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BNS.PR.I To Be Redeemed

Written by

jiHymas

in

The Bank of Nova Scotia has announced:

its intention to redeem (i) all outstanding CDN $1,750 million 3.89% Subordinated Debentures (Non-Viability Contingent Capital (NVCC)) due January 18, 2029 (the “Debentures”) at 100% of their principal amount plus accrued and unpaid interest to but excluding the date fixed for redemption, and (ii) all outstanding Non-cumulative 5-Year Rate Reset Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) (“Series 40 Shares”) at a price equal to $25.00 per share together with dividends declared and unpaid prior to the redemption. The redemptions of the Debentures and Series 40 Shares will occur on January 18, 2024, and January 29, 2024, respectively. Formal notice will be delivered to the debenture holders in accordance with the terms and conditions set forth in the related trust indenture.

On November 28, 2023, the Board of Directors of Scotiabank declared a quarterly dividend of $0.303125 per Series 40 Share. This will be the final dividend of the Series 40 Shares and will be paid on January 29, 2024, to shareholders of record at the close of business on January 3, 2024, as previously announced. Subsequent to this final dividend payment, the Series 40 Shares will cease to be entitled to dividends.

The redemptions of the Debentures and Series 40 Shares have been approved by the Office of the Superintendent of Financial Institutions and will be financed out of the general funds of Scotiabank. These redemptions are part of the Bank’s ongoing management of its Tier 1 and Tier 2 capital.

BNS.PR.I is a FixedReset, 4.85%+243, NVCC, issue that commenced trading 2018-10-12 after being announced 2018-10-2. It has been tracked by HIMIPref™ and has been assigned to the FixedReset-Discount sub-index.

This obviously comes as a surprise, since the issue closed today with a quote of 23.20-25. Sometimes, Santa comes early!

Thanks to Assiduous Reader Peculiar_Investor for bringing this to my attention!

Comments

7 responses to “BNS.PR.I To Be Redeemed”

  1. Peculiar_Investor

    Looks like that was Scotiabank’s last preferred?
    https://www.scotiabank.com/ca/en/about/ … hares.html — tip of the hat to FWF member ‘big easy’

  2. Peculiar_Investor

    Sorry that link should be https://www.scotiabank.com/ca/en/about/investors-shareholders/equity-investors/preferred-shares.html

  3. jiHymas

    Looks like that was Scotiabank’s last preferred?

    It’s their last publicly traded issue, anyway. Their 2023 Annual Report lists 300MM in preferred shares, compared to 3,249MM in AT1 and 4,526MM in LRCNs (page 62 of PDF). They say “Additional Tier 1 capital consists primarily of qualifying non-cumulative preferred shares, and qualifying other equity instruments (as described in Note 24).” (p64 of PDF) with details in Note 24 on pp 209-212. The 3,249MM in AT1 is in two USD issues, described on p211 of the PDF as part of Note 24.

  4. Joel A

    Hi Jim,
    I am confused about the language in the prospectus that refers to conversion.

    TRP.PR.H prospectus states, “The Series 3 Shares and Series 4 Shares are series of shares in the same class. The conversion right entitles holders to elect periodically which of the two series they wish to hold and does not entitle holders to receive a different class or type of securities. Other than the different dividend rights and redemption rights attached thereto, the Series 3 Shares and Series 4 Shares are identical in all material respects.”

    Indeed the Floating Rate issues will not be able to be converted into the Fixed Rate Resets during the Reset Period beginning May 30, 2025?

    I can NOT get a response from their Investor Relations Contact . Any assistance is appreciated> JA

  5. jiHymas

    Well, first of all I can tell you that there were conversions both ways at the time of the last conversion.

    As you know, the prospectus is downloadable from the TC Energy preferred share page. On page 12 of the PDF there is a section commencing:

    Conversion of Series 4 Shares into Series 3 Shares
    The Series 4 Shares shall not be convertible prior to June 30, 2020. Holders of Series 4 Shares shall have the right to convert on each Series 4 Conversion Date, subject to restrictions on conversion described below, all or any of their Series 4 Shares into Series 3 Shares on the basis of one Series 3 Share for each Series 4 Share. Notice of a holder’s intention to convert Series 4 Shares must be received by the transfer agent and registrar for the Series 4 Shares at its principal office in Toronto or Calgary not earlier than the 30th day prior to, but not later than 5:00 p.m. (Toronto time) on the 15th day preceding, a Series 4 Conversion Date. Once received by the transfer agent and registrar on behalf of the Corporation, the election of a holder to convert is irrevocable.

    … and, on page 7:

    ‘‘Series 4 Conversion Date’’ means June 30, 2020, and June 30 in every fifth year thereafter

    So, sure you can convert.Note however that any conversion in either direction is subject to a ‘minimum outstanding’ rule: if there will be less than 1-million shares of either series outstanding after giving effect to all the voluntary conversions, then conversions into that little series will be disallowed and conversions out of the series will be forced; therefore, the unpopular series will cease to exist until the next conversion date five years later.

  6. Joel A

    Thank You for your experienced reply. Seems there is an interesting arbitrage opp between the two with a big IF on interest rate changes and flip into a different pricing structure. Strange that BOTH are tradeable and active since 2020. So, the All or None conversion, if under a million float, is apparently past in 2020. Will assess my chances. Thanks! JA

  7. jiHymas

    Seems there is an interesting arbitrage opp between the two

    You may wish to read my articles on the theory of Preferred Pairs, linked with an analytical example at IFC.PR.A, BAM.PF.J, BAM.PR.Z, BPO.PR.I : Convert or Hold?

    Strange that BOTH are tradeable and active since 2020.

    There are a number of FixedReset/FloatingReset pairs trading. Not a lot, since FloatingResets have been fairly unpopular, overall. Some of the FloatingResets have barely over a million shares outstanding and trade by appointment only.

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