{"id":180,"date":"2006-10-19T10:05:36","date_gmt":"2006-10-19T14:05:36","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=180"},"modified":"2006-10-19T10:05:36","modified_gmt":"2006-10-19T14:05:36","slug":"rypro-to-be-redeemed","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=180","title":{"rendered":"RY.PR.O to be Redeemed"},"content":{"rendered":"<p>The Royal Bank <a href=\"http:\/\/www.rbc.com\/newsroom\/20061019oseries.html\">announced today<\/a> that RY.PR.O will be redeemed at a price of $25.50 on November 24, 2006.<\/p>\n<p>This is an interesting decision on their part. As noted in <a href=\"http:\/\/www.prefblog.com\/?p=94\">my previous post<\/a> on this topic, the issue pays $1.375 and the premium was declining by $0.25 annually &#8211; implying a net cost to Royal of $1.125 annually for the $25 capital, which is quite competitive.<\/p>\n<p>I can only assume that they have a desired capital structure that includes some preferreds &#8230; and that the issue of <a href=\"http:\/\/www.prefblog.com\/?p=28\">RY.PR.B<\/a> was an opportunistic move with the proceeds earmarked for this redemption.<\/p>\n<p>RY.PR.O was quoted at the close\u00a0yesterday,\u00a02006-10-18, at $25.96-23, and had a pre-Tax YTW of -6.48% based on a call 2006-11-17 at $25.50 (OK, so the calculation was one week off! It&#8217;s still quite bad enough!). Had the issue survived until called\u00a0 2008-09-23, the pre-tax YTM realized would have been\u00a03.89 % &#8211; still pretty skimpy.<\/p>\n<p>So there&#8217;s an objective lesson for all readers! It&#8217;s all very well to make elegant arguments that something won&#8217;t be called based on net cost to issuer, and there may often be a great deal of validity to these arguments. But plain old\u00a0YTW\u00a0remains a very powerful tool for avoiding mistakes and decisions made on any single element of valuation will often be in error.\n<\/p>\n<p><!--1c9d6c97333f274ae7c9f18be3d82205--><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Royal Bank announced today that RY.PR.O will be redeemed at a price of $25.50 on November 24, 2006. This is an interesting decision on their part. As noted in my previous post on this &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-180","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/180","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=180"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/180\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=180"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=180"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=180"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}