{"id":31435,"date":"2015-12-03T01:46:15","date_gmt":"2015-12-03T06:46:15","guid":{"rendered":"http:\/\/prefblog.com\/?p=31435"},"modified":"2015-12-03T01:46:15","modified_gmt":"2015-12-03T06:46:15","slug":"gwo-pr-n-to-reset-to-2-176","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=31435","title":{"rendered":"GWO.PR.N To Reset To 2.176%"},"content":{"rendered":"

Great-West Lifeco has announced<\/a>:<\/p>\n

the dividend rates for its Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) and for its Non-Cumulative Floating Rate First Preferred Shares, Series O (the “Series O Shares”).<\/p>\n

The annual fixed dividend rate for the five-year period commencing on December 31, 2015 and ending on December 30, 2020 applicable to any Series N Shares that remain outstanding on December 31, 2015 will be 2.176% per annum (or $0.136 per Series N Share per quarter), which rate is equal to the sum of the Government of Canada Yield (as defined in the Series N Share Conditions) on December 1, 2015 plus 1.30%.<\/p>\n

The floating dividend rate for the period commencing on December 31, 2015 and ending on March 30, 2016 applicable to any Series O Shares issued on December 31, 2015 will be 1.742% per annum (or $0.108578 per Series O Share). The 1.742% annual rate is equal to the sum of the T-Bill Rate (as defined in the Series O Share Conditions) on December 1, 2015 plus 1.30%.<\/p>\n

Beneficial owners of Series N Shares who wish to exercise their right to convert their Series N Shares into Series O Shares on a one-for-one basis should communicate as soon as possible with their brokers or other intermediaries through whom they hold their Series N Shares and ensure that they follow their instructions so as to meet the 5:00 p.m. (eastern time) December 16, 2015 deadline for exercising such right. The news release announcing such conversion right was issued on November 5, 2015 and can be viewed on Great-West Lifeco’s website.<\/p>\n

The Series N Shares and the Series O Shares have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws. The Series N Shares and the Series O Shares may not be offered, sold or delivered in the United States and this release does not constitute an offer to sell or a solicitation of an offer to buy any Series N Shares or Series O Shares within the United States.<\/p><\/blockquote>\n

The extension of GWO.PR.N was announced on November 6<\/a>.<\/p>\n

GWO.PR.N commenced trading 2010-11-23<\/a> as a FixedReset, 3.65%+130, after being announced 2010-11-15<\/a>. The issue was met with disfavour and there was an inventory clearance sale closing 2010-12-3<\/a>.<\/p>\n

The new rate of 2.176% is therefore a dividend reduction of just over 40%. Ouch!<\/p>\n

As noted in the release, the deadline for notifying the company of a desire to convert to the FloatingReset Series O is 5:00 p.m. (EST) on December 16, 2015, (a Wednesday) but brokerages will normally have an internal deadline a day or two prior to that. If you miss the brokerage deadline, they\u2019ll probably submit the request for you if you grovel, but if you miss the company deadline, that\u2019s it.<\/p>\n

At this point, market conditions are such that I expect the FloatingReset to trade significantly below GWO.PR.N. GWO.PR.N closed today at a bid of 13.35 (!) and the average implied 3-month bill rate of other investment-grade issues is -0.58%. Assuming this relationship holds, the estimated trading price for the new FloatingReset is 11.82, about 11% lower. Rather than convert and thereby get 1.00 shares of the new FloatingReset, it seems likely (but by no means guaranteed!) that it will be better to execute trades in the marketplace after the new FloatingReset commences trading and thereby get (maybe!) 1.13 shares of the new FloatingReset<\/p>\n

So, I expect to recommend that holders of GWO.PR.N hang on to them, but I will make a formal recommendation on December 11, just in time for PrefLetter<\/a>.<\/p>\n

Note that since the issue is issued by an insurance holding company and is not convertible into common at the option of the issuer, I consider it to have a “Deemed Maturity” 2025-1-31 (this date may change in the future). This is due to my belief that OSFI will eventually extend the Non-Viability Contingent Capital (NVCC) rules to insurers and insurance holding companies. There is a brief explanation of this on the PrefLetter website<\/a> (under the heading “DeemedRetractibles”) and with more detailed argument and progress reports on international negotiations in every edition of PrefLetter.<\/p>\n

I will note that the market does not share my views regarding future application of the NVCC rules insurers and insurance issues trade very similarly to perpetuals. <\/p>\n","protected":false},"excerpt":{"rendered":"

Great-West Lifeco has announced: the dividend rates for its Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) and for its Non-Cumulative Floating Rate First Preferred Shares, Series O (the “Series …<\/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-31435","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/31435","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=31435"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/31435\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31435"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31435"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31435"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}