Allbanc Split Corp. Announces Reorganization Proposal
Tuesday December 11, 3:33 pm ET
TORONTO, Dec. 11 /CNW/ - Allbanc Split Corp. (the "Company") announced today that its Board of Directors has approved a proposal to reorganize the Company. The reorganization will permit holders of Class A Capital Shares to extend their investment in the Company beyond the redemption date of March 10, 2008 for up to an additional 5 years. The Class A Preferred Shares will be redeemed on the same terms originally contemplated in their share provisions. Holders of Class A Capital Shares who do not wish to extend their investment and all holders of Class A Preferred Shares will have their shares redeemed on March 10, 2008.
The reorganization will involve (i) the extension of the originally scheduled redemption date, (ii) a special retraction right to enable holders of Class A Capital Shares to retract their shares as originally contemplated should they not wish to extend their investment and (iii) the creation of a new class of shares to be known as the Class B Preferred Shares in order to provide continuing leverage for the Class A Capital Shares. The reorganization will be subject to receipt of all necessary regulatory approvals.
A special meeting of holders of Class A Capital Shares has been called and will be held on January 25, 2008 to consider and vote upon the reorganization. Details of the proposed reorganization will be outlined in an information circular to be prepared and delivered to holders of Class A Capital Shares in connection with the special meeting.
For further information
Investor Relations, Allbanc Split Corp., (416) 945-4171, E-mail: email@example.com, Web site: www.scotiamanagedcompanies.com
gerryf wrote:If I don't do anything, will the cash show up in my account? Or do these split corporations roll over into a new incarnation and if I don't specifically sell them, I wind up with shares in the new corporation?
gerryf wrote:A recent investing author mentioned she didn't like split corporations, but she wasn't specific why.
Are there any pro/con reasons to prefer an ETF over a Split corporation investing in the same sector?
Hie thee to your public library. Most carry CMS. If for some reason they don't, contact CMS (Dale or Betty Ennis) and tell them who the offending library is. They'll give them a free one-year subscription.queerasmoi wrote:I have no access to the article from this month though.
queerasmoi wrote:My understanding is that the split-share corporation owns a basket of securities
queerasmoi wrote:effectively, it behaves as if the common shares owned the entire basket on a margin loan (5.25%, it would seem, in most cases) from the preferred side. The preferred shareholders receive dividends equivalent to those interest payments, and their principal is backed by the equity in the common shares (as long as the common shares still have value ).
queerasmoi wrote:What should I be aware / afraid of when it comes to pref split shares?
queerasmoi wrote:Where do they fit on the spectrum of equity-to-fixed income? My instinct is "safer principal than corporate preferreds, still riskier than 'real' fixed-income"
queerasmoi wrote:Wondering if they'd be a good complement to the cash and bonds section of my little portfolio.
Arby wrote:I expect there should be a direct inverse relationship between split pref prices and interest rates. It also depends on which interest rate is used. James Hymas blog provides a good explanation of the relationship between preferred share price and interest rates. Since split prefs typically have a 5 year maturity, the split pref inverse relationship should be with short term corporate bond rates. However, since split prefs are so thinly traded, a few small trades can greatly affect the price, so I don't think the relationship is very solid.
Perhaps what it comes down to is that split prefs are using the common stock as a cushion.
Arby wrote:queerasmoi wrote:Where do they fit on the spectrum of equity-to-fixed income? My instinct is "safer principal than corporate preferreds, still riskier than 'real' fixed-income"
like_to_retire wrote:No, the reason is that splits act much like retractable preferred shares that enjoy a retraction date, which is a put option for the holder, at a known price at a known time. The maturity date of a split is a proxy for this feature. Like a bond, if I know that at a certain date I can "get my money back", it tends to support the price from being wildly affected by interest rates, especially if the retraction or maturity date is within sight.
For example, check a graph of MFC.PR.A (retractable) against a perpetual and a high rated split. The retractable and split will track and the perpetual falls off a cliff.
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