L.PR.A: Pricing Clue from New Note Issue

Loblaws has announced:

intends to issue $350 million principal amount of Medium Term Notes, Series 2-A pursuant to its Medium Term Notes, Series 2 program. The notes are to be offered through an agency syndicate led by CIBC World Markets Inc. and RBC Dominion Securities Inc and are expected to be issued on May 8, 2009. The notes will pay a fixed rate of 4.85% until maturity on May 8, 2014. The notes will be unsecured obligations of the Company and will rank equally with all other unsecured indebtedness of the Company that has not been subordinated. The net proceeds of the offering will be added to the general funds of the Company, used to repay short term debt, refinance other indebtedness and for general corporate purposes.

The Company intends to file in Canada a pricing supplement for this issue pursuant to its short form base shelf prospectus dated June 5, 2008 and its prospectus supplement dated May 5, 2009 in respect of the program. Details of the offering will be set out in the prospectus supplement and the pricing supplement, which will be available on the SEDAR website at www.sedar.com.

L.PR.A is a very liquid OperatingRetractible, relegated to the HIMIPref™ Scraps index due to credit concerns. It closed last night at 25.40-70 to yield 5.70-47% until its softMaturity 2015-7-31.

The 5.70% bid-side dividend yield is equivalent to 7.98% interest, so we can say that the pre-tax interest-equivalent spread vs. bonds for this issue is over 310bp … balancing the poorer credit vs. the advantages of retraction, I’d say the preferreds are cheap here.

L.PR.A was last mentioned on PrefBlog in the post L.PR.A Goes Stale on Shelf … it had a difficult underwriting in June 2008.

2 Responses to “L.PR.A: Pricing Clue from New Note Issue”

  1. “I’d say the preferreds are cheap here.”

    Keep saying that, please. I’ve been dribbling out those I bought at $22.25 when the underwriter got cold feet and I have a few more yet.


  2. […] was last mentioned on PrefBlog when a bond issue offered a pricing clue last […]

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