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BCE.PR.Q To Reset At 6.538%

Written by

jiHymas

in

BCE Inc. has announced:

Holders of BCE Inc. fixed-rate Series AQ Preferred Shares have the right to convert all or part of their shares, effective on October 3, 2023, on a one-for-one basis, into floating-rate Cumulative Redeemable First Preferred Shares, Series AR of BCE Inc. (the “Series AR Preferred Shares”). In order to convert their shares, holders must exercise their right of conversion during the conversion period, which runs from September 5, 2023 until 5:00 p.m. (Montréal/Toronto time) on September 18, 2023.
…
In order to exercise its conversion right in respect of all or part of its Series AQ Preferred Shares, the registered holder must provide a written notice thereof, accompanied by its Series AQ Preferred Share certificates with the transfer form on the back thereof or other appropriate stock transfer power of attorney duly endorsed, and deliver them, at the latest by 5:00 p.m. (Montréal/Toronto time) on September 18, 2023, to one of the following addresses of TSX Trust Company: … Beneficial holders who wish to exercise their conversion right should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period.
…
4. The Series AQ Preferred Shares will, should they remain outstanding, pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on a fixed rate equal to the sum of: (a) the yield to maturity compounded semi-annually (the “Government of Canada Yield”), computed on August 31, 2023 in accordance with the articles of BCE Inc., of a Canadian dollar denominated non-callable Government of Canada bond with a term to maturity of five years, and (b) 2.64%. The “Government of Canada Yield” computed on August 31, 2023 is 3.898 %. Accordingly, the annual fixed dividend rate applicable to the Series AQ Preferred Shares for the period of five years beginning on September 30, 2023 will be 6.538 %.

5. The Series AR Preferred Shares, if issued, will pay, for each quarterly period beginning with the quarterly period from and including September 30, 2023 up to but excluding December 31, 2023, as and when declared by the Board of Directors of BCE Inc., a quarterly floating dividend rate equal to the “Floating Quarterly Dividend Rate” for such quarterly period. The “Floating Quarterly Dividend Rate” for any such quarterly period shall be equal to the rate, expressed as a percentage, equal to the sum of: (a) the “T-Bill Rate”, calculated in accordance with the articles of BCE Inc. on the 30th day prior to the first day of the new quarterly period, and (b) 2.64%, calculated on the basis of the actual number of days in such quarterly period divided by 365. The “T-Bill Rate” means, for any quarterly period, the average yield expressed as a percentage per annum on three-month Government of Canada Treasury Bills, as reported by the Bank of Canada, for the most recent treasury bills auction preceding the applicable calculation date. The “Floating Quarterly Dividend Rate” computed on August 31, 2023 and applicable to the Series AR Preferred Shares for the quarterly period beginning on September 30, 2023 will be 1.96527 % (annual rate of 7.797 %, based on an initial T-Bill Rate of 5.157 %).

6. After the end of the conversion period on September 18, 2023, if BCE Inc. determines that there would be less than 1,000,000 Series AQ Preferred Shares outstanding after the conversion date (October 3, 2023), BCE Inc. will automatically convert all remaining Series AQ Preferred Shares into Series AR Preferred Shares.
However, if BCE Inc. determines that there would be less than 1,000,000 Series AR Preferred Shares outstanding after the conversion date, then no Series AQ Preferred Shares will be converted into Series ARPreferred Shares.

7. For any questions about the steps to be followed, please contact TSX Trust Company at 1-800-561-0934, the
transfer agent and registrar for BCE Inc.’s preferred shares.

BCE.PR.Q is a FixedReset that came into being through an Exchange from BAF.PR.E which in turn commenced trading 2013-2-14 as a FixedReset, 4.25%+264, after being announced 2013-1-30. The issue reset at 4.812% in 2018; I recommended against conversion; and there was no conversion.

Comments

6 responses to “BCE.PR.Q To Reset At 6.538%”

  1. Joel A

    BROOKFIELD, NEWS, Sept. 01, 2023 (GLOBE NEWSWIRE) — Brookfield Corporation (NYSE: BN, TSX: BN) (“Brookfield”) today announced that it has determined the fixed dividend rate on its Cumulative Class A Preference Shares, Series 32 (“Series 32 Shares”) (TSX: BN.PF.A) for the five years commencing October 1, 2023 and ending September 30, 2028.

    If declared, the fixed quarterly dividends on the Series 32 Shares during the five years commencing October 1, 2023 will be paid at an annual rate of 6.744% ($0.4249644 per share per quarter).

  2. Alphabeta

    Where exactly was the GCA5YR benchmark trading when these issues were reset?

    It is interesting to note that the respective officers of Brookfield Corp and BCE responsible for setting the reset rates of their respective issues coming up for reset at exactly the same time (10:00 AM on Sept 01, 2023) presumably starring at the same Bloomberg screen (GCA5YR) came up with 2 different valuations of the underlying Canada 5 year bond benchmark. In the case of Brookfield, 6.744-2.90 =3.844%. In the case of BCE, 6.538-2.64 =3.898%.

    I make that a difference of (3.898-3.844) =5.4 basis points!

  3. jiHymas

    Where exactly was the GCA5YR benchmark trading when these issues were reset?

    You should be able to get this information from the respective Investor Relations department.

    It is interesting to note that the respective officers of Brookfield Corp and BCE responsible for setting the reset rates of their respective issues coming up for reset at exactly the same time (10:00 AM on Sept 01, 2023)

    As noted in the BCE release quoted above:

    The “Government of Canada Yield” computed on August 31, 2023 is 3.898 % …. Accordingly, the annual fixed dividend rate applicable to the Series AQ Preferred Shares for the period of five years beginning on September 30, 2023 will be 6.538 %.

    The BN.PF.A release states:

    for the five years commencing October 1, 2023 and ending September 30, 2028.

    You may be interested in the post FixedReset Prospectuses Are Imprecise! but in this particular case the reset rate was calculated on different days.

  4. Alphabeta

    RE: Where exactly was the GCA5YR benchmark trading……….?

    Thank you James for pointing out that the BCE issue was reset on Aug 31. I missed that as I was reading the Sept 01 BCE release along with the BN release on Sep 01 and presumed (wrongly) that both issues were reset on Sep 01, 30 days prior to the subsequent fixed rate period. Clearly BCE chose Aug 31 however BN doesn’t appear to state the day they used.

    I was interested to read the contents of your link and now understand that the day chosen to calculate the Canada yield, give or take a day is no more precise than the screen prints of where Canada’s were trading at 10:00 AM on Sep. 03, 2019.

    Even though I would not willingly ‘look a gift horse in the mouth’ and Can5yr rates did decline in yield between Aug 31 and Sep 01 when BN appears to have calculated the Canada yield (or so I presume), I wonder why BCE set the calculation date as Aug. 31, 2023 that as near as I can figure is 31 days prior to the first day of the subsequent fixed rate period. (I know I could inquire directly as you suggest)

    The original Bell Aliant short form prospectus that relates to this issue and is dated Feb. 06, 2013 states the following, “Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.” That would be Sep. 01.

    I understand that if the 30th day prior falls on a Sat, or Sun. or on a legal Holiday, then presumably the reset would occur sooner, like Aug 31. However even though there was an announcement that fixed income markets would close early (12:00 PM) on Sep 01, 2023, it was trading at 10:00 AM. It appears a gray area has arisen as to the definition of business day when some markets close early.

    I’ll sign off on this subject with my conspiracy hat still on and wonder if BN took a screen print of the Bloomberg terminal at 10:00 AM on Thur Aug 31 and another one the following day,,,,,,,,,,,,,,,, just in case Sep 01 could be considered a non business day as BCE seems to have done. Quoting from the Bell Aliant prospectus, ““Business Day” means a day, other than a Saturday, Sunday or statutory holiday, when banks are generally open in the Cities of
    Halifax, Nova Scotia and Toronto, Ontario, for the transaction of banking business.” It appears the banks were open in each jurisdiction.

    Hey..what’s a day or two or a nickel in yield?! At least BCE and Artis (AX.PR.E 30SEP23) agreed on the underlying Canada yield at 3.898%!

  5. peet

    “I wonder why BCE set the calculation date as Aug. 31, 2023 that as near as I can figure is 31 days prior to the first day of the subsequent fixed rate period.”

    It’s 30 days prior, not 31. You can take off your conspiracy hat.

  6. BN.PF.A To Reset To 6.744% « PrefBlog

    […] Thanks to Assiduous Reader Joel A for bringing this to my attention! […]

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