Brookfield Asset Management Inc. has announced (in October, 2021):
that it has determined the fixed dividend rate on its Class A Preference Shares, Series 9 (the “Series 9 Preferred Shares”) (TSX: BAM.PR.G) for the five years commencing November 1, 2021 and ending October 31, 2026.
If declared, the fixed quarterly dividends on the Series 9 Preferred Shares during the five years commencing November 1, 2021 will be paid at an annual rate of 2.75% ($0.171875 per share per quarter). This dividend rate represents 218% of the interpolated yield, calculated as of October 12, 2021 at 10:00 a.m. (Toronto time), on the 1.00% Government of Canada bond due September 1, 2026 and the 1.00% Government of Canada bond due June 1, 2027. This dividend will be payable quarterly on the first day of February, May, August and November, commencing with the dividend payable on February 1, 2022.
The annual rate currently paid on the Series 9 Preferred Shares is 2.75%. A quarterly dividend payable at this rate will be paid on November 1, 2021 to shareholders of record on October 15, 2021.
Conversion Rights
Holders of Series 9 Preferred Shares have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on October 18, 2021, to convert all or part of their Series 9 Preferred Shares, on a one-for-one basis, into Brookfield’s Class A Preference Shares, Series 8 (the “Series 8 Preferred Shares”) (TSX: BAM.PR.E), effective November 1, 2021. Holders of Series 9 Preferred Shares who elect to convert their shares by the conversion deadline will receive Series 8 Preferred Shares, effective November 1, 2021 and will be entitled to receive, if declared, a monthly floating-rate dividend based on the prime rate.Holders of Series 8 Preferred Shares also have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on October 18, 2021, to convert all or part of their Series 8 Preferred Shares, on a one-for-one basis, into Series 9 Preferred Shares, effective November 1, 2021. Holders of Series 8 Preferred Shares who elect to convert their shares by the conversion deadline will receive Series 9 Preferred Shares, effective November 1, 2021 and will be entitled to receive, if declared, the fixed-rate dividend as described above.
Holders of Series 9 Preferred Shares are not required to elect to convert all or any part of their Series 9 Preferred Shares into Series 8 Preferred Shares and holders of Series 8 Preferred Shares are not required to elect to convert all or any part of their Series 8 Preferred Shares into Series 9 Preferred Shares.
As provided in the share conditions of the Series 9 Preferred Shares, (i) if Brookfield determines that there would be fewer than 500,000 Series 9 Preferred Shares outstanding after November 1, 2021, all remaining Series 9 Preferred Shares will be automatically converted into Series 8 Preferred Shares on a one-for-one basis effective November 1, 2021; and (ii) if Brookfield determines that there would be fewer than 500,000 Series 8 Preferred Shares outstanding after November 1, 2021, no Series 9 Preferred Shares will be permitted to be converted into Series 8 Preferred Shares. There are currently 5,515,981 Series 9 Preferred Shares outstanding.
Similarly, as provided in the share conditions of the Series 8 Preferred Shares, (i) if Brookfield determines that there would be fewer than 500,000 Series 8 Preferred Shares outstanding after November 1, 2021, all remaining Series 8 Preferred Shares will be automatically converted into Series 9 Preferred Shares on a one-for-one basis effective November 1, 2021; and (ii) if Brookfield determines that there would be fewer than 500,000 Series 9 Preferred Shares outstanding after November 1, 2021, no Series 8 Preferred Shares will be permitted to be converted into Series 9 Preferred Shares. There are currently 2,476,185 Series 8 Preferred Shares outstanding.
Holders of Series 8 Preferred Shares and Series 9 Preferred Shares will again have the opportunity to convert their shares into the other series on November 1, 2026 and every five years thereafter.
They later announced (on 2021-10-22):
that holders of 8,202 of its Class A Preference Shares, Series 8 (the “Series 8 Preferred Shares”) (TSX: BAM.PR.E) and holders of 853,503 of its Class A Preference Shares, Series 9 (the “Series 9 Preferred Shares”) (TSX: BAM.PR.G) have elected, effective November 1, 2021, to convert their shares into an equivalent number of shares of the other series. Following these conversions, there will be 3,321,486 Series 8 Preferred Shares and 4,670,680 Series 9 Preferred Shares issued and outstanding.
I didn’t post this at the proper time! This post exists as a matter of record only!
“For the five year period from November 1, 2021 until October 31, 2026, the Series 9 Preferred Shares will pay on a quarterly basis, as and when declared by the Board of Directors of Brookfield Asset Management, a fixed cash dividend in an amount equal to 2.75% per annum applied to the price of C$25.00 per share. The first dividend at this new rate will be payable on February 1, 2022.”
This is all the remaining future guidance that BAM provides about this series on their website. What the heck happens in 2026? BAM has been unresponsive to my enquiries on this matter.
They don’t provide the prospectus on their preferred share page, but they do provide a summary of its provisions.
In 2026, the shares will either be redeemed at par or be reset to a new rate. This rate is set at BAM’s discretion, but will not be less than 80% of the contemporary 5-year GOC yield (as defined in the prospectus). If they reset, then after the new dividend rate has been announced, holders will have the option to retain their shares or exchange them for BAM.PR.E.
See my article Preferred Pairs for more discussion.
Thanks James 🙂
As I read the responses, I understand that the 2.75% relates to the 25.00 par value. With today’s price of approx, 13.00 puts the % up to approx 5.3%. With rates being what they are (and will be), I can’t see the price rising any time soon.
With such a low price, why would BAM redeem them?
I imagine that BAM.PR.E is the better choice?
But BAM could buy them on the open market and then cancel them, immediately improving the Book Value. On the flip side, if they need the cash, then why bother buying them back.
I have been examining BAM.PR.E and BAM.PR.G more closely today in the context of Brookfield’s spin-out of the asset management division.
There’s a significant discrepancy in the Series 9 “Issued and Outstanding” share count between the Brookfield press releases cited above and Brookfield’s own annual reports for 2020 and 2021.
The 2020 annual report on page 198 shows 1,515,981 shares of Series 9 (BAM.PR.G) outstanding, not 5,515,981. The 2021 annual report on page 222 says 670,680, not 4,670,680. Why might _both_ press releases be overstating the share count by 4,000,000? Shouldn’t “Issued and Outstanding” mean the same thing in both places?
As the Series 8/9 pair is interconvertible, I also checked the totals. In the 2020 report, outstanding Series 8 (BAM.PR.E) and Series 9 (BAM.PR.G) shares were 2,476,185 and 1,515,981 respectively, totaling 3,992,166. In the 2021 report, outstanding Series 8 and 9 shares were 3,321,486 and 670,680 respectively, for the same total of 3,992,166, not the 7,992,166 implied by the press releases.
I am still wondering if an extra $100,000,000 in par value for this pair of prefs actually exists or not. I checked the TSX’s numbers: total issued and outstanding for the pair doesn’t match either total from above. TSX shows today a Series 8 count of 3,320,486 and Series 9 count of 1,177,580, for a total of 4,498,066. i.e. the TSX indicates an extra 505,900 shares exist compared to the BAM annual report total for the pair! Help!
Even more odd: Brookfield’s “Management Information Circular and Proxy” dated October 6, 2022 describing the plan of arrangement is showing, on page 18, Series 8 and 9 outstanding share counts that agree with the TSX figures: Series 8 at 3,320,486 and Series 9 at 1,177,580.
So Brookfield has provided investors with 3 conflicting totals between the annual reports, the press releases, and the information circular.
So Brookfield has provided investors with 3 conflicting totals between the annual reports, the press releases, and the information circular.
For questions of fact, you’re better off asking Investor Relations at Brookfield. I suggest you fill out their on-line form and ask them. That’s all I would do if I undertook to answer the question!