Category: New Issues

GMP Capital has announced:

that it has entered into an agreement with a syndicate of underwriters led by National Bank Financial Inc., GMP Securities L.P. and Scotia Capital Inc., acting as joint bookrunners, under which the underwriters have agreed to purchase, on a bought-deal basis, 4,000,000 Cumulative 5-Year Rate Reset Preferred Shares, Series B (the “Series B Preferred Shares”) at a price of $25.00 per share for aggregate gross proceeds to GMP of $100,000,000.

The Series B Preferred Shares will pay fixed cumulative dividends of $1.375 per share per annum, yielding 5.50% per annum, payable quarterly on the last day of March, June, September and December of each year, as and when declared by the Board of Directors of GMP, for the initial five year period ending on March 31, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the sum of the then current five-year Government of Canada bond yield plus 2.89%.

The Series B Preferred Shares will be redeemable in whole or in part by GMP, at its option, on March 31, 2016, and on March 31 of every fifth year thereafter in accordance with their terms, at a cash redemption price per share of $25.00 together with all accrued and unpaid dividends.

Holders of Series B Preferred Shares will have the right, at their option, to convert their shares into Cumulative Floating Rate Preferred Shares, Series C (the “Series C Preferred Shares”), subject to certain conditions and GMP’s right to redeem the Series B Preferred Shares as described above, on March 31, 2016 and on March 31 of every fifth year thereafter. Holders of the Series C Preferred Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus 2.89%, as and when declared by the Board of Directors of GMP.

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

The Series C Preferred Shares will be redeemable in whole or in part by GMP, at its option, at a cash redemption price per share of $25.00 together with all accrued and unpaid dividends in the case of redemptions on March 31, 2021 and on March 31 every five years thereafter or $25.50 together with all accrued and unpaid dividends in the case of redemptions on any other date after March 31, 2016.

The Company has also granted the underwriters an option (the “Over-Allotment Option”) to purchase up to an additional 600,000 Series B Preferred Shares, on the same terms and conditions as the offering, exercisable any time, in whole or in part, until the date that is 30 days from the closing date of the offering. If the Over-Allotment Option is exercised in full, the total gross proceeds to GMP will be $115,000,000.

The net proceeds of the offering will be used by GMP for general corporate purposes, which may include the reduction of indebtedness.

The Series B 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.

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

The offering is scheduled to close on or about February 22, 2011, subject to certain conditions, including Toronto Stock Exchange and other customary regulatory approvals, as well as other conditions set forth in the underwriting agreement.

More junk! This is going to end in tears. It always does.

Update: The DBRS press release offers a lengthy justification of the rating. Note that according to DBRS, Pfd-3(low) is “investment grade”.

Rona Inc. has announced:

that it has entered into an agreement with a syndicate of underwriters led by National Bank Financial Inc. and BMO Capital Markets, acting as joint bookrunners, under which the underwriters have agreed to purchase, on a bought-deal basis, 5,000,000 Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares (the “Series 6 Class A Preferred Shares”) at a price of $25.00 per share for aggregate gross proceeds to RONA of $125,000,000.

Not the most informative of releases! Canadian Business has more details (but not all of them!):

The syndicate led by National Bank Financial and BMO Capital Markets has agreed to purchase at least five million shares for $25 each, for a total of $125 million in gross proceeds.

That could increase to $143.75 million if the underwriters exercise their overallotment option in full.

The Series 6 Class A preferred shares will each pay $1.31 per year in annual fixed cumulative dividends for five years, yielding 5.25 per cent per year. The dividend rate will be reset in March 2016 and be reset every five years.

Rona has the option to redeem the preferreds on March 31, 2016, and on March 31 of every fifth year after that.

Tom Kiladze of the Globe reports:

The deal had strong demand, according to people on the Street, and if anything, being a unique name probably helped because it gave the deal some novelty.

Novelty, schmovelty. If he wants to say “diversification”, that’s reasonable, but “novelty”?

S&P rates them P-3:

Standard & Poor’s Ratings Services today said it assigned its ‘BB’ global scale and ‘P-3’ Canadian scale ratings to RONA (RON.TO) Inc.’s proposed C$125 million cumulative five-year rate reset preferred shares. We are applying “intermediate” equity treatment to the preferred shares, treating them as 50% debt and 50% equity for the calculation of credit ratios.

In view of our debt treatment, as well as the small size of the issuance relative to RONA’s capital structure, we believe the instruments will have only a modestly negative effect on credit measures while boosting the company’s already strong liquidity as it grows through acquisition.

DBRS rates them Pfd-3:

DBRS has today assigned a new rating of Pfd-3 with a Stable trend to the new five million Cumulative Five-Year Rate Reset Series 6 Class A Preferred Shares (Preferred Shares) of RONA inc. (RONA or the Company) for total proceeds of $125 million.

Brookfield Asset Management has announced:

that it has agreed to issue 8,600,000 Preferred Shares, Series 28 on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., CIBC, RBC Capital Markets and Scotia Capital Inc. for distribution to the public. The Preferred Shares, Series 28 will be issued at a price of $25.00 per share, for aggregate gross proceeds of CDN$215,000,000. Holders of the Preferred Shares, Series 28 will be entitled to receive a cumulative quarterly fixed dividend yielding 4.60% annually for the initial period ending June 30, 2017. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 1.80%.

Holders of Preferred Shares, Series 28 will have the right, at their option, to convert their shares into cumulative Preferred Shares, Series 29, subject to certain conditions, on June 30, 2017 and on June 30 every five years thereafter. Holders of the Preferred Shares, Series 29 will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 1.80%.

Brookfield Asset Management has granted the underwriters an over-allotment option, exercisable for a period of 30 days following closing, to purchase up to an additional 1,290,000 Preferred Shares, Series 28 which, if exercised, would increase the gross offering size to $247,250,000. The Preferred Shares will be offered in all provinces of Canada by way of short form prospectus.

The net proceeds of the issue will be used for general corporate purposes, including funding a portion of the company’s acquisition of additional common shares in U.S. mall operator General Growth Properties Inc. The offering is expected to close on or about February 8, 2011.

Brookfield’s announcement of the General Growth Properties share purchase stated:

Brookfield will issue 27.5 million Class A shares valued at $907 million to Fairholme based on stock market prices and pay $804 million in cash from general corporate sources to acquire the General Growth shares.

As very briefly noted yesterday, DBRS noted the deal with Fairholme but didn’t say much. They rate this issue Pfd-2(low).

Update, 2011-1-21: The Break Even Rate Shock on this issue is 195bp.

Update, 2011-1-26: Brookfield has announced:

that it has agreed to issue approximately 15,300,000 Class A Common Shares (“Class A Shares”), on a bought deal basis, to a syndicate of underwriters led by RBC Capital Markets, CIBC World Markets, TD Securities Inc. and Scotia Capital Inc. (the “Underwriters”) at a price of C$32.85 per Class A Share (the “Offering Price”) for aggregate gross proceeds of C$502.6 million (the “Offering”).

In addition, the Company has granted the Underwriters an over-allotment option, exercisable in whole or in part for a period of 30 days following closing, to purchase up to an additional 2,295,000 Class A Shares at the Offering Price, which, if exercised, would increase the gross offering size to C$578.0 million.

The Class A Shares will be offered by way of a short form prospectus to be filed in all of the provinces of Canada and on a private placement basis in the United States pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended.

As previously announced, the Company has acquired 113.3 million common shares of General Growth Properties, Inc. (“GGP”) from The Fairholme Fund for aggregate consideration of approximately US$1.7 billion. The proceeds of the Offering, together with the proceeds of the Company’s previously announced offering of preferred shares, means that the Company’s purchase of the common shares of GGP is financed almost entirely with permanent equity, thoroughly enhancing the Company’s ability to pursue additional investment opportunities. The Offering is expected to close on or about February 15, 2011 and is subject to receipt of all necessary regulatory approvals.

RioCan Real Estate Investment Trust has announced:

that it has reached agreements to issue to the public on a bought deal basis, subject to regulatory approval, 4 million Cumulative Rate Reset Preferred Trust Units, Series A (the “Series A Units”) at a price of $25 per unit for aggregate gross proceeds of $100 million, and $175 million principal amount of Series O senior unsecured debentures (the “Debentures”).

The Series A Units are being issued by a syndicate of underwriters co-led by RBC Capital Markets, Macquarie Capital Markets Canada Ltd. and Scotia Capital. The Series A Units will pay fixed cumulative distributions of $1.3125 per unit per annum, yielding 5.25% per annum, payable on the last day of March, June, September and December of each year, as and when declared by the board of trustees of RioCan, for the initial five-year period ending March 31, 2016. The first quarterly distribution, if declared, shall be payable on March 31, 2011 and shall be $0.2301 per unit, based on the anticipated closing of the Series A Units of January 26, 2011. The distribution rate will be reset on March 31, 2016 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 2.62%. The Series A Units are redeemable by RioCan, at its option, on March 31, 2016 and on March 31 of every fifth year thereafter.

Holders of Series A Units will have the right to reclassify all or any part of their units as Cumulative Floating Rate Preferred Trust Units, Series B (the “Series B Units”), subject to certain conditions, on March 31, 2016 and on March 31 of every fifth year thereafter. Such reclassification privilege may be subject to certain tax considerations (to be disclosed in the prospectus supplement). Holders of Series B Units will be entitled to receive a cumulative quarterly floating distribution at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus 2.62%, as and when declared by the board of trustees of RioCan.

DBRS Limited (“DBRS”) has assigned a preliminary rating of Pfd-3 (High) for the Series A Units. It is a condition of closing that Standard & Poor’s, a division of the McGraw Hill Companies, Inc. (“S&P”) assign a rating of P-3 (High) for the Series A Units.

RioCan has granted the underwriters an over-allotment option exercisable in whole or in part at any time up to 30 days after closing, to purchase up to an additional 1 million Series A Units at the issue price which, if fully exercised, would result in additional gross proceeds of $25 million.

The Debentures are being issued by a syndicate of underwriters co-led by RBC Capital Markets, CIBC and TD Securities. The Debentures will carry a coupon rate of 4.499% and will mature on January 21, 2016. RioCan has granted the underwriters an option, exercisable at any time up to 48 hours prior to the closing of the Debenture offering, to purchase a further $25 million principal amount of Debentures at the same terms as set forth above.

RioCan will use a portion the proceeds from these offerings to redeem its $180 million 8.33% Series L senior unsecured debentures due April 3, 2014 and the balance for general trust purposes.

The offerings are being made under RioCan’s amended and restated base shelf prospectus dated December 21, 2010. The terms of each of the offerings will be described in prospectus supplements to be filed with Canadian securities regulators. The offering of Series A Units is expected to close on or about January 26, 2011. The Debenture offering is expected to close on or about January 21, 2011.

The debenture issue was later upsized to $225-million.

I believe that this is an interest-bearing issue, although I have not yet seen that spelt out in so many years. I’ll confirm when I see the final prospectus.

DBRS rates it Pfd-3(high).

Update, 2011-1-19: S&P rates it P-3(high).

Update, 2011-1-20: TIM KILADZE of the Globe & Mail reports:

In RioCan’s case, distributions will be taxed as income, not as dividends. That matters, because income is taxed at a higher rate. But the preferred units will be treated just like RioCan’s regular trust units, so a portion of the distributions will be treated as a return of capital. REITs often distribute more than their net incomes because depreciation skews their bottom lines (property values usually go up, not down), and the amount overpaid allows investors to get a better tax treatment.

First National Financial Corporation has announced:

a Canadian public offering of Cumulative 5-Year Rate Reset Class A Preference Shares, Series 1 (“Series 1 Preferred Shares”). First National will issue 4 million Series 1 Preferred Shares priced at $25 per share to raise gross proceeds of C$100 million. The offering will be underwritten by a syndicate of investment dealers led by RBC Capital Markets and Scotia Capital Inc.

The offering is being made in all the provinces of Canada by means of a prospectus and the expected closing date is on or about January 25, 2011. The net proceeds of the offering will be used to repay current indebtedness as well as for general corporate purposes.

Holders of the Series 1 Preferred Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.65% 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 yield plus 2.07%.

Holders of Series 1 Preferred Shares will have the right, at their option, to convert their shares into Cumulative, Floating Rate Class A Preference Shares, Series 2 (“Series 2 Preferred Shares”), subject to certain conditions, on March 31, 2016 and on March 31 every five years thereafter. Holders of the Series 2 Preferred Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 2.07%.

This is interesting because First National is a shadow-bank:

First National is Canada’s largest non-bank lender, offering both commercial and residential mortgage solutions.

Through a combination of our innovative mortgage solutions, Merlin our industry leading mortgage approval and tracking system, and the experts we have on our team, First National has earned trust with Mortgage Brokers, Commercial Clients as well as Residential Customers.

These strong relationships are thanks to an unwavering commitment to delivering excellent service. A Commitment shared by Senior Management and every member of the First National team

Since it’s not regulated as a bank, FN doesn’t have to worry about formal definitions of Tier 1 Capital, so it can make its preferred shares cumulative. Theoretically, this should result in less “equity credit” for the shares and hence detract from the credit quality of issues senior to it. Theoretically.

Update, 2011-1-19: DBRS rates Pfd-3

Transalta Corporation has announced:

that it has agreed to issue to a syndicate of underwriters led by CIBC, RBC Capital Markets and Scotia Capital Inc. for distribution to the public 8,000,000 Cumulative Rate Reset First 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 4.60% 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 2.03%.

Holders of Series A Shares will have the right, at their option, to convert their shares into Cumulative Rate Reset First Preferred Shares, Series B (the “Series B Shares”), subject to certain conditions, on March 31, 2016 and on March 31 every five years thereafter. Holders of the Series B 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 2.03%.

TransAlta Corporation 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 A Shares at the same offering price. The Series A Shares will be offered by way of prospectus supplement under the short form base shelf prospectus of TransAlta Corporation dated October 19, 2009. The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.

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 the Company and its affiliates, which short term indebtedness was used to fund the Company’s capital program and for general corporate purposes. The Company may invest funds that it does not immediately require in short term marketable debt securities. The offering is expected to close on or about December 10, 2010.

Update: The market says “Super-Size me!”

TransAlta Corporation (TSX:TA) (NYSE:TAC) has increased its previously announced bought deal financing to $250 million. TransAlta Corporation has agreed to issue to a syndicate of underwriters led by CIBC, RBC Capital Markets and Scotia Capital Inc. for distribution to the public 10,000,000 Cumulative Rate Reset First 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 $250 million.
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TransAlta Corporation 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 A Shares at the same offering price.

Capital Power Corporation has announced:

that it will issue 5,000,000 Cumulative Rate Reset Preference Shares, Series 1 (the “Series 1 Shares”) at a price of $25 per Series 1 Share (the “Offering”) for aggregate gross proceeds of $125 million on a bought deal basis with a syndicate of underwriters, led by TD Securities Inc. and RBC Capital Markets.

The Series 1 Shares will pay fixed cumulative dividends of $1.15 per share per annum, yielding 4.60% per annum, payable on the last day of March, June, September and December of each year, as and when declared by the board of directors of Capital Power, for the initial five-year period ending December 31, 2015. The first quarterly dividend of $0.3308 per share is expected to be paid on March 31, 2011. The dividend rate will be reset on December 31, 2015 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 2.17%. The Series 1 Shares are redeemable by Capital Power, at its option, on December 31, 2015 and on December 31 of every fifth year thereafter.

Holders of Series 1 Shares will have the right to convert all or any part of their shares into Cumulative Floating Rate Preference Shares, Series 2 (the “Series 2 Shares”), subject to certain conditions, on December 31, 2015 and on December 31 of every fifth year thereafter. Holders of Series 2 Shares will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus 2.17%, as and when declared by the board of directors of Capital Power.

The Offering is expected to close on or about December 16, 2010. Net proceeds will be lent to Capital Power L.P. pursuant to a subordinated debt agreement. Capital Power L.P. will use the funds to repay a portion of the outstanding balance under its credit facilities which were used to fund the acquisition of Island Generation and for general corporate purposes.

Standard & Poor’s, a division of the McGraw Hill Companies, Inc. (“S&P”) has assigned a preliminary rating of P-3 (High) for the Series 1 Shares and DBRS Limited (“DBRS”) has assigned a rating of Pfd-3 (low) for the Series 1 Shares.

The Series 1 Shares will be issued pursuant to a short form prospectus that will be filed with securities regulatory authorities in Canada. The Offering is subject to receipt of all necessary regulatory and stock exchange approvals.

Looks expensive to me.

Update: DBRS assigns Pfd-3(low) rating:

Update, 2010-12-2: Note that CPX should be considered the same name as CZP for purposes of issuer concentration calculation, due to the close relationship between the companies:

CPI Income Services Ltd., the general partner of the Partnership (the General Partner), is responsible for management of the Partnership. The General Partner is a wholly-owned subsidiary of CPI Investments Inc. (Investments). EPCOR Utilities Inc. (collectively with its subsidiaries, EPCOR) owns 51 voting, non-participating shares of Investments and Capital Power Corporation (collectively with its subsidiaries, CPC) indirectly owns 49 voting, participating shares of Investments.
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During the nine months ended September 30, 2010, the Partnership made cash distributions to CPC in the amount proportionate to its ownership interest. At September 30, 2010, CPC owned 29.8% of the Partnership’s units (30.6% at September 30, 2009).

and more specifically:

The Company’s power generation operations and assets are owned by Capital Power LP (CPLP), a subsidiary of the Company. At September 30, 2010, the Company held approximately 21.75 million general partnership units and one common limited partnership unit of CPLP which represented approximately 27.8% and zero %, respectively, of CPLP, and EPCOR held 56.625 million exchangeable limited partnership units of CPLP (exchangeable for common shares of Capital Power on a one-for-one basis) representing approximately 72.2% of CPLP. The general partner of CPLP is wholly-owned by Capital Power and EPCOR’s representation on the Board of Directors does not represent a controlling vote. Accordingly, Capital Power controls CPLP and the operations of CPLP have been consolidated for financial statement purposes.

The assets used in the operating business of the Company are primarily held through CPLP and its subsidiary entities. The interests held by the Company outside CPLP are not material to the Company’s consolidated operations, assets, liabilities and operating business or the Company’s consolidated financial statements and are primarily a consequence of the Company’s organizational structure.

It should also be noted that:

EPCOR, the power utility owned by the city of Edmonton, Alberta, plans to sell about $200 million (US$200 million) worth of stock in Capital Power Corp, a company it created through the spinoff of its generating assets in May last year.

Capital Power Corp and EPCOR said the offering would see 8,334,000 common shares of Capital Power sold at $24.00 each. The offering was to be handled by a syndicate of underwriters led by RBC Capital Markets and TD Securities Inc.

After the offering, EPCOR will indirectly own 61.6 percent of the common shares of Capital Power.

Underwriters have an option to purchase up to an additional 1,250,000 common shares at the price for further proceeds of about $30 million.

BAM Split Corp has announced:

that it has entered into an agreement to sell $110,000,000 principal amount of Class AA Preferred Shares, Series 5 (the “Series 5 Preferred Shares”), with an underwriters’ option to purchase an additional $15,000,000 principal amount of Series 5 Preferred Shares, to a syndicate of underwriters co-led by Scotia Capital Inc., CIBC World Markets Inc., RBC Capital Markets, and TD Securities Inc. on a bought deal basis. Closing of the offering is expected to occur on or about December 10, 2010. The Series 5 Preferred Shares will carry a fixed coupon of 4.85% and will have a final maturity of December 10, 2017. The Series 5 Preferred Shares have a provisional rating of Pfd-2 (low) from DBRS. The net proceeds of the offering will be used to pay a special cash dividend to holders of the Company’s Capital Shares.

BAM Split Corp. owns a portfolio consisting of 53,160,644 Class A Limited Voting Shares of Brookfield Asset Management Inc. (the “Brookfield Shares”) which is expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the company’s Preferred Shares and to enable the holders of the company’s Capital Shares to participate in any capital appreciation of the Brookfield Shares.

As of the March 2010 Semi-annual report there were 14.713-million units outstanding, so the addition of 4.4-million new preferreds (which will presumably be accompanied by a split of the capital units) will dilute the NAV to about 77% of its October 31 value of $109.53, or $84.

Another way to state this is that there used to be 3.61 shares of BAM.A held per unit; now there will be 2.78.

So credit quality has declined, but is still very high.

The funny thing about this is that BNA.PR.C has not budged on the news. It closed Friday at 22.56-69 for a yield-to-worst of 5.87-79% to its scheduled maturity 2019-1-10. So, compared with the new issue, an investor can pick up more than a point of yield for a one-year term extension, which sounds pretty good to me! I will also point out that the tax on the capital gain component of BNA.PR.C’s yield is, of course, deferred …. and, should the company exercise its call right in the event of a takeover of BAM, there’s a lot more upside than in the new issue.

But, you see, the other funny thing about this is that BNA.PR.C pays a dividend of 1.0875 p.a., which means that the Current Yield (which, of course, ignores the capital gain on maturity) is 4.82%. I don’t think the coupon rate of 4.85% on the new issue is coincidental … I love this market!

CU Inc. has announced:

it has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets and RBC Capital Markets, and including TD Securities Inc. The underwriters have agreed to buy 3,000,000 3.80% Cumulative Redeemable Preferred Shares Series 4 at a price of $25.00 per share for aggregate gross proceeds of $75,000,000. The Corporation intends to use the proceeds to purchase preferred shares to be issued by its wholly owned operating subsidiaries, ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd. It is expected that these subsidiaries will use the proceeds to fund a portion of their 2010 capital expenditure programs, to repay existing indebtedness, and for other general corporate purposes.

The Series 4 Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable quarterly for an initial period of five years, as and when declared by the Board of Directors of the Corporation, at an annual rate of $0.95 per share, to yield 3.80% annually. Thereafter, the dividend rate will reset every five years to the then current 5-Year Government of Canada bond yield plus 1.36%. On June 1, 2016, and on June 1 of every fifth year thereafter, the Corporation may redeem the Series 4 Preferred Shares in whole or in part at par.

Holders may elect to convert any or all of their Series 4 Preferred Shares into an equal number of Cumulative Redeemable Preferred Shares Series 5 on June 1, 2016, and on June 1 of every fifth year thereafter. Holders of the Series 5 Preferred Shares will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the board of directors, equal to the then current 3-month Government of Canada Treasury Bill yield plus 1.36%. On June 1, 2021, and on June 1 of every fifth year thereafter, the Corporation may redeem the Series 5 Preferred Shares in whole or in part at par. The Corporation may redeem the Series 5 Preferred Shares in whole or in part by the payment of $25.50 for each share to be redeemed in the case of redemption on any other date.

The offering is being made only in the provinces of Canada by means of a prospectus and the closing date of the issue is expected to be on or about December 2, 2010.

It is of interest to note that they issued long debs yesterday:

CU Inc. announced today that it will issue $125,000,000 of
4.947% Debentures maturing on November 18, 2050, at a price of $100.00 to yield 4.947%. This issue was sold by RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., and TD Securities Inc. Proceeds from the issue will be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of ATCO Electric Ltd.

Update, 2010-11-19: Rated Pfd-2(high) by DBRS and debs rated A(high).

Great-West Lifeco has announced that it:

has today entered into an agreement with a syndicate of underwriters led by BMO Capital Markets, RBC Capital Markets, and Scotia Capital Inc. and including CIBC World Markets Inc., TD Securities Inc., National Bank Financial Inc. and Desjardins Securities Inc. under which the underwriters have agreed to buy, on a bought deal basis, 10,000,000 Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series N (the “Series N Shares”) from Lifeco for sale to the public at a price of $25.00 per Series N Share, representing aggregate gross proceeds of $250 million.

Lifeco has granted the underwriters an option to purchase an additional 2 million Series N Shares at the offering price. Should the underwriters’ over-allotment option be fully exercised, the total gross proceeds of the Series N Share offering will be $300 million.

The Series N Shares will yield 3.65% per annum, payable quarterly, as and when declared by the Board of Directors of the Company, for an initial period ending December 31, 2015. On December 31, 2015 and on December 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 1.30%. Holders of the Series N Shares will have the right to convert their shares into Non-Cumulative Floating Rate First Preferred Shares, Series O of the Company (the “Series O Shares”), subject to certain conditions and the Company’s right to redeem the Series N Shares as described below, on December 31, 2015 and on December 31 every five years thereafter. Holders of the Series O Shares will be entitled to receive a quarterly floating rate dividend, as and when declared by the Board of Directors of the Company, equal to the three-month Government of Canada Treasury Bill yield plus 1.30%. Holders of the Series O Shares may convert their Series O Shares into Series N Shares, subject to certain conditions and the Company’s right to redeem the Series O Shares as described below, on December 31, 2020 and on December 31 every five years thereafter.

The Series N Shares will not be redeemable prior to December 31, 2015. On December 31, 2015 and on December 31 every five years thereafter, the Company may, subject to certain conditions, redeem all or any part of the Series N Shares at a cash redemption price per share of $25.00 together with all declared and unpaid dividends. The Company may redeem all or any part of the Series O Shares at a cash redemption price per share of $25.00 together with all declared and unpaid dividends in the case of redemptions on December 31, 2020 and on December 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 December 31, 2015.

The Series N Share offering is expected to close on November 23, 2010. The net proceeds will be used for general corporate purposes to augment Lifeco’s current liquidity position.

It’s very nice to see an investment-grade FixedReset with a current coupon! However, if we look at GWO’s PerpetualDiscounts as of Friday’s close:

We’ll throw out the data point for GWO.PR.H because only morons would choose to buy them given the other prices. So we’ll estimate an average YTW of 5.40% for GWO PerpetualDiscounts.

So we’ll plug the following into the Break Even Rate Shock Calculator: PD Yield 5.40%, FR Spread -1.75%, Term 5 Years and come up with a Break Even Rate Shock of 257bp, which seems pretty high.

Note that we can’t use GWO.PR.J as a comparable, because it has an Issue Reset Spread of 307bp and is therefore very likely to be called on its first exchange date, 2013-12-31. But for those who are interested, it was quoted at 27.75-99 on Friday, to yield 2.66-36% to call.

Update: Some entertaining commentary from the Globe:

Monday’s issue yields 3.65 per cent, a spread of 130 basis points over the 5-year Government of Canada bonds. In February, the company brought a series of preferred shares that yielded 5.8 per cent. That’s a 215 basis point gap, which new investors may not be aware of.
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The difference likely stems from the types of preferred shares offered. The February issue, Series M, were non-cumulative preferred shares, while Monday’s issue, Series N, were non-cumulative rate reset preferred shares.