Tuesday, March 24, 2009

Canadian Bank Preferred offerings get supersized

Posted on the Globe & Mail's Streetwise blog by Andrew Willis:

Two preferred share financings in the past 24 hours have been super-sized in the face of strong investor demand.

Royal Bank of Canada took a planned $200-million offering launched early Tuesday up to $325-million by the end of the session. The new shares offer a 6.25 per cent yield. RBC Dominion Securities led the underwriting.

Late Monday, HSBC Bank Canada raised its $125-million share sale to $175-million. The offering was led by HSBC Securities (Canada) and Scotia Capital, and yields 6.6 per cent.

These bought-deal offerings are largely pitched to individual investors, who can take advantage of a tax break on dividend income. The fact that deals tend to get pitched at one size, then bumped up into larger financings, partly reflects the fact that underwriters are cautious about trying to stuff too much product into their retail distributions networks. Once it's clear there's demand, the dealers can come back to issuers and increase the offerings.

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