Emera Incorporated has announced (on 2020-1-7):
that it does not intend to exercise its right to redeem all or any part of the currently outstanding Cumulative Rate Reset First Preferred Shares, Series F of the Company (the “Series F Shares”) on February 15, 2020. There are currently 8,000,000 Series F Shares outstanding.
Subject to certain conditions set out in the prospectus supplement of the Company dated June 2, 2014, to the short form base shelf prospectus dated May 2, 2013, relating to the issuance of the Series F Shares, the holders of the Series F Shares have the right, at their option, to convert all or any of their Series F Shares, on a one-for-one basis, into Cumulative Floating Rate First Preferred Shares, Series G of the Company (the “Series G Shares”) on February 15, 2020 (the “Conversion Date”).
On such date, holders who do not exercise their right to convert their Series F Shares into Series G Shares will continue to hold their Series F Shares.
The foregoing conversion right is subject to the following:
if the Company determines that there would be less than 1,000,000 Series G Shares outstanding on the Conversion Date, then holders of Series F Shares will not be entitled to convert their shares into Series G Shares, and
alternatively, if the Company determines that there would remain outstanding less than 1,000,000 Series F Shares on the Conversion Date, then all remaining Series F Shares will automatically be converted into Series G Shares on a one-for-one basis on the Conversion Date.
In either case, Emera will give written notice to that effect to holders of Series F Shares no later than February 8, 2020.The dividend rate applicable for the Series F Shares for the five-year period commencing on February 15, 2020 and ending on (and inclusive of) February 14, 2025, and the dividend rate applicable to the Series G Shares for the 3-month period commencing on February 15, 2020 and ending on (and inclusive of) May 14, 2020, will be determined on January 16, 2020 and notice of such dividend rates shall be provided to the holders of the Series F Shares on that day.
Beneficial owners of Series F Shares who wish to exercise their conversion right should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from January 16, 2020 until 5:00 p.m. (EDT) on January 31, 2020.
EMA.PR.F is a FixedReset, 4.25%+263, that commenced trading 2014-6-9 after being being announced 2014-5-29. It is tracked by HIMIPref™ and assigned to the FixedReset Discount subindex.
Given credit concerns, why is EMA.PR.F assigned to FixedReset Discount subindex (as opposed to scraps)?
Sorry! I copy-pasted from the first-day-of-trading post and did a horrible job of editing.
I’ve fixed it now.
Given credit concerns, why is EMA.PR.F assigned to FixedReset Discount subindex (as opposed to scraps)?
I think one of the rating agencies rates the preferred stock of Emera as investment grade at P2(L).
But if you look at overall debt ratings of Emera, they are more like BBB+ and BBB.
A generic mapping to the preferred stocks is a two notch downgrade from the top debt rating. Again, no hard and fast rules, but general guidelines. So for BBB+, the preferred stock rating would typically be BBB- or BB+, depending on whose interpretation you are listening to.
So for BBB+, the preferred stock rating would typically be BBB- or BB+, depending on whose interpretation you are listening to.
Neither DBRS nor S&P use the alphabetical rating system for preferred shares so not sure what you mean by BBB- or BB+ since they are defined terms for each rating agency and apply to overall credit worthiness and not any subset of the capital structure such as preferred shares. That being said, if you are looking for possible equivalencies between Preferred and Issuer Credit ratings, DBRS mentions at one point in their Preferred Share Rating Scale commentary that their Pfd-2 ratings generally correspond with companies whose senior bonds are rated in the “A” category”, their Pfd-3 ratings “generally correspond” with companies whose senior bonds are rated in the higher end of the BBB category [“adequate”], and their Pfd-4 shares are speculative and generally coincide with entities that have senior bond ratings ranging from the lower end of the BBB category through the BB category.
The following is from a DBRS publication. I couldn’t find the link, will try to look it up again.
Rating Preferred Shares in Canada
DBRS uses a separate rating scale for preferred shares issued in the Canadian securities market (Pfd-1 to Pfd-5). Outside of Canada, the long-term debt (LTD) rating scale is used. Typically, there is a standard mapping or ranking relationship between debt and preferred share ratings in Canada whereby, for example, an entity with an “A” issuer rating will usually be assigned a preferred shares rating of Pfd-2 and an entity with a BBB issuer rating will have a preferred shares rating of Pfd-3. (See the Preferred Share Rating Scale on dbrs.com, which discusses the mapping of the long-term debt to the Pfd scale, among other things.) Outside of Canada, preferred shares would normally be rated two notches below the issuer rating, with further notching downward to reflect subordination to hybrid or other subordinated securities, assuming they are present in the capital structure. However, as explained below, certain rare situations may warrant a deviation from these standard mappings.