BPO.PR.N Settles Flat on Good Volume

Brookfield Properties announced a FixedReset 6.15%+307 issue on January 11.

It will not have escaped notice that the initial fixed-rate period on this issue is six and a half years, just as was the slightly earlier BAM.PR.R new issue. In distinction to other commenters, I feel that the longer term has a lot more to do with the reset rate than the initial rate lock-in period … by extending term the reset can be set against the longer term Canadas rather than the five-year (or five-and-a-half year, as most of the banks did).

This is becoming a much more important consideration now that the chances that this and future issues will indeed be perpetual are increasing.

There’s no necessity for this: the banks have to calculate their reset in such a way or else OSFI will determine that a step-up exists and possibly disallow the issue as Tier 1 Capital. OSFI’s rules do not apply to BPO or BAM – they could set the reset to negative 20bp if they felt like it and thought it would sell – but presumably the dealers are trying to maintain the integrity of the FixedReset structure.

One way or the other, BPO.PR.N traded 333,903 shares on the TMX in a range of 24.90-09 before closing at 24.95-01, 25×30. Vital Statistics are:

Maturity Type : Limit Maturity
Maturity Date : 2040-01-20
Maturity Price : 23.09
Evaluated at bid price : 24.98
Bid-YTW : 5.70 %

BPO.PR.N is tracked by HIMIPref™ but is relegated to the Scraps subindex on credit concerns.

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