Cenovus Energy Inc. has announced (on March 18):
274,160 of its 10,435,932 Cumulative Redeemable First Preferred Shares, Series 1 (Series 1 Shares) have been tendered for conversion on March 31, 2021, on a one-for-one basis, into Cumulative Redeemable First Preferred Shares, Series 2 (Series 2 Shares) and 577,882 of its 1,564,068 Series 2 Shares have been tendered for conversion, on a one-for-one basis, into Series 1 Shares.
As of March 31, 2021 Cenovus will have 10,739,654 Series 1 Shares and 1,260,346 Series 2 Shares issued and outstanding. The Series 1 Shares are listed on the Toronto Stock Exchange under the symbol CVE.PR.A and the Series 2 Shares are listed on the Toronto Stock Exchange under the symbol CVE.PR.B.
CVE.PR.A was issued as HSE.PR.A, a FixedReset, 4.45%+173, on 2011-3-18 after being announced 2011-3-10. Notice of extension was published in February, 2016 and the issue reset to 2.404%. I recommended against conversion but there was a 13% conversion to the FloatingReset HSE.PR.B anyway. The ticker changed to CVE.PR.A following the Plan of Arrangement between HSE and CVE. CVE.PR.A reset to 2.577% in 2021.
CVE.PR.B is a FloatingReset, Bills+173, that arose via a partial conversion from HSE.PR.A to HSE.PR.B in 2016. The ticker changed to CVE.PR.B following the Plan of Arrangement between HSE and CVE.
Hello all,
I am a small time individual investor in preferred shares…
I have a question about CVE.PR.A/B and the chance of a redemption on the reset date of 31 Mar 2026. Both preferred shares have been rising closer to $25 recently, but the reset rate of +173 would result in a 4.4 or 4.5% preferred shared for the next five years if GOC 5 year stays around the current level of 2.7%. Not very attractive unless it was obtained at a discount. So I am presuming the market isn’t buying these shares to hold for the next 5 years. Initially I thought it was some arbitrage buying the float/fixed to exchange them in March 2026, but now both have risen too high to make sense to me.
The fact that they issued $2.6B of new notes in Nov, 2025 as described here: https://www.cenovus.com/News-and-Stories/News-releases/2025/3192126 with:
only $1.7B of prior notes named for redemption,
the fact that other preferred shares have already been redeemed (CVE.PR. E and G) in 2025, and
the fact that the new notes were issued at between 4.25% and 5.4%
To me the 12M preferred shares across the two remaining series ($300M total) are likely to be redeemed, but the argument could be made that they might not be. They are much cheaper at +173 than the E/G series redeemed last year at +350 or so.
So here is my problem, as I hold some of both A and B. CVE.PR.A/B are standard wide-spread, limited liquidity preferred shares that may result in $25 in 6 weeks; but if the company doesn’t redeem, the holder (me!) is taking a risk of a rapid capital loss (to say $20 to support a more reasonable yield of 5.5% yield going forward for the 5 years).
Am I missing something else here? Thanks in advance for any insight the community can offer.
The February Prefletter had CVE.PR.A with a YTW-bid of 4.53% at a bid of 24.68. That was the lowest YTW-bid of any of the sub-investment grade FRR. The YTW-bid was to perpetuity. You can buy many other preferred shares with a higher YTW-bid if that is what you are looking for.
Mr. Hymas does not give out sell recommendations. But that sure looks like a sell signal. Then again, the YTW-bid to redemption on Mar. 31 at $25 must be higher than 4.53% or that would have been shown as the YTW-bid. How much higher was the YTW-bid with that scenario?
If it is redeemed at 25 + the last dividend of .16 you end up with $25.16. There was a bid of 24.75 when I just looked. You suggest it might be redeemed and you will get another $.41. You also suggest the price might drop a few dollars if it is reset.
I do not know what will happen. For yourself, I suggest you hold, or sell, depending on which action makes you feel better.
A CVE.PR.A and CVE.PR.B redemption notice was published this morning:
https://www.cenovus.com/News-and-Stories/News-releases/2026/3245351
Glad I held!
Now I have to find somewhere else to deploy the funds.
Thanks john19 for joining the conversion!
Peter