PrefBlog

Brompton Group has announced:

that the board of directors has approved an extension of the maturity date of the Class A and Preferred shares of the Company for an additional 5 year term to November 29, 2022. The reset preferred share dividend rate for the extended term will be announced at least 60 days prior to the original November 29, 2017 maturity date and will be based on market yields for preferred shares with similar terms at that time.

The term extension allows Class A shareholders to continue to invest in the Canadian bank sector while offering an attractive distribution rate of 7.1% based on the March 2, 2017 closing price while also providing the opportunity for capital appreciation. Canadian banks continue to have attractive dividend yields and return on equity. As well, the extension of the term of the Fund is not a taxable event and enables shareholders to defer potential capital gains tax liability that would have otherwise been realized on the redemption of the Class A shares or Preferred Shares at the end of the term until such time as such shares are disposed of by shareholders.

Since inception in November 2005 to January 31, 2017, the Class A share has delivered a 12.0%(1) per annum return, which outperformed the S&P/TSX Capped Financials Index by 3.5% per annum and outperformed the S&P/TSX Composite Index by 5.6% per annum. Since inception to January 31, 2017, Class A shareholders have received cash distributions of $13.05. Class A shareholders also have the option to reinvest their cash distributions in a dividend reinvestment plan which is commission free to participants.

Since the last term extension on December 1, 2012 to January 31, 2017, the Class A share has generated a 21.7%(1) per annum return which outperformed the S&P/TSX Composite Index by 12.8% per annum and outperformed the S&P/TSX Capped Financials Index by 6.6% per annum.

The term extension offers Preferred shareholders the opportunity to enjoy preferential cash dividends until November 29, 2022. Since the last term extension on December 1, 2012 to January 31, 2017, the Preferred share has delivered an attractive 4.6%(1) per annum return, outperforming the S&P/TSX Preferred Share Index by 4.7% per annum with less volatility.

Brompton Split Banc Corp. invests in a portfolio, on an approximately equal weight basis, in common shares of 6 Canadian Banks: Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, The Bank of Nova Scotia and The Toronto-Dominion Bank.

The last term extension in 2012 had its details announced near the end of September, 2012, so don’t expect the reset dividend rate to be announced any time soon! Holders will note that there is a Special Retraction Right associated with the extension:

On March 29, 2012, the Company received approval at a special meeting of Shareholders of the Company to:

• • Allow for the extension of the term of the Shares for successive periods of up to 5 years to be determined by the board of directors of the Company;
• • Provide Shareholders who do not wish to continue their investment in the Company with a special retraction right to enable such holders to retract their Shares on any subsequent extension;
• • To change the annual retraction date from the second last business day of December to the second last business day of November commencing in 2013 with no concurrent retraction in years in which there is an extension of the Maturity Date;
• • To provide the Company with the right to redeem Shares on a pro-rata basis to the extent that there are more Preferred Shares than Class A Shares (or vice versa) are retracted under any special retraction right.

…
Upon the announcement of each extension of the Maturity Date, holders of Preferred Shares will be entitled to retract their Preferred Shares pursuant to a non-concurrent retraction right and the Company will provide at least 60 days notice to Preferred Shareholders. Preferred Shareholders will receive the same amount per Preferred Share that would have applied had the Company redeemed all of the Preferred Shares on the Maturity Date as scheduled prior to the extension. Preferred Shares must be surrendered for retraction by 5:00 p.m. (Toronto time) on the last business day of October in the year in which there is an extension of the term of the Preferred Shares. Preferred Shareholders will receive payment for Preferred Shares so retracted no later than the tenth business day of the following month.

This entry was posted on Tuesday, March 7th, 2017 at 12:17 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.