TD Direct / TD Waterhouse sends me alerts for initial public offerings. This mornings they are trying to sell 5.5% fixed income debentures in Storage Vault Canada.
The fact that these are a “bought deal” rather than a “marketed deal” suggests that TD and the others are confident they can sell these which is a positive indicator.
But, I would not buy these for several reasons:
- They are not convertible and therefore have no upside, the maximum return is the 5.5%. In contrast the recent North American Construction 5.5% debentures that have done well (trading at $110 versus the $100 issue price) were convertible and have risen in price as the share price rose in the past couple of weeks.
- Since this debenture (which I believe means UNSECURED bond) is not convertible, it will not trade and we would have to hold until maturity.
- More importantly a quick look at the balance sheet shows $1.2 billion of debt and only $0.2 billion in equity and it shows a large loss in the latest quarter.
- Another red flag is that prospectus will not be available until July 6. I don’t know if that is unusual but it looks odd to me.
Maybe this is a fine company. The storage sector has generally been a good investment. But at a quick look here I would definitely not invest. The more I look at this, the more it looks like a bad investment.