Toronto-Dominion Bank has announced:
a domestic public offering of Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 7 (the “Series 7 Shares”).
TD has entered into an agreement with a group of underwriters led by TD Securities Inc. to issue, on a bought deal basis, 12 million Series 7 Shares at a price of $25.00 per share to raise gross proceeds of $300 million. TD has also granted the underwriters an option to purchase, on the same terms, up to an additional 2 million Series 7 Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing.
The Series 7 Shares will yield 3.60% annually, payable quarterly, as and when declared by the Board of Directors of TD, for the initial period ending July 31, 2020. Thereafter, the dividend rate will reset every five years at a level of 2.79% over the then five-year Government of Canada bond yield.
Subject to regulatory approval, on July 31, 2020 and on July 31 every 5 years thereafter, TD may redeem the Series 7 Shares, in whole or in part, at $25.00 per share. Subject to TD’s right of redemption, holders of the Series 7 Shares will have the right to convert their shares into Non-Cumulative Floating Rate Preferred Shares, Series 8 (the “Series 8 Shares”), subject to certain conditions, on July 31, 2020, and on July 31 every five years thereafter. Holders of the Series 8 Shares will be entitled to receive quarterly floating dividends, as and when declared by the Board of Directors of TD, equal to the three-month Government of Canada Treasury bill yield plus 2.79%.
The expected closing date is March 10, 2015. TD will make an application to list the Series 7 Shares as of the closing date on the Toronto Stock Exchange. The net proceeds of the offering will be used for general corporate purposes.
The Bank, as previously announced, will redeem its outstanding Non-cumulative Redeemable Class A First Preferred Shares, Series P and Series Q on March 2, 2015. It is the intention of the Bank to exercise its right to redeem all of its outstanding 10 million Non-cumulative Redeemable Class A First Preferred Shares, Series R (the “Series R Shares”). The foregoing statement of intention does not constitute formal notice of redemption. Should the Bank exercise its right to redeem the Series R Shares, formal notice of redemption will be issued by the Bank in due course.
They later announced:
that, in connection with its recently announced public offering of 12,000,000 3.60% Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 7 (the “Series 7 Shares”), the underwriters have exercised their option (the “Underwriters’ Option”) to purchase an additional 2,000,000 Series 7 Shares at a price of $25.00 per share. TD will receive additional gross proceeds of $50,000,000 from the exercise of the Underwriters’ Option, increasing the total size of the offering to $350,000,000. Closing of the Underwriters’ Option is expected to occur concurrent with the closing of the public offering on March 10, 2015.
The Implied Volatility calculation has some points of interest:
Click for Big
Firstly, the market does not appear to be differentiated between the NVCC compliant and non-compliant issues, as the latter appear to be plotted on a line more or less defined by the former. Additionally, the Implied Volatility is very high – ridiculously high, for NVCC-compliant issues – so I would expect the new issue to outperform the three non-compliant issues (TD.PF.A, TD.PF.B and TD.PF.C) as the market comes to realize what the word “perpetual” means.