Great-West Spends CAD 4.6-Billion! Implications for Prefs?
It has been announced that Great-West will aquire Putnam Investments for CAD 4.6-Billion.
In response, DBRS has placed the entire corporate structure on credit review with developing implications: GWO (which includes CL and GWL), PWF and POW.
Standard & Poors has taken a much more nonchalant approach, affirming the current ratings.
Funding for the transaction will come from internal resources as well as from proceeds of an issue of Lifeco common shares of no more than CDN $1.2 billion, the issuance of debentures and hybrids, a bank credit facility, and an acquisition tax benefit securitization.
This transaction might possibly explain the mystery of CL.PR.B, which has still not been called. If they have to push through a lot of net issuance, they’re probably not too enthusiastic about calling the old stuff - CL.PR.B has 6-million shares outstanding, so redeeming it at $26.00 would add $156-million to the amount of gross issuance required.
Similarly, it is possible that the resources devoted to the GWO.PR.E / GWO.PR.X Issuer Bid will be reduced.
For the other companies in the group, the transaction may affect, for instance, the chance of PWF.PR.J being redeemed early.
One may take a lot of views and play with a lot of scenarios. Me, I’m just going to assume, as always, that the worst scenario - in life, love and investing - is most likely.
February 23rd, 2007 at 7:51 pm
[...] Update : I forgot the links to aid navigation! The issuer bid was last discussed January 25; it remains to be seen how the cash required for the Putnam Purchase will affect the buyback. [...]
March 6th, 2007 at 11:03 pm
[...] Strange trading near the close - possibly an error, although not in and of itself enough to explain the sharply lower closing bid. HSBC bought 105 shares at 26.96 from “Anonymous” and Jones Gable (the odd lot) at 3:54pm, then sold 155 shares at 26.65 to Anonymous and Jones Gable (again the odd-lot). Huh. I wonder if there’s a story there … but there was a block trade and a bunch of odd lots trading at 26.65 prior to this, with lots of time for anyone to put in a better bid, so it doesn’t seem that the error (if that’s what it was) affected the price. Now with a pre-tax bid-YTW of 2.33% based on a bid of 26.64 and a call 2009-04-30 at $26.00. The yield is 2.95% if it survives until 2011-4-30 @ $25.00! Woo-hoo! Interest equivalent of almost a bond! This issue is on Credit Watch Developing and GWO has an issuer bid in place. [...]
March 20th, 2007 at 10:03 pm
[...] Still on credit watch by DBRS as the market awaits information regarding their financing of the Putnam purchase. This issue has an issuer bid outstanding, although no shares were purchased under last year’s plan. Now with a pre-tax bid-YTW of 2.41% based on a bid of 26.62 and a call 2009-4-30 at $25.50 … if the company waits until the first possible par-value call, 2011-4-30, it will have yielded 3.00%; and if the issue lasts until its softMaturity 2014-3-30, it will have yielded 3.64%. Take your pick! [...]
March 22nd, 2007 at 8:08 pm
[...] Still http://www.prefblog.com/?p=543″>on credit watch by DBRS as the market awaits information regarding their financing of the Putnam purchase. This issue has an http://www.prefblog.com/?p=619″>issuer bid outstanding, although no shares were purchased under last year’s plan. Now with a pre-tax bid-YTW of 2.41% based on a bid of 26.62 and a call 2009-4-30 at $25.50 … if the company waits until the first possible par-value call, 2011-4-30, it will have yielded 3.00%; and if the issue lasts until its softMaturity 2014-3-30, it will have yielded 3.64%. Take your pick! [...]
March 23rd, 2007 at 11:59 pm
[...] Desjardins crossed 58,000 at 27.65, in a blatant attempt to capture the coveted “Biggest trades is low-yielding securities” tropy for March. Now with a pre-tax bid-YTW of 2.14% based on a bid of $27.60 and a call 2009-10-30 at $26.00. This is an interesting issue, with the issuer bid and Putnam financing to be considered. [...]
April 25th, 2007 at 11:33 pm
[...] Even four months after I expected them to be redeemed, I am still a little confused, since paying 1.5625 on a perp when new perps are paying 1.125 - and I can’t see a GWO issue having to pay more that 1.30, no matter how sick the Street is of seeing the name - doesn’t make a lot of sense to me. However, as I have mentioned numerous times, the purchase of Putnam still needs to be financed and maybe they’re just delaying a little until they’ve got all that stuff squared away. [...]
February 14th, 2008 at 11:23 pm
[...] Another issue reliant on the idea that GWO has better things to do with their money than call issued stock! Now with a pre-tax bid-YTW of -27.12% based on a bid of $26.63 and an immediate call at $26.00. It’s really a question of how long the game will last … to get a yield of 3.46%, you have to bet that there will be no call until 2009-1-30 at $25.50. There are a lot of people willing to make that bet, it seems! The issue was a stellar performer in February, with a total return of +2.5451% month/month bid/bid. [...]
May 16th, 2008 at 3:02 pm
[...] The financing of the Putnam purchase has been previously discussed, as was the DBRS response to the purchase itself. [...]