Category: New Issues

Fortis Inc. has announced:

that it has entered into an agreement with a syndicate of underwriters led by TD Securities Inc., Scotia Capital Inc., RBC Capital Markets and CIBC, pursuant to which they have agreed to purchase from Fortis and sell to the public 10,000,000 Cumulative Redeemable Five-Year Fixed Rate Reset Series First Preference Shares, Series H (the “Series H First Preference Shares”) of the Corporation (the “Offering”).

Holders of Series H First Preference Shares will be entitled to receive a cumulative quarterly fixed dividend for the initial period ending on but excluding June 1, 2015 (the “Initial Period”) of 4.25% per annum, if, as and when declared by the Board of Directors of the Corporation. The first of such dividends, if declared, shall be payable on June 1, 2010 and shall be $0.3668 per Series H First Preference Share. Thereafter, the dividend rate will reset every five years at a level of 1.45% over the five-year Canada bond yield. Holders of Series H First Preference Shares will, subject to certain conditions, have the option to convert all or any part of their shares into Cumulative Redeemable Floating Rate First Preference Shares, Series I (the “Series I First Preference Shares”) of the Corporation at the end of the Initial Period and at the end of each subsequent five-year period.

Holders of Series I First Preference Shares will be entitled to receive a cumulative quarterly floating dividend at the rate of the three-month Government of Canada Treasury Bill yield plus 1.45%, if, as and when declared by the Board of Directors of the Corporation.

The purchase price of $25.00 per Series H First Preference Share will result in gross proceeds of $250 million. The net proceeds of the Offering will be used to repay borrowings under the Corporation’s committed credit facility and to inject additional equity into a regulated subsidiary.

The first coupon will be for $0.3668 payable 2010-6-1 based on closing 2010-1-26.

FTS has an outstanding FixedReset, FTS.PR.G, 5.25%+213, which closed Friday at 26.46-70 to yield 3.70-43% to its presumed call 2013-9-1. There is also an outstanding PerpetualDiscount, FTS.PR.F, which pays $1.225 and last closed at 21.71-40 to yield 5.71-49%.

The Break-Even Rate Shock for the issue against FTS.PR.F, according to the BERS Calculator is a rather high 222bp.

Brookfield Asset Management has announced:

that it has agreed to issue to a syndicate of underwriters led by Scotia Capital Inc., CIBC World Markets, RBC Capital Markets, and TD Securities Inc. for distribution to the public 6,000,000 Preferred Shares, Series 24. The Preferred Shares, Series 24 will be issued at a price of $25.00 per share, for aggregate gross proceeds of CDN$150,000,000. Holders of the Preferred Shares, Series 24 will be entitled to receive a cumulative quarterly fixed dividend yielding 5.40% 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 5-year Government of Canada bond yield plus 2.30%.

Holders of Preferred Shares, Series 24 will have the right, at their option, to convert their shares into cumulative Preferred Shares, Series 25, subject to certain conditions, on June 30, 2016 and on June 30 every five years thereafter. Holders of the Preferred Shares, Series 25 will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 2.30%.

Brookfield Asset Management Inc. has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase an additional 2,000,000 Preferred Shares, Series 24 at the same offering price. The Preferred Shares will be offered by way of prospectus supplement under the short form base shelf prospectus of Brookfield Asset Management Inc. dated January 12, 2009. The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.

Note the relatively long term until the first Exchange Date: 6.5 years!

The first dividend will be for $0.2811, payable 2010-3-31, assuming a closing date of 2010-1-14.

BAM.PR.P, the 7.00%+445 FixedReset issued last June, closed last night at 27.30-42 to yield 4.90-79% until its presumed call 2014-9-30.

The BAM PerpetualDiscounts, BAM.PR.M & BAM.PR.N, closed last night yielding around 6.80%, therefore the Break-Even Rate Shock for the issue, according to the BERS Calculator is a very high 249bp.

Update: Brookfield has announced:

that as a result of strong investor demand for its previously announced public offering of Preferred Shares, Series 24, it has agreed to increase the size of the offering from CDN$150,000,000 to CDN$275,000,000 or from 6,000,000 Preferred Shares to 11,000,000 Preferred Shares. There will not be an underwriters’ option, as was previously granted.

Update: DBRS confirms a rating of Pfd-2(low) with a Stable trend.

Yellow Pages Income Fund has announced:

that its subsidiary, YPG Holdings Inc. (the “Issuer”), will be issuing 5,000,000 cumulative rate reset preferred shares, series 5 (the “Series 5 Preferred Shares”) for aggregate gross proceeds of $125 million on a bought deal basis to a syndicate of underwriters led by BMO Nesbitt Burns Inc., CIBC World Markets Inc., RBC Dominion Securities Inc. and Scotia Capital Inc., acting as joint book-runners. The Series 5 Preferred Shares will pay cumulative dividends of $1.7250 per share per annum, yielding 6.90% per annum, payable quarterly, for the initial five and one-half year period ending June 30, 2015. The dividend rate will be reset on June 30, 2015 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 4.26 %. The Series 5 Preferred Shares will be redeemable by the Issuer on or after June 30, 2015, in accordance with their terms.

Holders of the Series 5 Preferred Shares will have the right, at their option, to convert their shares into cumulative floating rate preferred shares, series 6, (the “Series 6 Preferred Shares”) subject to certain conditions, on June 30, 2015 and on June 30 every five years thereafter. Holders of the Series 6 Preferred 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 4.26 %.

The Issuer has also granted the underwriters the option to purchase up to 750,000 additional Series 5 Preferred Shares to cover over-allotments, exercisable in whole or in part anytime up to 30 days following closing of the offering.

Net proceeds resulting from the sale of the Series 5 Preferred Shares of the Issuer shall be used by the Issuer to repay indebtedness, and for general corporate purposes.

The first dividend is payable on March 29, 2010 for $0.45842, assuming a closing date of 2009-12-22.

IGM Financial has announced:

that it has agreed to issue 6,000,000 Non-Cumulative First Preferred Shares, Series B (the “Series B Shares”) on a bought deal basis, for gross proceeds of $150 million. The Series B Shares will be priced at $25.00 per share and will carry an annual dividend yield of 5.90%. Closing is expected on or about December 8, 2009. The issue will be underwritten by a syndicate of underwriters co-led by BMO Capital Markets and by RBC Capital Markets.

IGM Financial has also granted the underwriters an option to purchase an additional 2,000,000 Series B Shares at the same offering price, exercisable up to 48 hours prior to closing. Should the underwriters’ option be exercised fully, the total gross proceeds of the Series B Share offering will be $200 million.

Proceeds from the issue will be used to supplement IGM Financial’s financial resources and for general corporate purposes.

The first dividend is anticipated (based on 2009-12-8 closing) to be 0.57788, payable 2010-4-30.

Redemption terms are standard for straights: redeemable for 26.00 commencing 2014-12-31; redemption price declines by 0.25 p.a. until 2018-12-31; redeemable at 25.00 thereafter.

It’s quite interesting that these are non-cumulative. There is no direct reason for them to be so; IGM is not regulated as a bank or insurer and doesn’t need to qualify them for Tier 1 Capital. I can only imagine – so far – two explanations: (i) that they have decided that making it non-cumulative won’t cost them anything (in other words, that the current spreads observed for cumulativity exist only as a proxy for “non-financial”, and not for any other reason), or (ii) that they are preparing in some way for their parent, PWF, to be regulated due to its position as owner of an insurer, GWO, and there might be a need to qualify this issue as Tier 1 on the consolidated books of PWF. But all that’s merely speculation.

EPCOR Power Equity has announced:

that EPCOR Power Equity Ltd. will issue 4,000,000 Cumulative Rate Reset Preferred Shares, Series 2 (the “Series 2 Shares”) at a price of $25.00 per share, for aggregate gross proceeds of $100 million (the “Offering”) on a bought deal agreement basis to a syndicate of underwriters in Canada led by CIBC World Markets Inc. and Scotia Capital Inc.

The Series 2 Shares will pay fixed cumulative dividends of $1.75 per share per annum, yielding 7.0% per annum, payable on the last business day of March, June, September and December of each year, as and when declared by the board of directors of the Corporation, for the initial five-year period ending December 31, 2014. The first quarterly dividend of $0.28288 per share is expected to be paid on December 31, 2009. The dividend rate will reset on December 31, 2014 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 4.18%. The Series 2 Shares are redeemable by the Corporation on December 31, 2014 and on December 31 every five years thereafter.

The holders of Series 2 Shares will have the right to convert their shares into Cumulative Floating Rate Preferred Shares, Series 3 (the “Series 3 Shares”) of the Corporation, subject to certain conditions, on December 31, 2014 and on December 31 of every fifth year thereafter. The holders of Series 3 Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the board of directors of the Corporation, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate and 4.18%.

The Partnership will fully and unconditionally guarantee the payment of dividends, as and when declared, the amounts payable on a redemption of the Series 2 Shares or Series 3 Shares for cash and the amounts payable in the event of the liquidation, dissolution and winding up of the Issuer.

The offering is expected to close on or about November 2, 2009, subject to certain conditions, including conditions set forth in the underwriting agreement. The net proceeds will be used to repay outstanding bank indebtedness.

The first coupon is scheduled for payment 12/31, for $0.28288, assuming closing 2009-11-2

Update: The PerpetualDiscount EPP.PR.A closed today at 16.55b to yield 7.42% at the bid price. Therefore, according to the BERS Calculator (and, of course, the assumptions embedded therein), the Break-Even Rate Shock is 0.62%.

Industrial Alliance Insurance and Financial Services Inc. has announced:

has today entered into an agreement with a syndicate of underwriters led by Scotia Capital Inc. and RBC Dominion Securities Inc. under which the underwriters have agreed to buy, on a bought deal basis, 4,000,000 Non-Cumulative Class A Preferred Shares Series E (the “Series E Preferred Shares”) from Industrial Alliance for sale to the public at a price of $25.00 per Series E Preferred Share, representing aggregate gross proceeds of $100 million.

The Series E Preferred Shares will yield 6.00% per annum, payable quarterly, as and when declared by the Board of Directors of the Company.

The Series E Preferred Shares will not be redeemable prior to December 31, 2014. Subject to regulatory approval, on or after December 31, 2014, Industrial Alliance may, on no less than 30 or more than 60 days’ notice, redeem the Series E Preferred Shares in whole or in part, at the Company’s option, by the payment in cash of $26.00 per Series E Preferred Share if redeemed prior to December 31, 2015, at $25.75 per Series E Preferred Share if redeemed on or after December 31, 2015 but prior to December 31, 2016, at $25.50 per Series E Preferred Share if redeemed on or after December 31, 2016 but prior to December 31, 2017, at $25.25 per Series E Preferred Share if redeemed on or after December 31, 2017 but prior to December 31, 2018 and at $25.00 per Series E Preferred Share if redeemed on or after December 31, 2018, in each case together with all declared and unpaid dividends up to but excluding the date fixed for redemption.

The Series E Preferred Share offering is expected to close on October 15, 2009. The net proceeds will be used for general corporate purposes.

The first coupon is payable 2009-12-31 for $0.3139 assuming closing proceeds on 2009-10-15.

IAG.PR.A closed last night at 19.66-80, or 5.90-85% in yield terms.

Hard on the heels of the GWO 5.65% Straight announced last week comes an announcement from Power Financial Corporation:

Power Financial Corporation announced today that it has agreed to issue 6,000,000 Non-Cumulative First Preferred Shares, Series O (the “Series O Shares”) on a bought deal basis, for gross proceeds of $150 million. The Series O Shares will be priced at $25.00 per share and will carry an annual dividend yield of 5.80%. Closing is expected on or about October 9, 2009. The issue will be underwritten by a syndicate of underwriters led by BMO Capital Markets, Scotia Capital Inc. and RBC Capital Markets.

Power Financial has also granted the underwriters an option to purchase an additional 4,000,000 Series O Shares at the same offering price. Should the underwriters’ option be exercised fully, the total gross proceeds of the Series O Share offering will be $250 million.

Proceeds from the issue will be used to supplement the Corporation’s financial resources and for general corporate purposes.

The first dividend will be $0.45288 payable 2010-1-31 based on closing 2009-10-9

The shares are redeemable at 26.00 commencing 2014-10-31; the redemption price declines by $0.25 annually until 2018-10-31; redeemable at 25.00 thereafter.

Update: The issue may be compared with extant PWF issues outstanding:

Fairfax Financial Holdings has announced:

that it will issue in Canada 8 million Preferred Shares, Series C at a price of $25.00 per share, for aggregate gross proceeds of $200 million, on a bought deal basis to a syndicate of Canadian underwriters.

Holders of the Preferred Shares, Series C will be entitled to receive a cumulative quarterly fixed dividend yielding 5.75% annually for the initial five year period ending December 31, 2014. 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 3.15%.

Holders of Preferred Shares, Series C will have the right, at their option, to convert their shares into Preferred Shares, Series D, subject to certain conditions, on December 31, 2014, and on December 31st every five years thereafter. Holders of the Preferred Shares, Series D will be entitled to receive cumulative quarterly floating dividends at a rate equal to the then current three-month Government of Canada Treasury Bill yield plus 3.15%.

Fairfax has granted the underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to closing, to purchase an additional 2 million Preferred Shares, Series C at the same offering price for additional gross proceeds of $50 million.

Fairfax intends to use the net proceeds of the offering to augment its cash position, to increase short term investments and marketable securities held at the holding company level, to retire outstanding debt and other corporate obligations from time to time, and for general corporate purposes. The offering is expected to close on or about October 5, 2009.

The first dividend is payable 2009-12-31 for $0.34362.

This issue continues – and extends – the trend towards lower quality in FixedReset issuance: the issue is provisionally rated Pfd-3(low) by DBRS and P-3 by S&P.

It is rather interesting that a financial holding company is issuing cumulative preferreds (and I gnash my teeth about it, because “cumulative” has been a very good proxy for “non-financial” in my analysis). Assiduous Readers will remember that Treasury’s wish-list for bank regulation includes:

many of the [Bank Holding Companies] that have been most active in volatile capital markets activities have not been held to the highest consolidated regulatory capital standard available. To remedy this situation, in addition to the current [Financial Holding Company (FHC)] eligibility requirements, all FHCs should be required to achieve and maintain well-capitalized and well-managed status on a consolidated basis.

In civilized countries (as opposed to Canada), Tier 1 Capital is not cumulative, so Fairfax is either unconcerned about the prospects of consolidation or is convinced that this issue will be grandfathered if consolidation becomes effective.

Great-West Lifeco has announced that it:

has today entered into an agreement … under which the underwriters have agreed to buy, on a bought deal basis, 6,000,000 Non-Cumulative First Preferred Shares, Series L … 5.65% per annum

The morons have copy-protected the PDF, since this press release is such a big secret. I’m not retyping all that!

Issue: Great-West Lifeco Inc. Non-Cumulative First Preferred Shares, Series L

Size: 6-million shares (=$150-million) + greenshoe 4-million shares (=$100-million)

Dividends: 5.65% p.a. (= $1.4125); first dividend payable 2009-12-31 for $0.34829 based on closing 2009-10-2

Redeemable: Black-out until 2014-12-31. Redeemable at $26.00 commencing 2014-12-31; redemption price declines by $0.25 p.a. until 2018-12-31; redeemable at $25.00 thereafter.

This issue has great significance: it is the first straight to be issued since RY.PR.H settled 2008-4-29 and … they didn’t fiddle with the standard redemption terms. I had been afraid that issuers would assume that market had been lulled into idiocy by the five-year redemption terms that are standard in the FixedReset sector and try to grab themselves a little more advantage.

The issue may be compared with extant GWO issues outstanding: