TD Split Inc. has announced:
that it has completed its treasury offering of 3,120,000 Class C Capital Shares, Series 1 (the “Capital Shares”) and 3,120,000 Class C Preferred Shares, Series 1 (the “Preferred Shares”) for aggregate gross proceeds of $87,360,000. The Capital Shares and Preferred Shares will trade on the Toronto Stock Exchange under the symbols TDS.C and TDS.PR.C, respectively.
The Company also announced that it has redeemed all of its 712,861 Class B Preferred Shares (“Old Preferred Shares”) and 712,861 Class B Capital Shares (“Old Capital Shares”) currently outstanding in accordance with their terms. The Old Capital Shares were redeemed at a price of $45.2674 per share, in cash, or, if the holder had previously elected, by delivery of a pro rata share of the common shares of The Toronto-Dominion Bank (“TD Shares”) together with a cash amount equal to the holder’s pro rata share of the other net assets of the Company. The Old Preferred Shares were redeemed at a price of $28.10 per share, in cash. The Old Capital Shares and the Old Preferred Shares have been de-listed from the Toronto Stock Exchange.
The Company holds TD Bank Shares in order to generate fixed cumulative preferential dividends for the holders of the Company’s Preferred Shares while providing the holders of the Capital Shares with a leveraged investment, the value of which is linked to the changes in the market price of the TD Bank Shares.
The Preferred Shares were offered at a price of $10.00 per share. Holders of Preferred Shares will be entitled to receive quarterly fixed cumulative preferential distributions equal to $0.11875 per Preferred Share, representing a dividend yield on the offering price of the Preferred Shares of 4.75%.
The Capital Shares were offered at a price of $18.00 per share. The Capital Shares will provide holders with a leveraged investment, the value of which is linked to changes in the market price of TD Bank Shares. Holders of Capital Shares will be entitled on redemption to the benefit of any capital appreciation in the market price of TD Bank Shares after payment of the dividends on the Preferred Shares.
The coupon on TDS.PR.C is 4.75%, or $0.475 p.a., paid quarterly in MJSD.
The provisional DBRS rating is Pfd-2(low).
There’s a monthly retraction, but it’s pretty horrible: the formula is (95%NAV – C – 1) which means that, effectively, there’s no point contemplating monthly retraction. There’s an Annual Retraction Date every November 15, but only for Capital Unitholders (who may also submit a preferred simultaneously to get full NAV, if they wish).
The issue matures 2015-11-15 at $10.00. The company can exercise calls at $10.00 to offset Capital Unit retractions on every Annual Retraction Date, or if net assets falls below $15-million.
There’s no NAV test per se, but company will only distribute income to the extent that it receives dividends on its TD holdings.
TDS.PR.B was tracked by HIMIPref™ but was relegated to the Scraps index on volume concerns. It was last mentioned on PrefBlog when it was upgraded to Pfd-2(low) by DBRS. TDS.PR.C will be tracked by HIMIPref™ and will be initially assigned to the SplitShares index, although I suspect it will eventually get relegated as well.
Update: DBRS confirms at Pfd-2(low).