Preferred Shares
During the three and nine months ended July 31, 2019, we did not redeem any preferred shares.
On June 27, 2019, we announced that we did not intend to exercise our right to redeem the currently outstandingNon-Cumulative5-Year Rate Reset Class B Preferred Shares Series 29 (Preferred Shares Series 29) on August 25, 2019. As a result, subject to certain conditions, the holders of Preferred Shares Series 29 had the right, at their option, by August 12, 2019, to convert any or all of their Preferred Shares Series 29 on aone-for-one basis intoNon-Cumulative Floating Rate Class B Preferred Shares Series 30 (Preferred Shares Series 30). During the conversion period, which ran from July 26, 2019 to August 12, 2019, 223,098 Preferred Shares Series 29 were tendered for conversion into Preferred Shares Series 30, which is less than the minimum 1,000,000 required to give effect to the conversion, as described in the Preferred Shares Series 29 prospectus supplement dated May 30, 2014. As a result, no Preferred Shares Series 30 were issued and holders of Preferred Shares Series 29 retained their shares. The dividend rate for the Preferred Shares Series 29 for the five year period commencing on August 25, 2019, and ending on August 24, 2024, is 3.624%.
On April 17, 2019, we issued 14 millionNon-Cumulative5-Year Rate Reset Class B Preferred Shares Series 46(Non-Viability Contingent Capital (NVCC)), at a price of $25 per share, for gross proceeds of $350 million. For the initial five year period to the earliest redemption date of May 25, 2024, the shares pay quarterly cash dividends, if declared, at a rate of 5.1% per annum. The dividend rate will reset on the earliest redemption date and every fifth year thereafter at a rate equal to the5-year Government of Canada bond yield plus a premium of 3.51%. Holders have the option to convert their shares into an equal number ofNon-Cumulative Floating Rate Class B Preferred Shares Series 47 (Preferred Shares Series 47), subject to certain conditions, on the earliest redemption date and every fifth year thereafter. Holders of the Preferred Shares Series 47 will be entitled to receivenon-cumulative preferential floating rate quarterly dividends, as and when declared, equal to the3-month Government of Canada Treasury Bill yield plus 3.51%.
On March 29, 2019, we announced that we did not intend to exercise our right to redeem the currently outstandingNon-Cumulative5-Year Rate Reset Class B Preferred Shares Series 27 (Preferred Shares Series 27) on May 25, 2019. As a result, subject to certain conditions, the holders of Preferred Shares Series 27 had the right, at their option, by May 10, 2019, to convert any or all of their Preferred Shares Series 27 on aone-for-one basis intoNon-Cumulative Floating Rate Class B Preferred Shares Series 28 (Preferred Shares Series 28). During the conversion period, which ran from April 25, 2019 to May 10, 2019, 412,564 Preferred Shares Series 27 were tendered for conversion into Preferred Shares Series 28, which is less than the minimum 1,000,000 required to give effect to the conversion, as described in the Preferred Shares Series 27 prospectus supplement dated April 16, 2014. As a result, no Preferred Shares Series 28 were issued and holders of Preferred Shares Series 27 retained their shares. The dividend rate for the Preferred Shares Series 27 for the five year period commencing on May 25, 2019, and ending on May 24, 2024, is 3.852%.
Other Equity Instruments
On July 30, 2019, we issued US$500 million 4.800% Additional Tier 1 Capital Notes (NVCC) (“notes”) which are classified as equity and form part of our additional Tier 1non-viability contingent capital. The notes are compound financial instruments that have both equity and liability features. On the date of issuance, we assigned an insignificant value to the liability component of the notes and, as a result, the full amount of proceeds has been classified as equity. Semi-annual distributions on the notes will be recorded when payable. The rights of the holders of our notes are subordinate to the claims of the depositors and certain other creditors but rank above our common and preferred shares.
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(Canadian $ in millions, except as noted) | | | | | | | | | | | | | | | | | | |
| | | Face value | | | Interest rate (%) | | | Redeemable at our option | | | Convertible to | | | July 31, 2019 | | | October 31, 2018 | |
4.800% Additional Tier 1 Capital Notes | | US$ | 500 | | | | 4.800 (1) | | | | August 2024 (2) | | |
| Variable number of
common shares (3) |
| | | 658 | | | | - | |
Total | | | | | | | | | | | | | | | | | | | 658 | | | | - | |
| (1) | Non-cumulative interest is payable semi-annually in arrears, at the bank’s discretion. |
| (2) | The notes are redeemable, at a redemption price equal to 100% of the principal amount, plus any accrued and unpaid interest, in whole or in part at our option on or after the first interest reset date in 2024 or following certain regulatory or tax events. The bank may, at any time, purchase the notes at any price in the open market. |
| (3) | The notes issued include anon-viability contingent capital provision, which is necessary for the notes to qualify as regulatory capital under Basel III. As such, the notes are convertible into a variable number of our common shares if OSFI announces that the bank is, or is about to become,non-viable or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoidnon-viability. In such an event, the notes are convertible into common shares of the bank determined by dividing (a) the product of the Multiplier of 1.25, and the Note Value, by (b) the Conversion Price which is the greater of the Floor price of $5 and the current market price. |
Common Shares
On June 3, 2019, we renewed our normal course issuer bid (“NCIB”) effective for one year. Under this bid, we may purchase up to 15 million common shares for cancellation. The NCIB is a regular part of BMO’s capital management strategy. The timing and amount of purchases under the NCIB are subject to regulatory approvals and to management discretion, based on factors such as market conditions and capital levels.
During the three months ended July 31, 2019, we did not purchase for cancellation any common shares under the NCIB. During the nine months ended July 31, 2019, 1 million common shares were purchased for cancellation.
Capital Trust Securities
On December 31, 2018, BMO Capital Trust II redeemed all of its issued and outstanding BMO Tier 1 Notes - Series A at a redemption amount equal to $1,000 for an aggregate redemption of $450 million, plus accrued and unpaid interest to but excluding the redemption date.
50 BMO Financial Group Third Quarter Report 2019
