New Issue: BNS FixedReset 5.50%+451

The Bank of Nova Scotia has announced:

a domestic public offering of Non-cumulative 5-Year Rate Reset Preferred Shares, Series 34 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 34”).

Scotiabank has agreed to sell 12 million of Preferred Shares Series 34 to a syndicate of underwriters led by Scotia Capital Inc. on a bought deal basis. Scotiabank has granted the Underwriters an option, exercisable in whole or in part up to 48 hours before closing, to purchase up to an additional 2 million Preferred Shares Series 34 at the same offering price.

Scotiabank will issue Preferred Shares Series 34 priced at $25 per share and holders will be entitled to receive a non-cumulative quarterly fixed dividend for the initial period ending on and including April 25, 2021 in the amount of $1.3750 per share, to yield 5.50 per cent annually.

On or after April 26, 2021, Scotiabank may, at its option, with the prior approval of the Superintendent of Financial Institutions (Canada), redeem in whole at any time or in part from time to time at a redemption price which is equal to par. Thereafter, the dividend rate will reset every five years at a rate equal to 4.51% over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series 34 will, subject to certain conditions, have the right to convert all or any part of their shares to non-cumulative floating rate preferred shares Series 35 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 35”) of Scotiabank on April 26, 2021 and on April 26 every five years thereafter.

Holders of the Preferred Shares Series 35 will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 4.51%, as and when declared by the Board of Directors of Scotiabank. Holders of Preferred Shares Series 35 will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series 34 on April 26, 2026 and on April 26 every five years thereafter.

Closing is expected to occur on or after December 17, 2015. This domestic public offering is part of Scotiabank’s ongoing and proactive management of its Tier 1 capital structure.

Net proceeds from this transaction will be added to Scotiabank’s funds and will be used for general business purposes.

The issue has been assigned a provisional Pfd-2 rating by DBRS:

DBRS Limited (DBRS) has today assigned a provisional rating of Pfd-2 with a Stable trend to the Bank of Nova Scotia’s Non-Cumulative 5-Year Rate Reset Preferred Shares Series 34 (NVCC Preferred Shares or Series 34).

DBRS assigned the NVCC Preferred Shares a rating equal to the Bank’s intrinsic assessment of AA (low) less four rating notches, consistent with DBRS’s criteria titled “Rating Bank Capital Securities — Subordinated, Hybrid, Preferred & Contingent Capital Securities.”

This is Scotia’s first NVCC-compliant FixedReset issue, so there is no real point in performing an Implied Volatility analysis.

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