Bank of Montreal has announced (although not yet on their website):
the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 25 (the “Preferred Shares Series 25”) and Non-Cumulative Floating Rate Class B Preferred Shares, Series 26 (the “Preferred Shares Series 26”).
With respect to any Preferred Shares Series 25 that remain outstanding after August 25, 2016, commencing as of such date, holders thereof will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on August 25, 2016, and ending on August 24, 2021, will be 1.805 per cent, being equal to the sum of the five-year Government of Canada bond yield as at July 26, 2016, plus 1.15 per cent, as determined in accordance with the terms of the Preferred Shares Series 25.
With respect to any Preferred Shares Series 26 that may be issued on August 25, 2016, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, calculated on the basis of the actual number of days elapsed in each quarterly floating rate period divided by 365, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the three-month period commencing on August 25, 2016, and ending on November 24, 2016, will be 1.622 per cent, being equal to the sum of the three-month Government of Canada Treasury bill yield as at July 26, 2016, plus 1.15 per cent, as determined in accordance with the terms of the Preferred Shares Series 26.
Beneficial owners of Preferred Shares Series 25 who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to ensure that they meet the deadline to exercise such right, which is 5:00 p.m. (EDT) on August 10, 2016.
Conversion enquiries should be directed to BMO’s Registrar and Transfer Agent, Computershare Trust Company of Canada, at 1-800-340-5021.
I previously reported that this issue will be extended.
BMO.PR.Q is a FixedReset, 3.90%+115, that commenced trading 2011-3-11 after being announced 2011-3-2.
The new rate therefore represents a 54% cut in dividends. Ouch!
This issue has been tracked by HIMIPref™ and is a member of the FixedResets index. A hardMaturity at par dated 2022-1-31 has been added to the call schedule indicated by the prospectus to reflect an anticipated call due to the issues lack of a NVCC clause and OSFI’s refusal to grandfather such issues – but note that this Deemed Maturity is a matter of analysis, not a formal commitment of the issuer!
As noted, the deadline to notify the company regarding conversion is 5:00 p.m. (EDT) on August 10, 2016; brokers will have internal deadlines a day or two in advance.
I will post a recommendation regarding whether or not to convert closer to the deadline.
What is the recommendation for the floating reset conversion?