{"id":2684,"date":"2008-08-26T20:21:09","date_gmt":"2008-08-27T00:21:09","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=2684"},"modified":"2008-08-26T20:21:09","modified_gmt":"2008-08-27T00:21:09","slug":"bam-perps-vs-bnaprc-how-long-is-forever","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=2684","title":{"rendered":"BAM Perps vs. BNA.PR.C … How Long is Forever?"},"content":{"rendered":"

Remember the old days, when retractible issues yielded less than perpetuals? That inspired one of my first articles<\/a>, in which I examined the question of just how bad things had to get before the tortoise outpaced the hare.<\/p>\n

And, Assiduous Readers will recall, BNA.PR.C often exhibits puzzling behavior<\/a>.<\/p>\n

These two concepts have now met, with (at the closing bid) BNA.PR.C priced below BAM.PR.N.<\/p>\n

BNA.PR.C yields 9.37%, based on a bid of 16.83 and a hardMaturity<\/a> 2019-1-10 at 25.00, while BAM.PR.N yields 7.13% based on a bid of 17.00 and a limitMaturity<\/a>. The former issue is a split share based solely on BAM.A, with asset coverage of 3.3+:1 as of July 31, according to the company<\/a>. As of March 31, 2008, there were 19,032,000 Units outstanding<\/a>, each unit comprised of one capital share and one preferred share – each series of preferreds has a $25 liquidation value. The company owns 46,161,000 shares of BAM.A, so the BAM.A:Unit ratio is 2.4:1, so at today’s closing price of $31.52, asset coverage is a hair over 3.0:1. Give or take.<\/p>\n

Now, one thing that makes the BNA issues intrinsically fascinating is the fact that they are so well covered by a relatively poor credit. I wish I could be as poor a credit as Brookfield, at Pfd-2(low) according to DBRS, but it’s still worse than the banks! This means that the credit rating of BNA is constrained by the rating of the BAM prefs – which makes all kinds of sense. As a rough approximation – for conceptual purposes only – we can say that BNA prefholders get hurt when the common is below $10, while the BAM prefholders get hurt when the common is below $0.<\/p>\n

Anyway, the upshot is:<\/p>\n