There were five resets announced 2019-12-2, as follows:
| Ticker | Issue Reset Spread |
Announced Rate |
Implied GOC-5 Yield |
| FFH.PR.C | 315bp | 4.709% | 1.559% |
| TRP.PR.A | 192bp | 3.479% | 1.559% |
| BPO.PR.A | 315bp | 4.709% | 1.559% |
| HSE.PR.C | 313bp | 4.636% | 1.506% |
| AZP.PR.B | 418bp | 5.67% | 1.490% |
The first three issues listed are consistent and the implied GOC-5 rate of 1.559% isn’t anything that raises any eyebrows around here … but the bottom two are a puzzle. I believe that all these calculations should be based on the rate at 10:00am December 2 … though it has been shown that prospectuses are imprecise regarding the details.
An inquiry directed to Atlantic Power’s Investor Relations Department elicited a claim that the GOC-5 yield was measured at the close, November 29, and that this was in accordance with the indenture. Well, it may or may not be, but my reading of the prospectus (available on SEDAR, not allowed to link directly of course, which is a disgrace, so the regulators say you have to search for “Atlantic Power Preferred Equity Ltd. Oct 21 2009 17:20:19 ET Final short form prospectus – English PDF 229 K”) suggests the correct time should have been 10am (Toronto time) on 2019-12-2.
An inquiry directed to Husky Energy’s Investor Relations Department has not yet been answered. My thanks to Assiduous Reader PG who brought this to my attention.
Inquiries continue.
Update, 2019-12-4: AZP will issue a press release on December 5, I am told. HSE has not yet responded to my two eMails asking them to specify the date and time as of which the GOC-5 yield was measured … but they’ve got a lot going on right now so I’ll wait another day before sending eMail #3.
Thanks to James for pursuing this!
I find it astounding that AZP can actually take the position that Nov. 29 is the operative rate reset date, at the close of business to boot. The prospectus states that the “Fixed Rate Calculation Date” fell thirty days prior to Dec. 31, ie. December 1. That day, of course, was a Sunday. The “business day” clause in the Prospectus meant the operative date then became the next business date, ie. Dec. 2 [ the date taken by FFH,TRP and BMO]. Also AZP’s reference to taking the rate at the “close of business” is nonsensical. The AZP Prospectus has the standard “10 AM Bloomberg” clause.
I note that AZP’s pick of Nov. 29 produces a tidy benefit to AZP — $ .1325 per share each year, times 10 million shares outstanding, for $ 132,500 saved each year for each of the five reset years!
HSE’s reset at 1.506 also makes no sense, unless they too picked Nov. 29.
It will be interesting to see what James’ further inquiries bring.
Correction: AZP has 4 million outstanding and HSE has the 10 million …
So fixing up my error: the “benefit” calculated above [$ 132,500 per year] flowing from not using the 1.559% rate is for HSE’s 10 million shares, not AZP. The latter’s “benefit” from not using Monday’s rate should read some $69,000 per year for its 4 million shares. The perils of hasty posting 🙁
I find it astounding that AZP can actually take the position
To give them their due, I’m sure they didn’t make this statement after a sober analysis of all the evidence and deciding this was a defensible position … it was less formal than that.
I am told they will be issuing another press release tomorrow.
the “benefit” calculated above [$ 132,500 per year] flowing from not using the 1.559% rate is for HSE’s 10 million shares, not AZP. The latter’s “benefit” from not using Monday’s rate should read some $69,000 per year for its 4 million shares.
Be nice to be a class action lawyer on this, eh, scooping up 30%+ of the underpayment?
I have updated the post above.
Hi James
I was doing some research on a Manulife preferred share and noticed they have links to the prospect on Sedar site but it opens in a new window https://www.manulife.com/en/investors/shareholder-services/preferred-shares.html Maybe you could do the same.
Thank you
When you click the Manulife link you are taken to the SEDAR issuer page that comes with a “Terms of Use” statement for the site:
I asked them for written permission to use links – either regular links, or ‘active links’ through their API – to prospectuses and other documents some time ago.
I was brushed off.
There is really very little point in asking again (I am not a bank or an employer of ex-regulators), but I might. There might be some entertainment value in their reply.