Royal Bank has announced:
a domestic public offering of $200 million of Non-Cumulative, 5 year rate reset Preferred Shares Series AR.
The bank will issue 8.0 million Preferred Shares Series AR priced at $25 per share and holders will be entitled to receive non-cumulative quarterly fixed dividend for the initial period ending February 24, 2014 in the amount of $1.5625 per share, to yield 6.25% annually. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 3.0 million Preferred Shares at the same offering price.
Subject to regulatory approval, on or after February 24, 2014, the bank may redeem the Preferred Shares Series AR in whole or in part at par. Thereafter, the dividend rate will reset every five years at a rate equal to 4.50% over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series AR will, subject to certain conditions, have the right to convert all or any part of their shares to non-cumulative floating rate preferred shares Series AS (the “Preferred Shares Series AS”) on February 24, 2014 and on February 24 every five years thereafter.
Holders of the Preferred Shares Series AS will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 4.50%. Holders of Preferred Shares Series AS will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series AR on February 24, 2019 and on February 24 every five years thereafter.
The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is January 29, 2009.
We routinely undertake funding transactions to maintain strong capital ratios and a cost effective capital structure. Net proceeds from this transaction will be used for general business purposes.
The first dividend will be $0.49229 payable May 24, based on anticipated closing January 29.
Update, 2009-1-22: Royal announced on Jan 21:
that as a result of strong investor demand for its domestic public offering of Non-Cumulative, 5 year rate reset Preferred Shares Series AR (the “Preferred Shares Series AR”), the size of the offering has been increased to 10 million shares. The gross proceeds of the offering will now be $250 million. In addition, the bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 3 million Preferred Shares Series AR at a price of $25 per share. The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is January 29, 2009.
… and announced on Jan 22:
that as a result of strong investor demand for its domestic public offering of Non-Cumulative, 5 year rate reset Preferred Shares Series AR (the “Preferred Shares Series AR”), the bank has increased the Underwriters option to 4 million Preferred Shares Series AR at a price of $25 per share.
Update, 2009-1-28: This will trade with the symbol RY.PR.R.
What are your thoughts on the RBC TruCS YIELDING 6.65% to June 30, 2011 capital trust units vis-avis the new RBC pref — or on capital trust units vs prefs in general ?
RYT.NT.P is currently quoted at 100.50-00 on the TSX and pays $7.183 p.a. From 2011-12-31, Holder can convert to prefs paying $1.796 p.a. on a par value of $25.00, or about 7.2%
It therefore seems reasonable (at the moment) to assume that the bank will redeem the TruCS on 2011-12-31.
I’m not sure where you’re getting a 2011-6-31 redemption date from. After that date they can redeem at par, but there’s no necessity to do so. Given that Innovative issues are paying in excess of 7.183% at the moment, it would seem reasonable to assume redemption will be postponed until the holder-favourable conversion to preferreds becomes effective. On the other hand, the earlier redemption is the yield-to-worst. So take your pick.
It’s a tough pick. The high step-up on the TruCS implies a high probability of redemption, but that increases your reinvestment risk. And, of course, the TruCS pay interest but the new issue pays dividends.
Too many variables! It depends on what you’re trying to accomplish.
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