BIP.PR.B Settles Better than Expected On Anemic Volume

Brookfield Infrastructure has announced:

the completion of its previously announced issue of Cumulative Class A Preferred Limited Partnership Units, Series 3 (“Series 3 Preferred Units”) in the amount of $125,000,000. The offering was underwritten by a syndicate led by RBC Capital Markets, CIBC, Scotiabank, and TD Securities Inc.

Brookfield Infrastructure issued 5,000,000 Series 3 Preferred Units at a price of $25.00 per unit, for total gross proceeds of $125,000,000. Holders of the Series 3 Preferred Units will be entitled to receive a cumulative quarterly fixed distribution yielding 5.50% annually for the initial period ending December 31, 2020. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 4.53%, and (ii) 5.50%. The Series 3 Preferred Units will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BIP.PR.B.

BIP.PR.B is a FixedReset, 5.50%+453M550 (Interest + ROC), announced December 1. The issue traded 113,268 shares today (consolidated exchanges) in a range of 24.35-58 before closing at 24.35-40, 8×40.

Given that the TXPL index is down 6.37% to December 8 from its December 1 level, the issue actually performed a little better than expected; but it remains to be seen how much of that is due to underwriter support. I’d have more confidence in the level if the volume was higher.

With some trepidation I am including this issue in the HIMIPref™ FixedReset subindex rather than the Interest-Bearing subindex, since I feel that the defining characteristic of the issue is its dividend formula rather than its dividend taxation status. I might change my mind later!

Vital statistics are:

BIP.PR.B FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-12-08
Maturity Price : 22.92
Evaluated at bid price : 24.35
Bid-YTW : 5.61 %

4 Responses to “BIP.PR.B Settles Better than Expected On Anemic Volume”

  1. prefnoob says:

    Given where the spreads and the yields are at right now, is this a good time to buy preferred shares?

  2. fed says:

    Do you happen to know what is the DBRS rating for Brookfield Infrastructure? I can’t seem to find it anywhere.

  3. jiHymas says:

    Given where the spreads and the yields are at right now, is this a good time to buy preferred shares?

    I think that, generally speaking, it’s a good time to buy preferred shares. But I also thought that on December 10, and look what’s happened since then!

    And note, although I think that, generally speaking, it’s a good time to buy preferred shares, I have no idea whether or not it’s a good time for you to buy preferred shares.

    Do you happen to know what is the DBRS rating for Brookfield Infrastructure?

    Ain’t got one. See the prospectus for BIP.PR.B on SEDAR, “Brookfield Infrastructure Partners L.P. Dec 1 2015 21:10:22 ET Prospectus supplement – English
    PDF 383 K ”

    The Series 3 Preferred Units have been assigned a provisional rating of “P-2 Low” by S&P.

  4. fed says:

    Thanks. I guess it will come with time.

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