PrefBlog

Bank of Montreal has announced (bolding added):

the pricing of USD 750 million of non-viability contingent capital (“NVCC”) Additional Tier 1 (AT1) Limited Recourse Capital Notes, Series 5 (the “LRCNs”).

The LRCNs will bear interest at a rate of 7.300 per cent annually, payable quarterly, for the initial period ending, but excluding, November 26, 2034. Thereafter, the interest rate on the LRCNs will reset every five years at a rate equal to the prevailing 5-year U.S. Treasury Rate plus 3.01 per cent. The LRCNs will mature on November 26, 2084. The expected closing date of the offering is July 17, 2024.

On or before the issuance of the LRCNs, the Bank will issue NVCC Non-Cumulative 5-Year Fixed Rate Reset Class B Preferred Shares, Series 54 (“Preferred Shares Series 54”) to be held by Computershare Trust Company of Canada, as trustee for BMO LRCN Trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the LRCNs when due, the recourse of each LRCN holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of Preferred Shares Series 54 except in limited circumstances.

The LRCNs may be redeemed at the option of the Bank, with the prior written approval of the Superintendent of Financial Institutions (Canada), in whole or in part, on not less than 10 nor more than 60 days’ prior notice, every quarter on the interest payment date, commencing on November 26, 2034.

The net proceeds will be contributed to the general funds of the Bank and will be utilized for general banking purposes, which may include the redemption of outstanding capital securities of the Bank and/or repayment of other outstanding liabilities of the Bank, and are expected to qualify as Additional Tier 1 capital of the Bank for regulatory purposes.

BMO Capital Markets Corp., BofA Securities, Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, Truist Securities, Inc. and UBS Securities LLC are the joint book-running managers for the offering.

BMO.PR.T was issued as a FixedReset, 3.90%+224, NVCC-compliant issue that commenced trading 2014-6-6 after being announced 2019-05-28. BMO.PR.T reset at 3.624% effective August 25, 2019. I recommended against conversion and there was no conversion. It is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

It is certainly possible that BMO.PR.T will be redeemed with the proceeds from this LRCN, but certainly not guaranteed until BMO makes a formal announcement. So be careful! The market for this issue didn’t change much today, closing with a quote of 24.91-05 – the trading price went up $0.40 on June 24, the day TD announced an LRCN deal, which was also for USD 750-million.

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

This entry was posted on Tuesday, July 9th, 2024 at 8:21 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.