PrefBlog

Veresen Inc. has announced:

it will issue 6,000,000 Cumulative Redeemable Preferred Shares, Series A (“Series A Preferred Shares”) at a price of $25.00 per share (the “Offering”) for aggregate gross proceeds of $150 million on a bought deal basis. The Series A Preferred Shares will be offered to the public through a syndicate of underwriters co-led by Scotiabank, TD Securities Inc. and CIBC.

The holders of Series A Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of 4.40%, payable quarterly for an initial period up to but excluding September 30, 2017, as and when declared by the Board of Directors of Veresen. The first quarterly dividend payment date is scheduled for June 30, 2012. The dividend rate will reset on September 30, 2017 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 2.92%. The Series A Preferred Shares are redeemable by Veresen, at its option, on September 30, 2017 and on September 30 of every fifth year thereafter.

Holders of Series A Preferred Shares will have the right to convert all or any part of their shares into Cumulative Redeemable Preferred Shares, Series B (“Series B Preferred Shares”), subject to certain conditions, on September 30, 2017, and on September 30 of every fifth year thereafter. The holders of Series B Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of Veresen, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 2.92%.

Veresen has granted the underwriters an option to purchase at the offering price an additional 2,000,000 Series A Preferred Shares exercisable in whole or in part at any time up to 6:30 AM (Calgary time) on the date that is two business days prior to closing. Should the option be fully exercised, the total gross proceeds of the Offering will be $200 million.

The Offering is expected to close on or about February 14, 2012. Net proceeds from the Offering will be used to reduce indebtedness, partially fund capital expenditures and for other general corporate purposes.

The Series A Preferred Shares will be issued pursuant to a prospectus supplement that will be filed with the securities regulatory authority in each of the provinces of Canada under Veresen’s short form base shelf prospectus dated August 22, 2011. An application has been made to list the Series A Preferred Shares and the Series B Preferred Shares on the Toronto Stock Exchange. The Offering is subject to receipt of all necessary regulatory and stock exchange approvals.

I have mixed feelings about this one. On the one had, it’s nice to see a new issuer. On the other hand, we already have lots of junk (it’s rated Pfd-3(high) by DBRS and the shelf prospectus was at P-3(high) by S&P). So, whatever.

This entry was posted on Friday, February 3rd, 2012 at 11:06 pm and is filed under New Issues. 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.