New Issue : Canadian Utilities 4.60% Perps

Canadian Utilities has announced an issue of Cumulative (!) Redeemable Preferred Shares Series 1.

Issue size is 4.6-million shares priced at $25.00 for gross proceeds of $115-million.

Dividends are 4.60% per annum ($1.15), payable quarterly, cumulative (!), payable on the first day of March/June/September/December. The initial dividend of $0.13863 will be paid on June 1, based on the anticipated closing date of April 18, 2007.

The call schedule is:

CU 4.60% Redemptions
From To Price
2012-06-01 2013-5-31 $26.00
2013-06-01 2014-05-31 25.75
2014-06-01 2015-05-31 25.50
2015-06-01 2016-05-31 25.25
2016-06-01 Infinite Date 25.00

These are rated at Pfd-2(high) by DBRS and P-2 (high) by S&P.

The material I have indicates that the proceeds will be used to finance capital expenditures and for other general corporate purposes … but I wonder! CU.PR.T is currently callable at $25.00 with a dividend rate of $1.475 p.a. (issue size 2,277,675 according to the TSX) and CU.PR.V is currently callable at $25.00 with a dividend rate of $1.325 p.a. (issue size 2,146,730 : ibid). I have previously complained that these issues appear to be surviving due solely to regulatory boneheadism … but perhaps a ray of sunlight has penetrated Canadian capital markets. However, there is more boneheadism in heaven and earth than is dreamt of in my philosophy. We shall see.

More later.

Update : DBRS has confirmed on their site that the new issue is rated Pfd-2(high).

Interestingly, they have a different understanding of the use of proceeds from the issue than the one I saw (my bolding):

The net proceeds of the Preferred Shares are expected to be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of CU Inc.’s subsidiaries, ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.

I don’t think CU.PR.T & CU.PR.V will last very much longer. And, if you look at the issue sizes and account for underwriting fees of about 3%, you might decide that “general corporate purposes” consist largely of buying a new pencil.

3 Responses to “New Issue : Canadian Utilities 4.60% Perps”

  1. […] PrefBlog Canadian Preferred Shares – Data and Discussion « New Issue : Canadian Utilities 4.60% Perps […]

  2. […] Nesbitt crossed 40,000 at 27.20, then Scotia crossed 10,000 at the same price. Perhaps the sellers were making room for the pending new issue – but then, what were the buyers doing? Now with a pre-tax bid-YTW of 3.06% based on a bid of 27.02 and a call 2008-07-01 at $26.00 … it won’t yield much more than bonds, unless CU decides to waive the call. […]

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