The YPG Holdings treasury department has been working overtime; there were two announcements of interest today.
First, they are redeeming the 4.65% of 2011:
Yellow Pages Group announced today that YPG Holdings Inc. (the “Company”) intends to exercise its right to redeem all of its outstanding $150 million 4.65% Medium Term Notes, Series 6, due February 28, 2011 (CUSIP No. 98424ZAF14) (the “Series 6 Notes”) on the following terms:
Redemption Date: January 15, 2010;
Redemption Price: $1,041.681 per $1,000 principal amount;
Accrued and Unpaid Interest: $17.836 per $1,000 principal amount; and
Total Redemption Price and Accrued and Unpaid Interest: $1,059.517 per $1,000 principal amount.The redemption price has been determined in accordance with the terms of the Series 6 Notes and the provisions of the trust indenture dated April 21, 2004 governing the Series 6 Notes. Interest accrued on the Series 6 Notes up to, but excluding, the redemption date will be paid on the redemption date. The Company plans to finance the redemption through its existing commercial paper program.
That’s a very fat price for a one-year, The Pricing Supplement for the Series 6 is on SEDAR dated 2006-2-22:
YPG Holdings shall be entitled, at its option, to redeem the Series 5 Notes and/or Series 6 Notes in whole at any time or in part from time to time, by giving prior notice of not less than 30 days and not more than 60 days to the holders thereof, at the greater of the “Canada Yield Price” (as defined herein) and par, together in each case with accrued and unpaid interest to but excluding the date fixed for redemption. “Canada Yield Price” shall mean a price equal to the price of the Series 5 Notes or Series 6 Notes, as the case may be, calculated on the banking day preceding the day on which the redemption is authorized by YPG Holdings to provide a yield from the date fixed for redemption to the maturity date of the Series 5 Notes or Series 6 Notes to be redeemed, as the case may be, equal to the “Government of Canada Yield” plus 0.50% in the case of the Series 5 Notes or the “Government of Canada Yield” plus 0.16% in the case of the Series 6 Notes.
Of particular interest to YPG.PR.B holders is news of their issue of 10-year bonds at 7.75%:
YPG Holdings sold C$300 million ($286 million) of 10-year medium term notes, according to a term sheet seen by Reuters on Wednesday.
The 7.75 percent notes, due March 2, 2010, were priced at C$100.00 to yield 7.753 percent, or 432.5 basis points over the Canadian government benchmark, the term sheet said.
The bookrunners of the sale were investment dealer arms of Royal Bank of Canada, Bank of Nova Scotia and Bank of Montreal.
The reported due date of 2010-3-2 is a typographical error. I am advised it’s really 2020-3-2.
I noted in July that a ten-year issue would increase confidence and now they’ve done it!
YPG.PR.B closed last night at 17.56-60 to yield 11.09-05%; it is retractible 2017-6-30 at 25.00, so it has a term of about 7.5 years. There may be some who argue that the seniority difference justifies a 335bp spread to bonds, but I’m not one of them!
YPG is tracked by HIMIPref™ but is relegated to the “Scraps” index on credit concerns. The MAPF Performance Report for October 2009 disclosed a position in YPG.PR.B.
Update, 2009-11-21: I should have linked to the post about the YPG.PR.A & YPG.PR.B Issuer Bid and its reality.
Ahh, very interesting, as you say.
Isn’t the seniority spread defined as Pref Yield x 1.40 Bond Equiv Yield – Bond Yield = 770 bp here?
I see the last few days had a terrific rally in the prices of YPG.PR.C (Fixed Reset; up more than $2.30) and YPG.PR.A (Perpetual Discount; up $1.20), but very little change in YPG.PR.B.
Now we have data for both bond and pref yield curves that suggests the same old: Pref A is overvalued compared with Pref B and Fixed Reset Pref C is overvalued compared with both A and B.
Do you think the recent pref rallies were due to anticipation of the bond redemption and new issue?
Isn’t the seniority spread defined as Pref Yield x 1.40 Bond Equiv Yield – Bond Yield = 770 bp here?
Um … er … well … yeah. I was thinking more in terms of non-taxable holders bidding up the prefs, but you’re right.
Do you think the recent pref rallies were due to anticipation of the bond redemption and new issue?
I hope not! That would be naughty!
Hi James: I am assuming that the recent bond issue bodes well for investor confidence, since I have been watching insider buying at YPG lately.
The insiders recently went for $1.6MM worth of YPG.PR.B.
My assumption is that the shares will likely head north towards 20-21 soon.
Is there any reason why they would in fact call these preferreds in ?
Wonderful yield – hopefully they can keep paying it.
Thank you.
The insiders recently went for $1.6MM worth of YPG.PR.B.
Didn’t know that, but it’s another cause for confidence … I assume that this is different money from the issuer bid.
Is there any reason why they would in fact call these preferreds in ?
At full redemption price, you mean, not through market purchases? I think it would be only in the event of a Plan of Arrangement a la BCE, in order to avoid giving holders a vote.
Wonderful yield – hopefully they can keep paying it.
They’re not a great credit, but they’re good enough that their bonds are on the right side of investment grade. I don’t include them in the indices – or recommend them in PrefLetter – because loss on default for operating companies tends to be 100%, but somebody looking for a little bit of spice in his portfolio could do a lot worse than buy these.