TD has announced:
that it has entered into an agreement with a group of underwriters led by TD Securities Inc. for an issue of 8 million Non-cumulative Class A First Preferred Shares, Series R (the “Series R Shares”), carrying a face value of $25.00 per share, to raise gross proceeds of $200 million. TD intends to file in Canada a prospectus supplement to its January 11, 2007 base shelf prospectus in respect of this issue.
TD has also granted the underwriters an option to purchase, on the same terms, up to an additional 2 million Series R Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing. The maximum gross proceeds raised under the offering will be $250 million should this option be exercised in full.
The Series R Shares will yield 5.60% per cent annually and are redeemable by TD for cash, subject to regulatory consent, at a declining premium after approximately five years.
The issue is anticipated to qualify as Tier 1 capital for TD and the expected closing date is March 12, 2008.
Name of issue: Toronto-Dominion Bank (The) Non-cumulative Class A First Preferred Shares, Series R
Size: 8-million shares @ $25; greenshoe option for another 2-million shares
Ratings: DBRS Pfd-1; S&P P-1(low); Moody’s Aa2
Dividend: $1.40 p.a., long first dividend of $0.54082 payable July 31 (assuming March 12 Closing)
Redemption: Redeemable at $26.00 commencing April 30, 2013; Redemption price declines by $0.25 every April 30 until April 30, 2017; redeemable at $25.00 on and after April 30, 2017.
Underwriting terms: bought deal, subject to syndication, “disaster out”, “regulatory out”, “rating change out” and “material adverse change out”.
You don’t need to look far for a comparable! The issue is virtually identical to the recent TD.PR.Q issue, which differs only in a three month shift in the redemption schedule. TD.PR.Q closed 2008-2-29 at 25.59-65.
Update: Using the closing yield curve on 2008-3-3 for taxable accounts, HIMIPref™ calculates a fair value (“curvePrice“) of $25.48 for the new issue, compared with $25.57 for TD.PR.Q.
To my great pleasure, the fitting error of the yield curve has jumped considerably today – more fitting error means more mispricing means more trading opportunities!
Update, 2008-03-04: TD has announced:
that a group of underwriters led by TD Securities Inc. has exercised the option to purchase an additional 2 million Non-cumulative Class A First Preferred Shares, Series R (the “Series R Shares”) carrying a face value of $25.00 per share. This brings the total issue announced on March 3, 2008, and expected to close March 12, 2008, to 10 million shares and gross proceeds raised under the offering to $250 million.
Update 2008-3-4: Using the closing taxable curve, fair value $25.37.
Update 2008-3-7: Closing taxable curve, fair value $25.24.
Update 2008-3-11: Fair value $25.24 when marked to the closing taxable curve. The symbol when it starts trading tomorrow morning will be TD.PR.R. The fair value of the comparable, TD.PR.Q, is 25.29; it closed at 25.10-15.