Power Financial Corporation has announced:
that all of its outstanding 1,542,484 Non-Cumulative Floating Rate First Preferred Shares, Series Q (the “Series Q shares”) will be converted on February 2, 2026, on a one-for-one basis, into Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series P (the “Series P shares”) of Power Financial. During the conversion notice period which ran from January 2, 2026 to January 16, 2026, 4,200 Series P shares were tendered for conversion into Series Q shares and 856,753 Series Q shares were tendered for conversion into Series P shares. Pursuant to the terms and conditions of the Series Q shares, since there would remain outstanding on February 2, 2026, after having taken into account all Series P shares and Series Q shares tendered for conversion, less than 1,000,000 Series Q shares, all remaining Series Q shares will automatically be converted into Series P shares without the consent of the holders, regardless of whether they were initially tendered for conversion by holders.
In addition, despite the fact that, during the conversion notice period 4,200 Series P shares were tendered for conversion into Series Q shares, since there would be fewer than 1,000,000 Series Q shares outstanding on February 2, 2026, after having taken into account all Series P shares and Series Q shares tendered for conversion, holders of Series P shares who elected to tender their shares for conversion will not have their Series P shares converted into Series Q shares on February 2, 2026, in accordance with the terms and conditions of the Series P shares.
Consequently, no Series Q shares will be issued on February 2, 2026 and all 1,542,484 Series Q shares will be automatically converted into Series P shares on February 2, 2026. As a result of the foregoing, after February 2, 2026, there will be 11,200,000 Series P shares outstanding and no Series Q shares outstanding.
The Series P shares and Series Q shares are currently listed on the Toronto Stock Exchange under the symbols PWF.PR.P and PWF.PR.Q, respectively.
PWF.PR.P was issued as a a FixedReset, 4.40%+160 that commenced trading 2010-6-29 after being announced 2010-6-17. It reset to 2.306% in 2016; I recommended against conversion but there was a 20% conversion to PWF.PR.Q anyway. After providing notice of extension the company announced the 2021 reset of PWF.PR.P to 1.998% effective 2021-01-31 and there was a net 6% conversion to the FixedReset. The company provided notice of extension on 2025-12-2. PWF.PR.P will reset to 4.591% effective 2026-01-31.
Thanks to Assiduous Reader P_I for bringing this to my attention!
Guys, anyone know the tax consequences of the conversion? if you have Q’s and you’re forced into a conversion to P’s, is there a tax issue? (i won’t take this as tax advice, just an opinion) Thanks.
I suspect that it would be deemed a disposition in a taxable account since the P is a different security that the Q (that is, the economics are different: the former has fixed rate dividend for 5 years, the latter would have had a floating rate dividend for 5 years).
Thanks Niagara. makes sense.
I seem to remember reading in the past that there are no tax implications. Here’s what I got when I consulted “artificial intelligence”…
(it talks about conversion of preferred to common shares, but I don’t see why the same principle wouldn’t apply to conversion of preferred to preferred)
AI Overview
In Canada, a forced (or automatic) conversion of preferred shares into common shares does not typically trigger an immediate capital gain, provided it qualifies as a tax-deferred exchange under the Income Tax Act.
Specifically, the conversion is generally treated as a non-disposition for tax purposes under Section 51 of the Act, which allows for a rollover, meaning any capital gains tax is deferred until the new shares are sold.
Here is a detailed breakdown of the tax implications:
Key Conditions for Tax-Deferred Treatment
For the conversion to be considered tax-free (no immediate tax payable), the following conditions must usually be met:
Same Corporation: The preferred shares must be converted into common shares of the same corporation.
Conversion Privilege: The preferred shares should ideally contain a conversion privilege, though Section 51 can still apply to conversions of shares without a explicit right, provided it is part of a share reorganization.
No Other Consideration: The shareholder must receive only new shares (common shares) in exchange for the old shares (preferred shares). If cash or other property is received instead of fractional shares, it may trigger a small, immediate tax consequence.
Equal Fair Market Value (FMV): The FMV of the new shares received should be equal to the FMV of the preferred shares given up. If the new shares are worth less and a benefit is deemed to be conferred on a related person, tax consequences may arise.
How the Tax Deferral Works
No Immediate Capital Gain: The CRA considers this a “roll-over,” meaning you do not have to report a capital gain or loss in the year of the conversion.
Cost Base Carry-Over: The adjusted cost base (ACB) of the old preferred shares is transferred to the new common shares.
Future Tax: The capital gain is only realized when the new common shares are eventually sold or redeemed.
Brian, thanks for that. So it would seem that the key point here is that the conversion is “forced”. I wonder if the tax implications would be different if the holder of the Qs had chosen to switch to P and the Q series had not been terminated.
Data point:
In exchanging our PWF.PR.Q for PWF.PR.P, BMOIL maintained the original ACB.
My guess (I have no special tax expertise) is that this was done because it is not considered a deemed disposition.
Supporting that guess is that the Ps continue to be exchangeable for Qs in the future, subject to the minimum number of units condition.
thank you for that. i decided to sell actually, since i had a bunch of both and wanted to reduce overall exposure and free up cash.