Bank of Montreal is back in the market to redeem its second batch of trust capital securities, better known as BMO BOaTS.
This batch, Series B, totals $400-million and pays 6.64 per cent interest annually. They were first issued way back in 2001. BMO also bought back its Series A issue in the first half of 2010, which totalled $350-million.
BMO redeemed because as of year end 2010, holders of these securities can exchange them into a series of preferred shares. Knowing this, investors expected BMO to act and already priced in a buyback.
**This post has been updated. Initially it suggested the securities might also have been called because they will no longer count as Tier 1 capital under Basel III. These rules are still very vague. Starting in 2013, the amount that this debt contributes to Tier 1 capital will be phased out by 10 per cent each year, for 10 years, but some issues will be grandfathered in and won't be subject to this change.
In that case, this redemption simply follows suit with the reasons for buying back Series A earlier in 2010.Report Typo/Error