{"id":1963,"date":"2008-03-25T10:19:42","date_gmt":"2008-03-25T14:19:42","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1963"},"modified":"2008-03-25T10:19:42","modified_gmt":"2008-03-25T14:19:42","slug":"new-issue-bmo-580-perps","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1963","title":{"rendered":"New Issue: BMO 5.80% Perps"},"content":{"rendered":"

Bank of Montreal has announced<\/a>:<\/p>\n

a domestic public offering of $200 million of Non-Cumulative Perpetual Class B Preferred Shares Series 15 (the \u201cPreferred Shares\u201d). The offering will be underwritten on a bought deal basis by a syndicate led by BMO Capital Markets. The Bank has granted to the underwriters an option to purchase up to an additional $50 million of the Preferred Shares exercisable at any time up to two days before closing.<\/p>\n

The Preferred Shares will be issued to the public at a price of $25.00 per Preferred Share and holders will be entitled to receive non-cumulative preferential quarterly dividends as and when declared by the board of directors of the Bank, payable in the amount of $0.3625 per Preferred Share, to yield 5.80 per cent annually.<\/p>\n

Subject to regulatory approval, on or after May 25, 2013, the Bank may redeem the Preferred Shares in whole or in part at a declining premium.<\/p>\n

The anticipated closing date is April 2, 2008. The net proceeds from the offering will be used by the Bank for general corporate purposes.<\/p><\/blockquote>\n

Issue: Non-Cumulative Perpetual Class B Preferred Shares Series 15<\/p>\n

Size: 8-million shares @ $25; underwriters’ greenshoe for an additional 2-million shares.<\/p>\n

Dividends: 5.80% p.a., payable quarterly. Long first dividend of $0.57603 payable August 25, based on closing of April 2.<\/p>\n

Redemption at Bank’s option: Redeemable at $26.00 commencing 2013-5-25; redemption price declines by $0.25 every May 25 until May 25, 2017; redeemable at $25.00 thereafter.<\/p>\n

Ratings: S&P, P-1(low); DBRS, Pfd-1; Moody’s, Aa3<\/p>\n

Priority: parri passu with all other prefs.<\/p>\n

… More Later …<\/p>\n

Later, More<\/b>: Curve Price (the fair value, which does not include dynamic factors) as of the close 2008-3-24 is $25.43.<\/p>\n

Later, Even More<\/b>: BMO has been busy today! They’ve just announced a $600-million sub-debt issue at Canadas + 260bp, stepping up to BAs+200 March 28, 2018 (at which time it is callable at par), maturing March 28, 2023. Prospectus Supplement dated 2008-3-25; 10-year Canadas are now at 3.47%, so say this stuff comes with 6.07-ish coupon.<\/p>\n

Later, So Much More You Just Can’t Believe It!<\/b>: I am advised the BMO sub-debt issue got done at a size of $900-million, Coupon 6.17%, Price 99.97 to give a yield-to-hoped-for-and-very-well-advertised-call of 6.174%,<\/p>\n

Later…<\/b>: CurvePrice as of the close 2008-3-25 is 25.38.<\/p>\n

Update, 2008-3-28<\/b>: There have been some comments made<\/a> about BMO.PR.K falling out of bed, with speculation about the implications for the opening price of the issue. First, let’s look at the BMO comparables:<\/p>\n

\n\n\n\n\n\n\n\n
BMO Perps at Close 2008-3-27<\/td>\n<\/tr>\n
Issue<\/td>\nQuote<\/td>\nDividend<\/td>\nPre-tax
Bid
YTW<\/td>\n		Curve
Price<\/td>\n<\/tr>\n
BMO.PR.H<\/td>\n23.23-54<\/td>\n1.325<\/td>\n5.73%<\/td>\n23.89<\/td>\n<\/tr>\n
BMO.PR.J<\/td>\n19.81-87<\/td>\n1.125<\/td>\n5.75%<\/td>\n20.76<\/td>\n<\/tr>\n
BMO.PR.K<\/td>\n22.35-54<\/td>\n1.3125<\/td>\n5.95%<\/td>\n23.74<\/td>\n<\/tr>\n
BMO.PR.?<\/td>\n25.00
(Assumed)<\/td>\n		1.45<\/td>\n5.82%<\/td>\n25.26<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Assiduous Readers will be familiar with my article on convexity<\/a>, in which I estimate that a 15bp yield pickup is required to make holding a near-par instrument worth-while. If we may assume a 5.75% base yield for deep-discount BMO prefs, this implies a 5.90% “fair-ish, sorta” yield for the new BMO issue, which implies a price of about 24.60. We shall see!<\/p>\n

Note that the convexity stuff is considered a dynamic factor and is not incorporated into the evaluation of curvePrice, which is restricted to static factors.<\/p>\n

Update, 2008-3-31<\/b>: Quarter-end<\/a> was a bad day thanks to the National Bank 6.00% Perps<\/a>! Curve price at the close of business was 25.09.<\/p>\n

Update, 2008-4-1<\/b>: Closes tomorrow. Curve price at the close today was 25.08.<\/p>\n","protected":false},"excerpt":{"rendered":"

Bank of Montreal has announced: a domestic public offering of $200 million of Non-Cumulative Perpetual Class B Preferred Shares Series 15 (the \u201cPreferred Shares\u201d). The offering will be underwritten on a bought deal basis by …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[],"class_list":["post-1963","post","type-post","status-publish","format-standard","hentry","category-new-issues"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1963","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=1963"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1963\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1963"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1963"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1963"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}