Intact Financial Corporation has announced:
that it has closed its bought deal offering (the “Offering”) of Non-cumulative Rate Reset Class A Shares Series 1 (the “Series 1 Preferred Shares”) underwritten by a syndicate of underwriters led by CIBC, RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc., and including BMO Nesbitt Burns Inc., National Bank Financial Inc., Canaccord Genuity Corp., GMP Securities L.P., Macquarie Capital Markets Canada Ltd., HSBC Securities (Canada) Inc. and Raymond James Ltd. (the “Underwriters”), resulting in gross proceeds (including the over-allotment option proceeds) to IFC of $250,000,000.
IFC entered into an underwriting agreement dated June 27, 2011 with the Underwriters under which the Underwriters agreed to purchase from IFC and sell to the public 9,000,000 Series 1 Preferred Shares at a price of $25.00 per Series 1 Preferred Share for gross proceeds to IFC of $225,000,000. The Underwriters have exercised their over-allotment option and purchased an additional 1,000,000 Series 1 Preferred Shares at a price of $25.00 per Series 1 Preferred Share for gross proceeds to IFC of $25,000,000.
The net proceeds from the Offering, together with borrowings under acquisition credit facilities previously arranged by IFC, the proceeds of a previously announced subscription receipt offering, the net proceeds from a previously announced private placement of medium term notes and a portion of IFC’s existing cash resources are intended to be used by IFC to fund the purchase price for its previously announced acquisition of all of the issued and outstanding shares of AXA Canada Inc. (the “Acquisition”). The closing of the Acquisition is expected to occur in the fall of 2011 and is 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 of the Offering 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 IFC, 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 IFC, at a rate equal to the 90-day Canadian Treasury Bill rate plus 1.72%.
DBRS Limited has assigned a rating of Pfd-2(low) with a Stable trend for the Series 1 Preferred Shares.
The Series 1 Preferred Shares will commence trading on the Toronto Stock Exchange on July 12, 2011 under the symbol IFC.PR.A.
IFC.PR.A 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 25.08-15.
IFC.PR.A is tracked by HIMIPref™ and has been assigned to the FixedReset index. As Intact Financial is an insurance holding company and the issue does not have an NVCC clause, a DeemedMaturity entry has been added to the call schedule for this issue – see the January, February, March and June editions of PrefLetter for discusion.
Vital Statistics are:
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.08
Bid-YTW : 4.06 %