Credit union preferred shares | General financial discussion | Discussion forum

Credit union preferred shares are actual preferred shares of a corporation and the preferred shares do rank ahead of the credit union's common shares.

However, credit unions don't pay regular corporate income taxes. So, they don't have any balance in their general rate income pool (GRIP) that they can pay an eligible dividend out of. More details in this previous post.

Bill said
I was told they actually don't "mature",.  

That's why they are not suitable for RRSP's (because they never mature).

Bill said
Exactly, got confirmation today they go on forever, unless I want to sell them back to the credit union, which I can do anytime but it takes about a month or so to get your money. And the annual March dividend (interest for tax purposes) is paid to holders of record the previous Dec 31. If you do turn them in you get the pro-rated dividend to the end of the previous month, so if you turn them in in July you will get the dividend portion calculated to the end of June, though it's not clear when.

And the 3.5% rate they told me for 2021, well apparently the board doesn't meet to confirm that until March or so but it "looks like" that will be the rate, that's why I had no notice of it. So it's not confirmed what dividend/interest I've been getting since Jan 1. And my "coach" had to go off for a few hours to get these answers to my questions, even she wasn't sure how it all worked until I asked. Maybe I should have read the multi-page fine print prospectus or whatever it was 5 years, I was just going on their representation that I was buying a 5-year vehicle when in fact I wasn't. Luckily it's no big deal to me, I'm just leaving it there, as long as they don't go broke I'll be fine. Ah, credit unions, (back to this thread's topic) be careful what you're signing.  

So they offered to "buy back" the shares if you wanted. Would you get your full cost back if you decide to cash in? or less than your "original investment."
Is this one of the major CUs?

Are you sure the credit union was going to buy back the shares?

With a waiting list of buyers, the credit union may just be matching you up with some of the buyers on the list.

We looked at some 4.25% shares from DUCA. If there were not enough buyers lining up, that credit union would not buy back/redeem more than 10% of what was outstanding at the start of each year.

Bill said
That's what she told me, if I ever want to cash them in they take them back. I don't really care if they're buying them or another buyer is, makes no difference to me. It makes sense they might cap redemptions though, like DUCA, they probably couldn't pay out if everybody wanted their money back. Maybe that's why they're offering a crazy 3.5% this year, they want no redemptions they can't easily re-flog.

Of course I kept the book they gave me at the time with all the fine print until about a week ago when I put it out for the blue box because I thought they were maturing now and I wouldn't need it! And I can't find anything about these shares online. If I decide to keep them I'm going to tell them I need another copy.

My investment is only about $25K so not a big deal, but seems there's often a lack of clarity with these credit unions.  

With Pace, I was told they will "try" to match up buyer with seller when I decide to sell. Also something about a 5y holding period something like that (bot in Aug, 2018). Will contact them re how I can cash out and close account once my only GIC matures next month.
With I bought the GIC, the guy kept asking me to buy some of the "investment shares" which were 4% at the time. So I threw him a bone and put $2k in it 🙂

Bill said
I just did find, in some financial statements, same thing about only redeeming up to 10% of the total outstanding per year. So "coach" told me I could cash them in, but I suppose only if they haven't had 10% redeemed yet that year (another thing she didn't mention, though to be fair I don't think she knows much about these details). And, yes, they weren't redeemable for the first 5 years, the period of the 4% minimum rate guarantee.

They're Class I, Series 5 Prosperity Investment Shares at Libro credit union, fairly typical of what credit unions issue from what I've learned here. Seems like they just issue new series whenever they need more dough.  

sounds like I will have some dead money sitting at Pace and wait for the 5y mark. Lets hope the Pace name still alive by then.....

To me a retraction right would apply only to an issuer, not a holder, i.e. retract what one has previously issued. But I don't know. The terminology they used when I asked about getting my money out, about redeeming my shares, was "selling them back" to them. The month's delay to get my funds would be to give the "board" time to consider and approve my request at the monthly meeting, I was told.

Got it, retractable it is, thanks Norman1.

They're not redeeming them, if I hadn't contacted them they would have just assumed I wanted to keep them and collect the 3.5% dividend in 2021. It was me who incorrectly assumed they were going to mature soon, she clarified they're shares that don't mature at all. When I asked then how do I ever get my money she said I could any time sell them back to Libro if I didn't want to be a preferred shareholder any more.

I'm not clear about what the waiting list is for. When she told me they were paying 3.5% this year I said well in that case maybe I'll want to buy more then, on top of what I've already got, and she told me there's a waiting list for that (whatever "that" is). I didn't pursue it.

In any event, she gave me no indication they were encouraging me to sell my shares back to them.

I'm thinking now, due to the present lack of clarity plus the fact they were sold to me years ago without them making sure I had a clear understanding of what I was buying (admittedly, at least partly my fault), maybe I'll just sell them back to them. Then, aside from a few small GICs with a couple of Manitoba credit unions, I could done with credit unions and the confusion that seems often to be attached to some of their products.

Bill said
They're not redeeming them, if I hadn't contacted them they would have just assumed I wanted to keep them and collect the 3.5% dividend in 2021. It was me who incorrectly assumed they were going to mature soon, she clarified they're shares that don't mature at all. When I asked then how do I ever get my money she said I could any time sell them back to Libro if I didn't want to be a preferred shareholder any more.

I'm not clear about what the waiting list is for. When she told me they were paying 3.5% this year I said well in that case maybe I'll want to buy more then, on top of what I've already got, and she told me there's a waiting list for that (whatever "that" is). I didn't pursue it.

In any event, she gave me no indication they were encouraging me to sell my shares back to them.

I'm thinking now, due to the present lack of clarity plus the fact they were sold to me years ago without them making sure I had a clear understanding of what I was buying (admittedly, at least partly my fault), maybe I'll just sell them back to them. Then, aside from a few small GICs with a couple of Manitoba credit unions, I could done with credit unions and the confusion that seems often to be attached to some of their products.  

CU will continue to pay higher interest rate compared to other FIs, so no need to ditch them completely in my mind. Just be mindful and do not assume someone works at a branch knows more than you. In other words, they may use loose terms like GIC, preferred shares to describe a particular product, but the product may not be exactly as what you think it is. That applies to all FI staff, not just CUs !