Category: Issue Comments

Pembina Pipeline Corporation has announced:

that it has closed its previously announced offering of $600 million of 4.80% Fixed-to-Fixed Rate Subordinated Notes, Series 1 due January 25, 2081 (the “Offering”). The Company also announced its intention to redeem its issued and outstanding Cumulative Redeemable Minimum Rate Reset Class A Preferred Shares, Series 11 (TSX: PPL.PR.K) (the “Series 11 Shares”) on March 1, 2021.

Closing of Hybrid Note Offering

Pembina expects to use the net proceeds of the Offering to fund the redemption of its outstanding Series 11 Shares and its Cumulative Redeemable Minimum Rate Reset Class A Preferred Shares, Series 13 (TSX: PPL.PR.M), to repay other outstanding indebtedness, as well as for general corporate purposes.

The subordinated notes were offered through a syndicate of underwriters, co-led by RBC Capital Markets, CIBC Capital Markets, Scotiabank and TD Securities, under Pembina’s short form base shelf prospectus dated December 30, 2020, as supplemented by a prospectus supplement dated January 12, 2021.

Pembina announced that they were considering this step in mid-January and confirmed the intent a few days later.

PPL.PR.K was issued as a FixedReset, 5.75%+500M575 that commenced trading 2016-1-15 after being announced 2016-1-6.

Standard & Poor’s has announced:

• Atlantic Power Corp. (APC) announced it has entered into an agreement to be acquired by I Squared Capital for $3.03 per share.
• The ratings on our ‘BB-‘ issuer credit rating on APC are unchanged and we are placing the company’s ratings on CreditWatch with negative implications.
• At the same time, we are placing the issue-level ratings on APLP Holdings L.P.’s term loan B, $180 million revolving credit facility, and Atlantic Power L.P.’s C$210 million medium-term notes on CreditWatch with negative implications.
• We are also placing the preferred shares at Atlantic Power Preferred Equity Ltd. (APLP) on CreditWatch with negative implications.
• The CreditWatch placements capture our view that the new sponsor could alter the capital structure.

S&P Global Ratings today took the rating actions listed above. Pro forma for the transaction, Atlantic Power’s financial policy will be determined by I Squared, which we would most likely designate a financial sponsor. We typically expect financial sponsors to use leverage to fund transactions to achieve returns. Consequently, ratings are generally lower for financial sponsor-owned companies than strategically owned entities. However, I Squared indicated it plans to redeem some debt and reorganize APC’s capital structure. We will monitor and reassess financial policy, forward leverage, and any changes to the business strategy as we obtain additional clarity on I Squared’s plan and as the transaction approaches financial close.

Following the necessary approvals by APC’s board, shareholders, and regulators, we anticipate common shareholders will receive $3.03 per share at the close of the transaction. The unsecured convertible debt due Jan. 31, 2025, will be converted to common shares for $3.03, plus accrued and unpaid interest. The company’s senior secured term loan will also be redeemed at 101% of principal. Atlantic Power Preferred’s shares will be redeemed for C$22 each in cash. Atlantic Power L.P.’s 5.95% medium term notes due June 23, 2036, will be redeemed for consideration equal to 106.071% of the principal amount plus accrued and unpaid interest at financial close.

The CreditWatch listing reflects the likelihood that I Squared’s financial policy will inform the rating on Atlantic Power pro forma for the transaction. We would most likely classify I Squared as a financial sponsor. Consequently, any rating implications will depend on the forward capital structure, our assessment of the business strategy, and most important how we assess I Squared’s financial policy with regard to APC. We will likely resolve the CreditWatch when the transaction closes, projected for the second quarter of 2021.

Affected issues are AZP.PR.A, AZP.PR.B and AZP.PR.C.

I have previously reported the proposed redemption at $22 of these issues.

Brompton Group has announced:

Life & Banc Split Corp. (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A shares and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively).

The sales period for this overnight offering will end at 9:00 a.m. (ET) on Wednesday, January 20, 2021. The offering is expected to close on or about January 27, 2020 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Class A Shares will be offered at a price of $7.80 per Class A Share for a distribution rate of 15.4% on the issue price, and the Preferred Shares will be offered at a price of $10.15 per Preferred Share for a yield to maturity of 5.1%.(1) The closing price on the TSX for each of the Class A Shares and Preferred Shares on January 18, 2021 was $7.87 and $10.31, respectively. The Class A Share and Preferred Share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company (“Unit”) (calculated as at January 14, 2021), as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank.

The Company invests in a portfolio (the “Portfolio”) consisting of common shares of the six largest Canadian banks and the four major publicly traded Canadian life insurance companies:

Bank of Montreal	Great-West Lifeco Inc.
National Bank of Canada	The Bank of Nova Scotia
Canadian Imperial Bank of Commerce	Royal Bank of Canada
iA Financial Corporation Inc.	The Toronto-Dominion Bank
Sun Life Financial Inc.	Manulife Financial Corporation

The investment objectives for the Class A Shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per Class A Share and to provide the opportunity for growth in the net asset value per Class A Share.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.13625 per Preferred Share ($0.545 per annum), and to return the original issue price plus accrued dividends (if any) to holders of Preferred Shares on October 30, 2023.

The NAVPU was 17.20 as of January 14 and the Whole Units are being offered for 17.95; the premium is therefore 4%. There have been many higher figures on SplitShare offerings, but 4% is still good business!

Update, 2021-1-20: The offering was successful:

Life & Banc Split Corp. (the “Company”) is pleased to announce a successful overnight treasury offering of class A shares and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively). Gross proceeds of the offering are expected to be approximately $53.8 million. The offering is expected to close on or about January 27, 2020 and is subject to certain closing conditions. The Company has granted the Agents (as defined below) an over-allotment option, exercisable for 30 days following the closing date of the offering, to purchase up to an additional 15% of the number of Class A Shares and Preferred Shares issued at the closing of the offering

Power Financial Corporation has announced:

that (i) 137,539 of its outstanding 8,965,485 Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series P (the “Series P shares”) will be converted on February 1, 2021, on a one-for-one basis, into Non-Cumulative Floating Rate First Preferred Shares, Series Q (the “Series Q shares”) of Power Financial, and (ii) 829,570 of its outstanding 2,234,515 Series Q shares will be converted on February 1, 2021, on a one-for-one basis, into Series P shares of Power Financial.

As a result, on February 1, 2021, Power Financial will have issued and outstanding 9,657,516 Series P shares and 1,542,484 Series Q shares.

The Series P shares and Series Q shares are currently listed on the Toronto Stock Exchange under the symbols PWF.PR.P and PWF.PR.Q, respectively.

PWF.PR.P was issued as a a FixedReset, 4.40%+160 that commenced trading 2010-6-29 after being announced 2010-6-17. It reset to 2.306% in 2016; I recommended against conversion but there was a 20% conversion to PWF.PR.Q anyway. After providing notice of extension the company announced the 2021 reset of PWF.PR.P to 1.998%.

PWF.PR.Q is a FloatingReset, Bills+160, that arose via a partial conversion from PWF.PR.P in 2016.

Atlantic Power Corporation has announced:

that it has entered into a definitive agreement with I Squared Capital, a leading global infrastructure investor, under which the company’s outstanding common shares and convertible debentures, and the outstanding preferred shares and medium term notes of certain of its subsidiaries, will be acquired. The total enterprise value of the deal is approximately US$961 million (based on current foreign exchange rates) and the transaction was unanimously approved by Atlantic Power’s board of directors.
…

• Common shareholders of Atlantic Power will receive US$3.03 per common share in cash, representing a 48% premium to the 30-day volume weighted average price per common share on the New York Stock Exchange for the period ending January 14, 2021.
• Atlantic Power’s 6.00% Series E Convertible Unsecured Subordinated Debentures due January 31, 2025 will be converted into common shares of Atlantic Power immediately prior to the closing of the transaction based on the conversion ratio in effect at such time (including the “make whole premium shares” issuable under the terms of the trust indenture for the convertible debentures following a cash change of control). Holders of the convertible debentures will receive US$3.03 per common share held following the conversion of the convertible debentures, plus accrued and unpaid interest on the convertible debentures up to, but excluding, the closing date of the transaction.
• Atlantic Power Preferred Equity Ltd.’s (“APPEL”) cumulative redeemable preferred shares, Series 1, cumulative rate reset preferred shares, Series 2, and cumulative floating rate preferred shares, Series 3, will be redeemed for Cdn$22.00 per preferred share in cash, representing meaningful premiums to the recent trading prices of such shares on the Toronto Stock Exchange.
• Atlantic Power Limited Partnership’s (“APLP”) 5.95% medium term notes due June 23, 2036 will be redeemed for consideration equal to 106.071% of the principal amount of medium term notes held as of the closing of the transaction, plus accrued and unpaid interest on the medium term notes up to, but excluding, the closing date of the transaction. Holders of medium term notes that deliver a written consent to the proposed amendments to the trust indenture governing the medium term notes (as described below) will also be entitled to a consent fee equal to 0.25% of the principal amount of medium term notes held by such holders, conditional on closing of the transaction.

The acquisition of Atlantic Power’s outstanding common shares and the redemption of the outstanding preferred shares of APPEL will be completed by way of a plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia). In connection with the Arrangement, Atlantic Power’s shareholder rights plan will be terminated and all rights to purchase Atlantic Power’s common shares issued pursuant to the shareholder rights plan will be cancelled.
…
The Transaction is also conditional on the approval of two-thirds of the votes cast by holders of Atlantic Power’s common shares voting in person or by proxy at a special meeting of Atlantic Power’s common shareholders and the approval of two-thirds of the votes cast by holders of APPEL’s preferred shares (voting as a single class) in person or by proxy at a meeting of APPEL’s preferred shareholders in respect of both the Arrangement and the proposed continuance of APPEL under the laws of British Columbia.

In addition, the Transaction is conditional upon the approval of the holders of the convertible debentures and the medium term notes, respectively (in each case either by way of votes of the holders of the convertible debentures and the medium term notes holding at least two-thirds of the principal amount of the convertible debentures and the medium term notes, respectively, voted in person or by proxy at separate meetings of the holders of the convertible debentures and the medium term notes or by way of separate written consents of the holders of the convertible debentures and the medium term notes holding not less than two-thirds of the principal amount of convertible debentures and medium term notes outstanding, as applicable), of certain amendments to the trust indentures governing such securities, as described above. Atlantic Power and APLP will seek the approval of the holders of the convertible debentures and medium term notes by way of separate meetings and/or consent solicitations.

A bondholder representing approximately 66% of the principal amount of medium term notes and approximately 19% of the principal amount of convertible debentures outstanding has agreed to vote in favor of or otherwise consent to amendments to the trust indentures governing those securities.

A nice deal for the preferred shareholders, I think, as the yield on the preferreds is now 5.59%, 5.59% and 4.87% for AZP.PR.A, AZP.PR.B and AZP.PR.C, respectively, well within the range of issues in the “Pfd-3 Group” (not bad for issues rated P-4(low)!), although I have received an eMail that stated in part:

Why on earth would any preferred shareholder agree to sell their preferred shares below what is stated in the prospectuses?

I find it hard to believe that any preferred shareholder would agree to selling their preferred shares at $22.

Also, in your Q&A on the transaction, Atlantic Power states…” Preferred shareholders will not be entitled to a pro rata dividend in the event that the closing occurs mid-quarter.”

I believe Atlantic Power is mistaken here.

Presumably the elimination of the pro-rata dividend will be specified in the Plan of Arrangement.

It remains to be seen whether preferred shareholders are able to replicate their success realized in the negotiations regarding the Rona preferred shares in which Fidelity Investments Canada ULC was able to squeeze Lowes for a significant sum.

Many thanks to Assiduous Readers TS and JD for bringing this to my attention!

Further to their previous announcement that they were considering the deal, Pembina Pipeline Corporation has announced:

that it has priced an offering of $600 million of 4.80% Fixed-to-Fixed Rate Subordinated Notes, Series 1 due January 25, 2081 (the “Offering”).

The Offering is expected to close on or about January 25, 2021, subject to customary closing conditions. Pembina expects to use the net proceeds of the Offering to redeem or repurchase its outstanding cumulative redeemable minimum rate reset Class A Preferred Shares, Series 11 (TSX: PPL.PR.K) and its cumulative redeemable minimum rate reset Class A Preferred Shares, Series 13 (TSX: PPL.PR.M), to repay other outstanding indebtedness, as well as for general corporate purposes.

The subordinated notes are being offered through a syndicate of underwriters, co-led by RBC Capital Markets, CIBC Capital Markets, Scotiabank and TD Securities, under Pembina’s short form base shelf prospectus dated December 30, 2020, as supplemented by a prospectus supplement dated January 12, 2021.

These Notes are provisionally rated BB(high) by DBRS and BB+ by S&P which notes:

S&P Global Ratings said today that it assigned its ‘BB+’ rating to Pembina Pipeline Corp.’s (Pembina) $600 million, 4.8% fixed-to-fixed rate subordinated notes series 1 due Jan. 25, 2081. The company intends to use the net proceeds of this offering to repay approximately $420 million of preferred shares outstanding maturing in the first half of 2021, repay some of the borrowings under the Pembina’s credit facilities ($1.64 billion outstanding as of Sept. 30, 2020), and for other general corporate purposes.

We classify the notes as having intermediate equity content because of their subordination, permanence, and optional deferability features, in line with our hybrid capital criteria. As a result, the proposed notes will receive 50% equity treatment for the calculation of credit metrics.

While the subordinated notes are due in 60 years, the interest margins will increase by 25 basis points (bps) in 2031 (year 10) and a further 75 bps (total of 100 bps from initial spread) in 2051 (year 30). We consider this cumulative 100 bps increase as a material step-up, which, in our opinion, could provide an incentive for Pembina to redeem the instruments on that call date. Therefore, we consider 2051 as the effective maturity date for the notes.

In line with our criteria, the notes will receive minimal equity content after the first call date in 2031 because the remaining period until their effective maturity will be less than 20 years.

Pembina Pipeline Corporation has announced:

that it is considering an offering of hybrid subordinated debt securities under its short form base shelf prospectus dated December 30, 2020.

If a successful offering is priced and completed, the Company intends to use the net proceeds of the offering to redeem or repurchase its outstanding cumulative redeemable minimum rate reset Class A Preferred Shares, Series 11 (TSX: PPL.PR.K) and its cumulative redeemable minimum rate reset Class A Preferred Shares, Series 13 (TSX: PPL.PR.M), to repay other outstanding indebtedness, as well as for general corporate purposes. There is no certainty that Pembina will ultimately complete the offering being considered or as to the timing or terms on which such an offering might be completed.

Assiduous Readers will remember that on July 16 I speculated:

Are speculators hypothesizing that if the banks are successful in creating a new market for deeply subordinated 60-year notes, then the other issuers will join in with great enthusiasm, with a resurgent exchange-traded COPrS market?

There’s no indication in the press release that the contemplated notes will be exchange-traded, but the principle is the same!

This announcement has also been discussed in the comments to another thread. Hat tip to stusclues for bringing this to my attention!

Brookfield Renewable Partners L.P. has announced:

that it has determined the fixed distribution rate on its Class A Preferred Limited Partnership Units, Series 7 (“Series 7 Units”) (TSX: BEP.PR.G) for the five years commencing February 1, 2021 and ending January 31, 2026.

Series 7 Units and Series 8 Units

If declared, the fixed quarterly distributions on the Series 7 Units during the five years commencing February 1, 2021 will be paid at an annual rate of 5.50% ($0.343750 per unit per quarter).

Holders of Series 7 Units have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on January 18, 2021, to reclassify all or part of their Series 7 Units, on a one-for-one basis, into Class A Preferred Limited Partnership Units, Series 8 (“Series 8 Units”), effective January 31, 2021.

The quarterly floating rate distributions on the Series 8 Units will be paid at an annual rate, calculated for each quarter, of 4.47% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly distribution rate in respect of the February 1, 2021 to April 30, 2021 distribution period for the Series 8 Units will be 1.11799% (4.585% on an annualized basis) and the distribution, if declared, for such distribution period will be $0.279498 per unit, payable on April 30, 2021.

Holders of Series 7 Units are not required to elect to reclassify all or any part of their Series 7 Units into Series 8 Units.

As provided in the unit conditions of the Series 7 Units, (i) if Brookfield Renewable determines that there would be fewer than 1,000,000 Series 7 Units outstanding after January 31, 2021, all remaining Series 7 Units will be automatically reclassified into Series 8 Units on a one-for-one basis effective January 31, 2021; or (ii) if Brookfield Renewable determines that there would be fewer than 1,000,000 Series 8 Units outstanding after January 31, 2021, no Series 7 Units will be reclassified into Series 8 Units. There are currently 7,000,000 Series 7 Units outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 8 Units effective upon reclassification. Listing of the Series 8 Units is subject to Brookfield Renewable fulfilling all the listing requirements of the TSX and, upon approval, the Series 8 Units will be listed on the TSX under the trading symbol “BEP.PR.H”.

BEP.PR.G was issued as a Preferred Units FixedReset 5.50%+447M550, that commenced trading 2015-11-25 after being announced 2015-11-17. It must be remembered that the taxation status of the distributions is complex and – what’s more – can vary wildly from year to year.

Power Financial Corporation has announced (on January 4):

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series P (the “Series P shares”) and Non-Cumulative Floating Rate First Preferred Shares, Series Q (the “Series Q shares”).

With respect to any Series P shares that remain outstanding after February 1, 2021, holders thereof will be entitled to receive quarterly fixed non-cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Power Financial. The dividend rate for the 5-year period from and including January 31, 2021 to but excluding January 31, 2026 will be 1.998%, being equal to the 5-year Government of Canada bond yield determined as of today plus 1.60%, in accordance with the terms of the Series P shares.

With respect to any Series Q shares that remain outstanding after February 1, 2021, holders thereof will be entitled to receive quarterly floating rate non-cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Power Financial. The dividend rate for the 3-month floating rate period from and including January 31, 2021 to but excluding April 30, 2021 will be 1.715%, being equal to the 3-month Government of Canada Treasury Bill yield determined as of today plus 1.60%, calculated on the basis of the actual number of days in such quarterly period divided by 365, in accordance with the terms of the Series Q shares.

Beneficial owners of Series P shares or Series Q shares who wish to exercise their conversion right should communicate with their broker or other nominee to ensure their instructions are followed so that the registered holders of Series P shares or Series Q shares can meet the deadline to exercise such conversion right, which is 5:00 p.m. (Eastern Time) on January 18, 2021.

PWF.PR.P was issued as a a FixedReset, 4.40%+160 that commenced trading 2010-6-29 after being announced 2010-6-17. It reset to 2.306% in 2016; I recommended against conversion but there was a 20% conversion to PWF.PR.Q anyway.

PWF.PR.Q is a FloatingReset, Bills+160, that arose via a partial conversion from PWF.PR.P in 2016.

Well, it didn’t take long for Quadravest to take advantage of the post-consolidation price of FTN.PR.A. A new overnight deal is being marketted:

Financial 15 Split Corp. (the “Company”) is pleased to announce it will undertake an offering of Preferred Shares and Class A Shares of the Company. The offering will be co-led by National Bank Financial Inc., CIBC World Markets Inc., Scotia Capital Inc. and RBC Capital Markets, and will also include BMO Capital Markets, Canaccord Genuity Corp., Industrial Alliance Securities Inc., Richardson Wealth Limited, Raymond James Ltd., Desjardins Securities Inc., Hampton Securities, Mackie Research Capital Corporation, and Manulife Securities Incorporated.

The Preferred Shares will be offered at a price of $10.15 per Preferred Share to yield 6.7% and the Class A Shares will be offered at a price of $9.80 per Class A Share to yield 15.4%.

The closing price on the TSX of each of the Preferred Shares and the Class A Shares on January 5, 2021 was $10.45 and $9.66, respectively.

Since inception of the Company, the aggregate dividends declared on the Preferred Shares have been $9.08 per share and the aggregate dividends declared on the Class A Shares have been $20.53 per share, for a combined total of $29.61. All distributions to date have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The net proceeds of the offering will be used by the Company to invest in an actively managed, high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal	National Bank of Canada	Bank of America Corp.
The Bank of Nova Scotia	Manulife Financial Corporation	Citigroup Inc.
Canadian Imperial Bank of Commerce	Sun Life Financial Services of Canada Inc.	Goldman Sachs Group Inc.
Royal Bank of Canada	Great-West Lifeco Inc.	JP Morgan Chase & Co.
The Toronto-Dominion Bank	CI Financial Corp.	Wells Fargo & Co.

The Company’s investment objectives are:

Preferred Shares:

• to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends currently in the amount of 6.75% annually, to be set by the Board of Directors annually subject to a minimum of 5.50% until 2025; and
• on or about the termination date, currently December 1, 2025 (subject to further 5-year extensions thereafter), to pay the holders of the Preferred Shares $10.00 per Preferred Share.

Class A Shares:

• to provide holders of the Class A Shares with regular monthly cash dividends in an amount to be determined by the Board of the Directors; and
• to permit holders to participate in all growth in the net asset value of the Company above $10 per Unit, by paying holders on or about the termination date of December 1, 2025 (subject to further 5-year extensions thereafter) such amounts as remain in the Company after paying $10 per Preferred Share.

The sales period of this overnight offering will end at 9:00 a.m. EST on January 7, 2021. The offering is expected to close on or about January 14, 2021 and is subject to certain closing conditions including approval by the TSX.

So the Whole Units are being offered at 19.95, while the December 31, 2020, NAVPU was 18.60, a premium of 7.26%. What a great business this is!