Brookfield Office Properties Inc T.BPO.PR.A

Simple Example of "permanent capital" financial 101

[CrazyTrader]

Company ABC issues 1,000,000 prefer shares "A" at par of $25 with dividend rate of 3% + 5yr rate, plus $1 for my purchase of one common share. 

Company balance sheet now has:

Assets:  Cash $25,000,001
Liabilities: $0
Equity: Prefer Shares A $25,000,000..... Common Share $1

Now, Market goes Crazy and drops the share price of the A's to $5.    Company does a NCIB and buys all the A's for $5..... So it cost the company $5,000,000

Company balance sheet now:

Assets: Cash $20,000,001
Liabilities: $0
Equity: Common Share $20,000,001

I just made $20,000,000.   

See how it makes financial sense????   And you haven't even factor in saving on dividend payments to the prefers.   

All just my opinion/view/thinking/guessing/understanding

[Carena]

Good morning Crazy, It is irrefutable that you understand how companies create value through share buybacks.   Perhaps coincidentally, my margin account looks eerily similar to Company ABC's balance sheet before and after I short a stock successfully....?. Lol. Have a great day, Carena

[pierrelebel]

FREEDOM OF SPEECH is one of the most valuable asset we have in our free society. The ability and opportunity to post on open discussion boards is important to all. In the case of Stockhouse specifically, it offers the opportunity for readers to learn, often through posts offerings opposing perspectives. It offers posters the opportunity to share their experience, knowledge and feelings. Just as

[Carena]

Hi Pierre, I agree with all you said, and I appreciate all your posts. I have said in many posts, I do not think it is the goal of Brookfield to create value for themselves through extracting value from the "widows and orphans" who bought their BPO prefs at $25 per share.  I think they value the "permanent" source of capital way too much. Nonetheless, given the change

[CrazyTrader]

I still made $20,000,000 in my example.    I don't really care if it's transferred from others or created by selling products....  $20,000,000 is $20,000,000.   And that's why it makes financial sense in my example to buyback.    I admit, buying back doesn't always make financial sense, there are many factors at play.   My example was a

[Carena]

Crazy, BPO issued their prefs when their debt rating was investment grade.  If they were to go to market today to issue prefs with a junk rating, the prefs would be priced to yield 10-15%.  BPO will not be doing that anytime soon. And thus why I agree with Pierre, they are also not redeeming anything at par any time soon.  IMHO.  That is, today these BPO prefs are gold to BN

[CrazyTrader]

Hi Carena, I agree, I don't think Brookfield will redeem at par any time soon.   I don't think I ever suggested it would be wise for them to do so.    The only prefer that I said might, just might be redeemed would be the C's.... AND that's not now, that's way in the future, which at that time I'm thinking the C's will reset at a rate atleast 8

[Carena]

Hi again, Responses to your assertions: (i) The spread is 5.18% on the C's....if BPO redeems any prefs, it will be the one with the highest spread and the C's are the ones. But as long as BPY is a stand alone entity, they are JUNK and 5.18% is a better spread than they get going forward. If BN steps in and guarantees BPY, then things change again. (ii) The BILLIONS and BILLIONS that