PrefBlog

Here’s a switch!

AIC Global Financial Split Corp. has announced a rights offering, giving unit holders the opportunity to subscribe for additional units. Given that ASC (the capital units) closed at $16.25 today and ASC.PR.A closed at $10.52, it would appear that the offering should be successful and the company will issue additional units worth about $9.3-million.

The decision to issue more units makes all kinds of sense to me: the fund had total assets of only about $41-million as of the last annual report, dated 2005-12-31. Issuing more units should result in increased liquidity for the unitholders – not to mention increased fees for the manager!  It’s a cheap way to raise money for a split share fund, according to the prospectus disclosure of fees:

Proceeds from the Subscription for Units to the Company: Approximately $9,295,625 after deduction of expenses of the Offering estimated at $290,000 inclusive of all fees and commissions which could be payable by the Company pursuant to the Soliciting Dealer Group Agreement (as hereinafter defined) between the Company and National Bank Financial Inc. (the “Dealer Manager”) which provides that the Company will pay a fee of $100,000 to the Dealer Manager plus a subscription fee of $0.30 per Unit in respect of each subscription procured by a member of the Soliciting Dealer Group (as hereinafter defined). See “Soliciting Dealer Group”.

So AIC expects to receive $9,295,625 of the total $9,585,625 paid by the ultimate owners. In other words, they’re raising this money with an efficiency of 96.97%. We can compare this to the efficiency of the 5Banc reissue, where they expect to see $285,850,000 of the total $300-million, for an efficiency of 95.28%.

Equity analysts and other such good-for-nothing spendthrifts will doubtless pooh-pooh an efficiency increase of 1.69% absolute, but here in this blog we’re fixed income analysts and know better. Pennies Count! And when these pennies are left inside the company, they help our credit quality!

Just to make things more exciting, DBRS announced today that the credit rating of the ASC.PR.A has been increased to Pfd-2(high) from Pfd-2, which should help sales a bit. The prospectus claims that this occurred on November 28, 2006, but the DBRS press release is dated today, December 6. The prospectus itself is dated November 30, so it’s all rather mysterious. I regret to say I don’t know the DBRS policy on giving committments to issuers and making these committments public.

 The HIMIPref™ database has been updated with the new creditRatingDataRecord effective tomorrow, December 7, 2006.

More later.

Later, more : ASC.PR.A currently has an AFTER-TAX YTW of 3.34% based on a bid of $10.52 and a hardMaturity 2011-05-31 at $10.00. The curvePrice is $10.76 evaluated under the after-tax curve. The PRE-TAX bid-YTW is 4.19%.

This entry was posted on Wednesday, December 6th, 2006 at 8:34 pm and is filed under Data Changes, Issue Comments, New Issues. 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.