Archive for the ‘New Issues’ Category

New Issue: ECN FixedReset 6.25%+519M625

Tuesday, May 16th, 2017

ECN Capital Corp. has announced:

that it has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets, CIBC Capital Markets, National Bank Financial Inc., RBC Capital Markets and TD Securities Inc. The underwriters have agreed to buy 4,000,000 Cumulative 5-Year Minimum Rate Reset Preferred Shares, Series C (the “Series C Preferred Shares”) at a price of $25.00 per share for aggregate gross proceeds of $100,000,000. The net proceeds are expected to be used to originate and finance, directly and indirectly, finance assets, to fund future acquisitions and for general corporate purposes.
ECN Capital has granted the underwriters an option to purchase at the offering price up to an additional 1,000,000 Series C Preferred Shares exercisable, in whole or in part, at any time up to 48 hours prior to closing of the offering. Should the option be fully exercised, the total gross proceeds of the Series C Preferred Share offering will be $125,000,000.

The Series C Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable by quarterly installments for an initial period of five years, as and when declared by the Board of Directors of the Corporation, at a rate of $1.5625 per share per annum, to yield 6.25% annually. Thereafter, the dividend rate will reset every five years to the sum of the then current 5-Year Government of Canada Bond yield and 5.19%, provided that, in any event, such sum shall not be less than 6.25%. On June 30, 2022, and on June 30 of every fifth year thereafter, the Corporation may redeem the Series C Preferred Shares in whole or in part at par.

Holders will have the right to elect to convert all or any of their Series C Preferred Shares into an equal number of Cumulative Floating Rate Preferred Shares, Series D (the “Series D Preferred Shares”) on June 30, 2022, and on June 30 of every fifth year thereafter. Holders of the Series D Preferred Shares will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of the Corporation, equal to the sum of the then current 3-month Government of Canada Treasury Bill yield and 5.19%. On June 30, 2027 and on June 30, of every fifth year thereafter (a “Series D Redemption Date”), the Corporation may redeem the Series D Preferred Shares in whole or in part at par. On any other date that is not a Series D Redemption Date after June 30, 2022, the Corporation may redeem the Series D Preferred Shares in whole or in part by the payment of $25.50 for each share to be redeemed.

The offering is being made only in the provinces of Canada by means of a prospectus supplement to the Corporation’s base shelf prospectus. The closing date of the offering is expected to be on or about May 25, 2017.

DBRS has assigned a Pfd-3(low) rating to the issue:

The rating reflects the Company’s solid franchise as a leading commercial lender and lessor in North America with strong origination platforms and sound risk management across multiple asset classes. The rating also considers the solid earnings generation derived from the franchise, producing more than sufficient pre-provision earnings to absorb the cost of credit with a solid cushion to absorb potentially higher losses that would be expected through the cycle, as well as unexpected losses. Funding is appropriate and aligned with the asset base, while leverage is considered low compared to peers. The Company’s reliance on secured forms of wholesale funding and execution risks associated with the Company’s evolving strategy to become more “asset-lite”, as well as the potential for entry into new business activities currently constrain the ratings.

New Issue: IFC Straight Perpetual 5.20%

Saturday, May 13th, 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, 5,000,000 Non-Cumulative Class A Shares, Series 5 (the “Series 5 Shares”) from Intact for sale to the public at a price of $25.00 per Series 5 Share, representing aggregate gross proceeds of $125 million.

Intact has granted the underwriters an underwriters’ option to purchase up to an additional 1,000,000 Series 5 Shares at the same offering price. Should the underwriters’ option be fully exercised, the total gross proceeds of the Series 5 Shares offering will be $150 million.

The Series 5 Shares will yield 5.20% per annum, payable quarterly, as and when declared by the Board of Directors of the Company. The Series 5 Shares will not be redeemable prior to June 30, 2022. On and after June 30, 2022, Intact may, on not less than 30 nor more than 60 days’ notice, redeem for cash the Series 5 Shares in whole or in part, at the Company’s option, at $26.00 per share if redeemed on or after June 30, 2022 and prior to June 30, 2023; $25.75 per share if redeemed on or after June 30, 2023 and prior to June 30, 2024; $25.50 per share if redeemed on or after June 30, 2024 and prior to June 30, 2025; $25.25 per share if redeemed on or after June 30, 2025 and prior to June 30, 2026; and $25.00 per share if redeemed on or after June 30, 2026, in each case together with all declared and unpaid dividends up to but excluding the date of redemption.

The Series 5 Share offering is expected to close on May 24, 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.

They later announced:

that due to strong demand, the underwriters have exercised their option to purchase an additional 1,000,000 Non-Cumulative Class A Shares, Series 5 (the “Series 5 Shares”), which increases the size of the previously announced offering to 6,000,000 Series 5 Shares in aggregate, to be offered on a bought deal basis to a syndicate of underwriters led by CIBC Capital Markets together with BMO Capital Markets, National Bank Financial and TD Securities Inc. The Series 5 Shares will be issued at a price of $25.00 per Series 5 Share, representing aggregate gross proceeds of $150 million. The Series 5 Shares will yield 5.20% per annum. The Series 5 Share offering is expected to close on May 24, 2017.

Intact recently raised $754-million to fund its purchase of OneBeacon Insurance Group, Ltd..

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: GWO Straight Perpetual, 5.15%

Wednesday, May 10th, 2017

Great-West Lifeco Inc. has announced:

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

Lifeco has granted the underwriters an underwriters’ option to purchase an additional 2,000,000 Series T Shares at the same offering price. Should the underwriters’ option be fully exercised, the total gross proceeds of the Series T Shares offering will be $200 million.

The Series T Shares will yield 5.15% per annum, payable quarterly, as and when declared by the Board of Directors of the Company. The Series T Shares will not be redeemable prior to June 30, 2022. On and after June 30, 2022, Lifeco may, on not less than 30 nor more than 60 days’ notice, redeem for cash the Series T Shares in whole or in part, at the Company’s option, at $26.00 per share if redeemed on or after June 30, 2022 and prior to June 30, 2023; $25.75 per share if redeemed on or after June 30, 2023 and prior to June 30, 2024; $25.50 per share if redeemed on or after June 30, 2024 and prior to June 30, 2025; $25.25 per share if redeemed on or after June 30, 2025 and prior to June 30, 2026; and $25.00 per share if redeemed on or after June 30, 2026, in each case together with all declared and unpaid dividends up to but excluding the date of redemption.

The Series T Share offering is expected to close on May 18, 2017. The net proceeds will be used for general corporate purposes and to augment Lifeco’s current liquidity position.

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 T (the “Series T Shares”), which increases the size of the previously announced bought deal public offering to 8,000,000 Series T Shares for gross proceeds of $200 million. The Series T 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 18, 2017. The issue will be underwritten by a syndicate of underwriters co-led by BMO Capital Markets, CIBC Capital Markets, Scotiabank, and TD Securities Inc.

This new issue carries the same dividend as GWO.PR.Q, which commenced trading 2012-7-6 after being announced 2012-6-28.

As this issue is not NVCC compliant, it will be analyzed as a DeemedRetractible.

I consider the following two points rather interesting when taken together:

  • GWO is generally acknowledged to be the best managed and most conservative of the big life insurers
  • GWO has issued many more Straights than FixedResets since the inception of the latter class

Implied Volatility analysis of the GWO Straights indicates that the issue is well priced, with a theoretical price of 25.02:

impvol_gwo_170509
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New Issue: BPO FixedReset 4.85%+374M485

Thursday, April 27th, 2017

Brookfield Office Properties Inc. has announced:

that it has agreed to issue to a syndicate of underwriters led by TD Securities Inc., CIBC Capital Markets, RBC Capital Markets and Scotiabank, for distribution to the public, ten million Cumulative Minimum Rate Reset Class AAA Preference Shares, Series GG (the “Preferred Shares, Series GG”). The Preferred Shares, Series GG will be issued at a price of C$25.00 per share, for aggregate proceeds of C$250 million. Holders of the Preferred Shares, Series GG will be entitled to receive a cumulative quarterly fixed dividend yielding 4.85% annually for the initial period ending June 30, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of (i) the five-year Government of Canada bond yield plus 3.74% and (ii) 4.85%.

Holders of Preferred Shares, Series GG will have the right, at their option, to convert their shares into Cumulative Floating Rate Class AAA Preference Shares, Series HH (the “Preferred Shares, Series HH”), subject to certain conditions, on June 30, 2022 and on June 30 every five years thereafter. Holders of Preferred Shares, Series HH will be entitled to receive cumulative quarterly floating dividends at a rate equal to the 90-day Government of Canada Treasury Bill yield plus 3.74%.

The Series GG Shares and Series HH Shares will be fully and unconditionally guaranteed, jointly and severally, as to: (i) the payment of dividends, as and when declared, (ii) the payment of amounts due on redemption, and (iii) the payment of amounts due on the liquidation, dissolution or winding-up of Brookfield Office Properties, by the following entities: Brookfield Property Partners L.P., Brookfield Property L.P., Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, BPY Bermuda Holdings II Limited, BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited.

Brookfield Office Properties has granted the underwriters an option, exercisable in whole or in part anytime up to two business days prior to closing, to purchase an additional 2,000,000 Preferred Shares, Series GG at the same offering price. Should the option be fully exercised, the total gross proceeds of the financing will be C$300 million.

The Preferred Shares, Series GG will be offered in all provinces of Canada by way of a supplement to Brookfield Office Properties’ existing Canadian short form base shelf prospectus dated August 29, 2016.

The net proceeds of the issue will be used for general corporate purposes which may include the redemption of existing preferred shares. The offering is expected to close on or about May 4, 2017.

The reference to possibly using proceeds to redeem extant preferred shares may mean that BPO.PR.J, which was partially redeemed 2017-3-29 will finally disappear. But we will see!

The issue seems quite expensive to me:

impvol_bpo_170426
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Of course, promoters will protest that I think it’s expensive because I’m assigning zero value to the minimum rate guarantee, a practice for which I have been criticized in the past. And, of course, it should be clear that as has been remarked:

I guess you mean by that that you CURRENTLY do not give much value to this feature given your conviction that interest rates will go up in the upcoming years (what we have been hearing for a quite a while now)?

So take it as you will!

New Issue: EFN FixedReset 5.75%+464M575

Thursday, April 27th, 2017

Element Fleet Management Corp. has announced:

that it has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets, CIBC Capital Markets, National Bank Financial Inc., RBC Capital Markets, and TD Securities Inc. The underwriters have agreed to buy 4,000,000 Cumulative 5-Year Minimum Rate Reset Preferred Shares, Series I (the “Series I Preferred Shares”) at a price of $25.00 per share for aggregate gross proceeds of $100,000,000. The net proceeds are expected to be used to fund the growth of Element’s business and for general corporate purposes.

Element has granted the underwriters an option to purchase at the offering price up to an additional 2,000,000 Series I Preferred Shares exercisable, in whole or in part, at any time up to 48 hours prior to closing of the offering. Should the option be fully exercised, the total gross proceeds of the Series I Preferred Share offering will be $150,000,000.

The Series I Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable by quarterly installments for an initial period of five years, as and when declared by the Board of Directors of the Company, at a rate of $1.4375 per share per annum, to yield 5.75% annually. Thereafter, the dividend rate will reset every five years to the sum of the then current 5-Year Government of Canada Bond yield and 4.64%, provided that, in any event, such sum shall not be less than 5.75%. On June 30, 2022, and on June 30 of every fifth year thereafter, the Company may redeem the Series I Preferred Shares in whole or in part at par.

Holders will have the right to elect to convert all or any of their Series I Preferred Shares into an equal number of Cumulative Floating Rate Preferred Shares, Series J (the “Series J Preferred Shares”) on June 30, 2022, and on June 30 of every fifth year thereafter. Holders of the Series J Preferred Shares will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of the Company, equal to the sum of the then current 3-month Government of Canada Treasury Bill yield and 4.64%. On June 30, 2027 and on June 30, of every fifth year thereafter (a “Series J Redemption Date”), the Company may redeem the Series J Preferred Shares in whole or in part at par. On any other date that is not a Series J Redemption Date after June 30, 2022, the Company may redeem the Series J Preferred Shares in whole or in part by the payment of $25.50 for each share to be redeemed.

The offering is being made only in the provinces of Canada by means of a prospectus supplement to the Company’s base shelf prospectus. The closing date of the offering is expected to be on or about May 5, 2017.

DBRS has assigned a rating of Pfd-3(high) to the issue.

The omission of Scotia from the list of dealers is interesting and consistent with most of the company’s past offerings. There’s a story there, somewhere!

The issue is attractively priced relative to other EFN issues:

impvol_efn_170426
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New Issue: EIT Retractible, ROC, 4.80%, 7-Year

Wednesday, March 8th, 2017

Canoe EIT Income Fund has announced:

that it has filed and obtained a receipt for a final short form prospectus in respect of the previously announced offering of Cumulative Redeemable Series 1 Preferred Units (the “Series 1 Preferred Units”) at a price of $25.00 per Series 1 Preferred Unit (the “Offering”). The Series 1 Preferred Units were offered to the public through a syndicate of underwriters led by Scotiabank and RBC Capital Markets which also includes BMO Capital Markets, CIBC Capital Markets, National Bank Financial Inc., TD Securities Inc., Canaccord Genuity Corp., Industrial Alliance Securities Inc. and Manulife Securities Incorporated.

The Fund will issue and sell to the underwriters 4,900,000 Series 1 Preferred Units at a price of $25.00 per Series 1 Preferred Unit for total gross proceeds of the Offering of $122,500,000. The Fund has also granted the underwriters an option, exercisable at the offering price for a period of 30 days from the closing of the Offering, to purchase up to an additional 735,000 Series 1 Preferred Units to cover over-allotments, if any. The quarterly cumulative preferential cash distributions on the Series 1 Preferred Units will be 4.80% per annum. The Toronto Stock Exchange has conditionally approved the listing of the Series 1 Preferred Units under the symbol EIT.PR.A. The closing of the Offering is expected to occur on or about March 14, 2017.

The proceeds from the Offering will be invested by the Fund in accordance with its investment objectives and strategies. The Offering is expected to ensure the sustainability of the Fund by increasing the earning capacity of the units. The Series 1 Preferred Units are provisionally rated Pfd – 2 (high) by Dominion Bond Rating Service Limited.

Full details are available in the prospectus, to which I am not permitted to link because Canadian Securities Administrators take the view that you are all stupid, filthy, ignorant investor scum and do not deserve the slightest consideration whatsoever. You will have to go to SEDAR and look for “Canoe EIT Income Fund Mar 8 2017 14:21:01 ET Final short form prospectus – English PDF 266 K”.

On and after March 15, 2022, the Fund may redeem all or from time to time any part of the outstanding Series 1 Preferred Units, at the Fund’s option, at a price per Series 1 Preferred Unit equal to $25.75 if redeemed on or after March 15, 2022, but before March 15, 2023; $25.50 if redeemed on or after March 15, 2023, but before March 15, 2024; and $25.00 thereafter, together, in each case, with all accrued and unpaid distributions up to but excluding the date fixed for redemption. On or after March 15, 2024, the Series 1 Preferred Units will be retractable for cash, at the option of the holder, for $25.00 per Series 1 Preferred Unit, together with any accrued and unpaid distribution in respect of such Series 1 Preferred Units, less any tax required by law to be deducted therefrom, by notice by the holder of the Series 1 Preferred Units (“Series 1 Preferred Unitholders”) to be retracted delivered to the Manager not less than 30 days prior to the applicable retraction date. Certain other provisions relating to the Series 1 Preferred Units are summarized under “Description of the Preferred Units”

The distributions are not expected be entirely eligible dividends:

Distributions in any given period may consist of net income, net capital gains and/or returns of capital. The Fund’s income and net taxable gains for the purposes of the Tax Act will be allocated to the holders of Units and Series 1 Preferred Units in the same proportion as the distributions received by such holders. See “Principal Canadian Federal Income Tax Considerations”.

The recent historical composition of the fund’s distributions is provided in the prospectus and was reproduced in the previous post regarding this issue. I am taking the view that expected distributions will ultimately be taxed at a rate reasonably close to eligible dividends, so for analytical purposes I have recorded the issue as paying dividends.

New Issue: BMO FixedReset, 4.50%+333

Wednesday, March 1st, 2017

The Bank of Montreal has announced:

a domestic public offering of $500 million of Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 40”). The offering will be underwritten on a bought-deal basis by a syndicate of underwriters led by BMO Capital Markets.

The Preferred Shares Series 40 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 ending May 25, 2022, as and when declared by the Board of Directors of the Bank, payable in the amount of $0.28125 per share, to yield 4.50 per cent annually.

Subject to regulatory approval, on or after May 25, 2022, the Bank may redeem the Preferred Shares Series 40 in whole or in part at par. On May 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 3.33 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 40 into an equal number of Non-Cumulative Floating Rate Class B Preferred Shares Series 41 (Non-Viability Contingent Capital (NVCC)) (“Preferred Shares Series 41”) on May 25, 2022, and on May 25 of every fifth year thereafter. Holders of the Preferred Shares Series 41 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 3.33 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 41 into an equal number of Preferred Shares Series 40 on May 25, 2027, and on May 25 of every fifth year thereafter.

The anticipated closing date is March 9, 2017. The net proceeds from the offering will be used by the Bank for general banking purposes.

Implied Volatility analysis indicates that (subject to the usual caveats) this issue is well priced relative to the other BMO NVCC FixedResets:

impvol_bmo_170228
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Mind you, though, the Implied Volatility of this set of issues is enormous – 33%! Such a high figure (I suggest that a more rational number is in the 5%-10% range) is suggestive of the idea that an expectation of market directionality is influencing the relative pricing of the different issues; specifically, I suggest that there is an influential view in the market that since these shares are issued by a bank, everything will be OK and they’ll all trade around par forever. We have seen that this assumption can sometimes lead to bad result – boy, have we ever!

I suggest that the level of Implied Volatility implies that a flattening of the indicated curve is more likely than a future steepening – regardless of whether this involves yields of the high-spread issues declining or of low-spread yields increasing, or any other combination of movements – and that therefore the higher-spread issues may be expected to outperform … provided Black-Scholes holds in this particular case! It is entirely possible that Assiduous Readers will have their own views on market direction – a change in spreads, a change in the GOC-5 yield, whatever – and that these views might influence their choice.

New Issue: EIT Retractible, ROC, Details to Follow

Wednesday, February 22nd, 2017

Canoe EIT Income Fund has announced:

that it has filed and obtained a receipt for a preliminary short form prospectus in respect of a potential offering of Cumulative Redeemable Series 1 Preferred Units (the “Series 1 Preferred Units”) at a price of $25.00 per Series 1 Preferred Unit (the “Offering”). The Series 1 Preferred Units will be offered to the public through a syndicate of underwriters led by Scotiabank and RBC Capital Markets which also includes BMO Capital Markets, CIBC Capital Markets, National Bank Financial Inc., TD Securities Inc., Canaccord Genuity Corp., Industrial Alliance Securities Inc. and Manulife Securities Incorporated. Canoe Financial LP, the manager of the Fund, believes that successful completion of the Offering will provide the Fund with longer-term fixed rate capital at an attractive all in cost of financing. The additional capital will be used to take advantage of attractive investment opportunities, and is also expected to ensure the sustainability of the Fund by increasing the earning capacity of the Units. The Series 1 Preferred Units are provisionally rated Pfd – 2 (high) by Dominion Bond Rating Service Limited.

The Fund’s regular monthly distribution of $0.10 per unit for unitholders of EIT.UN units remains unchanged. The Fund has maintained the $0.10 per unit monthly distribution since August 2009, through varying market conditions.

The Fund’s annual voluntary redemption feature for unitholders of EIT.UN units remains unchanged. Once a date has been set for the 2017 annual redemption, the Fund will issue a news release with the details.

A preliminary short form prospectus containing important information relating to the Series 1 Preferred Units has been filed with securities commissions or similar authorities in all provinces and territories of Canada. The preliminary short form prospectus is still subject to completion or amendment. Copies of the preliminary short form prospectus may be obtained from your registered financial advisor using the contact information for such advisor, or from representatives of the underwriters listed above. There will not be any sale or any acceptance of an offer to buy the Series 1 Preferred Units until a receipt for the final short form prospectus has been issued.

The preliminary prospectus is on SEDAR, but Canadian Regulatory Authorities have determined in their infinite wisdom that nasty investor scum may not link directly to it. Instead, one must search for “Canoe EIT Income Fund Feb 17 2017 16:18:30 ET Preliminary short form prospectus – English PDF 335 K”

The investment objectives of the Fund are to maximize monthly distributions relative to risk and maximize Net Asset Value, while maintaining and expanding a diversified investment portfolio, primarily through acquiring, investing, holding, transferring, disposing of or otherwise dealing with or in equity and debt securities of corporations, partnerships, or other issuers and such other investments as the Manager may determine in its sole discretion from time to time. The investment objectives set forth above may be achieved through direct acquisitions, investments or, at the election of the Manager, through “exchange offers” or rights offerings completed by the Fund from time to time.

Set out below are the tax classifications of the historical distributions of the Fund (which were $0.10 per Unit per month for the entire period presented) for the past five years and the Manager expects the Series 1 Preferred Units to have a similar distribution breakdown:
% 2015 2014 2013 2012 2011
Capital gain 60.92% 59.89% 32.73% 32.82%
Actual amount of eligible dividends 9.29% 5.33% 18.18% 32.25% 16.73%
Actual amount of ineligible dividends
Foreign income, net of tax 17.28%
Other income 1.49%
Return of Capital(1) 29.79% 34.78% 49.09% 66.26% 33.17%
Total 100.00% 100.00% 100.00% 100.00% 100.00%

(1) Includes warrants from 2012-2016


Certain Provisions of the Series 1 Preferred Units

Distributions

Series 1 Preferred Unitholders will be entitled to receive quarterly cumulative preferential cash distributions on the 15th day of March, June, September and December of each year at a rate of ●% per annum of the issue price of a Series 1 Preferred Unit ($● per Series 1 Preferred Unit per annum or $● per Series 1 Preferred Unit per quarter), less any tax required by law to be deducted therefrom. The initial distribution, if declared, will be payable on June 15, 2017 and will be $● per Series 1 Preferred Unit, assuming a closing date of ●, 2017. Distributions in any given period may consist of net income, net capital gains and/or returns of capital. The Fund’s income and net taxable gains for the purposes of the Tax Act will be allocated to the holders of Units and Series 1 Preferred Units in the same proportion as the distributions received by such holders. See “Principal Canadian Federal Income Tax Considerations”.

Redemption at the Option of the Fund

Prior to March 15, 2022, the Fund may not redeem any Series 1 Preferred Units. On or after March 15, 2022, the Fund may give notice in writing not less than 30 days nor more than 60 days prior to the applicable redemption date of its intention to redeem for cash the Series 1 Preferred Units in whole or in part, at the Fund’s option, at a price per Series 1 Preferred Unit equal to $25.75 if redeemed on or after March 15, 2022, but before March 15, 2023; $25.50 if redeemed on or after March 15, 2023, but before March 15, 2024; and $25.00 thereafter, together, in each case, with all accrued and unpaid distributions up to but excluding the date fixed for redemption and less any tax required by law to be deducted therefrom.

If less than all outstanding Series 1 Preferred Units are at any time to be redeemed, the particular Series 1 Preferred Units to be redeemed will be selected on a pro rata basis (disregarding fractions) or in such other manner as the Trustee in its discretion may, by resolution, determine.

Retraction by Series 1 Preferred Unitholders

Prior to March 15, 2024, a Series 1 Preferred Unitholder may not require the Fund to retract any Series 1 Preferred Units. Subject to the provisions of any equity securities of the Fund ranking prior to or pari passu with the Series 1 Preferred Units, and to the provisions described under “− Restrictions on Distributions and Retirement and Issue of Series 1 Preferred Units”, a Series 1 Preferred Unitholder may require the Fund to retract such Series 1 Preferred Units (by delivering notice to the Manager of the intention to have Series 1 Preferred Units retracted not less than 30 days prior to the applicable retraction date) on or after March 15, 2024 for a cash price of $25.00, together with any accrued and unpaid distributions up to but excluding the date of retraction and less any tax required by law to be deducted therefrom.

Purchase for Cancellation

Subject to applicable law, including the requirements in NI 81-102, the provisions of any equity securities of the Fund ranking prior to or pari passu with the Series 1 Preferred Units, and to the provisions described under “− Restrictions on Distributions and Retirement and Issue of Series 1 Preferred Units”, the Fund may at any time purchase for cancellation the whole or any part of the Series 1 Preferred Units outstanding from time to time, in the open market through or from an investment dealer or any firm holding membership on a recognized stock exchange, or by private agreement or otherwise, at the lowest price or prices at which, in the opinion of the Manager of the Fund, such Series 1 Preferred Units are obtainable.

Rating

The Series 1 Preferred Units are provisionally rated Pfd-2(high) by Dominion Bond Rating Service Limited (“DBRS”).

New Issue: ALA FixedReset, 5.00%+380M500

Tuesday, February 14th, 2017

AltaGas Ltd. has announced:

that it will issue 8,000,000 Cumulative 5-Year Minimum Rate Reset Redeemable Preferred Shares, Series K (the “Series K Preferred Shares”), at a price of $25.00 per Series K Preferred Share (the “Offering”) for aggregate gross proceeds of $200 million on a bought deal basis. The Series K Preferred Shares will be offered to the public through a syndicate of underwriters co-led by CIBC Capital Markets, BMO Capital Markets, National Bank Financial Inc. and Scotiabank.

Holders of the Series K Preferred Shares will be entitled to receive a cumulative quarterly fixed dividend for the initial period ending on but excluding March 31, 2022 (the “Initial Period”) at an annual rate of 5.00%, payable on the last day of March, June, September and December, as and when declared by the Board of Directors of AltaGas. The first quarterly dividend payment is payable on June 30, 2017 and shall be $0.4384 per Series K Preferred Share. The dividend rate will reset on March 31, 2022 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 3.80%, provided that, in any event, such rate shall not be less than 5.00% per annum. The Series K Preferred Shares are redeemable by AltaGas, at its option, on March 31, 2022 and on March 31 of every fifth year thereafter.

Holders of Series K Preferred Shares will have the right to convert all or any part of their shares into Cumulative Redeemable Floating Rate Preferred Shares, Series L (the “Series L Preferred Shares”), subject to certain conditions, on March 31, 2022 and on March 31 every fifth year thereafter. Holders of Series L Preferred 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 3.80%, as and when declared by the Board of Directors of AltaGas.

The Offering is expected to close on or about February 22, 2017. Net proceeds will be used to reduce existing indebtedness and for general corporate purposes. AltaGas has granted to the underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to closing of the Offering, to purchase up to an additional 2,000,000 Series K Preferred Shares at a price of $25.00 per share.

The Series K Preferred Shares will be issued pursuant to a prospectus supplement that will be filed with securities regulatory authorities in Canada under AltaGas’ short form base shelf prospectus dated August 10, 2015. The Offering is only being made by way of a prospectus. The prospectus contains important detailed information about the securities being offered. The Offering is subject to receipt of all necessary regulatory and stock exchange approvals.

They later announced:

that as a result of strong investor demand for its previously announced bought deal offering of Cumulative 5-Year Minimum Rate Reset Redeemable Preferred Shares, Series K (the “Series K Preferred Shares”), the size of the offering has been increased to 12,000,000 shares at a price of $25.00 per Series K Preferred Share (the “Offering”), for aggregate gross proceeds of $300 million. In connection with the increase in the size of the Offering, the previously granted underwriters’ option has been terminated. The syndicate of underwriters is being co-led by CIBC Capital Markets, BMO Capital Markets, National Bank Financial Inc. and Scotiabank.

Andrew Willis of the Globe has some colour on the background:

Executives at capital-hungry companies such as utilities are always conscious of their credit ratings. This is especially true of CEOs and boards at U.S. pipelines: Enron’s meltdown and the near-death experience of the global financial crisis made top-notch ratings a priority. As a result, many U.S. utilities carry relatively little debt. That’s “lazy” in the sense that the company could easily borrow more money, while continuing to be judged as investment grade by the likes of S&P and Moody’s.

While utility executives might care about ratings, the credit market stopped paying much attention last year. In the spring of 2016, borrowing costs began to fall for any investment grade-rated company. At the same time, the spread or gap narrowed between the interest rates paid by a blue-chip double-A-rated borrower and a still-respectable but more leveraged triple B-rated business. And credit markets opened up – massive loans and bond sales were possible.

The most recent and most revealing of these takeovers came from AltaGas, which is buying WGL Holdings in a takeover that has an enterprise value – debt plus equity – of $8.4-billion. To pay for the acquisition, AltaGas rolled out an equity offering that was larger than the company’s market capitalization at the time. AltaGas sold $2.1-billion in stock to a team of banks led by TD Securities, RBC Capital Markets and JPMorgan, and an additional $400-million of equity to the OMERS pension plan. In addition, AltaGas took out a $4.95-billion (U.S.) bridge loan from JPMorgan, TD and RBC.

Implied Volatility analysis indicates that while the new issue is reasonably priced, cheaper alternatives for this name are available with ALA.PR.A and ALA.PR.I:

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New Issue: BPO FixedReset, 5.10%+396M510

Friday, February 10th, 2017

Brookfield Office Properties has announced (but not on their website yet, as far as I can tell given their idiotic, but ever-so-cool website design):

Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P., announced today that it has agreed to issue to a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities Inc. for distribution to the public, eight million Cumulative Minimum Rate Reset Class AAA Preference Shares, Series EE (the “Preferred Shares, Series EE”). The Preferred Shares, Series EE will be issued at a price of C$25.00 per share, for aggregate proceeds of C$200 million. Holders of the Preferred Shares, Series EE will be entitled to receive a cumulative quarterly fixed dividend yielding 5.10% annually for the initial period ending March 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of (i) the five-year Government of Canada bond yield plus 3.96% and (ii) 5.10%.

Holders of Preferred Shares, Series EE will have the right, at their option, to convert their shares into Cumulative Floating Rate Class AAA Preference Shares, Series FF (the “Preferred Shares, Series FF”), subject to certain conditions, on March 31, 2022 and on March 31 every five years thereafter. Holders of Preferred Shares, Series FF will be entitled to receive cumulative quarterly floating dividends at a rate equal to the 90-day Government of Canada Treasury Bill yield plus 3.96%.

The Series EE Shares and Series FF Shares will be fully and unconditionally guaranteed, jointly and severally, as to: (i) the payment of dividends, as and when declared, (ii) the payment of amounts due on redemption, and (iii) the payment of amounts due on the liquidation, dissolution or winding-up of the Corporation, by the following entities: Brookfield Property Partners L.P., Brookfield Property L.P., Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, BPY Bermuda Holdings II Limited, BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited.

Brookfield Office Properties has granted the underwriters an option, exercisable in whole or in part anytime up to two business days prior to closing, to purchase an additional 2,000,000 Preferred Shares, Series EE at the same offering price. Should the option be fully exercised, the total gross proceeds of the financing will be C$250 million.

The Preferred Shares, Series EE will be offered in all provinces of Canada by way of a supplement to Brookfield Office Properties’ existing Canadian short form base shelf prospectus dated August 29, 2016.

The net proceeds of the issue will be used by Brookfield Office Properties for general corporate purposes which may include the redemption of existing preferred shares. The offering is expected to close on or about February 17, 2017.

They later announced:

Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P., announced today that as a result of strong investor demand for its previously announced offering it has agreed to increase the size of the offering to eleven million Cumulative Minimum Rate Reset Class AAA Preference Shares, Series EE (the “Preferred Shares, Series EE”). The Preferred Shares, Series EE will be issued at a price of C$25.00 per share, for aggregate proceeds of C$275 million. There will not be an underwriters’ option. The Preferred Shares, Series EE are being offered on a bought deal basis by a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities Inc.

Holders of the Preferred Shares, Series EE will be entitled to receive a cumulative quarterly fixed dividend yielding 5.10% annually for the initial period ending March 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of (i) the five-year Government of Canada bond yield plus 3.96% and (ii) 5.10%.

Holders of Preferred Shares, Series EE will have the right, at their option, to convert their shares into Cumulative Floating Rate Class AAA Preference Shares, Series FF (the “Preferred Shares, Series FF”), subject to certain conditions, on March 31, 2022 and on March 31 every five years thereafter. Holders of Preferred Shares, Series FF will be entitled to receive cumulative quarterly floating dividends at a rate equal to the 90-day Government of Canada Treasury Bill yield plus 3.96%.

The Series EE Shares and Series FF Shares will be fully and unconditionally guaranteed, jointly and severally, as to: (i) the payment of dividends, as and when declared, (ii) the payment of amounts due on redemption, and (iii) the payment of amounts due on the liquidation, dissolution or winding-up of the Corporation, by the following entities: Brookfield Property Partners L.P., Brookfield Property L.P., Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, BPY Bermuda Holdings II Limited, BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited.

The Preferred Shares, Series EE will be offered in all provinces of Canada by way of a supplement to Brookfield Office Properties’ existing Canadian short form base shelf prospectus dated August 29, 2016.

The net proceeds of the issue will be used by Brookfield Office Properties for general corporate purposes which may include the redemption of existing preferred shares. The offering is expected to close on or about February 17, 2017.

Implied volatility analysis indicates:

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So according to that, the new issue is a little expensive and should have had a coupon of more like 5.25%, but that depends on how much value you accord the minimum rate guarantee. I value it as zero!