Intact Financial Corporation has announced:
that it has closed its $300 million offering of medium term notes (the “Notes”) and its $250 million offering of Non-cumulative Rate Reset Class A Shares Series 3 (the “Series 3 Preferred Shares”).
The Notes were offered on a best efforts basis through a syndicate led by CIBC World Markets Inc., RBC Dominion Securities Inc. and TD Securities Inc. and including Scotia Capital Inc., BMO Nesbitt Burns Inc., National Bank Financial Inc. and Casgrain & Company Limited. The Notes will be direct unsecured obligations of IFC and will rank equally with all other unsecured and unsubordinated indebtedness of IFC. The Notes will bear interest at a fixed annual rate of 4.70% until maturity on August 18, 2021.
The Series 3 Preferred Share offering was underwritten on a bought deal basis by a syndicate of underwriters led by CIBC World Markets Inc., RBC Dominion Securities Inc., Scotia Capital Inc., and TD Securities Inc. and including National Bank Financial Inc., BMO Nesbitt Burns Inc., Canaccord Genuity Corp., GMP Securities L.P., Desjardins Securities Inc., HSBC Securities (Canada) Inc., Macquarie Capital Markets Canada Ltd. and Raymond James Ltd. (the “Underwriters”). IFC entered into an underwriting agreement dated August 11, 2011 with the Underwriters under which the Underwriters agreed to purchase from IFC and sell to the public 9,000,000 Series 3 Preferred Shares at a price of $25.00 per Series 3 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 3 Preferred Shares at a price of $25.00 per Series 3 Share for gross proceeds to IFC of $25,000,000.
The holders of Series 3 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 September 30, 2016, based on an annual rate of 4.20%. The dividend rate will be reset on September 30, 2016 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 2.66%. The Board of Directors has approved and declared the initial dividend of $0.12370 per Series 3 Preferred Share which is payable on September 30, 2011 to holders of record on September 15, 2011.
Holders of the Series 3 Preferred Shares will have the right, at their option, to convert their Series 3 Preferred Shares into Non-cumulative Floating Rate Class A Shares Series 4 (the “Series 4 Preferred Shares”), subject to certain conditions, on September 30, 2016 and on September 30 every five years thereafter. The holders of Series 4 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 2.66%.
IFC intends to use the net proceeds of the Series 3 Preferred Share offering and the Note 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, the net proceeds of a previously announced preferred share 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 Series 3 Preferred Share offering and the Note offering are not conditional upon closing of the Acquisition; if the Acquisition is not completed, the net proceeds from these offerings will be used for general corporate purposes.
The Notes have been given a rating of A(low) with a Stable trend by DBRS Limited and a rating of A3, under review for possible downgrade by Moody’s Investors Service, Inc. DBRS Limited has assigned a rating of Pfd-2(low) with a Stable trend for the Series 3 Preferred Shares.
The Series 3 Preferred Shares will commence trading on the Toronto Stock Exchange on August 18, 2011 under the symbol IFC.PR.C.
IFC.PR.C is a FixedReset, 4.20%+266, announced August 9. As the issue does not have a NVCC clause, I have followed my current policy and added a Deemed Maturity entry to the call schedule for 2022-1-31 in the expectation that the NVCC rules will be imposed on insurers and insurance holding companies in the reasonably near future. The issue will be tracked by HIMIPref™ and is assigned to the FixedReset subindex.
The issue traded 425,905 shares today in a range of 24.87-95 before closing at 24.90-94, 30×100.
Vital statistics are:
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.90
Bid-YTW : 4.20 %