BAM.PF.J Firm on Excellent Volume

I should have posted this on September 13, but … well, better late than never!

Brookfield Asset Management Inc. has announced:

the completion of its previously announced Class A Preference Shares, Series 48 issue in the amount of C$300,000,000. The offering was underwritten on a bought deal basis by a syndicate led by CIBC Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc.

The Preferred Shares, Series 48 were issued at a price of C$25.00 per share, for gross proceeds of C$300,000,000. Holders of the Preferred Shares, Series 48 will be entitled to receive a cumulative quarterly fixed dividend yielding 4.75% annually for the initial period ending December 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 3.10%, and (ii) 4.75%. The Preferred Shares, Series 48 will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BAM.PF.J. The Preferred Shares, Series 48 may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

BAM.PF.J is a FixedReset, 4.75%+310M475, announced 2017-09-06. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

The issue traded 1,280,452 shares on September 13 in a range of 24.97-04 before closing at 25.02-03. Vital statistics are:

Maturity Type : Limit Maturity
Maturity Date : 2047-09-13
Maturity Price : 23.15
Evaluated at bid price : 25.02
Bid-YTW : 4.70 %

Implied Volatility analysis continues to indicate that this issue is expensive:

Click for Big

With the parameters shown, the theoretical value of the new issue is 24.19, compared to 24.20 on announcement day. Critics will be quick to point out that in this calculation there is zero value assigned to the minimum rate guarantee … but I’d say that’s about right!

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