Could this be the end of Bombardier's preferred shares? $BBD.B

I tried looking at the Bombardier Preferred Shares series 2, 3, and 4. The preliminary Q4/Full Year news release last week was vague as to what "solving" their capital structure actually means, but I am theorizing the preferred shares may be targeted. If they are, then the Series 4 Preferred Shares BBD.PR.C would be an easy choice for them.

The final step in our turnaround is to de-lever and solve our capital structure.

I own Series 2 (DRIP since Dec 2013), but back then never picked the Series 4 because, while Bombardier can redeem at Par, Series 4 has an additional option of forced conversion into Class B Common Shares. Separately, they can also do an offering of a new and undetermined series of Preferred Share into which Series 4 investors have the option of converting.

Bombardier Inc. may, on not less than 30, nor more than 60 days' notice, and subject to stock exchange approvals, convert all or any of the Series 4 preferred shares into Class B shares.

The Corporation may subsequent to the date hereof, at its option, create one or more further series of Preferred Shares of the Corporation, into which the holders of Series 4 Preferred Shares could have the right, but not the obligation, to convert their shares on a share-for-share basis,

What is the dividend difference between the three Preferred Share Series?
Series 2 (BBD.PR.B): Variable, Monthly, Reference Rate: Prime Rate
Series 3 (BBD.PR.D): Variable (5 year), Quarterly, Reference Rate: GoC Bond Yield
Series 4 (BBD.PR.C): Fixed, Quarterly, Reference Rate: Par Cost Yield 6.25% (Annual $1.5625)

Earlier tonight I thought this might actually make money with an arbitrage between Series 4's Par vs Market Value. However, if my revised calculations are correct, at Friday's closing prices (Series 4: $16.21, Class B: $1.12) it actually may be no good. The conversion formula uses Par $25 (plus accrued/unpaid dividends) divided by the conversion Class B share price. BBD.B is at $1.12 and the conversion will assign the greater value of $2 per Class B share. This means an automatic $0.88 loss on the shares and with the number of shares, the loss is greater than the Par vs Market arbitrage.

greater of $2.00 and 95% of the weighted average trading price of the Class B

Break even in the scenario would be if BBD.B = ~$1.35. If the price rises from there and the conversion happens then it becomes profitable.

Forcing conversion of the 9.4MM Series 4 into 117.5MM Class B ($25/$2=12.5 BBD.B *9.4MM Series 4) will save $14,687,500 of dividend payments annually and avoid paying out $235MM cash for redemption. Yes, that's a potential ouch for holders of BBD.B as 117.5MM shares would be issued as a result of this, but maybe net it will be balanced by the elimination of Series 4. Plus, the investor will get ONE vote per share (yay...). Current outstanding number of BBD.B: 2,066,356,118 = 5.68% dilution.

For a chuckle here's an example formula from their site: back in 2002 when Series 4 was issued the common was greater than $10.

example: redemption price $26.00; weighted average trading price of Class B shares $11.45, 95% of $11.45 is $10.8775, which is greater than $2.00; thus, dividing $26.00 by $10.8775, one would obtain 2.39026 shares at the conversion date.

What throws everything off even more is if Bombardier throws a curve ball and some general negative scenarios come into play:

• Not redeeming or converting any of the preferred shares.
• Not assigning a par value of $25. Remember the sub-par Rona offer by Lowes: $20 preferred share
• Halting the preferred dividend
• Declaring bankruptcy and there is not enough cash after paying out more senior debt

Interesting though, of the three Preferred Share series, Series 4 actually held up the best dropping less. Perhaps I am missing something and/or my calculations is incorrect. The break even $1.35 is pretty close, so a bounce up in the common shares makes the potential trade profitable.

Series 2 (Series 3 should apply as well since it shares a prospectus with Series 2) should be better positioned in the best case scenario that "solving" the capital structure includes Bombardier redeeming all Preferred Shares and assuming no negative scenarios listed above.

Series 2: 5,811,736 = $145,293,400
Series 3: 6,188,264 = $154,706,600
Total: $300,000,000
Retained Dividends
Series 2 ($0.9876 annual) = $5,739,670.47
Series 3 ($0.99575 annual) = $6,161,963.87
Total Annual Savings (Series 2,3,4): $11,901,634.35 (Series 2+3)+$14,687,500 (Series 4)=$26,589,134.35

Naturally, not recommending anybody make any investment/trade decisions on Bombardier Commons and their Preferred Shares based on my thoughts. We will find out more on Thursday February 13, 2020.

Maybe this could be the end for Bombardier preferred shares?