Nesbitt Burns Inc., aiming to bolster the dividend yield and capital appreciation of three bank and two pipeline stocks, has created a derivative-like instrument from these issues.
The underlying stocks are Canadian Imperial Bank of Commerce, Bank of Nova Scotia, Toronto-Dominion Bank, IPLEnergy Inc., and TransCanada Pipelines Ltd., says Brent Fullard, director of equity capital markets at Nesbitt.
Mr. Fullard said the product's goal is twofold: to offer capital-gain investors leverage on the potential returns of the stocks underlying the instrument over a five-year period when it expires; and to boost the potential dividend yield of the same underlying common shares - at minimal risk to the investor - during the same time frame.
Investors' response to this instrument, called Leverage Equity and Enhanced Dividend, could indicate the market's perception of how interest- sensitive stocks are expected to fare over the next five years, financial services analysts say.
Toronto-based Nesbitt created the instrument, which expires Sept. 7, 2001, by buying $26 million worth of shares in each of the banks and pipeline companies, Mr. Fullard said. It separated this portfolio of common shares into five million "capital shares" and five million "equity dividend shares."
Now, Nesbitt, through LEED NT Corp., plans to offer the capital shares at $9.15 each and the dividend shares at $18.30 apiece, the executive said.
Listing of the shares on the Toronto Stock Exchange is expected after the offering closes on Sept. 10, Mr. Fullard said.