TRP.PR.H Listed; 39% Conversion

TransCanada Corporation has announced:

that 5,466,595 of its 14,000,000 fixed rate Cumulative Redeemable First Preferred Shares, Series 3 (Series 3 Shares) were tendered for conversion into floating-rate Cumulative Redeemable First Preferred Shares, Series 4 (Series 4 Shares). As a result of the conversion TransCanada has 8,533,405 Series 3 Shares and 5,466,595 Series 4 Shares issued and outstanding. The Series 3 Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbol TRP.PR.B. The Series 4 Shares will begin trading on the TSX today under the symbol TRP.PR.H.

The Series 3 Shares will continue to pay on a quarterly basis, for the five-year period beginning on June 30, 2015, as and when declared by the Board of Directors of TransCanada, a fixed dividend based on an annual fixed dividend rate of 2.152 per cent.

The Series 4 Shares will pay a floating quarterly dividend for the five-year period beginning on June 30, 2015, as and when declared by the Board of Directors of TransCanada. The floating quarterly dividend rate for the Series 4 Shares for the first quarterly floating rate period (being the period from June 30, 2015 to but excluding September 30, 2015) is 1.945 per cent and will be reset every quarter.

For more information on the terms of, and risks associated with an investment in, the Series 3 Shares and the Series 4 Shares, please see the Corporation’s prospectus supplement dated March 4, 2010 which can be found under the Corporation’s profile on SEDAR at www.sedar.com or on the Corporation’s website.

No shares traded today and the closing quote, as reported by the Toronto Stock Exchange, was 14.35-25.00.

Vital statistics are:

TRP.PR.B FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 14.65
Evaluated at bid price : 14.65
Bid-YTW : 3.74 %
TRP.PR.H FloatingReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 3.81 %

At the indicated bid prices, the break-even three-month bill rate (the average bill rate at which the total return of the two elements of the Strong Pair will be equal until the next Exchange Date) is 0.26%, slightly below the average for all investment grade FixedReset / FloatingReset Strong Pairs (irrespective of Exchange Date) of 0.36%. Thus, if the average rate exceeds 0.26% then TRP.PR.H will outperform TRP.PR.B over the period (measured from today’s bid prices), which seems like a pretty good bet.

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