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  5. ECN.DB.A: hello 5i [ECN Capital Corp. 6.00% Senior Unsecured Debentures]
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Investment Q&A

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Q: hello 5i:
a follow up to a previous question on ECN.DB: can you explain why there has been a steady erosion in the price of ECN.DB, from a high of 104 a year ago, to $98.50 today? I would think that a 6.1% return (at todays price) would be attractive and would actually result in a higher price, assuming that one believes ECN is worth holding (I do). Is it simply a matter of higher interest rates, present and anticipated?
thanks
Paul L

Asked by Paul on August 19, 2022
5i Research Answer:

ECN.DB is an unsecured bond backed by the creditworthiness of ECN, and while a 6% return is quite attractive, it is uncollateralized and so any change in the expected financial situation of ECN will affect the debentures pricing. Another consideration is that the rise in government bond yields over the past several months has been a source of relative attractiveness for investors, that comes with a lot less risk than a corporate bond. If rates stagnate and investor confidence in stock returns, we would expect the debenture to increase in price.