New Issue: ENB FixedReset, 4.40%+266

Enbridge Inc. has announced:

that it has entered into an agreement with a group of underwriters to sell eight million Cumulative Redeemable Preference Shares, Series 9 (the “Series 9 Preferred Shares”) at a price of $25.00 per share for distribution to the public. Closing of the offering is expected on March 13, 2014.

The holders of Series 9 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.10 per share, payable quarterly on the first day of March, June, September and December, as and when declared by the Board of Directors of Enbridge, yielding 4.40 per cent per annum, for the initial fixed rate period to but excluding December 1, 2019. The first quarterly dividend payment date is scheduled for June 1, 2014. The dividend rate will reset on December 1, 2019 and every five years thereafter at a rate equal to the sum of the then five-year Canadian Government bond yield plus 2.66 per cent. The Series 9 Preferred Shares are redeemable by Enbridge, at its option, on December 1, 2019 and on December 1 of every fifth year thereafter.

The holders of Series 9 Preferred Shares will have the right to convert their shares into Cumulative Redeemable Preference Shares, Series 10 (the “Series 10 Preferred Shares”), subject to certain conditions, on December 1, 2019 and on December 1 of every fifth year thereafter. The holders of Series 10 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of Enbridge, at a rate equal to the sum of the 90-day Government of Canada Treasury bill rate plus 2.66 per cent.

Enbridge has granted to the underwriters an option, exercisable at any time up to 48 hours prior to the closing of the offering, to purchase up to an additional 2 million Series 9 Preferred Shares at a price of $25.00 per share.

The offering is being made only in Canada by means of a prospectus supplement to the base shelf prospectus of the Corporation dated June 6, 2013. Proceeds will be used to partially fund capital projects, to reduce existing indebtedness and for other general corporate purposes of the Corporation and its affiliates.

The syndicate of underwriters is led by TD Securities Inc., CIBC, RBC Capital Markets, and Scotiabank.

Later, they further announced:

that as a result of strong investor demand for its previously announced offering of Cumulative Redeemable Preference Shares, Series 9 (the “Series 9 Preferred Shares”), the size of the offering has been increased to 11 million shares. The aggregate gross proceeds will be C$275 million. Closing of the offering is expected on March 13, 2014.

This issue is extremely comparable to ENB.PR.N, a FixedReset 4.00%+265, which settled July 17, 2012, and was announced July 9, 2012. Not surprisingly, ENB.PR.N was down significantly on the day on good volume of 34,966 shares, closing at 24.66-68, 8×1, which makes it roughly equivalent to the new issue priced at $25.00 since there will be an extra $0.10 dividends per year for the new issue … until reset!

Update, 2014-3-7: Pfd-2(low) from DBRS.

It is also of interest to note that ENB issued 500-million in thirty-year notes at 4.57%.

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