PrefBlog

Kinder Morgan Canada Limited has announced (although not yet on their website):

that it has entered into an agreement with a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities (together, the “Underwriters”) pursuant to which the Underwriters have agreed to purchase from the Company, 8,000,000 cumulative redeemable minimum rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”) at a price of $25.00 per share for distribution to the public.

The Company 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 2,000,000 Series 1 Preferred Shares at a price of $25.00 per share.

The Company intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership, which intends to subsequently use such proceeds to, directly or indirectly, finance the development, construction and completion of the Trans Mountain Expansion Project and Base Line Terminal project as well as potential future growth opportunities, to repay indebtedness and for general corporate purposes.

The holders of Series 1 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.3125 per share, payable quarterly on the 15th day of February, May, August and November, as and when declared by the Board of Directors of the Company, yielding 5.25 per cent per annum at the issue price, for the initial fixed rate period to but excluding November 15, 2022 (the “Initial Fixed Rate Period”). The first quarterly dividend payment date is scheduled for November 15, 2017. The dividend rate will reset on November 15, 2022 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 3.65 per cent, provided that, in any event, such rate shall not be less than 5.25 percent per annum. The Series 1 Preferred Shares are redeemable by the Company, at its option, on November 15, 2022 and on November 15 of every fifth year thereafter at a price of $25.00 per share plus accrued and unpaid dividends.

The holders of Series 1 Preferred Shares will have the right to convert their shares into cumulative redeemable floating rate preferred shares, Series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on November 15, 2022 and on November 15 of every fifth year thereafter. The holders of Series 2 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of the Company, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 3.65 percent.

Closing of the offering is expected on August 15, 2017, subject to customary closing conditions.

The offering is being made under a prospectus supplement to the base shelf prospectus of the Company dated July 28, 2017 (together, the “Prospectus”). Copies of the Prospectus may be obtained from The Bank of Nova Scotia, Scotia Plaza, 44 King Street West, Toronto, Ontario M5H 1H1, Telephone: (416) 866-3672, Canadian Imperial Bank of Commerce, Commerce Court, Toronto, Ontario M5L 1A2, Telephone (416) 980-3096, Royal Bank of Canada, 200 Bay Street, 4th Floor, North Tower, Toronto, Ontario, M5J 2W7, Telephone (416) 955-7803 and The Toronto-Dominion Bank, Toronto-Dominion Centre, Toronto, Ontario M5K 1A2, Telephone: (416) 308-6963. Investors should read the Prospectus, and the documents incorporated therein by reference, before making an investment decision.

They later announced:

that as a result of strong investor demand for its previously announced offering of cumulative redeemable minimum rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”), the size of the offering has been increased to 12,000,000 shares. The offering no longer includes the previously granted underwriters’ option. The aggregate gross proceeds of the offering will now be $300 million. The syndicate of underwriters is led by Scotiabank, CIBC Capital Markets, RBC Capital Markets, and TD Securities.

Nice to see a new issuer … too bad it’s junk! S&P calls it P-3(high):

S&P Global Ratings said today it assigned its ‘BB+’ (P-3 (High) Canadian National Scale Preferred Share Rating) issue-level rating to Kinder Morgan Canada Ltd.’s (KML) cumulative redeemable minimum rate reset preferred shares, series 1.

Update, 2017-08-08: Pfd-3(high) [Provisional] from DBRS:

DBRS Limited (DBRS) has today assigned a provisional rating of Pfd-3 (high) with a Stable trend to Kinder Morgan Canada Limited’s (KML or the Company) proposed issuance of Cumulative Redeemable Minimum Rate Reset Preferred Shares, Series 1 (Series 1 Preferred Shares).

DBRS has not assigned an Issuer Rating to KML; however, the Series 1 Preferred Shares rating is based on the credit profile of Kinder Morgan Cochin ULC (KMU; rated BBB (high) with a Stable trend). KMU is KML’s operating subsidiary, which operates the Company’s Canadian energy infrastructure assets, including the existing Trans Mountain Pipeline, the $7.4 billion Trans Mountain Expansion Project (TMEP), the Puget Sound pipeline, the Canadian portion of Cochin pipeline as well as various terminal, rail and storage facilities.

KML intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership (KMLP; 100% owner of KMU) through Kinder Morgan Canada GP Inc. (KMCGP; 100% owned by KML). KMLP in turn intends to use such proceeds to finance the development, construction and completion of TMEP and the Base Line Terminal project as well as potential future growth opportunities, to repay indebtedness and for general corporate purposes. KMLP receives all dividends paid by KMU. KMLP’s preferred units mirror the terms and conditions of the Series 1 Preferred Shares issued by KML. The dividends due on the Series 1 Preferred Shares are matched by the dividends paid on the preferred units of KMLP to which KML subscribes. Dividends on KMLP’s preferred units have priority over dividends paid on KMLP’s common units and are distributed through KMCGP to KML for further distribution to holders of KML’s Series 1 Preferred Shares. KMLP and KMCGP have no debt. The rating on KML’s Series 1 Preferred Shares is therefore linked to KMU’s rating and any change in KMU’s rating could affect the rating of the Series 1 Preferred Shares.

This entry was posted on Thursday, August 3rd, 2017 at 8:35 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.