LFE.PR.B To Be Extended with Dividend Boost

Quadravest Capital Management has announced:

Canadian Life Companies Split Corp (the “Company”) is pleased to announce it has extended the termination date of the Company a further six year period from December 1, 2018 to December 1, 2024.

In connection with the extension, the Company will also amend the dividend entitlement of the LFE.PR.B Preferred Shares (“Preferred Shares”) effective December 1, 2018, to pay a cumulative preferential floating rate monthly dividend at an annual rate equivalent to the greater of, (i) 6.5% based on the $10 original issue price and (ii) the prevailing Canadian Prime Rate plus 2% annually based on the $10 original issue price, to a maximum of 8%. Based on the current Prime Rate of 3.7%, the annual rate would be 6.5%, which represents an increase of 0.25% per annum from the current rate of 6.25%.

The dividend policy for the LFE Class A Shares (“Class A Shares”) will remain unchanged.

In connection with the extension, the Company will offer a Special Retraction Right which will allow existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2018 net asset value per unit.

Since inception of the Company, Class A Shares have received a total of $7.15 per share and Preferred Shares have received a total of $7.64 per share, for a combined total of $14.79.

The Company invests in a portfolio of four publicly traded Canadian life insurance companies as follows: Great-West Lifeco Inc., Industrial Alliance Insurance & Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.

LFE.PR.B came into being in 2012, when it was received in exchange from LFE.PR.A (warrants were also part of the exchange consideration). The dividend was set to 6.25% – they had to be generous, because the NAVPU at the time was only about 11.55. The NAVPU is now 13.94 as of September 14, 2018.

From the Annual Information Form comes the following information:

In the event that the Termination Date is extended in any Extension Year, each holder of Preferred Shares or Class A Shares shall have the right to retract such Preferred Shares or Class A Shares effective December 1 of such Extension Year (the “Recurring Special Retraction Right”). The price payable per Preferred Share so retracted shall be equal to (i) the sum of (A) the lesser of (x) $10.00 and (y) the net asset value of the Company calculated on November 30 of such Extension Year, divided by the number of Preferred Shares then outstanding, plus (B) an amount equal to the accrued and unpaid dividends on each Preferred Share to but excluding November 30 of such Extension Year, plus (ii) all Dividends Owing thereon to but excluding November 30 of such Extension Year. The price payable per Class A Share so retracted shall be equal to the greater of (i) the net asset value per Unit calculated on November 30 of such Extension Year less $10.00, and (ii) zero. Holders of Preferred Shares or Class A Shares wishing to take advantage of the Recurring Special Retraction Right must surrender their Preferred Shares or Class A Shares for retraction no later than the close of business on November 1 of such Extension Year (or, if November 1 of such year is not a business day, on the immediately preceding business day). Payment of the retraction price per Preferred Share or Class A Share owing in respect of the exercise of the Recurring Special Retraction Right will be made on or before December 15 of such Extension Year (or, if December 15 of such year is not a business day, on the immediately succeeding business day).

November 1 is a Thursday this year, so the deadline to notify the company of a desire to retract is November 1 (brokerages will set their internal deadlines a few days earlier). LFE.PR.B is currently trading above its retraction price, however, so in the absence of extortionate transaction costs, holders who want to get out are better off selling.

Leave a Reply

You must be logged in to post a comment.