I had a look at the prospectus, as promised, and have added this issue to the HIMIPref™ Universe.
Maturity is 2014-12-1. There are no intervening redemptions.
Dividend is 5.25% p.a., payable monthly, par value $10.00. There will be no distributions to the Capital Unitholders if this would result in asset coverage for the prefs falling below 1.65:1.
Underlying security is shares of BNS. The manager is covering the cost of issue – in exchange, the manager gets a fee (payable by the retracting shareholder) if units are retracted prior to maturity. Hence, asset coverage will initially be (very close to) 2.5:1. Since BNS yields approximately 3.12% p.a., income coverage at issue will be in excess of 1:1.
Downside is: DBRS rating of Pfd-2(low). I suspect that the issue lost a notch due to a very high concentration risk on BNS, but that’s for DBRS to say and for the rest of us to guess. Additionally, the maximum issue size is only $100-million. If they can get that high, it will be a respectable size as far as split-shares go, but trading may be expected to require patience.
A nice little issue, worthy of consideration as part of a DIVERSIFIED portfolio. Did I mention that a portfolio containing this issue should be DIVERSIFIED? Don’t come running to me if you have to sell 1,000 shares in two years and the price moves a buck. Or if BNS finds out they’ve made a little arithmetic error on their commodities trading and there won’t be any dividends for the next few years. Or whatever.
And while the preferred will be offered separately, there is no guarantee that they will be offered to YOU separately. The prefs are quite attractive enough that they should trade at a premium to par immediately upon issue.
The preIssue securityCode for this issue is P71400.
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