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Analysis••By Canadian Preferred Shares

Redemption Wave: Cenovus and First National Pull $300M+ from Preferred Market

# Redemption Wave: Cenovus and First National Pull $300M+ from Preferred Market

March 2026 is seeing a significant contraction in the Canadian preferred share market as two major issuers redeem their preferred shares at par value.

Cenovus Energy Redemption

Cenovus Energy Inc. (TSX:CVE) is redeeming all outstanding Series 1 and Series 2 Preferred Shares on March 31, 2026, at $25.00 per share. The total outlay is approximately $300 million, funded primarily from cash on hand.

  • Series 1: 2.577% fixed rate, final dividend $0.16106/share

  • Series 2: 3.948% fixed rate, final dividend $0.24337/share

    • The company stated this is part of ongoing capital structure management. With strong cash generation from their oil sands operations, Cenovus has the flexibility to retire higher-cost capital.

    First National Financial Redemption

    First National Financial Corporation (TSX:FN) is also redeeming all outstanding Series 1 and Series 2 Preferred Shares on March 31, 2026.

  • The shares will be delisted from the TSX following redemption

  • Final quarterly dividends will be paid to shareholders of record as of March 13, 2026

    • First National, a major Canadian mortgage lender, has been active in optimizing its funding mix. The redemption suggests confidence in alternative funding sources or a desire to simplify their capital structure.

    What This Means for Investors

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    Immediate Impact

    For holders of these preferreds, redemptions at par value typically mean:

  • Guaranteed exit at $25/share - no market risk

  • Final dividend payment - the last quarterly payment before redemption

  • Capital to redeploy - investors need to find alternative income investments

    • #

    Broader Market Implications

    The preferred share market has been gradually shrinking as issuers redeem older, higher-rate issues. This trend reflects:

    1. Strong corporate balance sheets - companies have cash to retire expensive capital
    2. Lower interest rates - issuers can refinance more cheaply
    3. Capital optimization - companies simplifying structures post-pandemic

    #

    Where to Reinvest?

    Investors receiving redemption proceeds may consider:

  • Other rate reset preferreds - look for resets with attractive spreads

  • Insurance company preferreds - generally strong credit quality

  • Split corp preferreds - higher yields with different risk profile

    • Use our Preferreds Screener to find alternatives with similar yield and credit characteristics.

    Conclusion

    The redemption of Cenovus and First National preferred shares removes liquidity from an already concentrated market. For income-focused investors, this underscores the importance of diversification and having a watchlist of alternatives ready when redemptions occur.

    As the Bank of Canada holds rates at 2.25%, more issuers may choose to redeem higher-cost preferreds. Stay informed by checking our rankings for the best available yields in the current market.