IGM Issues 10-Year Debs; in Line with IGM.PR.A

IGM Financial Inc. has announced:

that it has priced the issuance of $375 million principal amount of debentures. The debentures will be offered through a group of agents to be led by BMO Capital Markets and RBC Capital Markets.

The Debentures will be dated April 7, 2009 and will mature April 8, 2019. These debentures will bear interest at a rate of 7.35% per cent per annum payable semi-annually in arrears in equal installments on April 8 and October 8 of each year, commencing on October 8, 2009. The Debentures have been priced to provide a yield to maturity of 7.358% percent.

The senior unsecured credit rating for IGM assigned by S&P is A+ and by DBRS is A (High).

This looks like a reasonable deal compared to the IGM.PR.A retractible (retraction date 2013-6-30). The preferred closed yesterday at 25.85-99, which corresponds to a YTW market of 4.91%-72. When the retractible’s yield is multiplied by the standard equivalency factor of 1.4x, the YTW market becomes 6.87%-61.

Bearing in mind the junior nature of preferreds, shorter term of IGM.PR.A and convexity of the preferred, these issues seem in line with each other.

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