M-Split Corp has announced (emphasis added):
Since the inception of the Company on April 18, 2007 the price of Manulife has declined 52% from $41.08 to $19.75 as of November 24, 2008. This sharp decline in Manulife has resulted in the Company’s net asset value being reduced significantly and as mentioned in the previous update, has required the Company to implement the Priority Equity Portfolio Protection Plan in accordance with the prospectus. The plan’s objective was to provide that the Priority Equity Share Repayment amount would be paid in full on the termination date (December 1, 2014). Due to the recent decline in Manulife’s share price of 20% during the week ended November 21, the Company has dramatically decreased its exposure to Manulife under the requirements of the plan.
The Company’s total net asset value is approximately $9.01 per unit as at November 24, 2008, consisting of $6.43 per unit in cash and permitted repayment securities (current value) and $2.58 in Manulife exposure per Unit. The permitted repayment securities have an estimated forward value of approximately $8.04 at maturity in 2014. The reduced exposure to Manulife will materially limit the future impact of price movements of Manulife shares on the net asset value of the Company and lower the ability of the Company to generate income from dividends and its covered call option writing program.
The combined trading prices of both classes of the Company’s shares are trading at a substantial discount to the current net asset value per unit. In addition, the significant price decline in Manulife shares since inception of the Company has made it difficult to achieve the original stated objectives for both classes of shares. As a result, the Company is reviewing options to maximize shareholder value that may include but not limited to establishing a normal course issuer’s bid and initiating proposals (subject to shareholder vote) to reorganize the Company.
The Company’s portfolio is continually rebalanced and adjusted based on market conditions to provide both security for Priority Equity shareholders and upside potential for Class A shareholders. The Company may buy or sell additional shares of Manulife, the permitted repayment securities, and or option positions based on market conditions and provided that the Company remains in compliance with the Priority Equity Protection Plan.
With respect to the net value of the firm, they have stroked the nail right on the button. XMF closed today at 0.91-1.15, 10×2. XMF.PR.A closed at 6.88-49, 51×28; which may be compared to “total net asset value is approximately $9.01 per unit as at November 24, 2008, consisting of $6.43 per unit in cash and permitted repayment securities (current value) and $2.58 in Manulife exposure per Unit.”. I confess I haven’t checked to see what retraction options there might be; nor have I looked at the effects of fees and expenses on NAV over time.
The previous mention of XMF.PR.A on PrefBlog noted the suspension of dividends on capital units. XMF.PR.A is not tracked by HIMIPref™.
[…] was last mentioned on PrefBlog when the company announced it was mulling over plans to reorganize. XMF.PR.A is not tracked by […]