IGM.PR.B Redeemed at Par

IGM Financial Inc. announced (on March 20):

– IGM Financial Inc. (TSX:IGM) (“IGM Financial”) announced today that it has completed its previously announced offering of $250 million principal amount of 4.206% debentures due March 21, 2050.

The debentures were offered through a group of agents led by BMO Capital Markets and RBC Capital Markets.

The net proceeds of the offering will be used by IGM Financial to fund the intended redemption of all six million of its issued and outstanding 5.90% Non-Cumulative First Preferred Shares, Series B (the “Series B Preferred Shares”) and for general corporate purposes. IGM Financial intends to issue a notice later today to redeem the Series B Preferred Shares on or about April 30, 2019. In accordance with the terms of the Series B Preferred Shares, the redemption price will be $25.00 for each Series B Preferred Share plus an amount equal to all declared and unpaid dividends, net of any tax required to be withheld by IGM Financial.

IGM.PR.B commenced trading 2009-12-8 after being announced 2009-11-30. The offering was not very successful and I reported an inventory blow-out sale 2009-12-17.

As noted in some comments on this redemption, it is particularly noteworthy that the redemption is explicitly being financed with a 31-year bond issue yielding 4.206%, compared to the 5.90% dividend on the issue, which is equivalent to 7.67%, implying a Seniority Spread of almost 350bp; within a few basis points of the 350bp Seniority Spread reported March 20, the announcement date. The redemption is another data point in my collection illustrating the current cheapness of the preferred share market relative to bonds, last discussed April 10.

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