ENB.PF.K Soft on Modest Volume

Enbridge Inc. has announced:

that it has closed its previously announced public offering (the Offering) of Cumulative Redeemable Minimum Rate Reset Preference Shares, Series 19 (the Series 19 Preferred Shares) through a syndicate of underwriters led by Scotiabank, BMO Capital Markets, CIBC Capital Markets and National Bank Financial. Enbridge issued 20 million Series 19 Preferred Shares, inclusive of 4 million Series 19 Preferred Shares issued on full exercise of the underwriters’ option, for gross proceeds of $500 million. The Series 19 Preferred Shares will begin trading on the Toronto Stock Exchange (TSX) today under the symbol ENB.PF.K. Proceeds from the Offering are expected to be used to partially fund capital projects, to reduce existing indebtedness and for other general corporate purposes of the Company and its affiliates.

ENB.PF.K is a FixedReset 4.90%+317M490 announced December 4. It has been added to the HIMIPref™ database but has been relegated to the Scraps subindex on credit concerns.

The issue traded 694,690 shares in a range of 24.72-88 before closing at 24.72-75. Vital statistics are:

ENB.PF.K FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-11
Maturity Price : 23.05
Evaluated at bid price : 24.72
Bid-YTW : 4.88 %

This issue looks extraordinarily expensive to me! According to Implied Volatility analysis:

impvol_enb_171211
Click for Big

With the parameters shown, the theoretical value of the new issue is 23.23, roughly equivalent to the BPO new issue that settled recently. Critics will be quick to point out that in this calculation there is zero value assigned to the minimum rate guarantee … but I’d say that’s about right!

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