{"id":33144,"date":"2016-06-02T22:28:27","date_gmt":"2016-06-03T03:28:27","guid":{"rendered":"http:\/\/prefblog.com\/?p=33144"},"modified":"2016-06-02T22:28:27","modified_gmt":"2016-06-03T03:28:27","slug":"new-issue-na-fixedreset-5-40466-nvcc","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=33144","title":{"rendered":"New Issue: NA FixedReset, 5.40%+466, NVCC"},"content":{"rendered":"

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

that it has entered into an agreement with a group of underwriters led by National Bank Financial Inc. for the issuance on a bought deal basis of 10 million non-cumulative 5-year rate reset first preferred shares series 36 (non-viability contingent capital (NVCC)) (the \u201cSeries 36 Preferred Shares\u201d) at a price of $25.00 per share, to raise gross proceeds of $250 million.<\/p>\n

National Bank has granted the underwriters an option to purchase, on the same terms, up to an additional 2 million Series 36 Preferred Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing. The gross proceeds raised under the offering will be $300 million should this option be exercised in full.<\/p>\n

The Series 36 Preferred Shares will yield 5.40% annually, payable quarterly, as and when declared by the Board of Directors of National Bank, for the initial period ending August 15, 2021. The first of such dividends, if declared, shall be payable on November 15, 2016. Thereafter, the dividend rate will reset every five years at a level of 466 basis points over the then 5-year Government of Canada bond yield. Subject to regulatory approval, National Bank may redeem the Series 36 Preferred Shares in whole or in part at par on August 15, 2021 and on August 15 every five years thereafter.<\/p>\n

Holders of the Series 36 Preferred Shares will have the right to convert their shares into an equal number of non-cumulative floating rate first preferred shares series 37 (non-viability contingent capital (NVCC)) (the \u201cSeries 37 Preferred Shares\u201d), subject to certain conditions, on August 15, 2021, and on August 15 every five years thereafter. Holders of the Series 37 Preferred Shares will be entitled to receive quarterly floating dividends, as and when declared by the Board of Directors of National Bank, equal to the 90-day Government of Canada Treasury Bill rate plus 466 basis points.<\/p>\n

The net proceeds of the offering will be used for general corporate purposes and added to National Bank\u2019s capital base. The expected closing date is on or about June 13, 2016. National Bank intends to file in Canada a prospectus supplement to its December 1, 2014 base shelf prospectus in respect of this issue.<\/p><\/blockquote>\n

They later announced<\/a>:<\/p>\n

that as a result of strong investor demand for its previously announced domestic public offering of non-cumulative 5-year rate reset first preferred shares series 36 (non-viability contingent capital (NVCC)) (the \u201cSeries 36 Preferred Shares\u201d), the size of the offering has been increased to 16 million shares. The gross proceeds of the offering will now be $400 million. The offering will be underwritten by a syndicate led by National Bank Financial Inc. The expected closing date is on or about June 13, 2016.<\/p>\n

The net proceeds of the offering will be used for general corporate purposes and added to National Bank\u2019s capital base.<\/p><\/blockquote>\n

As has so often been the case recently, using Implied Volatility analysis to determine whether the pricing of this issue is rich or cheap yields ambiguous results:<\/p>\n

\"impVol_NA_160602\"<\/a>
Click for Big<\/i><\/div>\n

The new issue fits in very well with the line determined by the three extant NVCC-compliant issues, but the Implied Volatility is very high. Thus, if one believes that spreads are very high and will eventually regress to more usual levels, one will buy the low-spread low-price issues in order to capture the expected capital gain. However, if one believes that current conditions represent the new normal (with low GOC-5 yields and spreads that are high relative to historical norms) then one will buy the high-spread high-price issues in order to avoid the capital loss that one expects on the low-spread issues as Implied Volatility declines and the curve flattens.<\/p>\n

Thanks to Assiduous Readers FletcherLynd<\/i>, brian<\/i> and klargenf<\/i>, who discussed this issue in the comments to New Issue: NA FixedReset, 5.60%+490<\/a> (which was NA’s previous new issue).<\/p>\n","protected":false},"excerpt":{"rendered":"

National Bank of Canada has announced: that it has entered into an agreement with a group of underwriters led by National Bank Financial Inc. for the issuance on a bought deal basis of 10 million …<\/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-33144","post","type-post","status-publish","format-standard","hentry","category-new-issues"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/33144","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=33144"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/33144\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=33144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=33144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=33144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}