Fortis has announced:
that it has closed its public offering (the “Offering”) of Cumulative Redeemable Five-Year Fixed Rate Reset First Preference Shares, Series G (the “Series G First Preference Shares”) underwritten by a syndicate of underwriters led by Scotia Capital Inc. and CIBC World Markets Inc. Fortis issued 8,000,000 Series G First Preference Shares at a price of $25.00 per share for gross proceeds to the Corporation of $200,000,000. The underwriters also have the option to purchase up to an additional 1,200,000 Series G First Preference Shares to cover over-allotments, if any, and for market stabilization purposes, during the 30 days following the closing of the Offering (the “Over-Allotment Option”). If the Over-Allotment Option is exercised in full, the Offering will result in gross proceeds to the Corporation of $230,000,000.
A portion of the net proceeds of the Offering will be used to repay the total amount outstanding of approximately $170 million under the Corporation’s committed credit facility, which indebtedness was incurred to fund a portion of the purchase price for the acquisition of Terasen Inc. on May 17, 2007 and the purchase price for the acquisition of the Delta Regina hotel on August 1, 2007. The balance will be used for general corporate purposes.
The issue traded 190,570 shares today in a range of 24.84-25.10, closing at 25.00-15, 88×100.
The issue will not be tracked by HIMIPref™, due largely to the lack of comparables. There is a possibility that a rush of new issues of this type is in the pipeline, as has been noted previously. Should the asset class become important, the fixed-resets from Fortis and from Scotia will be added on a back-dated basis.
With the BCE / Teachers’ deal in jeopardy, however, there is a chance that these pipelined issues might die on the vine.
Interested in this issue. Can you elaborate on how the BCE deal affects Fortis?
I’m not sure I understand the question.
What I referred to in the post was the potential redemption of the BCE preferreds should the BCE deal close on schedule. If this happens, it is widely assumed on the Street that there will be $3-billion looking for a home – presumably, a home where the straight perpetuals don’t roam.
Thus, my speculation is that there are a number of deals in the pipeline, all set to go, ready to be announced the day that BCE announces a closing date, ready to close on that closing date. Should the BCE deal fall through, then these pipelined deals will become much harder to sell than their issuers are currently counting on.
BCE will not directly affect this particular FTS.PR.G issue because it has already been sold. There might be indirect effects, however, if the deal closes, if there is indeed a rush of fixed-reset issuance, and the asset class suddenly becomes less scarce.
Does this answer your question?
I think so. Should BCE go through preferred rates are going to go down as it will be easier for new issues to sell off at reduced interest rates given that there is all that money out there looking for a home? Conversely, those already issued and carrying a higher coupon rate should appreciate somewhat no?
Well … the effect on the market will depend on the volume of issuance.
If new issues that are triggered by a BCE mass redemption total $2-billion, then there will be too much money chasing too few assets and I would expect rates – for both new and extant issues – to decline.
If there is $4-billion worth of new issues triggered by the sudden availability of $3-billion in capital …
[…] has an outstanding FixedReset, FTS.PR.G, 5.25%+213, which closed Friday at 26.46-70 to yield 3.70-43% to its presumed call 2013-9-1. There is also an […]
[…] issue does not have an option to convert into FloatingResets – the structure was very new at the time of issue and provisions had not yet standardized although, of course, there is nothing stopping a new issuer […]