Emera Inc. has announced a new issue, but no press release is available as yet.
Issue Name: Emera Inc. Cumulative 5-Year Rate Reset First Preferred Shares, Series A
Issue Size: 6-million shares (= $150-million) + greenshoe 2-million (=$50-million)
Dividends: 4.40% p.a. (=$1.10), payable quarterly F/M/A/N. Initial dividend payable 2010-8-15 for $0.2230, assuming closing 2010-6-2. Dividend resets on Exchange Dates to 5-Year Canadas + 184bp.
Redeemable on Exchange Dates at $25.00.
Exchangeable to and from Floaters on Exchange Dates. Floaters pay 3-month Bills +184bp, reset quarterly, and are callable on Exchange Dates at 25.00 and at $25.50 at all other times.
First Exchange Date is 2015-8-15. Subsequent Exchange Dates every five years following.
Ratings are split: S&P has them at P-2(low); DBRS calls the Pfd-3(high)
Emera has no preferred shares currently outstanding. Nova Scotia Power is one of its wholly owned subsidiaries, but that company has only one wierd, lightly traded retractible (NSI.PR.D).
The closest comparators in the PerpetualDiscount field are TCA.PR.X and TCA.PR.Y (not very good, since TCA is a regulated sub of TRP and a better credit, but we do what we can), which are currently trading to yield about 6.2%. Plugging that in to the BERS Calculation routine shows a Break-Even Rate Shock of 277bp; down significantly from SLF.PR.G at 384bp and BNS.PR.Y at 318bp but still ludicrously overpriced.
CIU.PR.B is worthy of note as a comparator, yielding 4.32% to its expected call date 2014-6-1 and is far more likely to be called. TRP.PR.A yields 4.35% to perpetuity, given a constant GOC-5 rate of 2.32%. Applying that rate to the EMA issue results in a yield-to-perpetuity of 4.24%.
The Bank of Canada quoted five-years at 2.62% as of May 21, but Canadian Bond Indices quotes them at 2.35% at the close today, so take your pick.
The flip side of these overpriced pref share issues is that these companies are getting access to dirt cheap perpetual capital. That can’t be bad for the common shares!
Seems like a very expensive offering. I’ll stick with the common shares which are quite liquid, have netted me a substantial capital gain since I bought them and yield more than the new prefs will.
[…] EMA.PR.A is a FixedReset, 4.40%+184, announced May 25. […]
[…] consider the credits to be identical, results in a Break Even Rate Shock of 222bp. This compares to 277bp for EMA.PR.A; SLF.PR.G at 384bp. March’s issue of TRP.PR.B was […]