Archive for the ‘Issue Comments’ Category

FN.PR.A & FN.PR.B To Be Extended

Monday, February 22nd, 2021

First National Financial Corporation has announced (although not yet on their website):

that it does not intend to exercise its right to redeem the currently outstanding 2,887,147 cumulative 5-year rate reset Class A Preference Shares, Series 1 of First National (“Series 1 Preference Shares”) or 1,112,853 cumulative floating rate reset Class A Preference Shares, Series 2 of First National (“Series 2 Preference Shares”) on March 31, 2021.

As a result, subject to certain conditions, the holders of Series 1 Preference Shares have the right to convert all or part of their Series 1 Preference Shares on a one-for-one basis into Series 2 Preference Shares on March 31, 2021. As well, subject to certain conditions, the holders of Series 2 Preference Shares have the right to convert all or part of their Series 2 Preference Shares on a one-for-one basis into Series 1 Preference Shares on March 31, 2021. Holders who do not exercise their right to convert their Series 1 Preference Shares into Series 2 Preference Shares will retain their Series 1 Preference Shares. Holders who do not exercise their right to convert their Series 2 Preference Shares into Series 1 Preference Shares will retain their Series 2 Preference Shares.

The foregoing conversions are subject to the conditions that: (i) if First National determines that there would be less than 1,000,000 Series 1 Preference Shares outstanding on March 31, 2021, then all remaining Series 1 Preference Shares will automatically be converted into Series 2 Preference Shares on a one-for-one basis on March 31, 2021, and (ii) alternatively, if First National determines that there would be less than 1,000,000 Series 2 Preference Shares outstanding on March 31, 2021, then all remaining Series 2 Preference Shares will automatically be converted into Series 1 Preference Shares on a one-for-one basis on March 31, 2021. In either case, First National shall give a written notice to that effect to holders of both Series 1 and Series 2 Preference Shares no later than March 24, 2021.

Deadline to Exercise Right

Beneficial owners of Series 1 Preference Shares and Series 2 Preference Shares who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to ensure that they meet the deadline to exercise such right, which is 5:00 p.m. (Toronto time) on March 16, 2021.

Dividend Rate

On March 2, 2021, the Company will announce by way of a news release:

i) The dividend rate applicable to the Series 1 Preference Shares for the five-year period commencing on April 1, 2021, and ending on March 31, 2026,

ii) The dividend rate applicable to the Series 2 Preference Shares for the three-month period commencing on April 1, 2021, and ending on June 30, 2021.

The dividend rates will be determined in accordance with the terms of the respective classes of preference shares.

FN.PR.A was issued as a FixedReset, 4.65%+207, that commenced trading 2011-1-25 after being announced 2011-1-17. Notice of extension was given in February, 2016 and the issue reset to 2.79%. I recommended against conversion, but there was a 28% conversion to FloatingReset anyway.

FN.PR.B is a FloatingReset, Bills+207, that arose via a 28% conversion from FN.PR.A in 2016.

MIC.PR.A Strong On Excellent Volume

Friday, February 19th, 2021

Sagen MI Canada Inc. has announced:

the closing of its previously announced bought deal offering (the “Offering”) of 4,000,000 non-cumulative Class A Preferred Shares, Series 1 (the “Series 1 Shares”). The Offering was underwritten by a syndicate of underwriters led by BMO Capital Markets, CIBC World Markets, National Bank Financial, RBC Capital Markets, Scotia Capital and TD Securities, and resulted in gross proceeds of C$100 million.

Each Series 1 Share entitles the holder thereof to fixed, non-cumulative dividends, if, as and when declared by the board of directors of the Company, with an annual dividend yield of 5.40%. Such dividends, if, declared, will be paid on the last day of March, June, September and December in each year at a rate equal to $0.3375 per Series 1 Share. The initial dividend, if declared, will be paid on June 30, 2021 and will be $0.48822 per Series 1 Share. The Series 1 Shares will commence trading today on the Toronto Stock Exchange under the symbol MIC.PR.A.

The Company intends to use the net proceeds of the Offering to strengthen the Company’s capital base, for distributions to shareholders (subject to the completion of the previously announced plan of arrangement (the “Arrangement”) pursuant to which Brookfield Business Partners L.P., together with certain of its affiliates and institutional partners (“Brookfield”), will acquire all of the outstanding common shares of the Company not already owned by Brookfield), and/or for general corporate purposes.

Following the closing of the Arrangement, in order to maintain in force an exemption order from the public voting requirement currently in section 411 of the Insurance Companies Act (Canada) that has been granted to Genworth Financial Mortgage Insurance Company Canada (a wholly-owned subsidiary of the Company doing business as Sagen™), and subject to certain other limitations and conditions, the Class A Preferred Shares, as a class, will carry adjustable voting rights to ensure that, at any given time, 35% of the voting rights in the Company will be held by persons who, among other things, do not hold 20% or more of any class of voting shares of the Company.

MIC.PR.A is a Straight Perpetual, 5.40%, that was announced 2021-2-8.

The issue traded 649,600 shares today in a range of 25.08-48. It has been assigned to the PerpetualPremium subindex. Vital statistics are:

MIC.PR.A Perpetual-Premium YTW SCENARIO
Maturity Type : Call
Maturity Date : 2030-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 5.19 %

DFN.PR.A To Get Bigger

Tuesday, February 9th, 2021

Quadravest has announced:

Dividend 15 Split Corp. (the “Company”) is pleased to announce it will undertake an offering of Preferred Shares and Class A Shares of the Company. The offering will be led by National Bank Financial Inc.

The Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.5% and the Class A Shares will be offered at a price of $7.15 per Class A Share to yield 16.8%.

The closing price on the TSX of each of the Preferred Shares and Class A Shares on February 8, 2021 was $10.33 and
$7.20, respectively.

Since inception of the Company, the aggregate dividends declared on the Preferred Shares have been $8.89 per share and the aggregate dividends declared on the Class A Shares have been $23.30 per share (including five special distributions of $0.25 per share, one special distribution of $0.50 per share and one special stock dividend of $1.75 per share), for a combined total of $32.19 per unit. All distributions paid to date have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The net proceeds of the offering will be used by the Company to invest in an actively managed, high quality portfolio consisting of 15 dividend yielding Canadian companies as follows:

Bank of Montreal Enbridge Inc. TC Energy
The Bank of Nova Scotia Manulife Financial Corp. TELUS Corporation
BCE Inc. National Bank of Canada Thomson Reuters Corp.
Canadian Imperial Bank of Commerce Royal Bank of Canada The Toronto-Dominion Bank
CI Financial Corp. Sun Life Financial Inc. TransAlta Corporation

Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends in the
amount of 5.50% annually; and
ii. on or about the termination date, currently December 1, 2024 (subject to further 5 year extensions thereafter and it has been extended in the past), to pay the holders of the Preferred Shares $10.00 per Preferred Share.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends currently targeted to be $0.10 per
share; and
ii. on or about the termination date, currently December 1, 2024 (subject to further 5 year extensions thereafter and it has been extended in the past) to pay holders of Class A Shares at least the original issue price of those shares.

The sales period of this overnight offering will end at 9:00 a.m. EST on February 10, 2021. The offering is expected to close on or about February 17, 2021 and is subject to certain closing conditions including approval by the TSX.

The NAVPU as of January 29 was 15.54 and Whole Units are being offered at 17.15 so, ignoring interim valuation changes, the premium is 10.4% … not a bad business to be in at all!

Update, 2021-2-17: The offering was very successful:

Dividend 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight offering of Preferred Shares and Class A Shares of the Company. Total gross proceeds of the offering were $92.2 million, bringing the Company’s net assets to approximately $1.0 billion.

Empire Life Intends To Redeem EML.PR.A If OSFI Stops Dithering On LRCNs

Tuesday, February 2nd, 2021

The Empire Life Insurance Company has announced:

that it has filed a preliminary short form prospectus (the “Prospectus”) in connection with an offering of Limited Recourse Capital Notes, Series 1 (Subordinated Indebtedness) (the “Notes”). The offering will be conducted on an agency basis by a syndicate of dealers co-led by Scotia Capital Inc., CIBC World Markets Inc. and RBC Dominion Securities Inc., as Joint Bookrunners and Co-Lead Managers, along with BMO Nesbitt Burns Inc., National Bank Financial Inc. and TD Securities Inc., as Co-Managers (collectively, the “Agents”).

If issued, the Notes will bear interest at a fixed rate to be determined by Empire Life and the Agents in the context of the market, payable semi-annually, for the initial period ending on but excluding April 17, 2026. Thereafter, the interest rate on the Notes will reset every five years. The offering will be priced in the context of the market with the price and other final terms to be determined at the time of entering into a formal agency agreement with the Agents for the offering. The Notes will mature on April 17, 2081.

Concurrently with the issuance of the Notes, Empire Life will issue Non-Cumulative 5-Year Fixed Rate Reset Preferred Shares, Series 5 (the “Preferred Shares Series 5”) to be held by Computershare Trust Company of Canada as trustee for a newly-formed trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the Notes when due, the recourse of each Note holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of Preferred Shares Series 5 except in limited circumstances.

Empire Life may redeem the Notes during the period from March 17 to and including April 17, commencing in 2026 and every five years thereafter, only upon the redemption by Empire Life of the Preferred Shares Series 5 held in the Limited Recourse Trust, in accordance with the terms of such shares and with the prior written approval of the Superintendent of Financial Institutions (Canada) (the “Superintendent”), in whole but not in part on not less than 15 nor more than 60 days’ prior notice.

The purpose of the sale of the Notes is to enlarge Empire Life’s Tier 1 capital base with a view to optimizing Empire Life’s capital structure within the parameters prescribed by the Superintendent for regulatory capital requirements. The net proceeds from the sale of the Notes, if issued, will be used for general corporate purposes and to redeem Empire Life’s outstanding Non-Cumulative Rate Reset Preferred Shares, Series 1, expected to occur on April 17, 2021, subject to a formal notice being delivered.

The closing of the offering will be subject to certain conditions including, but not limited to, the execution of a formal agency agreement. The Prospectus contains important information relating to the offering and is still subject to completion or amendment. For more information, potential investors should read the Prospectus, which is available on Empire Life’s SEDAR profile at www.sedar.com. There will not be any sale or acceptance of an offer to buy the Notes until a receipt for a final short form prospectus has been issued.

OK, so Empire Life will issue LRCNs at an interest rate yet to be determined. And DBRS assigned a provisional rating of BBB(high) without commenting on the structure.

The interesting thing is, the existence of insurer LRCNs is yet to be determined, although the promise was given by OSFI many, many nap times ago. So this kinda looks like EML and its dealer friends are forcing the issue. Snap it up a little, OSFI! Post-employment plums can always be plucked by persons on another pillar!

Update: 2021-2-11:LRCN size and price announced:

The Empire Life Insurance Company (“Empire Life” or the “Company”) (TSX: EML.PR.A) today announced the size and pricing of its previously announced offering of Limited Recourse Capital Notes, Series 1 (Subordinated Indebtedness) (the “Notes”). Empire Life intends to issue $200 million aggregate principal amount of Notes, which will bear interest at a fixed rate of 3.625%, payable semi-annually, for the initial period ending on but excluding April 17, 2026. Thereafter, the interest rate on the Notes will reset every five years at a rate equal to the 5-year Government of Canada Yield plus 3.082%. The Notes will mature on April 17, 2081.

As previously announced, the offering will be conducted on an agency basis by a syndicate of dealers co-led by Scotiabank, CIBC Capital Markets and RBC Capital Markets, as Joint Bookrunners and Co-Lead Managers, along with BMO Capital Markets, National Bank Financial Markets and TD Securities, as Co-Managers. The expected closing date of the offering of the Notes is on or about February 17, 2021.

In connection with the issuance of the Notes, Empire Life will issue Non-Cumulative 5-Year Fixed Rate Reset Preferred Shares, Series 5 (the “Preferred Shares Series 5”) to be held by Computershare Trust Company of Canada as trustee for a newly-formed trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the Notes when due, the recourse of each Note holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of the Preferred Shares Series 5 except in limited circumstances.

Empire Life may redeem the Notes during the period from March 17 to and including April 17, commencing in 2026 and every five years thereafter, only upon the redemption by Empire Life of the Preferred Shares Series 5 held in the Limited Recourse Trust, in accordance with the terms of such shares and with the prior written approval of the Superintendent of Financial Institutions (Canada) (the “Superintendent”), in whole but not in part, on not less than 15 nor more than 60 days’ prior notice.

The purpose of the sale of the Notes is to enlarge Empire Life’s Tier 1 capital base with a view to optimizing Empire Life’s capital structure within the parameters prescribed by the Superintendent for regulatory capital requirements. As previously announced, the net proceeds from the sale of the Notes will be used for general corporate purposes and to redeem Empire Life’s outstanding Non-Cumulative Rate Reset Preferred Shares, Series 1, expected to occur on April 17, 2021, subject to a formal notice being delivered.

The closing of the offering will be subject to certain conditions. For more information, potential investors should read the final short form prospectus relating to the offering of the Notes and the distribution of the Preferred Shares Series 5, which is available on Empire Life’s SEDAR profile at www.sedar.com.

PPL.PR.K To Be Redeemed

Monday, January 25th, 2021

Pembina Pipeline Corporation has announced:

that it has closed its previously announced offering of $600 million of 4.80% Fixed-to-Fixed Rate Subordinated Notes, Series 1 due January 25, 2081 (the “Offering”). The Company also announced its intention to redeem its issued and outstanding Cumulative Redeemable Minimum Rate Reset Class A Preferred Shares, Series 11 (TSX: PPL.PR.K) (the “Series 11 Shares”) on March 1, 2021.

Closing of Hybrid Note Offering

Pembina expects to use the net proceeds of the Offering to fund the redemption of its outstanding Series 11 Shares and its Cumulative Redeemable Minimum Rate Reset Class A Preferred Shares, Series 13 (TSX: PPL.PR.M), to repay other outstanding indebtedness, as well as for general corporate purposes.

The subordinated notes were offered through a syndicate of underwriters, co-led by RBC Capital Markets, CIBC Capital Markets, Scotiabank and TD Securities, under Pembina’s short form base shelf prospectus dated December 30, 2020, as supplemented by a prospectus supplement dated January 12, 2021.

Pembina announced that they were considering this step in mid-January and confirmed the intent a few days later.

PPL.PR.K was issued as a FixedReset, 5.75%+500M575 that commenced trading 2016-1-15 after being announced 2016-1-6.

AZP Put On Watch-Negative By S&P

Friday, January 22nd, 2021

Standard & Poor’s has announced:

  • Atlantic Power Corp. (APC) announced it has entered into an agreement to be acquired by I Squared Capital for $3.03 per share.
  • The ratings on our ‘BB-‘ issuer credit rating on APC are unchanged and we are placing the company’s ratings on CreditWatch with negative implications.
  • At the same time, we are placing the issue-level ratings on APLP Holdings L.P.’s term loan B, $180 million revolving credit facility, and Atlantic Power L.P.’s C$210 million medium-term notes on CreditWatch with negative implications.
  • We are also placing the preferred shares at Atlantic Power Preferred Equity Ltd. (APLP) on CreditWatch with negative implications.
  • The CreditWatch placements capture our view that the new sponsor could alter the capital structure.

S&P Global Ratings today took the rating actions listed above. Pro forma for the transaction, Atlantic Power’s financial policy will be determined by I Squared, which we would most likely designate a financial sponsor. We typically expect financial sponsors to use leverage to fund transactions to achieve returns. Consequently, ratings are generally lower for financial sponsor-owned companies than strategically owned entities. However, I Squared indicated it plans to redeem some debt and reorganize APC’s capital structure. We will monitor and reassess financial policy, forward leverage, and any changes to the business strategy as we obtain additional clarity on I Squared’s plan and as the transaction approaches financial close.

Following the necessary approvals by APC’s board, shareholders, and regulators, we anticipate common shareholders will receive $3.03 per share at the close of the transaction. The unsecured convertible debt due Jan. 31, 2025, will be converted to common shares for $3.03, plus accrued and unpaid interest. The company’s senior secured term loan will also be redeemed at 101% of principal. Atlantic Power Preferred’s shares will be redeemed for C$22 each in cash. Atlantic Power L.P.’s 5.95% medium term notes due June 23, 2036, will be redeemed for consideration equal to 106.071% of the principal amount plus accrued and unpaid interest at financial close.

The CreditWatch listing reflects the likelihood that I Squared’s financial policy will inform the rating on Atlantic Power pro forma for the transaction. We would most likely classify I Squared as a financial sponsor. Consequently, any rating implications will depend on the forward capital structure, our assessment of the business strategy, and most important how we assess I Squared’s financial policy with regard to APC. We will likely resolve the CreditWatch when the transaction closes, projected for the second quarter of 2021.

Affected issues are AZP.PR.A, AZP.PR.B and AZP.PR.C.

I have previously reported the proposed redemption at $22 of these issues.

LBS.PR.A To Get Bigger

Tuesday, January 19th, 2021

Brompton Group has announced:

Life & Banc Split Corp. (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A shares and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively).

The sales period for this overnight offering will end at 9:00 a.m. (ET) on Wednesday, January 20, 2021. The offering is expected to close on or about January 27, 2020 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Class A Shares will be offered at a price of $7.80 per Class A Share for a distribution rate of 15.4% on the issue price, and the Preferred Shares will be offered at a price of $10.15 per Preferred Share for a yield to maturity of 5.1%.(1) The closing price on the TSX for each of the Class A Shares and Preferred Shares on January 18, 2021 was $7.87 and $10.31, respectively. The Class A Share and Preferred Share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company (“Unit”) (calculated as at January 14, 2021), as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank.

The Company invests in a portfolio (the “Portfolio”) consisting of common shares of the six largest Canadian banks and the four major publicly traded Canadian life insurance companies:

Bank of Montreal Great-West Lifeco Inc.
National Bank of Canada The Bank of Nova Scotia
Canadian Imperial Bank of Commerce Royal Bank of Canada
iA Financial Corporation Inc. The Toronto-Dominion Bank
Sun Life Financial Inc. Manulife Financial Corporation

The investment objectives for the Class A Shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per Class A Share and to provide the opportunity for growth in the net asset value per Class A Share.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.13625 per Preferred Share ($0.545 per annum), and to return the original issue price plus accrued dividends (if any) to holders of Preferred Shares on October 30, 2023.

The NAVPU was 17.20 as of January 14 and the Whole Units are being offered for 17.95; the premium is therefore 4%. There have been many higher figures on SplitShare offerings, but 4% is still good business!

Update, 2021-1-20: The offering was successful:

Life & Banc Split Corp. (the “Company”) is pleased to announce a successful overnight treasury offering of class A shares and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively). Gross proceeds of the offering are expected to be approximately $53.8 million. The offering is expected to close on or about January 27, 2020 and is subject to certain closing conditions. The Company has granted the Agents (as defined below) an over-allotment option, exercisable for 30 days following the closing date of the offering, to purchase up to an additional 15% of the number of Class A Shares and Preferred Shares issued at the closing of the offering

PWF.PR.P / PWF.PR.Q : Net 6% Conversion To FixedReset

Tuesday, January 19th, 2021

Power Financial Corporation has announced:

that (i) 137,539 of its outstanding 8,965,485 Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series P (the “Series P shares”) will be converted on February 1, 2021, on a one-for-one basis, into Non-Cumulative Floating Rate First Preferred Shares, Series Q (the “Series Q shares”) of Power Financial, and (ii) 829,570 of its outstanding 2,234,515 Series Q shares will be converted on February 1, 2021, on a one-for-one basis, into Series P shares of Power Financial.

As a result, on February 1, 2021, Power Financial will have issued and outstanding 9,657,516 Series P shares and 1,542,484 Series Q shares.

The Series P shares and Series Q shares are currently listed on the Toronto Stock Exchange under the symbols PWF.PR.P and PWF.PR.Q, respectively.

PWF.PR.P was issued as a a FixedReset, 4.40%+160 that commenced trading 2010-6-29 after being announced 2010-6-17. It reset to 2.306% in 2016; I recommended against conversion but there was a 20% conversion to PWF.PR.Q anyway. After providing notice of extension the company announced the 2021 reset of PWF.PR.P to 1.998%.

PWF.PR.Q is a FloatingReset, Bills+160, that arose via a partial conversion from PWF.PR.P in 2016.

Atlantic Power Proposes Redeeming AZP.PR.A, AZP.PR.B & AZP.PR.C at $22.00 Under Plan of Arrangement

Saturday, January 16th, 2021

Atlantic Power Corporation has announced:

that it has entered into a definitive agreement with I Squared Capital, a leading global infrastructure investor, under which the company’s outstanding common shares and convertible debentures, and the outstanding preferred shares and medium term notes of certain of its subsidiaries, will be acquired. The total enterprise value of the deal is approximately US$961 million (based on current foreign exchange rates) and the transaction was unanimously approved by Atlantic Power’s board of directors.
  • Common shareholders of Atlantic Power will receive US$3.03 per common share in cash, representing a 48% premium to the 30-day volume weighted average price per common share on the New York Stock Exchange for the period ending January 14, 2021.
  • Atlantic Power’s 6.00% Series E Convertible Unsecured Subordinated Debentures due January 31, 2025 will be converted into common shares of Atlantic Power immediately prior to the closing of the transaction based on the conversion ratio in effect at such time (including the “make whole premium shares” issuable under the terms of the trust indenture for the convertible debentures following a cash change of control). Holders of the convertible debentures will receive US$3.03 per common share held following the conversion of the convertible debentures, plus accrued and unpaid interest on the convertible debentures up to, but excluding, the closing date of the transaction.
  • Atlantic Power Preferred Equity Ltd.’s (“APPEL”) cumulative redeemable preferred shares, Series 1, cumulative rate reset preferred shares, Series 2, and cumulative floating rate preferred shares, Series 3, will be redeemed for Cdn$22.00 per preferred share in cash, representing meaningful premiums to the recent trading prices of such shares on the Toronto Stock Exchange.
  • Atlantic Power Limited Partnership’s (“APLP”) 5.95% medium term notes due June 23, 2036 will be redeemed for consideration equal to 106.071% of the principal amount of medium term notes held as of the closing of the transaction, plus accrued and unpaid interest on the medium term notes up to, but excluding, the closing date of the transaction. Holders of medium term notes that deliver a written consent to the proposed amendments to the trust indenture governing the medium term notes (as described below) will also be entitled to a consent fee equal to 0.25% of the principal amount of medium term notes held by such holders, conditional on closing of the transaction.

The acquisition of Atlantic Power’s outstanding common shares and the redemption of the outstanding preferred shares of APPEL will be completed by way of a plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia). In connection with the Arrangement, Atlantic Power’s shareholder rights plan will be terminated and all rights to purchase Atlantic Power’s common shares issued pursuant to the shareholder rights plan will be cancelled.

The Transaction is also conditional on the approval of two-thirds of the votes cast by holders of Atlantic Power’s common shares voting in person or by proxy at a special meeting of Atlantic Power’s common shareholders and the approval of two-thirds of the votes cast by holders of APPEL’s preferred shares (voting as a single class) in person or by proxy at a meeting of APPEL’s preferred shareholders in respect of both the Arrangement and the proposed continuance of APPEL under the laws of British Columbia.

In addition, the Transaction is conditional upon the approval of the holders of the convertible debentures and the medium term notes, respectively (in each case either by way of votes of the holders of the convertible debentures and the medium term notes holding at least two-thirds of the principal amount of the convertible debentures and the medium term notes, respectively, voted in person or by proxy at separate meetings of the holders of the convertible debentures and the medium term notes or by way of separate written consents of the holders of the convertible debentures and the medium term notes holding not less than two-thirds of the principal amount of convertible debentures and medium term notes outstanding, as applicable), of certain amendments to the trust indentures governing such securities, as described above. Atlantic Power and APLP will seek the approval of the holders of the convertible debentures and medium term notes by way of separate meetings and/or consent solicitations.

A bondholder representing approximately 66% of the principal amount of medium term notes and approximately 19% of the principal amount of convertible debentures outstanding has agreed to vote in favor of or otherwise consent to amendments to the trust indentures governing those securities.

A nice deal for the preferred shareholders, I think, as the yield on the preferreds is now 5.59%, 5.59% and 4.87% for AZP.PR.A, AZP.PR.B and AZP.PR.C, respectively, well within the range of issues in the “Pfd-3 Group” (not bad for issues rated P-4(low)!), although I have received an eMail that stated in part:

Why on earth would any preferred shareholder agree to sell their preferred shares below what is stated in the prospectuses?

I find it hard to believe that any preferred shareholder would agree to selling their preferred shares at $22.

Also, in your Q&A on the transaction, Atlantic Power states…” Preferred shareholders will not be entitled to a pro rata dividend in the event that the closing occurs mid-quarter.”

I believe Atlantic Power is mistaken here.

Presumably the elimination of the pro-rata dividend will be specified in the Plan of Arrangement.

It remains to be seen whether preferred shareholders are able to replicate their success realized in the negotiations regarding the Rona preferred shares in which Fidelity Investments Canada ULC was able to squeeze Lowes for a significant sum.

Many thanks to Assiduous Readers TS and JD for bringing this to my attention!

Pembina Expects To Redeem Or Repurchase PPL.PR.K & PPL.PR.M

Thursday, January 14th, 2021

Further to their previous announcement that they were considering the deal, Pembina Pipeline Corporation has announced:

that it has priced an offering of $600 million of 4.80% Fixed-to-Fixed Rate Subordinated Notes, Series 1 due January 25, 2081 (the “Offering”).

The Offering is expected to close on or about January 25, 2021, subject to customary closing conditions. Pembina expects to use the net proceeds of the Offering to redeem or repurchase its outstanding cumulative redeemable minimum rate reset Class A Preferred Shares, Series 11 (TSX: PPL.PR.K) and its cumulative redeemable minimum rate reset Class A Preferred Shares, Series 13 (TSX: PPL.PR.M), to repay other outstanding indebtedness, as well as for general corporate purposes.

The subordinated notes are being offered through a syndicate of underwriters, co-led by RBC Capital Markets, CIBC Capital Markets, Scotiabank and TD Securities, under Pembina’s short form base shelf prospectus dated December 30, 2020, as supplemented by a prospectus supplement dated January 12, 2021.

These Notes are provisionally rated BB(high) by DBRS and BB+ by S&P which notes:

S&P Global Ratings said today that it assigned its ‘BB+’ rating to Pembina Pipeline Corp.’s (Pembina) $600 million, 4.8% fixed-to-fixed rate subordinated notes series 1 due Jan. 25, 2081. The company intends to use the net proceeds of this offering to repay approximately $420 million of preferred shares outstanding maturing in the first half of 2021, repay some of the borrowings under the Pembina’s credit facilities ($1.64 billion outstanding as of Sept. 30, 2020), and for other general corporate purposes.

We classify the notes as having intermediate equity content because of their subordination, permanence, and optional deferability features, in line with our hybrid capital criteria. As a result, the proposed notes will receive 50% equity treatment for the calculation of credit metrics.

While the subordinated notes are due in 60 years, the interest margins will increase by 25 basis points (bps) in 2031 (year 10) and a further 75 bps (total of 100 bps from initial spread) in 2051 (year 30). We consider this cumulative 100 bps increase as a material step-up, which, in our opinion, could provide an incentive for Pembina to redeem the instruments on that call date. Therefore, we consider 2051 as the effective maturity date for the notes.

In line with our criteria, the notes will receive minimal equity content after the first call date in 2031 because the remaining period until their effective maturity will be less than 20 years.