National Bank of Canada has announced:
the dividend rates applicable to the Non-Cumulative 5‑Year Rate Reset First Preferred Shares, Series 40 Non-Viability Contingent Capital (NVCC) (the “Series 40 Shares”) and the Non-Cumulative Floating Rate First Preferred Shares, Series 41 (NVCC) (the “Series 41 Shares”).
Holders of Series 40 Shares, should any remain outstanding after May 15, 2023, will be entitled to receive fixed-rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on May 16, 2023, and ending on May 15, 2028, will be 5.818%, being equal to the sum of the five-year Government of Canada Bond yield (3.238%) plus 2.58%, as determined in accordance with the terms of the Series 40 Shares.
Holders of Series 41 Shares, should any be issued on May 15, 2023, will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the three-month period commencing on May 16, 2023, and ending on August 15, 2023, will be 7.017%, being equal to the sum of the 90-day Government of Canada Treasury Bill yield (4.437%) plus 2.58%, calculated on the basis of actual number of days elapsed in such quarterly floating rate period divided by 365, as determined in accordance with the terms of the Series 41 Shares.
Holders of the Series 40 Shares have, subject to certain conditions, the right to convert all or part of their Series 40 Shares on a one-for-one basis into Series 41 Shares on May 15, 2023.
Beneficial owners of Series 40 shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is May 1, 2023, at 5:00 p.m. (EDT).
NA.PR.E is a FixedReset, 4.60%+258, NVCC-Compliant, that commenced trading 2018-1-22 after being announced 2018-1-12. It is tracked by HIMIPref™ and assigned to the FixedReset (Discount) subindex.
Thanks to niagara for bringing this to my attention.. And thanks also to Assiduous Reader MO!
I’m reaching out to everyone for assistance regarding an upcoming Special Meeting of First Preferred Shareholders of National Bank of Canada, scheduled for April 19, 2024. I’m seeking clarity on whether it would be advantageous, adverse or neutral for current preferred shareholders to vote for or against this proposal. Could someone kindly break down the implications of this proposal in simple terms? Here’s the link for more details:
https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/relations-investisseurs/assemblee-annuelle/2024/lrcn-voting-instruction-solicitation-statement.pdf
Thanks you for broaching this matter DrSpinz.
I too have been invited by NA to vote yes or no on whether I want the authorized amount of first preference shares to be increased from $5.0 Billion to $7.5 Billion.
I looked at the 2023 Annual Report for NA. Note 18 to the FS describes the “Share Capital and Other Equity Instruments”. I quote from this document:
“First Preferred Shares An unlimited number of shares, without par value, issuable for a maximum aggregate consideration of $5 billion.”
I find this statement odd because I believe the preferred shares have a par value of $25.
I further quote from this document:
“Shares and Other Equity Instruments Outstanding As at October 31, 2023
First Preferred Shares Number of shares or LRCN
Series 30
Series 32
Series 38
Series 40
Series 42
Other equity instruments
LRCN - Series 1
LRCN – Series 2
LRCN – Series 3”
This is all part of a chart which I can not easily reproduce here. I will send a PDF of Note 18 to James. He can reproduce it if he wants.
I can summarize the chart by saying there are 5 issues of Preferred Shares totalling 66,000,000 shares with a value of $1.65 Billion and 3 issues of LRCN totalling 1,500,000 with a value of $1.50 Billion. The NA goes onto add the Preferred Shares and LRCN together wth these totals:
Preferred shares and other equity instruments 67,500,000 and a value of $3.15 Billion.
So, according to NA, as expressed in Chart 18, the amount of Preferred Shares and other equity instruments outstanding is $3.15 Billion. Since the amount they are allowed to issue is $5.0 Billion, NA wishes to increse the limit to $7.5 Billion.
Here are my comments:
1. The increase in the limit is more about issuing more LRCN than preferred shares.
2. NA is not very clear about the fact the LRCN are included with what we know as Preferred Shares.
3. NA considers Preferred Shares and LRCN to be somehow the same, even though they are different in many ways. Perhaps NA lumps these togehter because they rank equally in relation to the common shares.
4. It is likely good for NA to have freedom to issue more equity.
5. Is this motion good for holders of Preferred Shares that want an ongoing stream of income. I say it is not good because the proceeds of more LRCN can be used to redeem the existing Preferred Shares.
I found on the NA website that the holders of the LRCN also get a vote on the same motion.
NA has available on its website a PDF of the prospectus for each of the 5 issues of preferred shares. NA does not make available in the same place on its website a PDF of any prospctus for any of the 3 LRCN issues. I wonder how many votes each $1,000 of LRCN gets. Is it 1 vote or is it 40 votes, or some other number?
Thank you for thoroughly examining the documents and providing such a helpful summary. While some questions remain, I hope other users can offer their insights.
“I wonder how many votes each $1,000 of LRCN gets. Is it 1 vote or is it 40 votes, or some other number?”
It’s the former. See, for example, the Prospectus for the Series 46 ($1,000 per Share) Preferred Shares, top of page S-25:
“In connection with any action to be taken by the Bank which requires the approval of the holders of Series 46 Preferred Shares voting as a series or as part of the class, each such share will entitle the holder thereof to one vote”.
RAV4guy sent me the note on National Bank’s financials that he discussed in his post. Here it is.