New Issue: IFC FixedReset 4.20%+172

Intact Financial Corporation has announced:

that it has entered into an agreement to issue and sell 9,000,000 Non-cumulative Rate Reset Class A Shares Series 1 (the “Series 1 Preferred Shares”), at a price of $25.00 per Series 1 Preferred Share, for aggregate gross proceeds of $225 million on a bought deal basis to a syndicate of underwriters led by CIBC, RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc. IFC has granted the underwriters the option to purchase up to an additional 1,000,000 Series 1 Preferred Shares, at a price of $25.00, at any point prior to 30 days following closing of the offering.

IFC intends to use the net proceeds of the offering, together with borrowings under acquisition credit facilities previously arranged by IFC, the proceeds of a previously announced subscription receipt offering and a portion of IFC’s existing cash resources, to fund the purchase price for its previously announced acquisition of all of the issued and outstanding shares of AXA Canada (the “Acquisition”). The closing of the Acquisition is expected to occur in the fall of 2011 subject to receipt of required competition and insurance regulatory approvals and the satisfaction of certain closing conditions. The offering is not conditional upon closing of the Acquisition; if the Acquisition is not completed, the net proceeds will be used for general corporate purposes.

The holders of Series 1 Preferred Shares will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of Intact, on a quarterly basis (with the first quarterly dividend to be paid on September 30, 2011), for the initial fixed rate period ending on December 31, 2017, based on an annual rate of 4.20%. The dividend rate will be reset on December 31, 2017 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 1.72%.

Holders of the Series 1 Preferred Shares will have the right, at their option, to convert their Series 1 Preferred Shares into Non-cumulative Floating Rate Class A Shares Series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on December 31, 2017 and on December 31 every five years thereafter. The holders of Series 2 Preferred Shares will be entitled to receive floating rate non-cumulative preferential cash dividends, as and when declared by the Board of Directors of Intact, at a rate equal to the 90-day Canadian Treasury Bill rate plus 1.72%.

DBRS Limited has assigned a provisional rating of Pfd-2 (low) for the Series 1 Preferred Shares.

The Series 1 Preferred Shares will be offered for sale to the public in each of the provinces and territories of Canada pursuant to a short form prospectus to be filed with the Canadian securities regulatory authorities. The offering is scheduled to close on or about July 12, 2011.

Nice to see another insurance holding company on the board!

Update: DBRS assigns provisional Pfd-2(low) rating.

It is interesting to note the initial fixed dividend period of 6.5 years; this does not appear to be a mechanism to lower the Issue Reset Spread so much (since GOC 5-Years are at 2.10%, while sevens are at 2.18%) as it is to lock in the 4.2% for as long as possible.

One Response to “New Issue: IFC FixedReset 4.20%+172”

  1. […] is a FixedReset, 4.20%+172 announced June 22. The issue traded 542,720 shares today in a range of 24.95-17 before closing at […]

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