New Issue: BAF FixedReset 4.55%+309

Bell Aliant has announced:

that its subsidiary Bell Aliant Preferred Equity Inc. (the “Company”) will be issuing 4,000,000 Cumulative Rate Reset Preferred Shares, Series C (the “Series C Preferred Shares”), at a price of $25.00 per Series C Preferred Share, for aggregate gross proceeds of $100 million on a bought-deal basis to a syndicate of underwriters led by RBC Capital Markets, Scotia Capital and BMO Capital Markets.

The underwriters have been granted an over-allotment option to purchase an additional 600,000 Series C Preferred Shares at the offering price. Should the over-allotment option be fully exercised, the total gross proceeds of the Series C Preferred Share offering will be $115 million.

The Series C Preferred Shares will pay cumulative dividends of $1.1375 per share per annum, yielding 4.55 per cent, payable quarterly if, as and when declared by the Company’s board of directors (with the first quarterly dividend to be paid on March 31, 2012), for the initial five-year period ending March 31, 2017. The dividend rate will be reset on March 31, 2017 and every five years thereafter at a rate equal to the five-year Government of Canada bond yield plus 3.09 per cent. The Series C Preferred Shares will be redeemable by the issuer on or after March 31, 2017, in accordance with their terms.

Holders of the Series C Preferred Shares will have the right, at their option, to convert their shares into Cumulative Floating Rate Preferred Shares, Series D, (the “Series D Preferred Shares”) subject to certain conditions, on March 31, 2017 and on March 31 every five years thereafter. Holders of the Series D Preferred Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.09 per cent, if, as and when declared by the Company’s board of directors.

The Series C 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 Canadian securities regulatory authorities in all Canadian provinces and territories. The offering is scheduled to close on or about December 7, 2011, subject to certain conditions, including obtaining all necessary regulatory approvals.

The net proceeds of this offering will be used to make a lump-sum voluntary contribution to certain of Bell Aliant’s pension plans and for general corporate purposes.

The ‘use of funds ‘ is fascinating, especially since their 11Q3 press release notes that they made a $200-million contribution in 11Q1. The 11Q3 report notes:

Net benefit plans cost included in operating costs (pension expense) in 2011 will be $60–$65 million based on a discount rate of 5.3 per cent and a long-term rate of return on plan assets of 6.1 per cent, up from a comparable 2010 IFRS-based pension expense of $53 million;

The Statement of Comprehensive Income includes $150.2-million “Actuarial losses on defined benefit pension (DB) and other post-employment benefits (OPEB) plans”; the year-to-date figure is $176.4-million. Note 5 of the 11Q3 report is kind of horrific …they have a “Net benefit obligation as at September 30, 2011” of a little over $1-billion. Maybe we’ll see some more preferred share issues from these guys!

The issue is rated Pfd-3(high) by DBRS.

One Response to “New Issue: BAF FixedReset 4.55%+309”

  1. […] is a FixedReset, 4.55%+309, announced November 21. BAF.PR.C will be tracked by HIMIPref™, but relegated to the Scraps index on credit […]

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