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Perpetual preferred shares come back in style

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.

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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.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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