PrefBlog

Bombardier has announced:

As of August 1, 2007, the Series 3 Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of Bombardier Inc., cash dividends for the following five years that will be based on a fixed rate equal to the product of (a) the average of the yield to maturity, designated on July 11, 2007 by CIBC World Markets Inc. and National Bank Financial, that would be carried by a Government of Canada bond with a 5-year maturity, multiplied by (b) 115%.

The average yield of this Government of Canada bond is 4.580%. Accordingly, the annual dividend rate applicable to the Series 3 Preferred Shares for the period of five years beginning on August 1, 2007 will be 5.267%

As discussed earlier, the BBD.PR.B will continue to pay a ratcheted floating rate that may be expected to be 100% of Canadian Prime, currently 6.25%. Given that the issues are both rated Pfd-4 by DBRS, I do not recommend them for inclusion in fixed-income portfolios – they’re equity-substitutes for heavens’ sake! If you must hold either of them, I recommend the BBD.PR.B –  I consider the chance that Canadian Prime will average less than 5.25% over the next five years to be pretty slim.

This entry was posted on Saturday, July 14th, 2007 at 3:47 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.