PrefBlog

HSBC Bank of Canada has announced:

HSBC Bank Canada (the “Bank”) intends to file an amended and restated prospectus supplement for the previously announced offering of Non-Cumulative 5-Year Rate Reset Class 1 Preferred Shares Series E (the “Preferred Shares Series E”). The amendment is a result of ratings action announced on 31 March 2009 by Standard and Poor’s (“S&P”) on the hybrid capital securities of over 60 European financial institutions, including the Bank’s parent company, HSBC Holdings plc. The S&P ratings of the Preferred Shares Series E of ‘P-1(Low)’ and ‘A’ under S&P’s Canadian and Global Preferred Share Rating scales, respectively, are among the highest of the major Canadian banks.

The Bank and a syndicate of investment dealers led by HSBC Securities (Canada) Inc. and Scotia Capital Inc. (the “Underwriters”) intend to enter into an agreement that will amend in certain respects the underwriting agreement they signed on 24 March 2009 (the “Underwriting Agreement” and together with the amending agreement, the “Amended Underwriting Agreement”). The size of the offering will be unchanged at 7 million shares at a price of $25.00 per share, for gross proceeds of C$175 million. The expected closing date for the offering, previously scheduled for 31 March 2009, will be amended to 8 April 2009.

Pursuant to the Amended Underwriting Agreement, HSBC Bank Canada will grant the Underwriters the option (the “Underwriters’ Option”), exercisable in whole or in part at any time up to two business days prior to closing, to purchase up to an additional 3 million Preferred Shares Series E at the issue price. Should the Underwriters’ Option be fully exercised, the total gross proceeds of the financing will be C$250 million.

The Preferred Shares Series E will entitle the holders to receive non-cumulative preferential fixed quarterly cash dividends if, as and when declared by the board of directors of the Bank, of C$0.4125 per share, to yield 6.60 per cent annually for the initial period ending 30 June 2014. Thereafter, the dividend rate will reset every five years at a rate equal to 4.85 per cent over the then five-year Government of Canada Bond Yield. Subject to regulatory approval, on 30 June 2014 and on 30 June every five years thereafter, the Bank may redeem the Preferred Shares Series E in whole or in part at par.

Based on the anticipated closing date of 8 April 2009, the first dividend on the Preferred Shares Series E will be payable on 30 June 2009 in the amount of C$0.3762 per share.

This resolves the confusion previously noted on PrefBlog. The issue was announced on March 23, with size bumped from $125-million to $175-million same-day.

The release on Newswire is timestamped 8:14 pm, for those who are interested.

Update, 2009-4-6: S&P has released a commentary on HSBC Canada:

Standard & Poor’s Ratings Services today commented on the March 31, 2009, downgrade of the rating on the preferred shares of HSBC Bank Canada (HSBC Canada; AA/Negative/A-1+). On that date, the global scale rating on HSBC Canada’s preferred shares was lowered to ‘A’ from ‘A+’, and the Canada scale rating on these instruments was lowered to ‘P-1(Low)’ from ‘P-1’.

This rating action was a direct consequence of a review of the ratings on the hybrid capital securities of various European banks (see “Hybrid Securities Of Over 60 European Financial Institutions Downgraded Following S&P Review”, published March 31, 2009, on RatingsDirect). One of the groups included in this review was HSBC Canada’s ultimate parent, HSBC Holdings PLC (HSBC Group; AA-/Negative/A-1+), which is U.K.-incorporated.
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The hybrid capital-related ratings downgrades on HSBC Canada were not related to the previously planned closing date for HSBC Canada’s preferred share issuance on March 31, 2009.

I have communicated my displeasure to HSBC Canada regarding its delay in issuing a press release on this matter. While I am very well aware that it was a nightmarish occurance for them, I think that a March 31 press release to the effect that “Due to S&P’s rating action this morning the issue did not close as planned. HSBC Canada is in discussions with the underwriters to resolve this situation” should have been issued.

This entry was posted on Thursday, April 2nd, 2009 at 1:59 am and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.