Category: New Issues

Intact Financial Corporation has announced:

that it has entered into an agreement to issue and sell 9,000,000 Non-cumulative Rate Reset Class A Shares Series 3 (the “Series 3 Preferred Shares”), at a price of $25.00 per Series 3 Preferred Share, for aggregate gross proceeds of $225 million on a bought deal basis to a syndicate of underwriters led by CIBC, RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc. IFC has granted the underwriters the option to purchase up to an additional 1,000,000 Series 3 Preferred Shares, at a price of $25.00, at any point up to 48 hours prior to closing of the offering.

IFC intends to use the net proceeds of the offering, together with borrowings under acquisition credit facilities previously arranged by IFC, the proceeds of a previously announced subscription receipt offering, the net proceeds from a previously announced private placement of medium term notes, the net proceeds of a previously announced preferred share offering and a portion of IFC’s existing cash resources, to fund the purchase price for its previously announced acquisition of all of the issued and outstanding shares of AXA Canada (the “Acquisition”). The closing of the Acquisition is expected to occur in the fall of 2011 subject to receipt of required competition and insurance regulatory approvals and the satisfaction of certain closing conditions. The offering is not conditional upon closing of the Acquisition; if the Acquisition is not completed, the net proceeds will be used for general corporate purposes.

The holders of Series 3 Preferred Shares will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of Intact, on a quarterly basis (with the first quarterly dividend to be paid on September 30, 2011), for the initial fixed rate period ending on September 30, 2016, based on an annual rate of 4.20%. The dividend rate will be reset on September 30, 2016 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 2.66%.

Holders of the Series 3 Preferred Shares will have the right, at their option, to convert their Series 3 Preferred Shares into Non-cumulative Floating Rate Class A Shares Series 4 (the “Series 4 Preferred Shares”), subject to certain conditions, on September 30, 2016 and on September 30 every five years thereafter. The holders of Series 4 Preferred Shares will be entitled to receive floating rate non-cumulative preferential cash dividends, as and when declared by the Board of Directors of Intact, at a rate equal to the 90-day Canadian Treasury Bill rate plus 2.66%.

DBRS Limited has assigned a provisional rating of Pfd-2 (low) for the Series 3 Preferred Shares.

The Series 3 Preferred Shares will be offered for sale to the public in each of the provinces and territories of Canada pursuant to a prospectus supplement to be filed with the Canadian securities regulatory authorities. The offering is scheduled to close on or about August 18, 2011.

The issue will be tracked by HIMIPref™. In accordance with my policy on insurance holding companies, I am treating this as a DeemedRetractible (of the FixedReset variety, of course; it will be included in the FixedReset subindex) and have added a maturity at 25.00 on 2022-1-31 to the call schedule.

Sun Life Financial has announced:

a Canadian public offering of $200 million of Class A Non-Cumulative Rate Reset Preferred Shares Series 10R (the “Series 10R Shares”). The Series 10R Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive non-cumulative preferential fixed quarterly dividends for the initial period ending September 30, 2016, as and when declared by the Company’s board of directors, payable in the amount of $0.24375 per Preferred Share, to yield 3.90 per cent annually.

On September 30, 2016, and every five years thereafter, the dividend rate will reset at a rate equal to the 5-Year Government of Canada bond yield plus 2.17 per cent. Subject to certain conditions, holders may elect to convert any or all of their Series 10R Shares into an equal number of Class A Non-Cumulative Floating Rate Preferred Shares Series 11QR (the “Series 11QR Shares”) on September 30, 2016 and on the 30th of September every fifth year thereafter. Holders of the Series 11QR Shares will be entitled to receive non-cumulative preferential floating rate quarterly dividends, as and when declared by the Company’s board of directors, equal to the then 3-month Government of Canada Treasury Bill yield plus 2.17 per cent.

The net proceeds of the offering will be used for general corporate purposes. The offering will be underwritten by a syndicate led by Scotia Capital Inc., BMO Capital Markets and RBC Dominion Securities on a bought deal basis, and is expected to close on August 12, 2011. The proceeds from this domestic public offering are expected to qualify as Tier 1 capital of Sun Life Financial Inc. under current capital adequacy guidelines established by the Office of the Superintendent of Financial Institutions (OSFI).

Subject to regulatory approval, Sun Life Financial Inc. may redeem the Series 10R Shares in whole or in part on September 30, 2016 and on the 30th of September every five years thereafter.

An application is being made to list the Series 10R Shares as of the closing date on the Toronto Stock Exchange.

This issue does not appear to have a NVCC clause, so I have added a DeemedMaturity for 2022-1-31 at 25.00 to the call schedule for analytical purposes.

Intact Financial Corporation has announced:

that it has entered into an agreement to issue and sell 9,000,000 Non-cumulative Rate Reset Class A Shares Series 1 (the “Series 1 Preferred Shares”), at a price of $25.00 per Series 1 Preferred Share, for aggregate gross proceeds of $225 million on a bought deal basis to a syndicate of underwriters led by CIBC, RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc. IFC has granted the underwriters the option to purchase up to an additional 1,000,000 Series 1 Preferred Shares, at a price of $25.00, at any point prior to 30 days following closing of the offering.

IFC intends to use the net proceeds of the offering, together with borrowings under acquisition credit facilities previously arranged by IFC, the proceeds of a previously announced subscription receipt offering and a portion of IFC’s existing cash resources, to fund the purchase price for its previously announced acquisition of all of the issued and outstanding shares of AXA Canada (the “Acquisition”). The closing of the Acquisition is expected to occur in the fall of 2011 subject to receipt of required competition and insurance regulatory approvals and the satisfaction of certain closing conditions. The offering is not conditional upon closing of the Acquisition; if the Acquisition is not completed, the net proceeds will be used for general corporate purposes.

The holders of Series 1 Preferred Shares will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of Intact, on a quarterly basis (with the first quarterly dividend to be paid on September 30, 2011), for the initial fixed rate period ending on December 31, 2017, based on an annual rate of 4.20%. The dividend rate will be reset on December 31, 2017 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 1.72%.

Holders of the Series 1 Preferred Shares will have the right, at their option, to convert their Series 1 Preferred Shares into Non-cumulative Floating Rate Class A Shares Series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on December 31, 2017 and on December 31 every five years thereafter. The holders of Series 2 Preferred Shares will be entitled to receive floating rate non-cumulative preferential cash dividends, as and when declared by the Board of Directors of Intact, at a rate equal to the 90-day Canadian Treasury Bill rate plus 1.72%.

DBRS Limited has assigned a provisional rating of Pfd-2 (low) for the Series 1 Preferred Shares.

The Series 1 Preferred Shares will be offered for sale to the public in each of the provinces and territories of Canada pursuant to a short form prospectus to be filed with the Canadian securities regulatory authorities. The offering is scheduled to close on or about July 12, 2011.

Nice to see another insurance holding company on the board!

Update: DBRS assigns provisional Pfd-2(low) rating.

It is interesting to note the initial fixed dividend period of 6.5 years; this does not appear to be a mechanism to lower the Issue Reset Spread so much (since GOC 5-Years are at 2.10%, while sevens are at 2.18%) as it is to lock in the 4.2% for as long as possible.

BCE Inc. has announced:

that it has entered into an agreement to issue and sell 12,000,000 Cumulative Redeemable First Preferred Shares, Series AK (series AK 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 led by CIBC World Markets Inc., RBC Dominion Securities Inc. and Scotia Capital Inc.

The underwriters have been granted an over-allotment option to purchase at the offering price an additional 1,800,000 series AK preferred shares exercisable until the date that is 30 days following the closing. Should the over-allotment option be fully exercised, the total gross proceeds of the series AK preferred share offering will be $345 million.

The series AK preferred shares will pay on a quarterly basis (with the first quarterly dividend to be paid September 30, 2011), for the initial fixed rate period ending December 30, 2016, as and when declared by the Board of Directors of BCE, a fixed cash dividend based on an annual fixed dividend rate of 4.15%. The dividend rate will be reset on December 31, 2016 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 1.88%. The series AK preferred shares will be redeemable by the issuer on or after December 31, 2016, in accordance with their terms.

Holders of the series AK preferred shares will have the right, at their option, to convert their shares into Cumulative Redeemable First Preferred Shares, Series AL, (series AL preferred shares) subject to certain conditions, on December 31, 2016 and on December 31 every five years thereafter. Holders of the series AL preferred shares will be entitled to receive quarterly floating adjustable cash dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 1.88%.

The series AK preferred shares will be offered for sale to the public in each of the provinces of Canada pursuant to a short form prospectus to be filed with Canadian securities regulatory authorities in all Canadian provinces. The offering is scheduled to close on or about July 5, 2011, subject to certain conditions, including obtaining all necessary regulatory approvals.

The net proceeds of this offering will be used for general corporate purposes.

Update: DBRS rates Pfd-3(high).

Capstone Infrastructure Corporation has announced:

it has agreed to issue, on a bought deal basis, 3,000,000 Cumulative 5-Year Rate Reset Preferred Shares, Series A (the “Series A Shares”) at a price of $25.00 per Series A Share, for aggregate gross proceeds of $75,000,000, to a syndicate of underwriters co-led by TD Securities Inc., Macquarie Capital Markets Canada Ltd. and RBC Capital Markets for distribution to the public.

Capstone has granted the underwriters an option to purchase up to an additional 450,000 Series A Shares at $25.00 per Series A Share to cover over-allotments, exercisable in whole or in part at any time until 30 days after closing, which, if exercised in full, would increase the gross offering size to $86,250,000.

Holders of the Series A Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 5.0% annually for the initial period ending July 31, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the then current 5-year Government of Canada bond yield plus 2.71%.

Holders of Series A Shares will have the right, at their option, to convert their shares into Cumulative Floating Rate First Preferred Shares, Series B (the “Series B Shares”), subject to certain conditions and the Corporation’s right to redeem the Series A Shares as described below, on July 31, 2016 and on July 31 every five years thereafter. Holders of the Series B Shares will be entitled to receive cumulative quarterly dividends at a rate set quarterly equal to the then current three-month Government of Canada Treasury Bill yield plus 2.71%.

Holders of Series B Shares may convert their Series B Shares into Series A Shares, subject to certain conditions and the Corporation’s right to redeem the Series B Shares as described below, on July 31, 2021 and on July 31 every five years thereafter.

The Series A Shares will not be redeemable prior to July 31, 2016. On July 31, 2016 and on July 31 every five years thereafter, the Corporation may, subject to certain conditions, redeem all or any part of the Series A Shares at a cash redemption price per share of $25.00 together with all declared and unpaid dividends. The Corporation may redeem all or any part of the Series B Shares at a cash redemption price per share of $25.00 together with all declared and unpaid dividends in the case of redemptions on July 31, 2021 and on July 31 every five years thereafter or $25.50 together with all declared and unpaid dividends in the case of redemptions on any other date after July 31, 2016.

Standard & Poor’s, a division of the McGraw Hill Companies, Inc. (“S&P”), has assigned a preliminary rating of P-3 for the Series A Shares.

The net proceeds of the offering will be used to fund the Corporation’s final equity commitment to the Amherstburg solar power facility, to fund future potential acquisitions and for general corporate purposes. The Series A Shares will be offered in all provinces and territories of Canada by way of a short-form prospectus. The offering is expected to close on or about June 30, 2011 and is subject to the receipt of all necessary regulatory approvals.

Great! A junk FixedReset to fund solar power! I was hoping for one of these … not.

Canaccord Financial has announced:

that it has agreed to issue 4,000,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series A (the “Series A Preferred Shares”) to a syndicate of underwriters led by CIBC World Markets Inc. and Canaccord Genuity Corp., for distribution to the public. The Series A Preferred Shares will be issued at a price of $25.00 per share for aggregate gross proceeds of $100 million. Holders of the Series A Preferred Shares will be entitled to receive fixed, cumulative, preferential dividends payable quarterly, if, as and when declared by the board of directors of Canaccord, and yielding 5.50% annually for the initial period ending on September 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the five year Government of Canada bond yield plus 3.21%.

Holders of Series A Preferred Shares will have the right, at their option, to convert any or all of their shares into an equal number of Cumulative Floating Rate First Preferred Shares, Series B (the “Series B Preferred Shares”), subject to certain conditions, on September 30, 2016 and on September 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled to receive floating rate, cumulative, preferential dividends payable quarterly, if, as and when declared by the board of directors of Canaccord, at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.21%.

Canaccord has also granted the underwriters an option to purchase up to an additional 600,000 Series A Preferred Shares, on the same terms and conditions as the offering, exercisable in whole or in part, for a period of 30 days from the closing date of the offering. If this option is exercised in full, the total gross proceeds to Canaccord will be $115 million.

DBRS Limited has assigned a rating of Pfd-3 (low) for the Series A Preferred Shares.

The net proceeds of the offering will be used for general corporate purposes. The offering is expected to close on or about June 23, 2011, subject to certain conditions, including Toronto Stock Exchange approval, as well as other conditions set forth in an underwriting agreement to be entered into between Canaccord and the underwriters.

Just what we needed! More junk!

Update: DBRS rates Pfd-3(low):

Prior to the issue of the preferred shares, the only non-operating debt was a $15 million subordinated credit facility issued to the Company’s Canadian operating subsidiary, Canaccord Genuity Corp. Growth in larger underwriting opportunities following the acquisition of Genuity, a growing fixed income business, and international acquisition opportunities in the wake of the financial crisis have convinced the Company to increase its available capital in the form of low-cost preferred shares. The new issue is expected to increase the Company’s debt plus preferred share ratio as a percentage of capitalization to 13.2% (14.7% if the $15 million underwriter option is exercised) and the debt plus preferred share ratio to EBITDA to 0.70 times (0.78 times), both of which DBRS regard as being reasonable for the rating notwithstanding the inherently volatile nature of the Company’s business. On the basis of earnings for the fiscal year ended March 31, 2011, the pro forma fixed charge coverage ratio is expected to be in excess of 15 times with no credit for any prospective earnings on the preferred share proceeds

Shaw Communications has announced:

that it has agreed to issue, on a bought deal basis, to a syndicate of underwriters led by TD Securities Inc. and CIBC World Markets Inc. for distribution to the public, 8,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A (the “Series A Shares”). The Series A Shares will be issued at a price of $25.00 per Series A Share, for aggregate gross proceeds of $200 million. Holders of the Series A Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.50% annually for the initial period ending June 30, 2016.

Thereafter, the dividend rate will be reset every five years at a rate equal to the then current 5-year Government of Canada bond yield plus 2.00%.

Holders of Series A Shares will have the right, at their option, to convert their shares into Cumulative Redeemable Floating Rate Preferred Shares, Series B (the “Series B Shares”), subject to certain conditions, on June 30, 2016 and on June 30 every five years thereafter. Holders of the Series B Shares will be entitled to receive cumulative quarterly dividends at a rate set quarterly equal to the then current three-month Government of Canada Treasury Bill yield plus 2.00%.

Shaw has granted the underwriters an option, exercisable in whole or in part for a period of two business days prior to closing, to purchase up to an additional 2,000,000 Series A Shares at the same offering price, which, if exercised, would increase the gross offering size to $250 million.

The Series A Shares will be offered by way of prospectus supplement to the short form base shelf prospectus of Shaw Communications Inc. dated November 18, 2010. The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.

The net proceeds of the offering will be used for working capital and general corporate purposes.

The offering is expected to close on or about May 31, 2011, assuming satisfaction of certain conditions, including regulatory approvals and other conditions to be set forth in an underwriting agreement to be entered into between Shaw and the underwriters.

Well, it’s been a long wait between issues! The last one, HSE.PR.A, was announced March 10, so that’s two full months.

Update: Supersize me!

DBRS notes that Shaw Communications Inc. (Shaw or the Company) has announced a $100 million increase in its issue of 4.50% preferred shares. DBRS has assigned a rating of Pfd-3 to the preferred shares, which are now in the amount of $300 million. The trend is Stable.

The preferred shares are cumulative five-year rate reset preferred shares with an initial dividend rate of 4.50%. This share issuance was initiated by Shaw today for settlement on or around May 31, 2011. The shares will be issued by way of supplement to Shaw’s base shelf prospectus dated November 18, 2010.

DBRS expects Shaw to use the proceeds from this issue for general corporate purposes, including the financing/repayment of debt obligations.

Husky Energy Inc. has announced:

that it has agreed to issue to a syndicate of underwriters led by CIBC, RBC Capital Markets and BMO Capital Markets (collectively the “Underwriters”) for distribution to the public 10,000,000 Cumulative Rate Reset First Preferred Shares, Series 1 (the “Series 1 Shares”). The Series 1 Shares will be issued at a price of $25.00 per Series 1 Share, for aggregate gross proceeds of $250 million. Holders of the Series 1 Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.45% annually for the initial period ending March 31, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 1.73%.

Holders of Series 1 Shares will have the right, at their option, to convert their shares into Cumulative Rate Reset First Preferred Shares, Series 2 (the “Series 2 Shares”), subject to certain conditions, on March 31, 2016 and on March 31 every five years thereafter. Holders of the Series 2 Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 1.73%.

Husky Energy has granted the Underwriters an option, exercisable in whole or in part prior to closing, to purchase up to an additional 2,000,000 Series 1 Shares at the same offering price. The Series 1 Shares will be offered by way of prospectus supplement to the short form base shelf prospectus of Husky Energy dated November 26, 2010.

The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.

The net proceeds from this offering will be used for repayment of existing indebtedness, capital expenditures, corporate and asset acquisitions and for general corporate purposes. The offering is expected to close on or about March 18, 2011, subject to customary closing conditions and required regulatory approvals.

Nice to see a new investment grade issuer in the market – although some might take it as an indication that the market is overvalued.

Update: Rated Pfd-2(low) by DBRS:

DBRS has today assigned a rating of Pfd-2 (low) with a Stable trend to Husky Energy Inc.’s (Husky) Cumulative Redeemable Rate Reset Preferred Shares, Series 1 (Series 1 Preferred Shares), with a dividend rate of 4.45% per annum, payable quarterly for the initial five-year period ending March 31, 2016.
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The DBRS rating is based on the expectation that the Series 1 Preferred Shares will remain the most highly ranked preferred shares issued by Husky.

Manulife Financial has announced:

a Canadian public offering of Non-cumulative Rate Reset Class 1 Shares Series 3 (“Series 3 Preferred Shares”). Manulife will issue eight million Series 3 Preferred Shares priced at $25 per share to raise gross proceeds of $200 million. The offering will be underwritten by a syndicate of investment dealers led by Scotia Capital Inc. and RBC Dominion Securities Inc. and is anticipated to qualify as Tier 1 capital for Manulife. The expected closing date for the offering is March 11, 2011. Manulife intends to file a prospectus supplement to its September 3, 2010 base shelf prospectus in respect of this issue.

Holders of the Series 3 Preferred Shares will be entitled to receive a non-cumulative quarterly fixed dividend yielding 4.20% annually, as and when declared by the Board of Directors of Manulife, for the initial period ending June 19, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 1.41%.

Holders of Series 3 Preferred Shares will have the right, at their option, to convert their shares into Non-cumulative Rate Reset Class 1 Shares Series 4 (“Series 4 Preferred Shares”), subject to certain conditions, on June 19, 2016 and on June 19 every five years thereafter. Holders of the Series 4 Preferred Shares will be entitled to receive non-cumulative quarterly floating dividends, as and when declared by the Board of Directors of Manulife, at a rate equal to the three-month Government of Canada Treasury Bill yield plus 1.41%.

The net proceeds from the offering will be utilized for general corporate purposes, which may include investments in subsidiaries.

In setting up this issue on HIMIPref™ I have assumed that it will not have a non-viability contingent capital clause, and therefore will be subject to the declining cap on non-qualifying Tier 1 Capital that I anticipate will be applied to Insurance Holding Companies and that therefore it should have a hardMaturity in its call schedule for 2022-1-31.

I hate this. The most important thing in preferred share analysis nowadays is … guessing what OSFI’s going to do. So much for Pillar 3.

The Bank of Montreal has announced:

a domestic public offering of $250 million of Non-Cumulative 5-year Rate Reset Class B Preferred Shares Series 25 (the “Preferred Shares”). The offering will be underwritten on a bought deal basis by a syndicate led by BMO Capital Markets. The Bank has granted to the underwriters an option to purchase up to an additional $50 million of the Preferred Shares exercisable at any time up to two days before closing.

The Preferred Shares will be issued to the public at a price of $25.00 per Preferred Share and holders will be entitled to receive non-cumulative preferential fixed quarterly dividends for the initial period ending August 25, 2016, as and when declared by the board of directors of the Bank, payable in the amount of $0.24375 per Preferred Share, to yield 3.90 per cent annually.

Thereafter, the dividend rate will reset every five years to be equal to the 5-Year Government of Canada Bond Yield plus 1.15 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares into an equal number of Non-Cumulative Floating Rate Class B Preferred Shares Series 26 on August 25, 2016 and on August 25 of every fifth year thereafter. Holders of the Preferred Shares Series 26 will be entitled to receive non-cumulative preferential floating rate quarterly dividends, as and when declared by the board of directors of the Bank, equal to the then 3-month Government of Canada Treasury Bill yield plus 1.15 per cent.

The anticipated closing date is March 11, 2011. The net proceeds from the offering will be used by the Bank for general corporate purposes.

There is a long first coupon on this ($0.4461 payable August 25) so mark your calendars – there might be some trading opportunities!

I haven’t seen anything definitive yet, but I believe this will be the first issue with the new NVCC Clause; I will be most interested to see just exactly what it looks like.

They also announced a announced a new issue of sub-debt:

it intends to issue subordinated indebtedness under its Canadian Medium Term Note Program. The issue, the Series G Medium Term Notes, First Tranche, is a $1.5 billion public offering due 2021. Interest on this issue is payable semi-annually at a fixed rate of 3.979% until July 8, 2016, and at a floating rate equal to the rate on 3 month CDOR plus 1.09% (paid quarterly) thereafter to maturity.

Bank of Montreal may, at its option, with the prior approval of the Office of the Superintendent of Financial Institutions Canada, redeem the subordinated indebtedness, in whole or in part, on not less than 30 days and not more than 60 days notice to registered holders, at any time or from time to time on or after July 8, 2016 at par together with accrued and unpaid interest to but excluding the date fixed for redemption.

The net proceeds of the offering, which is expected to close on March 9, 2011, will be used for general corporate purposes of Bank of Montreal.

This makes things doubly interesting, because OSFI expects different treatment of different levels of capital should the NVCC clause be triggered. I presume they’ve consulted with OSFI regarding the wording of the two clauses; these issues could well set the paradigm.

Update, 2011-3-8: The sub-debt prospectus supplement on SEDAR (Mar 4 2011 Prospectus supplement – English) states:

The Notes may not fully qualify as non-common Tier 2 capital under new Canadian bank capital guidelines.

The Basel Committee on Banking Supervision has announced new international bank capital adequacy rules (commonly called Basel III) which will amend the existing Basel II capital management framework. The Office of the Superintendent of Financial Institutions of Canada (‘‘OSFI’’) has announced that it plans to adopt the new Basel III rules for purposes of Canadian bank capital guidelines. Under the new Basel III rules, effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments issued by a bank must have, either in their contractual terms and conditions or by way of statute in the issuer’s home country, a clause requiring a full and permanent conversion into common shares of such bank upon certain trigger events at the point where such bank is determined to be no longer viable. The Notes as a result may not fully qualify as non-common Tier 2 capital under the new capital rules as no such conversion mechanism exists. For purposes of being included in the Bank’s regulatory capital under the new capital rules, the Notes would be phased out beginning January 31, 2013 (their recognition will be capped at 90% of total Tier 2 capital from January 1, 2013, with the cap reducing by 10% in each subsequent year). As a result, the Bank may, with the prior approval of the Superintendent, redeem the Notes in accordance with their terms.

The similarly available prospectus for the preferreds states:

Under the new Basel III rules, effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments issued by a bank must have, either in their contractual terms and conditions or by way of statute in the issuer’s home country, a clause requiring a full and permanent conversion into common shares of such bank upon certain trigger events at the point where such bank is determined to be no longer viable. The Preferred Shares Series 25 as a result may not fully qualify as non-common Tier 1 capital under the new capital rules as no such conversion mechanism exists. As a result, the Bank may, with the prior approval of the Superintendent, redeem the Preferred Shares Series 25 in accordance with their terms.
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The Basel Committee on Banking Supervision has announced new international bank capital adequacy rules (commonly called Basel III) which will amend the existing Basel II capital management framework. The Office of the Superintendent of Financial Institutions of Canada (‘‘OSFI’’) has announced that it plans to adopt the new Basel III rules for purposes of Canadian bank capital guidelines. Under the new Basel III rules, effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments issued by a bank must have, either in their contractual terms and conditions or by way of statute in the issuer’s home country, a clause requiring a full and permanent conversion into common shares of such bank upon certain trigger events at the point where such bank is determined to be no longer viable. The Preferred Shares Series 25 and, if and when issued, the Preferred Shares Series 26 as a result may not fully qualify as non-common Tier 1 capital under the new capital rules as no such conversion mechanism exists. For purposes of being included in the Bank’s regulatory capital under the new capital rules, the Preferred Shares Series 25 and the Preferred Shares Series 26 would be phased out beginning January 31, 2013 (their recognition will be capped at 90% of total Tier 1 capital from January 1, 2013, with the cap reducing by 10% in each subsequent year). As a result, the Bank may, with the prior approval of the Superintendent, redeem the Preferred Shares Series 25 and the Preferred Shares Series 26, if any, in accordance with their respective terms.