OK, so the new issue was very badly received and the underwriters didn’t try to catch the falling knife and support the issue during the distribution phase.
But these relative prices are crazy! RY.PR.A started trading just a few months ago (and I didn’t like them either) and the terms of these two issues are virtually identical: the redemption schedule is simply shifted three months along, the ‘A’ issue pays a dividend of $1.1125 annually and the ‘B’ issue pays $1.1750.
So basically, you get 6.25-cents more per share in annual dividend with the B.
Closing Quotation of A : 24.40-45
Closing Quotation of B : 24.30-45
Let’s not ever call the pref market efficient!
[…] PrefBlog Canadian Preferred Shares – Data and Discussion « Crazy pricing! RY.PR.A vs. RY.PR.B on 2006-07-20 Power Financial Series L » […]
The .B seems to have an attractive current yield at the bid for a P1. Is it sufficiently attractive to buy now and, if so, would it make more sense to wait a while in anticipation of the underwriters unloading inventory; or would it make more sense to go long the .B and short the .A?
Well, the .B & .A didn’t move much against each other today! The .B is an attractive perpetual issue at its current quotation of 24.35-45, particularly for trading accounts that like liquidity. Whether it’s attractive enough to buy is a question that only HIMIPref subscribers can answer with great assurance!
I’m not sure if there will be an inventory-blow-out sale in the future … there’s a decent chance that this is the inventory-blow-out sale. Such questions are very hard to guess in advance without inside information so I’ll fall back on my usual tired response: if it looks like a good trade now, grab it, because good trades don’t come along every day of the week.
[…] RY.PR.B, bought near its July lows, returned 1.6633% […]
[…] I can only assume that they have a desired capital structure that includes some preferreds … and that the issue of RY.PR.B was an opportunistic move with the proceeds earmarked for this redemption. […]
Why would anyone buy RY.pr.B over $25 when you could buy RY.pr.W paying a much higher dividend well below $25 where you would also get a capital gain on redemption?. It appears that there would be a great Arbitrage here. any thoughts?
RY.PR.B yields 4.75% to a Deemed Maturity 2022-1-31, but RY.PR.W has a soft call (the company can force conversion to common). For the latter issue, there is therefore the possibility of getting NVCC status, similarly to the three similar CM issues.
Thus, I do not consider RY.PR.W to be a DeemedRetractible, it is instead an ordinary PerpetualDiscount, yielding 4.97% to perpetuity at last night’s bid of 24.78.
You can make a case for either issue, depending on your objectives, but in my estimation the extra yield on RY.PR.W is a little skimpy considering the longer term.
How does the RY.pr.B have a deemed Maturity to 2022-1-31. I see nothing in the prospectus indicating that. Is there something that I am missing?
Welcome to the blog!
See the explanation of DeemedRetractibles at http://www.prefletter.com/whatPrefLetter.php and the January, February, March and June editions of PrefLetter for discussion.