Convertible debenture

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mylund
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Convertible debenture

Post by mylund »

Aecon Group is offering a Conv. Deb.(are.db.b in and around $99. at a rate of 5.6% for 3 yrs, they will buy it back at a $100. Regardless of the going future value in three years.Today's volume over one million.
Never bought debentures.
Any advice yould be great
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AltaRed
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Re: Convertible debenture

Post by AltaRed »

Depends on whether it is convertible at your option (only) and not theirs.... and the credit rating of Aecon Group's debt.
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Re: Convertible debenture

Post by scomac »

Check the credit rating if it's available for the debentures in question. If not assume the credit rating on the issuer.

Check the prospectus (on SEDAR) for the call schedule, conversion rate and debt covenants. You are buying a call on the common shares, so you had better be sure that you like the company rather than just reaching for yield.

If this is non-investment grade (and I suspect that it almost surely is) you are not being paid enough for the additional risk you are taking on, even for three years. A number of years ago I purchased a series of GMAC bonds. When the company got into trouble, the prices were slashed on the bonds as there simply wasn't a bid out there for them. The only option was to hold to maturity and hope that the issuer didn't default (I wasn't facing the prospect of a forced conversion to near worthless stock). It worked out, but I can assure you it wasn't without angst. It was the toughest 10% return I ever earned!

I can't stress enough that my biggest belly aches have been a result of high yield investments gone wrong. The problem is liquidity. Sometimes you can't get out on any terms! :x
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Springbok
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Re: Convertible debenture

Post by Springbok »

mylund wrote:Aecon Group is offering a Conv. Deb.(are.db.b in and around $99. at a rate of 5.6% for 3 yrs, they will buy it back at a $100. Regardless of the going future value in three years.Today's volume over one million.
Never bought debentures.
Any advice yould be great
I actually own that convertible. Conversion price is $20 and current price under $10, so not much chance that holders will want to convert. So it is essentially like a corporate bond. With markets currently depressed, you can buy at just under par and earn a yield to maturity of about 5.78%.

I will try and attach prospectus, but from what I recall, the company can't redeem until Dec 31st 2016. During 217, they can only redeem if share price is over 125% of conversion price so $25. Unlikely! During final year they can redeem with notice at par. Maturity date is 31-Dec-18.

I may buy more!

https://dl.dropboxusercontent.com/u/547 ... E_DB_B.pdf
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Re: Convertible debenture

Post by mylund »

Thank you Springbock,the attached site/ debenture along with other invt.products are very informative.
I have not decided to buy the Aecon DB,
I have 50K in xsb
and xbb,would it be a greedy move to replace those etf,s with this Conv. Deb.I think Aecon
Will have a good year going forward if they are not called in like snc lavalin.
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Re: Convertible debenture

Post by Webber22 »

I had a few debentures for companies that have recently gone bankrupt. Only had a few thousand total, but the trend is disturbing.
SanGold SGR.DB
Parallel Energy PLT.DB

TDDI was the firm that offered them to client 2-3 years ago. Is there any legal action to take against TDDI for not doing its due diligence.
My due diligence obviously didn't pass the tests :cry:
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AltaRed
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Re: Convertible debenture

Post by AltaRed »

TDDI is simply an order taker (discount broker) and does not provide any investment advice.They offer products in their inventory for your consideration.

If you need investment guidance/support/assistance, you should be in a contractual relationship with an investment advisor (independent, full service brokerage, etc).

Added: Debentures are generally unsecured creditors and are often offered by issuers because they can no longer get secured debt on reasonable terms OR cannot get any more secured debt at all. I see the convertibility aspect as simply an additional enticement to potentially add some juice (upside) to the asset in the event its common shares take off above/beyond the convertible price. FWIW, I've never purchased a convertible debenture due to my inability to properly risk the instrument.
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Re: Convertible debenture

Post by Transformer »

I have a lot of exchange traded convertible debentures, almost all of the exchange traded ones are convertible. Drawing on my own experience I would only recommend them if you can hold a broad number of issues. And by broad I am talking say a minimum of 20 issues ( I probably have 40 plus issues). This allows you to spread out the risk and to have a ladder of maturities. I have had one issue go bankrupt, I have a couple in the 80's, but I also have a few trading in the 125 to 150 range. Also they can be difficult to buy in the amounts you may want, and in some of my accounts I have to phone up to place an order as orders cannot be done on line. While convertible debentures have worked out for me they do take a lot of investigative work and I would not recommend them unless you are prepared to dig into the companies and can hold a wide group of issues.
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Re: Convertible debenture

Post by kcowan »

Transformer wrote:While convertible debentures have worked out for me they do take a lot of investigative work and I would not recommend them unless you are prepared to dig into the companies and can hold a wide group of issues.
Recognizing that your are trading in a higher risk category, naturally the rewards should be higher too. The due diligence is a double whammy because you first investigate the company, then you have to check the debenture. I have stopped using them because of the risk factor. They are better than straight low rated bonds but not by much.

During the 90s, you could have your cake and eat it too, getting paid a higher rate while being hedged against a stock market takeoff.

The fact is that most CDs get sold out within 3 hours of their listing on TTDI. And their rates have dropped by 1.5% so, not only is the upside less likely but the payment for waiting has declined.

(All brokers have their commercial clients and have an obligation to raise money in the most efficient way possible. This has lead to them systematically reducing the % rate as long as they sell out. I think this happens because those buying them do not fully understand the risk. For a useful tutorial on risk, look at what happened to YP CD holders! I think their continued success is because so many uninformed investment advisors are reaching for yield.)
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Re: Convertible debenture

Post by adrian2 »

Hydro One's $1.4 Bln Bought Deal Sells Out Quickly
Underwriters had little trouble selling Hydro One's (H.TO) $1.4-billion bought deal, which was announced last week with the utility's $4.4-billion acquisition of U.S.-based Avista Corp., the Globe & Mail reported.

The entire allocation of convertible debentures was sold within a day, say sources familiar with the financing. Demand from retail investors was particularly strong out of the gate, which encouraged institutional buyers to jump in as well, a number of people said.

The appetite to buy Hydro One's latest bought deal will likely spur other Canadian utility companies shopping for U.S. assets to consider a similar financing structure. In the Hydro One deal, the debentures were sold through instalment receipts paying an interest rate of 4% a year.

Hydro One announced the Avista transaction last Wednesday after markets closed. After opening on Thursday down 5%, near the conversion price of $21.40, shares of Hydro One rallied sharply. Since then, the stock has traded sideways, closing on Monday down 0.3% to $22.58. H shares were down 0.7% early Tuesday at $22.42.
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Re: Convertible debenture

Post by kcowan »

Here is an analysis of the offering from CDBlog
Hydro One, 4.00%/ 0.00% 30-September-2027, Instalment Receipts. (Presumed ticker: H.R), (Last week's ranking: unranked). We went into the details of this offering in our last post, so we won't go into too many details here except for a few quick highlights. First, this large $1.4 billion offering is part of Hydro One's foray into the US through its proposed acquisition of Spokane-based Avista. Second, this deal will be accretive. Third, this offering has a complex structure, and is essentially a deferred equity raise by Hydro One that's been disguised as a convertible debenture offering that will be represented by instalment receipts until deal close sometime next summer - got all that? Fourth, complex terms be damned, there was great demand for this offering and it sold out very quickly. Fifth, owning the instalment receipts is essentially like owning an in-the-money call option, but instead of having to pay a premium for the privilege, Hydro One pays the investor a 4% coupon on the full value of the (eventual) convertible debenture in the year before deal close. Sixth, that coupon drops to zero after deal close, which means investors will in all likelihood convert the debentures into common shares well before the debenture's 10-year maturity term as long as it stays in-the-money. Seventh, even though this is an unconventional offering, this is a rare convertible debenture issue from a large, investment grade issuer. The bottom line: if one can obtain the instalment receipts when they hit the market (approximately, August 9) anywhere near the offering price, the value is there to make this a very promising investment. We tried to subscribe to this issue, but were too late as the entire offering reputedly sold out in less than six hours. If the price is right, we would be interested in acquiring a position once it becomes available for trading on the TSX.
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Re: Convertible debenture

Post by marcharry »

I considered buying this but ultimately did not get to it until the offering closed and it was trading at an unappealing premium. Oversimplified It seemed like you were getting an option for nothing. Did anyone (here) buy it? Was it even possible through a discount broker. Just curious.
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Re: Convertible debenture

Post by kcowan »

Yes TDDI had it as an IPO. I took a pass. I had just bought Rogers Sugar and was only allocated 1/3rd of my request.
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Re: Convertible debenture

Post by randomwalker »

I was using the Financial Post's listing of Canadian exchange traded convertible debentures but they don't seem to be maintaining/ offering that anymore. I'm just wondering where others who are interested in debentures are going for a compilation of what's on offer, what was traded and price. Thanks
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Re: Convertible debenture

Post by kcowan »

CD Blog is the best I have found. Analysis and top 25 list. But I miss FP too. OTOH because they always sell out, they are not as attractive as they used to be.
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Re: Convertible debenture

Post by Jaxson »

I wrote to the Financial Post regarding the missing convertible debenture listings. They responded, `technical difficulties`...`hope to have it fixed soon.` That was on Nov 14th. My recent experience with debentures has been unwelcome early redemptions - H&R, Superior Plus, Crombie, Chemtrade.
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Re: Convertible debenture

Post by Bril »

I was able to find the listed TSX debentures by doing a search for .DB on the TSX Money listed company directory search.
Convertible debentures are trickier to trade. You do have the know when they can be called and have a quick trigger finger if things go south. Here is an older convertible debenture report I found. https://www.cibcwg.com/c/document_libra ... upId=92706
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Re: Convertible debenture

Post by kcowan »

Bril wrote: 04 Dec 2017 16:19 I was able to find the listed TSX debentures by doing a search for .DB on the TSX Money listed company directory search.
Maybe you could show us the results of your search?
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Re: Convertible debenture

Post by Bril »

Here is the cleaned up version.
Company Name Symbol
  5N Plus Inc 5.75% Db VNP.DB
  Aecon Group 5.5% Deb ARE.DB.B
  Ag Growth IntlConvDb AFN.DB.A
  Ag Growth Intl ExtDb AFN.DB.B
  Ag Growth Intl2020Db AFN.DB.C
  AG Growth Intl4.85Db AFN.DB.D
  Algoma Centrl 5.25Db ALC.DB.A
  American Hotl Deb US HOT.DB.U
  Atlantic Pwr 6% Db D ATP.DB.D
  Atlantic Pwr5.75USDb ATP.DB.U
  Atrium Mtg Inv5.25Db AI.DB
  Atrium Mtg Inv6.25Db AI.DB.A
  Atrium Mtg Inv 5.5Db AI.DB.B
  Atrium Mtg Inv 5.3Db AI.DB.C
  Barclays Bank NtI-28 BXS.DB.C
  Bellatrix Expl Deb BXE.DB
  BlackBerry 3.75Db US BB.DB.V
  Boralex Inc 4.5% Deb BLX.DB.A
  Boyuan Constr Deb J BOY.DB.A
  BTB REIT 6.9% E Deb BTB.DB.E
  BTB REIT 7.15% F Deb BTB.DB.F
  Cardinal Engy J Deb CJ.DB
  Cargojet Inc 4.65%Db CJT.DB.C
  Chemtrade Lgst5.25Db CHE.DB.B
  Chemtrade Lgst 5% Db CHE.DB.C
  Chemtrade Lgst4.75Db CHE.DB.D
  Chesswood Grp 6.5 Db CHW.DB
  Chorus Aviation 6%Db CHR.DB
  Cineplex Inc 4.5% Db CGX.DB.A
  Clearstream 10% Deb CSM.DB.A
  Colabor Grp 6% Deb GCL.DB.A
  Constellation Deb 1 CSU.DB
  Crombie REIT 5.25 Db CRR.DB.E
  DHX Media 5.875% Deb DHX.DB
  Difference Cap 8%DbJ DCF.DB
  Discovry Air 8.375Db DA.DB.A
  Diversif Rlty 5.25Db DIV.DB
  Dorel Ind 5.5% Db US DII.DB.U
  Dream Indust 5.25 Db DIR.DB
  Element Fleet5.125Db EFN.DB
  Element Fleet 4.25Db EFN.DB.A
Energy Fuels Deb J EFR.DB
  ENTREC Corp. Deb ENT.DB
  Exchng Incm 5.5% Deb EIF.DB.E
  Exchng Incm 5.35 Deb EIF.DB.F
  Exchange Incm 6% Deb EIF.DB.G
  Exchng Incm 5.25% Db EIF.DB.H
  Extendicare 6% Deb EXE.DB.B
  Firm Cap Mtg 5.4% Db FC.DB.B
  Firm Cap Mtg 5.25%Db FC.DB.C
  Firm Cap Mtg 4.75 Db FC.DB.D
  Firm Cap Mtg 5.3% Db FC.DB.E
  Firm Cap Mtg 5.5% Db FC.DB.F
  Firm Cap Mtg 5.2% Db FC.DB.G
  Firm Cap Mtg 5.3% Db FC.DB.H
  First Cap Feb 4.45Db FCR.DB.J
  Fortress Paper 7% Db FTP.DB.A
  GDI Integrated 5%Deb GDI.DB
  Gibson Energy Inc Db GEI.DB
  goeasy Ltd 5.75% Deb GSY.DB
  Gran Colombia 18USDb GCM.DB.U
  Gran Colombia 20USDb GCM.DB.V
  Gran Colombia 24USDb GCM.DB.X
  H&R REIT 5.90% Deb HR.DB.D
  Holloway 6.25 Db B J HLC.DB
  Holloway 7.5% Deb J HLC.DB.A
  IBI Group 7% Sr 2 Db IBG.DB.C
  IBI GROUP 5.5% Deb IBG.DB.D
  Innergex Renew4.25Db INE.DB.A
  Just Engy Grp 5.75Db JE.DB.B
  Just Engy Grp 6.75Db JE.DB.C
  Kelt Expl 5% Deb J KEL.DB
  Kirklnd Lake 7.5Db J KLG.DB.A
  Lanesborough Sr G Db LRT.DB.G
  Leon's Furniture Db LNF.DB
  Liquor Stores 4.7%Db LIQ.DB.B
  Logiq Asst Mgt7%Db J LGQ.DB.A
  Mainstreet Hlth USDb HLP.DB.U
  Medical Fac 5.9% Deb DR.DB.A
  Melcor REIT 5.5 Deb MR.DB
  Mongo Fin Tech J Deb MOGO.DB
  Morguard NA REIT Deb MRG.DB
  Morguard REIT 4.5Deb MRT.DB
  Morneau Shepl 4.75Db MSI.DB.A
  N.A. Energy Part Deb NOA.DB
  Northland Pwr 5% Deb NPI.DB.B
  Northland Pwr 4.75Db NPI.DB.C
  Northview Apt REIT Db NVU.DB
  NW Healthcare Deb NWH.DB
  NW Healthcare 6.5%Db NWH.DB.A
  NW Healthcare 7.5%Db NWH.DB.B
  NW Healthcare7.25%Db NWH.DB.C
  NW Healthcare 5.5%Db NWH.DB.D
  NW Healthcare31JulDB NWH.DB.E
  NW Healthcare31DecDB NWH.DB.F
  Osisko Gld Rlty 4%Db OR.DB
  Partners REIT 5.5 Db PAR.DB.B
  Pembina Pipe5.75Db F PPL.DB.F
  Plaza RetailTr5.75Db PLZ.DB.D
  Premium Brand 5% Deb PBH.DB.D
  Premium Brand 4.65Db PBH.DB.E
  Premium Brand 4.6 Db PBH.DB.F
  Primero Mng 5.75USDb P.DB.V
  Rogers Sugar 5.75Db5 RSI.DB.D
  Rogers Sugar 5% Db 6 RSI.DB.E
  Sienna Sr Living Deb SIA.DB
  SmartCtr REIT 5.5Deb SRU.DB.B
  Stornoway Dia USDb J SWY.DB.U
  Stuart Olsn 12/19 Db SOX.DB.A
  Student Trans 5.25Db STB.DB.A
  Student Trans 6.25Db STB.DB.C
  Surge Engy 5.75% Deb SGY.DB
  Temple Hotl 7.25% Db TPH.DB.E
  Temple Hotels 7% Deb TPH.DB.F
  TerraVest Cap 7% Deb TVK.DB
  Intertain Grp 5%Db J ITX.DB
  Timbercrk Fin 6.35Db TF.DB
  Timbercrk Fin 5.4 Db TF.DB.A
  Timbercrk Fin 5.45Db TF.DB.B
  Timbercrk Fin 5.3 Db TF.DB.C
  Toscana Energy Deb J TEI.DB
  Tricon Cap 5.6% Deb TCN.DB.A
  Tricon Cap 5.75Db US TCN.DB.U
  WesternOne 6.25% Deb WEQ.DB
  Yellow Pages Dgtl Db YPG.DB
  Zargon Oil&Gas Deb ZAR.DB.A
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kcowan
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Re: Convertible debenture

Post by kcowan »

Yes but what I miss is the current price, YTM, et al.
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Re: Convertible debenture

Post by kcowan »

Public Service Message: the Financial Post Convertible Debentures List
We've received quite a few emails asking about the Financial Post's convertible debentures list, which has apparently vanished from the newspaper's website. Unfortunately, we don't know of another complete list of Canadian convertible debentures that is available free to the public. The stats and figures we use for the Peanut Power Rankings we collect from various public sources and calculate ourselves; we don't have a complete list of convertible debentures either. For those of you out there that are clients of a full-service brokerage firm with a research team that covers convertible debentures, you may be able to obtain a complete list if you ask your broker.

If we manage to stumble upon a complete list or if the Financial Post list comes back online first, we will will report it here.
From
https://convertibledebentures.blogspot.mx/
Please report any successes here.
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Re: Convertible debenture

Post by randomwalker »

I haven't had a chance to look closely at this but this may go some way to finding current debenture prices,

http://investdb.theglobeandmail.com/inv ... tockFilter
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Re: Convertible debenture

Post by kcowan »

Yes it seems to replace what FP provided but with more paging. Thanks.
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Re: Convertible debenture

Post by kcowan »

scomac wrote:The interest income from a convertible debenture will be taxed as regular interest income at your full marginal tax rate. Upon maturity, the principal amount is paid to the holder in the form of capital equity at a predetermined conversion ratio. There could be a capital gain or loss on the equity securities which would be realized when they are sold, not before. The conversion rate would represent the ACB of the equity securities.
So I had a gain in a non-reg account. Acquisition cost for ENE was $10000 and has paid 6.25% for five years. Then in June, it converted to common at $29244 which I continue to hold. The above confirms that no CG is due until actual disposition. So my ACB is 10000? IOW not the conversion rate but the actual original acquisition cost?
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