{"id":32275,"date":"2006-09-20T14:17:20","date_gmt":"2006-09-20T18:17:20","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=115"},"modified":"2006-09-20T14:17:20","modified_gmt":"2006-09-20T18:17:20","slug":"bceprt-reset-rate-calculation-conversion-from-bceprs","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=32275","title":{"rendered":"BCE.PR.T Reset-Rate Calculation (Conversion from BCE.PR.S)"},"content":{"rendered":"

BCE\u00a0has announced<\/a> that the fixed rate for the next five years on BCE.PR.T will be 112% of the rate on 5-year Canadas, determined on October 11 and published October 12.<\/p>\n

The Canadas are currently trading to yield a little under 4.00% … so for the sake of some commentary, we can assume that the yield on the BCE.PR.T will be something like 4.45%-4.50%.<\/p>\n

The BCE.PR.T do not currently exist, but can be issued in exchange for BCE.PR.S<\/a> at the option of the holder. The BCE.PR.S were quoted at the close 2006-09-19 at 24.71-80, which is below the price at which – subject to the Official Calculation of Trading Price – the percentage of prime paid will increase. Given that Prime is currently 6.00% and the last monthly dividend paid on these shares was $0.08, the rate paid on the shares is now 3.84%,\u00a0or … hmm, carry 1 …. 64% of prime.<\/p>\n

\u00a0Holy Smokes! I don’t know about my readers, but these rates sound pretty chintzy to me! These things are PERPETUAL and BCE is not a particularly good credit, rated Pfd-2(low) by DBRS<\/a>. I’d want something more like 4.80% to hold a Pfd-2(low) perpetual\u00a0 – that’s what WN.PR.E is trading at nowadays, and it’s not even a particularly cheap issue, at least according to HIMIPref\u2122.<\/p>\n

“Oh yeah, smart guy?” I hear someone calling from the back of the room “What about the potential for floating rate adjustment, huh? That’s worth a lot of money, that is!”<\/p>\n

Well, ‘pays yer money and takes yer chances’, that’s my motto. If we presume prime to be constant at 6% for the next five years, then to get 4.8% out of BCE.PR.S we need\u00a080% of prime, compared to the current 64%. It might happen … it might not. Prime might go up … or down. You can consider this kind of instrument to offer insurance … but pretty expensive insurance, I call it!<\/p>\n

It’s interesting to compare with the fairly recent BC.PR.C conversion offer<\/a> … Bell offered a fixed rate of 4.65% to the BC.PR.C holders and an insufficient number of them wanted to exchange into the ratchet-rates for Bell to create the issue. Bell’s a slightly better credit, too, rated Pfd-2 as opposed to BCE’s Pfd-2(low).<\/p>\n

So, it seems to me that BCE’s being a little aggressive here and wants to get shareholders to convert to the ratchets. But what do I know? I don’t like either issue!<\/p>\n","protected":false},"excerpt":{"rendered":"

BCE\u00a0has announced that the fixed rate for the next five years on BCE.PR.T will be 112% of the rate on 5-year Canadas, determined on October 11 and published October 12. The Canadas are currently trading …<\/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-32275","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/32275","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=32275"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/32275\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32275"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32275"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32275"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}