MST.PR.A & SFO.PR.A : Capital Unit Distributions Suspended

Sentry Select has announced:

In accordance with their respective declarations of trust, in order to preserve the capital available to repay the preferred securities upon their respective maturity dates, Sentry Select Capital Corp. (“Sentry Select”), the manager of Sentry Select 40 Split Income Trust and the trustee of Multi Select Income Trust (collectively, the “Trusts”) has suspended the payment of distributions (including the October distributions) for the Trusts until each Trust is permitted, according to its declaration of trust, to resume paying monthly distributions to holders of capital units.

This decision will not negatively impact the ability of either Trust to meet the obligations to preferred security holders. The respective maturity dates for the preferred securities are December 1, 2008 and September 30, 2009.

MST.PR.A is tracked by HIMIPref™ – it was moved to the scraps index from interestBearing in February due to volume concerns. Asset coverage was 1.6-:1 as of October 23 according to Sentry Select.

SFO.PR.A is not tracked by HIMIPref™

6 Responses to “MST.PR.A & SFO.PR.A : Capital Unit Distributions Suspended”

  1. cowboylutrell says:

    Now that you’re talking about MST.PR.A, I have a question for you. About three weeks ago, Sentry Select announced that some shares of MST.PR.A would be redeemed for an amount of $10.45 per share (this amount included the $10.00 face value, plus a premium, plus accrued interest). I don’t remember the exact percentage of shares redeemed, but I know it was between 10% and 15%.

    Usually, the annual redemptions for this stock take place between the 20th and the 25th of October. Since no activity showed in my account pertaining to this, I got in touch with my broker. The answer they gave me is this: The accounts into which the shares would be redeemed were determined randomly, and my account was not part of the selection.

    My question is this: Do you find this situation a bit odd, or is this just normal?

  2. jiHymas says:

    I know it was between 10% and 15%. … The accounts into which the shares would be redeemed were determined randomly, and my account was not part of the selection. My question is this: Do you find this situation a bit odd, or is this just normal?

    What that is is a disgrace.

    I have no idea of how many shares you hold or what the percentage redeemed was (Sentry Select is playing it coy; there is no press release on the website); but the only reason for you not to have had the precise percentage of shares redeemed (subject to rounding) would be a desire by your broker to redeeem only board lots. And if your share was more than one board lot you should have had some redeemed anyway.

    If I were you, I would write a stiff letter of complaint to your broker. There is a possibility that this is a company policy, in which case you can’t do much else than change brokers. It is much more likely that the decision was made by a hapless reorg clerk (I was once a hapless reorg clerk, back in the day) with no market knowledge or experience. Since the banks took over the securities business, all aspects of the business – particularly operations – are being de-skilled … don’t let them get away with it when it costs you money.

    I remember one time when I was Greydanus, Boeckh … I forget the details, but somehow an account under management had $600-odd worth of a bond redeemed, leaving us with a position not divisible by $1000. You can’t trade bond positions of less than $1000! Not even as part of a $50-million trade! Sorting that out took a month, and there were odd little echoes for over a year afterwards.

  3. cowboylutrell says:

    Thanks for the advice, I appreciate it.

    I had 2,300 shares on the ex date for the redemption, so I should have had somewhere between 200 and 300 shares redeemed. So there are definitely 2 board lots that should have been redeemed, as well as a few more shares. And usually, this broker deals properly with that type of corporate action (for instance, in the past they did it properly, in a prorated fashion, with FCS.PR.A, FIG.PR.A, ASI.PR.A, BDS.PR.A, RBT.PR.A, LSC.PR.C, BCX.PR.A, BXN.PR.B and many more); to my knowledge, it’s the first time they mess up with such a situation, and I’ve been dealing with them for over two years. So, it doesn’t look like it’s actually a company policy to select the accounts ‘randomly’.

    I will not divulge the name of this broker, but you can guess easily: it’s a broker based in Connecticut which is fairly known among active traders, and their Canadian office is based in Montreal; when they do a trade on a Canadian exchange, they go by the name of ‘Anonymous’. So this broker is defenitely not owned by a Canadian bank.

    Recently, this broker has been increasing the margin requirements on small caps to 100% (they no longer provide margin on small caps, i.e. stocks with less than US$100 million), and even preferred shares with a market cap of less than US$100 million are now part of their definition of a small cap. For instance, as of November 4th, they will no longer grant margin on preferreds such as BMT.PR.A, DGS.PR.A, GFV.PR.A, MST.PR.A, NEW.PR.B and many others. Thankfully, I’ve been able to adjust my positions yesterday and today. But I’m really disgusted.

  4. jiHymas says:

    If they’ve done it properly before, I suggest that a letter of complaint is in order.

    To jiggle things so that only board lots would be left intact wherever possible would be a reasonable, even laudable, arrangement; but to leave you completely out in the cold is not reasonable. I’ll bet (but only a nickel) that the decision was made by a clerk.

  5. [...] was mentioned on PrefBlog when dividends on capital units were suspended. SFO.PR.A is not tracked by [...]

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