Archive for the ‘New Issues’ Category

New Issue: PVS SplitShare, 7-Year, 4.80%

Thursday, September 7th, 2017

Partners Value Split Corp. has announced (although not yet on their website):

that it has entered into an agreement to sell 5,000,000 Class AA Preferred Shares, Series 8 (the “Series 8 Preferred Shares”) to a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets, and TD Securities Inc. on a bought deal basis.

The Series 8 Preferred Shares will be issued at a price of $25.00 per share, for gross proceeds of $125,000,000. The Series 8 Preferred Shares will carry a fixed coupon of 4.80% and will have a final maturity of September 30, 2024. The Series 8 Preferred Shares have a provisional rating of Pfd-2 (low) from DBRS. The net proceeds of the offering will be used to redeem the Company’s outstanding Class AA Preferred Shares, Series 5 and to pay a special dividend to holders of the Company’s capital shares.

The Company has granted the underwriters an option, exercisable in whole or part prior to closing, to purchase up to an additional 1,000,000 Series 8 Preferred Shares at the same offering price, which, if exercised, would increase the gross offering size to $150,000,000. Closing of the offering is expected to occur on or about September 18, 2017.

The Company owns a portfolio consisting of 79,740,966 Class A Limited Voting Shares of Brookfield Asset Management Inc. (the “Brookfield Shares”) which is expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Shares. Brookfield Asset Management Inc. is a global alternative asset manager with over US$250 billion in assets under management. For more than 100 years Brookfield has owned and operated assets on behalf of shareholders and clients with a focus on property, renewable energy, infrastructure and private equity. Brookfield has a range of public and private investment products and services which leverage its expertise and experience. Brookfield Shares are co-listed on the New York Stock Exchange under the symbol “BAM”, the TSX under the symbol “BAM.A” and the NYSE Euronext under the symbol “BAMA”.

David Clare, Vice President, will be available at (647) 503-6516 to answer any questions regarding the offering.

The Series 5 shares which are being redeemed have the ticker PVS.PR.C, which was originally traded as BNA.PR.E, which commenced trading 2010-12-10 after being announced 2010-11-22. It has a 4.85% coupon and has 4,999,000 shares outstanding.

4.80% on the new issue looks like a very nice coupon on the new issue, compared with yields on the company’s other issues of PVS.PR.B, 4.01% to 2019-1-10; PVS.PR.D, 4.36% to 2021-10-8; and PVS.PR.E, 4.56% to maturity 2022-10-31, although the YTW scenario is a current call at 26.00 (which can be triggered if BAM is taken over). The coupon is equal to that of EIT.PR.A, quoted today at 25.00-50; 4.81-4.45%, as yesterday’s 25.45 closing bid was vaporized. Mind you, EIT.PR.A’s low on the day was 25.42 on volume of 2,713 shares.

New Issue: BAM FixedReset, 4.75%+310M475

Wednesday, September 6th, 2017

Brookfield Asset Management Inc. has announced:

that it has agreed to issue 10,000,000 Class A Preferred Shares, Series 48 on a bought deal basis to a syndicate of underwriters led by CIBC Capital Markets, RBC Capital Markets, Scotiabank, and TD Securities Inc. for distribution to the public. The Preferred Shares, Series 48 will be issued at a price of C$25.00 per share, for gross proceeds of C$250,000,000. Holders of the Preferred Shares, Series 48 will be entitled to receive a cumulative quarterly fixed dividend yielding 4.75% annually for the initial period ending December 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 3.10% and (ii) 4.75%.

Brookfield has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 2,000,000 Preferred Shares, Series 48 which, if exercised, would increase the gross offering size to C$300,000,000. The Preferred Shares, Series 48 will be offered in all provinces of Canada by way of a supplement to Brookfield’s existing short form base shelf prospectus. The Preferred Shares, Series 48 may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

Brookfield intends to use the net proceeds of the issue of Preferred Shares, Series 48 for general corporate purposes. The offering of Preferred Shares, Series 48 is expected to close on or about September 13, 2017.

They later announced:

that as a result of strong investor demand for its previously announced offering, the underwriters have exercised their option to increase the size of the offering to 12,000,000 Class A Preferred Shares, Series 48. The Preferred Shares, Series 48 will be issued at a price of C$25.00 per share, for gross proceeds of C$300,000,000. The Preferred Shares, Series 48 are being issued on a bought deal basis to a syndicate of underwriters led by CIBC Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc. for distribution to the public.

The Preferred Shares, Series 48 will be offered in all provinces of Canada by way of a supplement to Brookfield’s existing short form base shelf prospectus. The Preferred Shares, Series 48 may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

Brookfield intends to use the net proceeds of the issue of Preferred Shares, Series 48 for general corporate purposes. The offering of Preferred Shares, Series 48 is expected to close on or about September 13, 2017.

It looks expensive to me! According to Implied Volatility analysis:

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With the parameters shown, the theoretical value of the new issue is 24.20. Critics will be quick to point out that in this calculation there is zero value assigned to the minimum rate guarantee … but I’d say that’s about right!

New Issue: IFC Straight Perpetual, 5.30%

Wednesday, August 9th, 2017

Intact Financial Corporation has announced:

that it has entered into an agreement with a syndicate of underwriters led by CIBC Capital Markets together with BMO Capital Markets, National Bank Financial and TD Securities Inc. pursuant to which the underwriters have agreed to purchase, on a bought deal basis, 6,000,000 Non-Cumulative Class A Shares, Series 6 (the “Series 6 Shares”) from Intact for sale to the public at a price of $25.00 per Series 6 Share, representing aggregate gross proceeds of $150 million.

Intact has granted the underwriters an underwriters’ option to purchase up to an additional 2,000,000 Series 6 Shares at the same offering price. Should the underwriters’ option be fully exercised, the total gross proceeds of the Series 6 Shares offering will be $200 million.

The Series 6 Shares will yield 5.30% per annum, payable quarterly, as and when declared by the Board of Directors of the Company. The Series 6 Shares will not be redeemable prior to September 30, 2022. On and after September 30, 2022, Intact may, on not less than 30 nor more than 60 days’ notice, redeem for cash the Series 6 Shares in whole or in part, at the Company’s option, at $26.00 per share if redeemed on or after September 30, 2022 and prior to September 30, 2023; $25.75 per share if redeemed on or after September 30, 2023 and prior to September 30, 2024; $25.50 per share if redeemed on or after September 30, 2024 and prior to September 30, 2025; $25.25 per share if redeemed on or after September 30, 2025 and prior to September 30, 2026; and $25.00 per share if redeemed on or after September 30, 2026, in each case together with all declared and unpaid dividends up to but excluding the date of redemption.

The Series 6 Share offering is expected to close on August 18, 2017. The net proceeds will be used to partially fund the previously announced acquisition of OneBeacon Insurance Group, Ltd. If the acquisition does not close, the net proceeds will be used for general corporate purposes.

The yield being offered on this issue is a little higher than the 5.20% that is effective for IFC.PR.E, which commenced trading 2017-5-24 after being announced 2017-5-12; IFC.PR.E was quoted at the close at 24.85-88. That issue also noted the acquisition of OneBeacon as the intended use of funds.

As this issue is not NVCC compliant, it will be analyzed as a DeemedRetractible. Note, however, that this carries more uncertainty than it does with most other insurers because Intact is a P&C insurer, not a life company.

New Issue: KML FixedReset 5.25%+365M525

Thursday, August 3rd, 2017

Kinder Morgan Canada Limited has announced (although not yet on their website):

that it has entered into an agreement with a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities (together, the “Underwriters”) pursuant to which the Underwriters have agreed to purchase from the Company, 8,000,000 cumulative redeemable minimum rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”) at a price of $25.00 per share for distribution to the public.

The Company has granted to the Underwriters an option, exercisable at any time up to 48 hours prior to the closing of the offering, to purchase up to an additional 2,000,000 Series 1 Preferred Shares at a price of $25.00 per share.

The Company intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership, which intends to subsequently use such proceeds to, directly or indirectly, finance the development, construction and completion of the Trans Mountain Expansion Project and Base Line Terminal project as well as potential future growth opportunities, to repay indebtedness and for general corporate purposes.

The holders of Series 1 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.3125 per share, payable quarterly on the 15th day of February, May, August and November, as and when declared by the Board of Directors of the Company, yielding 5.25 per cent per annum at the issue price, for the initial fixed rate period to but excluding November 15, 2022 (the “Initial Fixed Rate Period”). The first quarterly dividend payment date is scheduled for November 15, 2017. The dividend rate will reset on November 15, 2022 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 3.65 per cent, provided that, in any event, such rate shall not be less than 5.25 percent per annum. The Series 1 Preferred Shares are redeemable by the Company, at its option, on November 15, 2022 and on November 15 of every fifth year thereafter at a price of $25.00 per share plus accrued and unpaid dividends.

The holders of Series 1 Preferred Shares will have the right to convert their shares into cumulative redeemable floating rate preferred shares, Series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on November 15, 2022 and on November 15 of every fifth year thereafter. The holders of Series 2 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of the Company, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 3.65 percent.

Closing of the offering is expected on August 15, 2017, subject to customary closing conditions.

The offering is being made under a prospectus supplement to the base shelf prospectus of the Company dated July 28, 2017 (together, the “Prospectus”). Copies of the Prospectus may be obtained from The Bank of Nova Scotia, Scotia Plaza, 44 King Street West, Toronto, Ontario M5H 1H1, Telephone: (416) 866-3672, Canadian Imperial Bank of Commerce, Commerce Court, Toronto, Ontario M5L 1A2, Telephone (416) 980-3096, Royal Bank of Canada, 200 Bay Street, 4th Floor, North Tower, Toronto, Ontario, M5J 2W7, Telephone (416) 955-7803 and The Toronto-Dominion Bank, Toronto-Dominion Centre, Toronto, Ontario M5K 1A2, Telephone: (416) 308-6963. Investors should read the Prospectus, and the documents incorporated therein by reference, before making an investment decision.

They later announced:

that as a result of strong investor demand for its previously announced offering of cumulative redeemable minimum rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”), the size of the offering has been increased to 12,000,000 shares. The offering no longer includes the previously granted underwriters’ option. The aggregate gross proceeds of the offering will now be $300 million. The syndicate of underwriters is led by Scotiabank, CIBC Capital Markets, RBC Capital Markets, and TD Securities.

Nice to see a new issuer … too bad it’s junk! S&P calls it P-3(high):

S&P Global Ratings said today it assigned its ‘BB+’ (P-3 (High) Canadian National Scale Preferred Share Rating) issue-level rating to Kinder Morgan Canada Ltd.’s (KML) cumulative redeemable minimum rate reset preferred shares, series 1.

Update, 2017-08-08: Pfd-3(high) [Provisional] from DBRS:

DBRS Limited (DBRS) has today assigned a provisional rating of Pfd-3 (high) with a Stable trend to Kinder Morgan Canada Limited’s (KML or the Company) proposed issuance of Cumulative Redeemable Minimum Rate Reset Preferred Shares, Series 1 (Series 1 Preferred Shares).

DBRS has not assigned an Issuer Rating to KML; however, the Series 1 Preferred Shares rating is based on the credit profile of Kinder Morgan Cochin ULC (KMU; rated BBB (high) with a Stable trend). KMU is KML’s operating subsidiary, which operates the Company’s Canadian energy infrastructure assets, including the existing Trans Mountain Pipeline, the $7.4 billion Trans Mountain Expansion Project (TMEP), the Puget Sound pipeline, the Canadian portion of Cochin pipeline as well as various terminal, rail and storage facilities.

KML intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership (KMLP; 100% owner of KMU) through Kinder Morgan Canada GP Inc. (KMCGP; 100% owned by KML). KMLP in turn intends to use such proceeds to finance the development, construction and completion of TMEP and the Base Line Terminal project as well as potential future growth opportunities, to repay indebtedness and for general corporate purposes. KMLP receives all dividends paid by KMU. KMLP’s preferred units mirror the terms and conditions of the Series 1 Preferred Shares issued by KML. The dividends due on the Series 1 Preferred Shares are matched by the dividends paid on the preferred units of KMLP to which KML subscribes. Dividends on KMLP’s preferred units have priority over dividends paid on KMLP’s common units and are distributed through KMCGP to KML for further distribution to holders of KML’s Series 1 Preferred Shares. KMLP and KMCGP have no debt. The rating on KML’s Series 1 Preferred Shares is therefore linked to KMU’s rating and any change in KMU’s rating could affect the rating of the Series 1 Preferred Shares.

New Issue: CPX FixedReset, 5.75%+412M575

Thursday, July 27th, 2017

Capital Power Corporation has announced:

that it will issue 5,000,000 Cumulative Minimum Rate Reset Preference Shares, Series 9 (the “Series 9 Shares”) at a price of $25.00 per Series 9 Share (the “Offering”) for aggregate gross proceeds of $125 million on a bought deal basis with a syndicate of underwriters, co-led by TD Securities Inc. and National Bank Financial Inc. In addition, Capital Power has granted the underwriters an option, exercisable in whole or in part anytime up to two business days prior to closing, to purchase up to an additional 1,000,000 Series 9 Shares on the same terms, for additional gross proceeds of up to $25 million.

The Series 9 Shares will pay fixed cumulative dividends of $1.4375 per share per annum, yielding 5.75% per annum, payable on the last business day of March, June, September and December of each year, as and when declared by the board of directors of Capital Power, for the initial period ending September 30, 2022. Assuming an issue date of August 9, 2017, the first quarterly dividend of $0.2048 per share is expected to be paid on September 29, 2017. The dividend rate will be reset on September 30, 2022 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 4.12%, provided that, in any event, such rate shall not be less than 5.75%. The Series 9 Shares are redeemable by Capital Power, at its option, on September 30, 2022 and on September 30 of every fifth year thereafter.

Holders of Series 9 Shares will have the right to convert all or any part of their shares into Cumulative Floating Rate Preference Shares, Series 10 (the “Series 10 Shares”), subject to certain conditions, on September 30, 2022 and every five years thereafter. Holders of Series 10 Shares will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus 4.12%, as and when declared by the Board of Directors of Capital Power.

Net proceeds of the offering will be used to reduce indebtedness under Capital Power’s credit facilities.

Standard & Poor’s Ratings Services, a business unit of S&P Global Canada Corp., has assigned a provisional rating of P-3 for the Series 9 Shares and DBRS Limited has assigned a preliminary rating of Pfd-3 (low) for the Series 9 Shares.

The Series 9 Shares will be issued pursuant to a prospectus supplement to Capital Power’s short form base shelf prospectus dated May 3, 2016. The prospectus supplement will be filed with securities regulatory authorities in all provinces and territories in Canada. The Offering is subject to receipt of all necessary regulatory and stock exchange approvals.

They have also announced:

On July 25, 2017, the Company’s Board of Directors approved an increase of 7.1% in the annual dividend for holders of its common shares, from $1.56 per common share to $1.67 per common share. This increased common dividend will commence with the third quarter 2017 quarterly dividend payment on October 31, 2017 to shareholders of record at the close of business on September 29, 2017.

The new issue is extraordinarily expensive, according to Implied Volatility analysis:

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It’s a standard trick, but it never gets old! Set the yield of your new issue in accordance with the yield of lower-priced instruments … which will almost always have lower yields due to their lower call risk. The theoretical price of the new issue, according to this analysis, is 23.65.

New Issue: TD FixedReset, 4.50%+301, NVCC

Thursday, July 6th, 2017

The Toronto-Dominion Bank has announced (on July 5):

a domestic public offering of Non-Cumulative 5-Year Rate Reset Preferred Shares (non-viability contingent capital (NVCC)), Series 16 (the “Series 16 Shares”).

TD has entered into an agreement with a group of underwriters led by TD Securities Inc. to issue, on a bought deal basis, 12 million Series 16 Shares at a price of $25.00 per share to raise gross proceeds of $300 million. TD has also granted the underwriters an option to purchase, on the same terms, up to an additional 2 million Series 16 Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing.

The Series 16 Shares will yield 4.50% annually, with dividends payable quarterly, as and when declared by the Board of Directors of TD, for the initial period ending October 31, 2022. Thereafter, the dividend rate will reset every five years at a level of 3.01% over the then five-year Government of Canada bond yield.

Subject to regulatory approval, on October 31, 2022 and on October 31 every 5 years thereafter, TD may redeem the Series 16 Shares, in whole or in part, at $25.00 per share. Subject to TD’s right of redemption and certain other conditions, holders of the Series 16 Shares will have the right to convert their shares into Non-Cumulative Floating Rate Preferred Shares (NVCC), Series 17 (the “Series 17 Shares”), on October 31, 2022, and on October 31 every five years thereafter. Holders of the Series 17 Shares will be entitled to receive quarterly floating rate dividends, as and when declared by the Board of Directors of TD, equal to the three-month Government of Canada Treasury Bill yield plus 3.01%.

The expected closing date is July 14, 2017. TD will make an application to list the Series 16 Shares as of the closing date on the Toronto Stock Exchange. The net proceeds of the offering will be used for general corporate purposes.

They later announced:

that, in connection with its previously announced domestic public offering of 12 million 4.50% Non-Cumulative 5-Year Rate Reset Preferred Shares (non-viability contingent capital (NVCC)), Series 16 (the “Series 16 Shares”), the underwriters have exercised their option (the “Underwriters’ Option”) to purchase an additional 2 million Series 16 Shares at a price of $25.00 per share. TD will receive additional gross proceeds of $50 million from the exercise of the Underwriters’ Option, increasing the total size of the offering to $350 million. Closing of the Underwriters’ Option is expected to occur concurrently with the closing of the public offering on July 14, 2017.

This issue has much the same problem as most other new issues: it’s expensive – at least, according to Implied Volatility for FixedResets analysis:

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The theoretical price of the new issue according to this analysis is 24.30.

New Issue: BMO FixedReset, 4.40%+317, NVCC

Wednesday, June 21st, 2017

Bank of Montreal has announced:

a domestic public offering of $400 million of Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 42 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 42”). The offering will be underwritten on a bought-deal basis by a syndicate of underwriters led by BMO Capital Markets.

The Preferred Shares Series 42 will be issued to the public at a price of $25.00 per share. Holders will be entitled to receive non-cumulative preferential fixed quarterly dividends for the initial period to August 25, 2022, as and when declared by the Board of Directors of the Bank, payable in the amount of $0.275 per share, to yield 4.40 per cent annually.

Subject to regulatory approval, on August 25, 2022 and on August 25 of every fifth year thereafter, the Bank may redeem the Preferred Shares Series 42 in whole or in part at par. On August 25, 2022, the dividend rate will reset and will reset thereafter every five years to be equal to the 5-Year Government of Canada Bond Yield plus 3.17 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 42 into an equal number of Non-Cumulative Floating Rate Class B Preferred Shares Series 43 (Non-Viability Contingent Capital (NVCC)) (“Preferred Shares Series 43”) on August 25, 2022, and on August 25 of every fifth year thereafter. Holders of the Preferred Shares Series 43 will be entitled to receive non-cumulative preferential floating rate quarterly dividends, as and when declared by the Board of Directors of the Bank, equal to the then 3-month Government of Canada Treasury Bill Yield plus 3.17 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 43 into an equal number of Preferred Shares Series 42 on August 25, 2027, and on August 25 of every fifth year thereafter.

The anticipated closing date is June 29, 2017. The net proceeds from the offering will be used by the Bank for general banking purposes.

This isn’t a badly priced new issue, as new issues go, but can’t be called cheap – at least, not according to Implied Volatility for FixedResets analysis:

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According to this, the fair bid price for the new issue, given the closing bids of BMO’s other NVCC-compliant issues, is 24.84.

New Issue: NA FixedReset, 4.45%+343, NVCC

Thursday, June 1st, 2017

National Bank of Canada has announced:

that it has entered into an agreement with a group of underwriters led by National Bank Financial Inc. for the issuance on a bought deal basis of 12 million non-cumulative 5-year rate reset first preferred shares series 38 (non-viability contingent capital (NVCC)) (the “Series 38 Preferred Shares”) at a price of $25.00 per share, to raise gross proceeds of $300 million.

National Bank has granted the underwriters an option to purchase, on the same terms, up to an additional 4 million Series 38 Preferred Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing. The gross proceeds raised under the offering will be $400 million should this option be exercised in full.

The Series 38 Preferred Shares will yield 4.45% annually, payable quarterly, as and when declared by the Board of Directors of National Bank, for the initial period ending November 15, 2022. The first of such dividends, if declared, shall be payable on November 15, 2017. Thereafter, the dividend rate will reset every five years at a level of 343 basis points over the then 5-year Government of Canada bond yield. Subject to regulatory approval, National Bank may redeem the Series 38 Preferred Shares in whole or in part at par on November 15, 2022 and on November 15 every five years thereafter.

Holders of the Series 38 Preferred Shares will have the right to convert their shares into an equal number of non-cumulative floating rate first preferred shares series 39 (non-viability contingent capital (NVCC)) (the “Series 39 Preferred Shares”), subject to certain conditions, on November 15, 2022, and on November 15 every five years thereafter. Holders of the Series 39 Preferred Shares will be entitled to receive quarterly floating dividends, as and when declared by the Board of Directors of National Bank, equal to the 90-day Government of Canada Treasury Bill rate plus 343 basis points.

The net proceeds of the offering will be used for general corporate purposes and added to National Bank’s capital base. The expected closing date is on or about June 13, 2017. National Bank intends to file in Canada a prospectus supplement to its November 21, 2016 base shelf prospectus in respect of this issue.

They later announced:

that as a result of strong investor demand for its previously announced domestic public offering of non-cumulative 5-year rate reset first preferred shares series 38 (non-viability contingent capital (NVCC)) (the “Series 38 Preferred Shares”), the underwriters have exercised their option to purchase an additional 4,000,000 Series 38 Preferred Shares. The size of the offering has been increased to 16 million shares for gross proceeds of $400 million. The offering will be underwritten by a syndicate led by National Bank Financial Inc. The expected closing date is on or about June 13, 2017.

The net proceeds of the offering will be used for general corporate purposes and added to National Bank’s capital base.

Implied Volatility analysis for FixedResets suggests that this issue should be regarded as expensive:

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The theoretical price of the new issue is 24.25.

New Issue: CM FixedReset, 4.40%+338, NVCC Compliant

Thursday, May 25th, 2017

The Canadian Imperial Bank of Commerce has announced:

that it had entered into an agreement with a group of underwriters led by CIBC World Markets Inc. for an issue of 16 million Basel III-compliant Non-cumulative Rate Reset Class A Preferred Shares, Series 45 (the “Series 45 Shares”) priced at $25.00 per Series 45 Share to raise gross proceeds of $400 million.

CIBC has granted the underwriters an option to purchase up to an additional four million Series 45 Shares at the same offering price, exercisable at any time up to two days prior to closing. Should the underwriters’ option be fully exercised, the total gross proceeds of the financing will be $500 million.

The Series 45 Shares will yield 4.40% per annum, payable quarterly, as and when declared by the Board of Directors of CIBC, for an initial period ending July 31, 2022. On July 31, 2022, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 3.38%.

Subject to regulatory approval and certain provisions of the Series 45 Shares, on July 31, 2022 and on July 31 every five years thereafter, CIBC may, at its option, redeem all or any part of the then outstanding Series 45 Shares at par.

Subject to the right of redemption, holders of the Series 45 Shares will have the right to convert their shares into Non-cumulative Floating Rate Class A Preferred Shares, Series 46 (the “Series 46 Shares”), subject to certain conditions, on July 31, 2022 and on July 31 every five years thereafter. Holders of the Series 46 Shares will be entitled to receive a quarterly floating rate dividend, as and when declared by the Board of Directors of CIBC, equal to the three-month Government of Canada Treasury Bill yield plus 3.38%.

Holders of the Series 46 Shares may convert their Series 46 Shares into Series 45 Shares, subject to certain conditions, on July 31, 2027 and on July 31 every five years thereafter.

The expected closing date is June 2, 2017. CIBC will make an application to list the Series 45 Shares as of the closing date on the Toronto Stock Exchange. The net proceeds of this offering will be used for general purposes of CIBC.

Later, they announced:

that as a result of strong investor demand for its previously announced domestic public offering of non-cumulative Rate Reset Class A Preferred Shares, Series 45, the size of the offering has been increased to 32 million shares. The gross proceeds of the offering will now be $800 million. The offering will be underwritten by a syndicate led by CIBC World Markets Inc. The expected closing date is June 2, 2017.

The net proceeds from this transaction will be used for general purposes of CIBC.

A good sized issue!

Implied Volatility analysis for FixedResets suggests the issue may be a little expensive:

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The theoretical price implied by the above calculation is 24.76.

New Issue: PWF Straight Perpetual, 5.15%

Wednesday, May 17th, 2017

Power Financial Corporation has announced:

that it has agreed to issue 8,000,000 Non-Cumulative First Preferred Shares, Series V (the “Series V Shares”) on a bought deal basis, for gross proceeds of $200 million. The Series V Shares will be priced at $25.00 per share and will carry an annual dividend yield of 5.15%. Closing is expected to occur on or about May 26, 2017. The issue will be underwritten by a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc.

Power Financial has also granted the underwriters an option to purchase an additional 2,000,000 Series V Shares at the same offering price. Should the underwriters’ option be exercised fully, the total gross proceeds of the Series V Share offering will be $250 million.

Proceeds from the issue will be used to supplement Power Financial’s financial resources and for general corporate purposes.

They later announced:

that due to strong demand, the underwriters have exercised their option to purchase an additional 2,000,000 Non-Cumulative First Preferred Shares, Series V (the “Series V Shares”), which increases the size of the previously announced bought deal public offering to 10,000,000 Series V Shares for gross proceeds of $250 million. The Series V Shares will be priced at $25.00 per share and will carry an annual dividend yield of 5.15%. Closing is expected to occur on or about May 26, 2017. The issue will be underwritten by a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc.

Implied Volatility analysis (as derived for Straight Perpetuals) suggests that the issue is fairly priced:

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Note, however, that the implied volatility is very high at 31%, and therefore it might be expected that the higher-coupon, higher-yielding issues are the better bet, being expected to outperform on a flattening (lowering of implied volatility). However, the five issues with the highest coupons are all currently callable and are all trading with a negative yield to worst.