Capital Power Corp T.CPX

The Lord spoke to me last night!

[starboy101]

And this is what he told me:

Buy the CPX.PR.C, this is a rate reset preferred share who's reset is coming up at the end of this year. At that time they will have to either reset the dividend to the new rate for the next 5 year period or redeem it.

I believe that the chance of redemption at the end of this year to be quite good. Especially considering that they recently raised $350 million by way of a note offering which they announced would be used to repay debt.

Doesn't mean for certainty that they will redeem this series of preferred but I believe the odds are good that they will. It would certainly make all the sense in the world to do so since the reset coupon rate will be in the neighbourhood of 7%. Which is a significant bump up from it's current rate.

So whats the downside risk it they don't redeem it? If it is in fact redeemed it will be at $25 currently trades as I write this at just under $23. If the company decides to go with resetting the coupon. If you are buying it under under $23 based on the reset terms you will earning ROR of 7.5% to 8% for the next 5 years. Which ain't bad.

You are welcome now go in peace!

[Experienced]

While there is a few weeks to go before we know whether there is a redemption or not, the fact that the SP is still well below 25 suggests that most of the big money doesn't think a redemption is in the cards. Otherwise the SP would be around 25. In terms of the reset, the current math would suggest something closer to 7%.  Given that there are high quality preferreds such those of ENB

[starboy101]

My good man. Speaking of math lets do some, because yours doesn't appear that be that good. The terms of the reset are as follows: 5yrgovcan + 3.31%. Today the 5yrgovcan rate stands at 3.82%, you can expect it to be in that neighbourhood when the reset date comes. With the premium that would give it a coupon rate of 7.13%. So say 7% as I said in my initial post. Which would mean a yearly