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Preferred Share Description
Royal Bank of Canada (RY.PR.S) **New Issue**
4.80% Non-Cumulative, Redeemable, Rate Reset, NVCC* 1st preferred shares, Series BO
Prospectus - October 29, 2018
DBRS Credit Rating: June 26, 2018 - DBRS confirmed the ratings of Royal Bank of Canada and its related entities, including RBC’s Long-Term Issuer Rating at AA and Short-Term Issuer Rating at R-1 (high). Additionally, the trends on all long-term ratings have been changed to Positive while the short-term ratings at the Bank remain Stable.
RBC’s ratings reflect its leading Canadian banking and global wealth management franchise as well as its strong capital markets platform. In Canada, RBC ranks number one or two in most aspects of personal and business banking and wealth management. Additionally, RBC has steadily increased its global footprint, most notably in wealth management and capital markets. This expansion was accelerated by the 2016 acquisition of Los Angeles-based City National Bank, which has been the platform for strong growth in U.S. private and commercial banking and wealth management. The ratings also consider the longevity of the current credit cycle and the potential for a housing downturn in Canada, as well as the potential for increased volatility in its large capital markets business.
The Positive trends reflect the strong momentum RBC has exhibited building its diversified franchise that has delivered consistent earnings growth, while maintaining a sound risk profile. DBRS believes these traits distinguish the Bank from its Canadian as well as many global peers. Overall, DBRS views RBC as one of the top banks globally.
Important Note: NVCC preferred shares have a lower credit rating than other Royal Bank preferred share issues. DBRS assigned the NVCC Preferred Shares Series BM a rating equal to the Bank’s intrinsic assessment less four rating notches because the Series BM has only an Office of the Superintendent of Financial Institutions (OSFI)-compliant non-viable contingent capital (NVCC) trigger, which is consistent with the OSFI requirements for NVCC instruments, and no additional triggers.
*NVCC is short for Non-Viability Contingent Capital and it refers to the issuer's ability to convert the preferred shares into common shares if a "Trigger Event" occurs. See "Convertible by Company" section below for the definition of a trigger event.
Trading Note: The shares are expected to begin trading on the TSX on or about November 2, 2018.
- DBRS Rating
- Pfd-2 Stable Trend
- DBRS Rating Date
- Shares Issued
- Issued Date
- Shares O/S
- O/S Date
- $1.20 per share per year
- Dividend Dates
- Payable on the 24th day of February, May, August and November
- Dividend Details
- Initially the dividend will be fixed at 4.80% until February 24, 2024. The dividend rate will be reset on February 24, 2024 and on February 24th every five years thereafter. The subsequent dividend rate will be set at an annual rate equal to the sum of the 5-Year Government of Canada Yield (GCAN5YR) plus 2.38%.
- The company cannot redeem the shares prior to February 24, 2024. On February 24, 2024 and on February 24th every 5 years thereafter the company can redeem the shares at $25.00 per share.
- Holders of the Series BO preferred shares will have the right to convert their shares into an equal number of Series BP Floating-Rate preferred shares on February 24, 2024 and on February 24th every five years thereafter. The Floating Rate Series BP shares will calculate and pay dividends quarterly. The floating-rate dividend will equal the sum of the 3-month Government of Canada Treasury Bill yield plus 2.38%. On February 24, 20229 and on February 24th every five years thereafter Series BP shareholders have the right to convert back into Series BO rate-reset preferred shares.
- Lead Underwriter(s)
- RBC Capital Markets
- Transfer Agent
- Computershare Trust Company of Canada
- Computershare Trust Company of Canada
- Dividend Reinvestment Plan
- Registered holders of the preferred shares are eligible to participate in the Dividend Reinvestment Plan for the purchase of common shares. Preferred share dividends can be reinvested in the issuer's common shares. For more information, visit Shareholder investment Plans at http://www.rbc.com/investorrelations/ir_dividends.html
- Convertible by Company
- Contingent Conversion: If a "Trigger Event" (as defined below) were to occur, all of the then outstanding Preferred Shares Series BO and BP will be automatically exchanged, without the consent of the holders, for newly issued fully-paid and freely-tradable common shares of the Bank, the number of which to be determined in accordance with the Contingent Conversion Formula; rounding down, if necessary, to the nearest whole number of Common Shares, such conversion being referred to herein as the “Contingent Conversion”. Fractions of Common Shares will not be issued or delivered pursuant to a Contingent Conversion and no cash payment will be made in lieu thereof. A Trigger Event means any one of the following: 1) the Superintendent publicly announces that the Bank has been advised, in writing, that the Superintendent is of the opinion that the Bank has ceased, or is about to cease, to be viable and that, after the conversion of the Preferred Shares Series BM and all other non-viability contingent capital instruments issued by the Bank and taking into account any other factors or circumstances that are considered relevant or appropriate, it is reasonably likely that the viability of the Bank will be restored or maintained; or 2) a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection, or equivalent support, from the federal government or any provincial government or political subdivision or agent or agency thereof without which the Bank would have been determined by the Superintendent to be non-viable. See the share's prospectus for the exact details.
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