Aimia Inc T.AIM.PR.A

AIM.PR.C

[luscar99]

Now yielding 12.26%.

[DaneOddments]

If they're smart, Aimia should stop paying the preferred dividends for a while, until they get either Bozzetto or Tufropes sold.  No point in paying so much out when they are burning so much cash at the holdco, and there is a massive 40% tax on top of those preferred dividends.  So that's the first thing I would do if I were them.  And pair that annoucement with an offer to

[luscar99]

The dividend payment could only be delayed. Eventually they will have to pay the full vested amount. They've done that before. It would also completely destroy their credit rating. They will never get a dime from the credit markets again.  And I'm pretty sure the offer to buyback under par (even by 1 cent underpar) would be illegal. As it contradicts the terms of issuance.

[nkbourbaki]

Buybacks of prefs under par are certainly legal.  It happens all the time. (Unless there is specific language in the terms of these particular prefs?)    It sure seems like you shouldn't be able to stop dividends and then do a buyback,  but I have no idea if it's illegal or companies just don't do it because it would make them a pariah. 

[luscar99]

No, buybacks "under par" for prefs could only happen bidding on the open stock market under very restrictive conditions (the same conditions as for buybacks of regular stock). https://www.mltaikins.com/corporate-finance-securities/how-to-conduct-a-substantial-issuer-bid/ https://www.mltaikins.com/corporate-finance-securities/conducting-a-normal-course-issuer-bid-on-the-tsx/

[nkbourbaki]

Yes but I assume that's what the other poster was suggesting:   i.e. Cut the dividend and then launch an NCIB or SIB.  For common shares this is possible.  For prefs I've never seen it personally but I'm not sure of the rules.  Aimia's prefs are cumulative, so the terms would explicitly forbid common shareholders from receiving dividends while pref

[DaneOddments]

yes, that's true.  but it's easily done via SIB.  they bought $62 mil. of the preferreds back at a nice discount to par in December 2019.  and $62 mil. worth of common stock at $4.25. https://www.aimia.com/aimia-announces-results-of-preferred-share-substantial-issuer-bids/#:~:text=(TSX%3A%20AIM)%20announced%20today,Cumulative%20Floating%20Rate%20Preferred%20Shares%2C

[TheCount11]

The problem is pref shareholder litigation if the dividends are in arrears when pref stock is bought back.  The C suite and BoD don't exactly have a great track record with their largest common stock holder.  Could you imagine if they then ruin their relationship with preferred stock holders?  "We are going to stop paying the dividend, crash the preferred price then

[DaneOddments]

Pref shareholders would have no lawsuit because 1) the SIB would be voluntary, 2) the SIB would be announced in conjunction with the deferral of dividends (so no seller would be selling without that knowledge), and 3) Aimia is burning cash at the holdco, about $40 mil. per year, of which about half of that is pref dividends and the 40% tax on top of those.  Until that circumstance is fixed

[TheCount11]

Can you name 3 other companies that have done a SIB right after cancelling preferred dividends without litigation in the last 50 years? Cancelling the dividend, crashing the preferred stock price then company buying it back cheaper is the very definition of securities manipulation.  The preferred shareholder argument goes like this "the withholding of dividends provided the funds to

[DaneOddments]

I think if they announced both actions at the same time, there would not be a market manipulation claim available.  The disappointment of the dividend cut would impact pricing to the downside, but the announcement of the SIB would mitigate if not entirely offset that. Defering the pref divds until a better time (until an asset sale can be achieved, hopefully within 18 months), and buying

[TheCount11]

I'll give you the benefit of the doubt that this scheme is not securities manipulation as I won't go to jail if it is.  Imagine the only roadblock to enacting this is scheme is providing a skeptical Board of Directors a few recent examples.  Have any recent examples of companies doing this? 

[DaneOddments]

I can't think of any examples, but then again, I don't see this board as being particularly shy about doing the unprecedented... they just issued 5M shares at $2.50, less than half of liquidation value, and just a couple of days after saying the stock was so cheap that they couldn't wait to start an NCIB, to buy out the carried interest of a private equity fund, barely 1 year into the

[TheCount11]

If you don't see this board as being particularly shy about doing the unprecedented please include the scheme as a sort of shareholder resolution with them. Seems like a win win situation.  If it isn't securities manipulation the company saves a ton of money by cancelling pref dividends and using the funds to buy much cheaper pref shares. If cancelling pref dividends and using the

[luscar99]

I wonder why the hundreds of Canadian companies with preferred shares (most of them with no cash on hand, many of them deeply in debt) haven't figured out this genius maneuver.

[Hadituptohere]

Severely screw somebody out of money merely because they can? How very Aimia that would be. 

[DaneOddments]

I don't see the rational deferment of dividend payments on the preferreds as screwing anyone out of money their owed as the entity is burning cash, not paying dividends from any income earned.  The dividends would simply be defered until such time as Aimia is in a better position to pay them.  And any buyback, whether via NCIB or SIB, would be entirely voluntary.  I'm not a

[Hadituptohere]

You'll forgive me if I find taking the pensioners food money away to be a heartless alternative to honoring obligations.