Assiduous Readers will remember that there was an 8% Conversion from the FixedReset ENB.PR.B to the FloatingReset ENB.PR.C, which the company treated as top secret information. I advised readers not to convert, but to continue holding the ENB.PR.B, which have reset to 3.415%.
ENB.PR.C will pay dividends at a rate of 3-Month Canada Treasury Bills plus 240bp, reset quarterly.
The issue was listed yesterday, but didn’t trade – this is largely due to the banks’ hegemony over the Canadian financial system (approved by both securities regulators and the Competition-haha Board) and their total lack of interest in providing competent service to stinking investor scum such as yourselves. These exchanges do not hit client accounts until the day after the company gives effect to them – however, investors can complain to the bank-owned CDS and the (mostly) bank-owned brokerages about this lackadaisical attitude toward client assets and see how far it gets them.
The issue also did not trade today, but at least the spread on the quote narrowed considerably from yesterday’s value.
Vital Statistics are:
| ENB.PR.C | FloatingReset | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2047-06-02 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 4.36 % |
The most logical way to analyze the relative value of ENB.PR.C vs ENB.PR.B through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., IAG.PR.G and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.
We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).
Click for Big
The break-even T-Bill yield for the ENB.PR.B / ENB.PR.C pair is now 0.46% (given bid prices of 17.56 and 17.00, respectively), well above the junk-pair average of -0.16%, but slightly below the current actual bill rate of 0.54%.
I was wondering if I read this incorrectly. Is par value $17?
Also, what is the rate of this issue?
Thank you.
Par Value is $25.
The rate paid is 240bp over 3-month bills, reset quarterly. For the first three months, June 1 – September 1, Enbridge’s eMail to me indicated an annualized rate of 2.95%, paid on par, so the first dividend will be a little under $0.185.
Thank you very much for clarifying.
I see it is trading at $18 now. Wow what a drop!