Preferred and Derivatives  

Preferred Securities
This table is an alphabetical listing of all exchange-listed preferred securities (of which COPrS is a trademark of Merrill Lynch) issued by Canadian corporations. These securities are a hybrid security that combine certain characteristics of both debt and equity. The security is a junior unsecured subordinated debenture and pays interest, not dividends. It is equity-like because it is long-term (generally 49 years), has few obligations (the issuer can defer interest payments for up to 20 quarters without being put into bankruptcy by the holder) and is deeply subordinated. From an issuer’s perspective, preferred securities provide preferential treatment by ratings agencies and accounting authorities: the issuer can include the capital raised as equity for accounting purposes. The issuer is in effect issuing tax-deductible equity. The cost to the issuer is a higher rate on the securities than would be required on senior secured debt, assuming the issuer could issue such a security. The securities are primarily aimed at tax-free investors, particularly retail investors through their RRSPs. The securities provide the opportunity for the investor to receive a higher yield by going down the capital structure of a higher-grade issuer instead of purchasing a higher yielding debt from a lower-grade issuer. These securities also provide a pricing advantage over debt as they are listed on stock exchanges.