Atlantic Power Proposes Redeeming AZP.PR.A, AZP.PR.B & AZP.PR.C at $22.00 Under Plan of Arrangement

Atlantic Power Corporation has announced:

that it has entered into a definitive agreement with I Squared Capital, a leading global infrastructure investor, under which the company’s outstanding common shares and convertible debentures, and the outstanding preferred shares and medium term notes of certain of its subsidiaries, will be acquired. The total enterprise value of the deal is approximately US$961 million (based on current foreign exchange rates) and the transaction was unanimously approved by Atlantic Power’s board of directors.
  • Common shareholders of Atlantic Power will receive US$3.03 per common share in cash, representing a 48% premium to the 30-day volume weighted average price per common share on the New York Stock Exchange for the period ending January 14, 2021.
  • Atlantic Power’s 6.00% Series E Convertible Unsecured Subordinated Debentures due January 31, 2025 will be converted into common shares of Atlantic Power immediately prior to the closing of the transaction based on the conversion ratio in effect at such time (including the “make whole premium shares” issuable under the terms of the trust indenture for the convertible debentures following a cash change of control). Holders of the convertible debentures will receive US$3.03 per common share held following the conversion of the convertible debentures, plus accrued and unpaid interest on the convertible debentures up to, but excluding, the closing date of the transaction.
  • Atlantic Power Preferred Equity Ltd.’s (“APPEL”) cumulative redeemable preferred shares, Series 1, cumulative rate reset preferred shares, Series 2, and cumulative floating rate preferred shares, Series 3, will be redeemed for Cdn$22.00 per preferred share in cash, representing meaningful premiums to the recent trading prices of such shares on the Toronto Stock Exchange.
  • Atlantic Power Limited Partnership’s (“APLP”) 5.95% medium term notes due June 23, 2036 will be redeemed for consideration equal to 106.071% of the principal amount of medium term notes held as of the closing of the transaction, plus accrued and unpaid interest on the medium term notes up to, but excluding, the closing date of the transaction. Holders of medium term notes that deliver a written consent to the proposed amendments to the trust indenture governing the medium term notes (as described below) will also be entitled to a consent fee equal to 0.25% of the principal amount of medium term notes held by such holders, conditional on closing of the transaction.

The acquisition of Atlantic Power’s outstanding common shares and the redemption of the outstanding preferred shares of APPEL will be completed by way of a plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia). In connection with the Arrangement, Atlantic Power’s shareholder rights plan will be terminated and all rights to purchase Atlantic Power’s common shares issued pursuant to the shareholder rights plan will be cancelled.

The Transaction is also conditional on the approval of two-thirds of the votes cast by holders of Atlantic Power’s common shares voting in person or by proxy at a special meeting of Atlantic Power’s common shareholders and the approval of two-thirds of the votes cast by holders of APPEL’s preferred shares (voting as a single class) in person or by proxy at a meeting of APPEL’s preferred shareholders in respect of both the Arrangement and the proposed continuance of APPEL under the laws of British Columbia.

In addition, the Transaction is conditional upon the approval of the holders of the convertible debentures and the medium term notes, respectively (in each case either by way of votes of the holders of the convertible debentures and the medium term notes holding at least two-thirds of the principal amount of the convertible debentures and the medium term notes, respectively, voted in person or by proxy at separate meetings of the holders of the convertible debentures and the medium term notes or by way of separate written consents of the holders of the convertible debentures and the medium term notes holding not less than two-thirds of the principal amount of convertible debentures and medium term notes outstanding, as applicable), of certain amendments to the trust indentures governing such securities, as described above. Atlantic Power and APLP will seek the approval of the holders of the convertible debentures and medium term notes by way of separate meetings and/or consent solicitations.

A bondholder representing approximately 66% of the principal amount of medium term notes and approximately 19% of the principal amount of convertible debentures outstanding has agreed to vote in favor of or otherwise consent to amendments to the trust indentures governing those securities.

A nice deal for the preferred shareholders, I think, as the yield on the preferreds is now 5.59%, 5.59% and 4.87% for AZP.PR.A, AZP.PR.B and AZP.PR.C, respectively, well within the range of issues in the “Pfd-3 Group” (not bad for issues rated P-4(low)!), although I have received an eMail that stated in part:

Why on earth would any preferred shareholder agree to sell their preferred shares below what is stated in the prospectuses?

I find it hard to believe that any preferred shareholder would agree to selling their preferred shares at $22.

Also, in your Q&A on the transaction, Atlantic Power states…” Preferred shareholders will not be entitled to a pro rata dividend in the event that the closing occurs mid-quarter.”

I believe Atlantic Power is mistaken here.

Presumably the elimination of the pro-rata dividend will be specified in the Plan of Arrangement.

It remains to be seen whether preferred shareholders are able to replicate their success realized in the negotiations regarding the Rona preferred shares in which Fidelity Investments Canada ULC was able to squeeze Lowes for a significant sum.

Many thanks to Assiduous Readers TS and JD for bringing this to my attention!

2 Responses to “Atlantic Power Proposes Redeeming AZP.PR.A, AZP.PR.B & AZP.PR.C at $22.00 Under Plan of Arrangement”

  1. stusclues says:

    I agree that $22 is good offer for the preferred shares. AZP.PR.C is one of my top holdings and I’m not inclined to fight for more, given that they can remain outstanding as have Capstone’s after the purchase by Irving Infrastructure.

    That said, the enterprise value attributed to this deal is, arguably, low and may yet be topped by another bidder. Further, speculation about RONA-like success will probably pin the preferred shares very close to $22, so there is no rush to dispose.

  2. Joel A says:

    The Board needs to be encouraged to support those who waited all this out with a NO vote. The Privateers are after your assets. You need to fight for fairness:
    Investor Relations Contact:
    (617) 977-2700
    info@atlanticpower.com
    Sure take some lower tranche paper now that the hard work has been accomplished for CURRENT holders’ security. That’as WHY they used to be called ‘securities’ and the Board’s obligation to holders.

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