BNA.PR.D Settles Firm on Good Volume; Asset Coverage to Increase

BNA.PR.D, the 5-year split share refunding BNA.PR.A announced June 18 settled today, trading 261,515 shares in a range of 24.89-03 before closing at 24.99-25.

BAM Split also announced:

Concurrently with the completion of the offering, BAM Investments has agreed to transfer 7,000,000 BAM Shares to the Company in exchange for additional Capital Shares of the Company. On or about July 27, 2009, BAM Investments will convert its existing holdings of Class A Preferred Shares, Class AA Preferred Shares, Series 1 and Class AAA Preferred Shares, Series 1 of the Company (collectively, the “Preferred Shares”) into Capital Shares and the Company will consolidate the existing Capital Shares held by BAM Investments so that an equal number of Preferred Shares and Capital Shares will be outstanding.

BNA.PR.D will be tracked by HIMIPref™. It has been added to the HIMIPref™ SplitShares Index.

BNA.PR.D SplitShare YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2014-07-09
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 7.30 %

Update: Prospectus (via SEDAR) to the rescue! The transactions with BAM Investments are fully disclosed in the prospectus, which provides a pro-forma statement of the capitalization changes:

The capitalization of the Company at March 31, 2009, and at such date as adjusted to give effect to the issue and sale of the Series 4 Preferred Shares offered hereby, the redemption of the Class A Preferred Shares, the conversion of BAM Investments’ Preferred Shares to Capital Shares, and the acquisition of an additional 7,000,000 BAM Shares is set forth in the table below.

Item As of 3/31 Pro-Forma
as at 3/31
Class A Preferred Shares $125,000,000 $ —
Class AA Preferred Shares Series 1 $ 79,727,500 $ 51,905,000
Cl AA Series 2 $ 33,700,000 $ —
Series 3 $200,000,000 $190,920,000
Cl AA Series 4 $ — $125,000,000
Class AAA Preferred Shares Series 1 $ 37,116,800 $ —
Class A Voting Shares $ 100 $ 100
Capital Shares $123,872,500 $371,945,500
Retained Earnings $210,664,000 $209,464,000
Total Prefs $475,544,300 $367,825,000
Total Equity $334,536,600 $581,409,401
Asset Coverage 1.7+:1 2.6-:1

This is very good news for holders of BNA.PR.B & BNA.PR.C, who are seeng their credit quality increase dramatically for free.

Update, 2009-7-10: DBRS has announced:

To increase the level of protection to the Class AA Preferred Shares, BAM Investments will convert its existing Non-Rated Preferred Shares, Class A Preferred Shares and Class AA Preferred Shares to Capital Shares following the issuance of the Series 4 Preferred Shares. In addition, BAM will transfer seven million additional BAM Shares into the Portfolio in exchange for Capital Shares, which will increase the amount of Company assets and further increase the downside protection available for the Class AA Preferred Shares.

After giving effect to the foregoing changes, the downside protection available to the Class AA Preferred Shares will be approximately 62%, based on the market value of the BAM Shares as of July 8, 2009. The dividend coverage ratio will be approximately 1.6 times.

The rating assigned to the Series 4 Preferred Shares is an indication of the probability that the Company will make timely payments of dividends and ultimately repay principal by the Final Maturity. The Pfd-2 (low) ratings are primarily based on the downside protection and dividend coverage available to the Class AA Preferred Shares.

The main constraints to the rating are the following:
(1) The downside protection available to holders of the Class AA Preferred Shares depends solely on the market value of the BAM Shares held in the Portfolio, which will fluctuate over time.
(2) There is a lack of diversification as the Portfolio is entirely made up of BAM Shares.
(3) Changes in the dividend policy of BAM may result in reductions in Class AA Preferred Shares dividend coverage.
(4) The BAM Shares pay dividends in U.S. dollars, so the Company is exposed to foreign currency risk relating to the Canadian-U.S. exchange rate.

Note that a “downside protection” of 62% is equivalent to asset coverage of 2.6+:1.

8 Responses to “BNA.PR.D Settles Firm on Good Volume; Asset Coverage to Increase”

  1. […] PrefBlog Canadian Preferred Shares – Data and Discussion « BNA.PR.D Settles Firm on Good Volume […]

  2. […] Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2014-07-09 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 7.40 % […]

  3. […] forma asset coverage of 2.6+:1 as of July 8, according to DBRS. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 […]

  4. […] coverage of 2.6+:1 as of July 8, according to DBRS. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 […]

  5. […] Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2014-07-09 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 7.27 % […]

  6. […] Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2014-07-09 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 7.20 % […]

  7. […] recent infusion of riches doesn’t seem to have improved BAM Split’s ability to service its preferred shareholders […]

  8. […] BAM Split Corp. has three series of prefereds outstanding, BNA.PR.B, BNA.PR.C and BNA.PR.D. All are tracked by HIMIPref™. The first is relegated to the Scraps index on volume concerns, but the latter two are the sole constituents of the SplitShare index. These issues were last mentioned on PrefBlog during the Summer 2009 reorganization. […]

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