CBU.PR.A Announces Normal Course Issuer Bid

First Asset CanBanc Split Corp. has announced:

acceptance by the Toronto Stock Exchange (the “TSX”) of the Corporation’s Notice of Intention to make a Normal Course Issuer Bid (the “NCIB”) to permit the Corporation to acquire its Preferred Shares and Class A Shares (collectively, the “Securities”).

Pursuant to the NCIB, the Corporation proposes to purchase through the facilities of the TSX, from time to time, if it is considered advisable, up to 122,735 Preferred Shares and up to 122,735 Class A Shares of the Corporation, representing approximately 10% of the public float which is the same number as the Corporation’s issued and outstanding Securities, being 1,227,358 Preferred Shares and 1,227,358 Class A Shares as of the date hereof. The Corporation will not purchase in any given 30-day period, in the aggregate, more than 24,547 Preferred Shares and 24,547 Class A Shares, being 2% of the issued and outstanding Securities as of the date hereof. Purchases of Securities under the NCIB may commence on January 5, 2010. The Board of Directors of First Asset Investment Management Inc., the manager of the Corporation, believes that such purchases are in the best interests of the Corporation and are a desirable use of the Corporation’s funds. All purchases will be made through the facilities of the TSX in accordance with its rules and policies. All Securities purchased by the Corporation pursuant to the NCIB will not be cancelled and will be held for resale. The NCIB will expire on January 4, 2011.

On December 31, 2008, the Trust announced that it was making a Normal Course Issuer Bid, which commenced January 5, 2009, to purchase up to 132,000 Preferred Shares and up to 132,000 Class A Shares through the facilities of the TSX. Under the bid, which expires on January 4, 2010, an aggregate of 72,600 Class A Shares were repurchased at an average price of $14.90 per Class A Share including commissions. No Preferred Shares were repurchased.

I see lots of announcements of NCIBs, but not so many announcements of actual purchases!

It’s not entirely clear to me how the bookkeeping works. According to the June 2009 Financials:

A unit represents one Class A Share and one Preferred Share. The issued and outstanding units as at June 30, 2009 consists of 1,281,758 Class A Shares and 1,286,958 Preferred Shares. The Fund will ensure that an equal number of Class A Shares and Preferred Shares continue to be outstanding.

Now there are, according to the press release, 1,227,358 each, a decline of 54,400 Capital and 59,600 preferred in the past six months. And there was nothing on the books in June about the fund holding “treasury shares” or anything like that. However the prospectus (on SEDAR, dated October 31, 2008) states:

Preferred Shares may be surrendered at any time for retraction by the Company but will be retracted only on the second last Business Day of a month (the “Retraction Date”). Preferred Shares surrendered for retraction by a Preferred Shareholder at least ten Business Days prior to a Retraction Date will be retracted on such Retraction Date and such Preferred Shareholder will be paid on or before the 15th Business Day of the following month. Holders whose Preferred Shares are retracted on a Retraction Date will be entitled to receive a retraction price per share equal to the lesser of (i) 95% of the NAV per Unit determined as of the relevant Retraction Date less the pro rata portion of the Note then outstanding and less the cost to the Company of the purchase of a Class A Share for cancellation, and (ii) $10.00. The cost of the purchase of a Class A Share will include the purchase price of the Class A Share, commission and such other costs, if any, related to the liquidation of any portion of the Portfolio required to fund such purchase. If the Manager is unable to acquire sufficient Class A Shares for cancellation, the Preferred Shares will be redeemed on a pro rata basis based on the number of Class A Shares acquired or surrendered prior to the Retraction Date. If on any Retraction Date, Class A Shares are not required to be purchased in the market for cancellation in connection with the retraction of some or all of the Preferred Shares to be retracted, then the amount of the cost of a purchase of a Class A Share shall be such amount as the Manager determines is fair in the circumstances.

So it may be that the shares under this issuer bid are not cancelled immediately upon purchase, but are held for a few days and then cancelled to offset preferred share redemptions. But … it’s not clear.

Bookkeeping aside, the timing on this issue was excellent. They invested the proceeds at far better prices than anticipated in the prospectus and have benefitted to the point where a unit sold at $25 last fall is now worth $35.65 and the capital units are trading at a big fat discount to intrinsic value.

CBU.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-2 by DBRS. CBU.PR.A is not tracked by HIMIPref™.

One Response to “CBU.PR.A Announces Normal Course Issuer Bid”

  1. […] was last discussed on PrefBlog in the post CBU.PR.A Announces Normal Course Issuer Bid and at that time I noted that: benefitted to the point where a unit sold at $25 last fall is now […]

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