TSX:BPO.PR.A - Post by User
Comment by
SONOFFERGUSon Apr 27, 2024 6:47pm
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Post# 36011237
RE:Remember, Prefers "cost" more than debt... company can't
RE:Remember, Prefers "cost" more than debt... company can'tAnother crazy take, CRAZY.
Think (do your best) about this from the CFO's perspective. If we redeem, what are the implications? Off the top:
- We have a $150mm hole in our capital structure
- The increase in leverage may put our debt rating in jeopardy (and maintaining that "A" rating" is likely the most important factor in BN's analysis)
- EPS will drop because our target return on assets at 15% (say 10.5% after tax) is more than the 8.8% we pay on prefs
- Redemption of any series is likely to boost the market price of the other series, increasing the cost of the NCIB and a tender offer, if that is part of the plan
- Our tax bill will be lower, which will increase EPS and offset some of the negatives
Undoubtedly I'm missing considerations here, but you have to agree that "durr, redeem to lower taxes durr" is not a full analysis.
Your comments suggest that issuers are idiots. Perhaps, just perhaps, you are the idiot.