LRCNs Set to Overtake Prefs

Limited Recourse Capital Notes (LRCN) are shaking the world of preferred shares – and are likely to replace many of the existing preferred shares in the market now

Yan Barcelo 4 June, 2021 | 1:55AM
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Limited Recourse Capital notes, or LRCNs, are a new class of hybrid securities introduced about eight months ago. These products compete with preferred shares, shrinking that small universe significantly, but creating attractive opportunities in it for investors.

This Has Happened Before

This is not the first time something like this has happened. In the aftermath of the 2008 financial crisis, the world of preferred shares was transformed by the arrival of the new category of rate-reset preferred shares (RRPS). These new securities were still perpetual shares (with no predetermined term), except that on their five-year anniversary, the issuer could not only redeem them, but if it chose to leave them outstanding, it could also adjust the dividend up or down.

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About Author

Yan Barcelo  is a veteran financial and economic journalist with more than 30 years of experience, writing for many publications in Toronto and in Montreal, including CPA MagazineLes Affaires and Commerce.

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