Scotiabank has announced that it will be redeeming its $300,000,000 Series 13 preferred shares (BNS.PR.K) on July 29th. The shares will be redeemed for $25.00 plus a $0.30 dividend.
The BNS.PR.K was a perpetual preferred issue, but did not contain Non-Viable Contingent Capital compliant covenants. As a result, the shares had decreasing value as part of the bank’s regulatory capital. July 29th was the first date that the bank could redeem the issue at par. (OSFI has encouraged the banks to not redeem securities at a premium.)
The BNS.PR.K shares closed yesterday at $25.60, as some investors failed to realize the potential risk of redemption. Today, the shares closed at $25.29, a loss of more than 1% in the last 24 hours. The NexGen Canadian Preferred Share fund did not hold the BNS.PR.K issue because we had recognized the redemption risk.