TSX:AX.PR.E - Post by User
Comment by
Frankie10on Apr 02, 2023 10:51am
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Post# 35374501
RE:RE:Preffered shares I
RE:RE:Preffered shares I Prefs are essentially secured debt. They have an interest cost and are above commons in the cap table, therefore they are secured by the equity of the trust.
The priority, in an ideal world where capital is not tight, is the LEAST attractive debt. In my opinion variable debt with a fixed 6% floor is about the LEAST attractive debt I've ever seen a REIT carry.
It appears you've read my previous posts, as I said, the obvious conclusion is management wants to redeem these at a discount. But note, the discount is marginal and if capital was accessible at more favourable rates, they would tap that capital and redeem the prefs.
Total debt and management oppertunistically redeeming the prefs at a discount are not the problems.... the problem is that the terms of the prefs are so bad, that the fact management rolled the prefs, highlights what DZ and I have been saying, which is that capital is very, very tight.