Royal Bank has announced:
a domestic public offering of $200 million of Non-Cumulative First Preferred Shares Series AH.
The bank will issue eight million Preferred Shares priced at $25 per share and holders will be entitled to receive non-cumulative preferential quarterly dividends in the amount of $0.353125 per share, to yield 5.65 per cent annually. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 2 million Preferred Shares at the same offering price.
Subject to regulatory approval, on or after May 24, 2013, the bank may redeem the Preferred Shares in whole or in part at a declining premium.
The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is April 29, 2008.
The net proceeds of this transaction will be used for general business purposes and will strengthen the bank’s capital ratios.
Issue: 5.65% Non-Cumulative First Preferred Shares, Series AH
Amount: 8-million shares @ $25 = $200-million. Greenshoe exercisable prior to closing, for up to 2-million shares.
First Dividend: Long first dividend payable August 24, based on anticipated closing of April 29, of $0.452774.
Redemption: Redeemable at $26.00 commencing May 24, 2013. Redemption price declines by $0.25 every May 24 until May 24, 2017; redeemable at $25.00 thereafter.
Ratings (provisional): DBRS, Pfd-1; S&P, P-1(low).
Underwriting: Bought deal, expected closing April 29, 2008.
This is in addition to the $500-million Innovative Tier 1 Capital, a pretend-10-year priced at Canadas +310bp.
Later, More: Some comparables:
| RY Perps 4/21 | ||||
| Issue | Quote 4/21 (Intraday) |
Dividend | Curve Price |
Pre-tax Bid-YTW |
| RY.PR.A | 20.59-60 | 1.1125 | 20.75 | 5.50% |
| RY.PR.B | 21.18-22 | 1.1750 | 21.77 | 5.65% |
| RY.PR.C | 20.64-96 | 1.15 | 21.29 | 5.67% |
| RY.PR.D | 20.37-54 | 1.125 | 20.87 | 5.62% |
| RY.PR.E | 20.50-79 | 1.125 | 20.91 | 5.59% |
| RY.PR.F | 20.56-70 | 1.1125 | 20.75 | 5.51% |
| RY.PR.G | 20.38-55 | 1.125 | 20.87 | 5.62% |
| RY.PR.W | 22.12-56 | 1.225 | 22.50 | 5.63% |
| RY.PR.H | Issue Price $25.00 |
1.4125 | 24.61 | 5.67% |
Note that “Curve Price” is a static calculation – it assumes that the yield curve will not change in the future. Convexity effects decrease the value of near-par-by-curve-price issues
It should also be noted – as indicated in the comments by Assiduous Reader madequota – that today, April 21, is the last cum-dividend trading day for the Royal issues. They are all expected to drop in price tomorrow, April 22, to reflect the fact that tomorrow the buyer will not receive this quarter’s dividend.
The conclusion to be drawn from the comparables is … this new issue is quite expensive. Avoid.
Just to go on record . . . I “like” this IPO . . . 5.65% by RBC right now could mark the start of the pref recovery that has been so sorely needed.
The RY’s have sold off a little on light volume both on Friday, and today, but they’re already showing signs of firming. (of course they go ex tomorrow, and we’re probably going to get a 50bp cut to the bank rate tomorrow as well . . . both of which should work to support the stock)
all in all, a good coupon, and a strategically smart demonstration of timing on their part.
madequota
p.s.
but don’t buy the IPO; wait for opening day and buy it for $24.80!
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