New Issue: TRP FixedReset 4.00%+128

TransCanada Corporation has announced:

that it will issue 12 million cumulative redeemable first preferred shares, series 3 (the “Series 3 Preferred Shares”) at a price of $25.00 per share, for aggregate gross proceeds of $300 million on a bought deal basis to a syndicate of underwriters in Canada led by Scotia Capital Inc., and RBC Capital Markets.

The holders of Series 3 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.00 per share, payable quarterly, as and when declared by the board of directors of TransCanada, yielding 4.00 per cent per annum, for the initial five-year period ending June 30, 2015 with the first dividend payment date scheduled for June 30, 2010. The dividend rate will reset on June 30, 2015 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 1.28 per cent. The Series 3 Preferred Shares are redeemable by TransCanada, at its option, on June 30, 2015 and on June 30 of every fifth year thereafter.

The holders of Series 3 Preferred Shares will have the right to convert their shares into cumulative redeemable first preferred shares, series 4 (the “Series 4 Preferred Shares”), subject to certain conditions, on June 30, 2015 and on June 30 of every fifth year thereafter. The holders of Series 4 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the board of directors of TransCanada, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 1.28 per cent.

TransCanada 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 two million Series 3 Preferred Shares at a price of $25.00 per share.

The anticipated closing date is March 11, 2010. The net proceeds of the offering will be used to partially fund capital projects, for other general corporate purposes and to reduce short term indebtedness of TransCanada and its affiliates, which short term indebtedness was used to fund TransCanada’s capital program and for general corporate purposes.

There’s a narrow spread for you!

TRP.PR.A, a FixedReset 4.60%+192 closed last night at 26.01-05 to yield 3.62-58% to its first call 2014-12-31.

TCA.PR.X and TCA.PR.Y, both straights with a $50 par value and a dividend of $2.80 issued by TRP’s operating subsidiary, closed last night at 48.80-86 and 48.80-90, respectively, to yield 5.74-73%. The Break-Even Rate Shock on this issue is therefore an astonishing 266bp – and the straights used for this calculation, remember, are of the operating sub and therefore a marginally better credit.

Update: DBRS has announced that it:

has today assigned a rating of Pfd-2 (low) with a Stable trend to the $350 million Cumulative Redeemable First Preferred Shares, Series 3 (First Preferreds) to be issued by TransCanada Corporation (TCC or the Company). The First Preferreds will yield 4.0% per annum for the initial five-year period ending June 30, 2015. The dividend rate will reset on June 30, 2015, and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 1.28%. The First Preferreds are redeemable by TCC on June 30, 2015, and on June 30 of every fifth year thereafter. The First Preferreds are expected to settle on March 11, 2010.

The First Preferreds will rank equally with existing first preferred shares of the Company and the net proceeds from the offering will be used to partially fund capital projects, for other general corporate purposes and to repay short-term indebtedness of the Company and its affiliates

2 Responses to “New Issue: TRP FixedReset 4.00%+128”

  1. […] FixedResets are not five-year instruments, which I’ll point out again in the wake of the new TRP FixedReset 4.00%+128. Why not? Well, here’s one example: Two years after the auction-rate bond market froze, […]

  2. […] is the new FixedReset 4.00%+128 announced March 4. TRP.PR.B traded 437,233 shares in a range of 24.83-95 before closing at 24.88-90, […]

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