accordance with the articles of BCE Inc., of a Canadian dollar denominated non-callable Government of Canada bond with a term to maturity of five years, and (b) 2.09 per cent. The “Government of Canada Yield” computed on March 1, 2016 is 0.674%. Accordingly, the annual fixed dividend rate applicable to the Series AM Preferred Shares for the period of five years beginning on March 31, 2016 will be 2.764%.

BCE.PR.M came into existence upon exchange from BAF.PR.A; this exchange was forced after overwhelming voluntary conversion following the privatization of BAF.

BAF.PR.A was a FixedReset, 4.85%+209, which commenced trading 2011-3-15 after being announced 2011-2-22 and a delay caused by an apparent clerical error.

BCE.PR.M and its predecessor have been tracked by HIMIPref™ but relegated to the Scraps index due to credit concerns.

The new rate represents a cut of 43% in the dividend rate. Ouch!

As noted in the press release, the deadline for notification of intent to convert to the FloatingReset is March 16. I will post a recommendation on March 11.

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