John Nagel, a fixture in the preferred share market for more than three decades, has retired from his post at Desjardins Securities.
But it’s not clear at this stage, whether Nagel who spent the past 13 plus years at Desjardins, has retired from the investment industry.
In a note to clients, Nagel – who first traded preferred shares while at Gardiner Watson in the mid-1980s – noted the firm had achieved a “great deal” since he arrived in June 2002. For instance the firm “established and earned a significant improvement in its syndication positions,” as well as hiring and training assistants and analysts “many of whom have continued on successfully in the financial services field.” In addition, Nagel’s team, that produced market commentary and market, improved the firm’s preferred trading and sales activities.
Helping create the rate reset preferred share market in March 2008 was one of Nagel’s major achievements. Along with investment banking colleague Tom Jarmai, Robert McDowell, a partner with Faskens, and with the assistance of OSFI, Nagel developed a new security that counted as Tier 1 capital and was appealing to investors. (Scotiabank was the first issuer with a $345 million offering. For its work, Desjardins was named number two in the syndicate.)
‘The legacy is that we developed to assist the banks in raising Tier I and equity capital at a very critical time that matched the demands of the institutional investors who were looking for an alternative to what was then available,” said Nagel.
It was appealing because while buyers purchased a perpetual fixed rate security, they knew that in five years, the issuer would either redeem the offering or offer two other securities: another fixed rate security or a new floating rate security. The wrinkle was that the spread above a benchmark of either the 5-year Canada bond rate or the 91-day treasury bill rate – on the new securities would be the same as it was five years earlier. In time all the banks, a number of other financial and a slew of non-financial institutions joined the parade. At the end of 2015, more than 60 per cent of the $78.9 billion in issued and outstanding preferred shares was in the form of rate reset pref shares.
While the regulators have made it tough for banks to issue rate reset prefs in the former format, they have been given the green light to issue non-viable contingent capital in the form of rate reset preferred shares. This week TD Bank raised $700 million for which it paid 5.50 per cent. The amount raised – that was helped by the very large institutional interest – was more than double the original plan.
With Nagel’s retirement, the preferred share department will report to Mark Lucey, a managing director and head of equities and capital markets. Previously it reported to fixed income. Julian Pope, David Paul and Alex Somjen will now man the firm’s pref share group.