Rate reset preferred shares have been in vogue for years, but it appears that the pendulum could be swinging back in favour of the ordinary, plain vanilla type.
On Monday, Power Financial Corp. announced a $150-million deal for perpetual preferred shares, and on Friday, Great-West Lifeco Inc. announced a deal for both the same size and the same type of security. Before Friday’s deal, the market hadn’t seen perpetuals since February, 2010 -- two full years ago.
Not only did these new deals sell, they blew out. Great-West’s deal was increased to $250-million, and Power Financial’s was raised to the same amount, just two hours after the deal was launched. Both offerings were co-led by BMO Nesbitt Burns, RBC Dominion Securities and Scotia Capital.
This isn’t to say that rate reset preferred shares have gone out of style. Enbridge announced a $300-million offering of these securities less than a month ago, and the deal was increased to a whopping $500-million. But it is interesting to note that some companies now prefer the fixed perpetual rates, rather than hope that rates don’t jump too high within five years. And investors clearly don't seem to mind.