New Issue: EIT Retractible, ROC, 4.80%, 7-Year

Canoe EIT Income Fund has announced:

that it has filed and obtained a receipt for a final short form prospectus in respect of the previously announced offering of Cumulative Redeemable Series 1 Preferred Units (the “Series 1 Preferred Units”) at a price of $25.00 per Series 1 Preferred Unit (the “Offering”). The Series 1 Preferred Units were offered to the public through a syndicate of underwriters led by Scotiabank and RBC Capital Markets which also includes BMO Capital Markets, CIBC Capital Markets, National Bank Financial Inc., TD Securities Inc., Canaccord Genuity Corp., Industrial Alliance Securities Inc. and Manulife Securities Incorporated.

The Fund will issue and sell to the underwriters 4,900,000 Series 1 Preferred Units at a price of $25.00 per Series 1 Preferred Unit for total gross proceeds of the Offering of $122,500,000. The Fund has also granted the underwriters an option, exercisable at the offering price for a period of 30 days from the closing of the Offering, to purchase up to an additional 735,000 Series 1 Preferred Units to cover over-allotments, if any. The quarterly cumulative preferential cash distributions on the Series 1 Preferred Units will be 4.80% per annum. The Toronto Stock Exchange has conditionally approved the listing of the Series 1 Preferred Units under the symbol EIT.PR.A. The closing of the Offering is expected to occur on or about March 14, 2017.

The proceeds from the Offering will be invested by the Fund in accordance with its investment objectives and strategies. The Offering is expected to ensure the sustainability of the Fund by increasing the earning capacity of the units. The Series 1 Preferred Units are provisionally rated Pfd – 2 (high) by Dominion Bond Rating Service Limited.

Full details are available in the prospectus, to which I am not permitted to link because Canadian Securities Administrators take the view that you are all stupid, filthy, ignorant investor scum and do not deserve the slightest consideration whatsoever. You will have to go to SEDAR and look for “Canoe EIT Income Fund Mar 8 2017 14:21:01 ET Final short form prospectus – English PDF 266 K”.

On and after March 15, 2022, the Fund may redeem all or from time to time any part of the outstanding Series 1 Preferred Units, at the Fund’s option, at a price per Series 1 Preferred Unit equal to $25.75 if redeemed on or after March 15, 2022, but before March 15, 2023; $25.50 if redeemed on or after March 15, 2023, but before March 15, 2024; and $25.00 thereafter, together, in each case, with all accrued and unpaid distributions up to but excluding the date fixed for redemption. On or after March 15, 2024, the Series 1 Preferred Units will be retractable for cash, at the option of the holder, for $25.00 per Series 1 Preferred Unit, together with any accrued and unpaid distribution in respect of such Series 1 Preferred Units, less any tax required by law to be deducted therefrom, by notice by the holder of the Series 1 Preferred Units (“Series 1 Preferred Unitholders”) to be retracted delivered to the Manager not less than 30 days prior to the applicable retraction date. Certain other provisions relating to the Series 1 Preferred Units are summarized under “Description of the Preferred Units”

The distributions are not expected be entirely eligible dividends:

Distributions in any given period may consist of net income, net capital gains and/or returns of capital. The Fund’s income and net taxable gains for the purposes of the Tax Act will be allocated to the holders of Units and Series 1 Preferred Units in the same proportion as the distributions received by such holders. See “Principal Canadian Federal Income Tax Considerations”.

The recent historical composition of the fund’s distributions is provided in the prospectus and was reproduced in the previous post regarding this issue. I am taking the view that expected distributions will ultimately be taxed at a rate reasonably close to eligible dividends, so for analytical purposes I have recorded the issue as paying dividends.

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