Category: New Issues

Great-West Lifeco has announced that it:

has today entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets and Scotia Capital under which the underwriters have agreed to buy, on a bought deal basis, 6,000,000 Non-Cumulative First Preferred Shares, Series M (the “Series M Shares”) from Lifeco for sale to the public at a price of $25.00 per Series M Share, representing aggregate gross proceeds of $150 million.

Lifeco has granted the underwriters an underwriters’ option to purchase an additional 2,000,000 Series M Shares at the same offering price. Should the underwriters’ option be fully exercised, the total gross proceeds of the Series M Shares offering will be $200 million.

The Series M Shares will yield 5.80% per annum, payable quarterly, as and when declared by the Board of Directors of the Company. The Series M Shares will not be redeemable prior to March 31, 2015. On or after March 31, 2015, the Company may, on not less than 30 nor more than 60 days’ notice, redeem the Series M Shares in whole or in part, at the Company’s option, by the payment in cash of $26.00 per Series M Share if redeemed prior to March 31, 2016, of $25.75 per Series M Share if redeemed on or after March 31, 2016 but prior to March 31, 2017, of $25.50 per Series M Share if redeemed on or after March 31, 2017 but prior to March 31, 2018, of $25.25 per Series M Share if redeemed on or after March 31, 2018 but prior to March 31, 2019 and of $25.00 per Series M Share if redeemed on or after March 31, 2019, in each case together with all declared and unpaid dividends up to but excluding the date fixed for redemption.

The dealers are falling all over themselves in their haste to sell this one! One notification I’ve seen says it’s a Reset, while another insists that the issuer is GWL!

More, with comparables, later.

Later: Comparables are:

Assiduous Readers of PrefBlog & PrefLetter will note that not only is the yield on the new issue way below comparables, but that there is no allowance at all for Implied Volatility of the embedded short call. There are two classes of investor who will buy this issue: those desperate to invest a large sum of money with no effort and only one ticket; and morons.

The financial guys in the Power Group are well known for cutting their preferred share issue yields to the bone without worrying over-much as to the post-issue trading price of the shares. I believe – although this is wholly conjecture – that they have figured out that a 3% underwriting commission is pretty rich and demand some of that money back by way of lower issue yields when telling the underwriters on what terms they’ll sell the issue if they ever want to see any Power Group business again.

Remember! The smiley-boys will compete on lunches; they will compete on dinners; they will compete on entertainment; they will compete on number of old school buddies given jobs as relationship managers; they will compete on just about anything but price. The 3% commission is holy!

Even with that in mind, though, this issue is very expensive. If it were to trade at a price of 24.25 (representing the net cost after commission recovery to the bought-deal buyers), it would STILL be yielding less than 6%.

Brookfield Renewable Power Fund has announced:

that the Corporation (as defined below) will issue in Canada a total of 7 million Class A Preference Shares, Series 1 (the “Series 1 Preferred Shares”) guaranteed by the Fund, at a price of $25.00 per share, for aggregate gross proceeds of $175 million, on a bought deal basis to a syndicate of underwriters in Canada led by Scotia Capital Inc., CIBC, RBC Capital Markets and TD Securities Inc.

The holders of Series 1 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.3125 per share, payable quarterly, as and when declared by the Board of Directors of Brookfield Renewable Power Preferred Equity Inc. (the “Corporation”), a wholly-owned subsidiary of the Fund. The Series 1 Preferred Shares will yield 5.25% annually at the issue price, for the initial five-year period ending April 30, 2015 with the first dividend payment date scheduled for April 30, 2010, based on an anticipated closing date of March 10, 2010. The dividend rate will reset on April 30, 2015 and every five years thereafter at a rate equal to the then five-year Government of Canada Bond yield plus 2.62%. The Series 1 Preferred Shares are redeemable on or after April 30, 2015.

The holders of Series 1 Preferred Shares will have the right to convert their shares into Class A Preference Share, Series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on April 30, 2015 and on April 30 of every fifth year thereafter. The holders of Series 2 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors, at a rate equal to the then three month Government of Canada Treasury Bill yield plus 2.62%.

The Corporation has granted the underwriters an over-allotment option exercisable up to 30 days after closing to purchase up to an additional 1.05 million Series 1 Preferred Shares at the issue price on the same terms, for additional gross proceeds of up to $26.25 million.

The Corporation intends to lend the net proceeds of the offering to the Fund, which will repay in whole or in part the $200 million promissory note issued to Brookfield Renewable Power Inc. (“BRPI”) in connection with the Fund’s acquisition of substantially all of BRPI’s Canadian power generating assets in August 2009.

The Fund has previously announced its intention to convert to a corporation on or before January 1, 2011. It is expected that the Corporation will become the successor of the Fund through the conversion. If the Corporation does not become the successor, the successor entity will assume all the obligations of the Fund including those related to the Series 1 and Series 2 Preferred Shares.

The Series 1 and Series 2 Preferred Shares will be offered to the public in Canada pursuant to a short form prospectus that will be filed with securities regulatory authorities in each of the provinces of Canada.

Sorry for the lengthy headline, but I don’t think Brookfield Renewable Power Preferred Equity Inc. has a ticker symbol at this time. The parent and guarantor, Brookfield Renewable Power Fund, is BRC.UN.

Brookfield Asset Management (BAM) notes:

The Brookfield Renewable Power Fund (formerly Great Lakes Hydro Income Fund) was established in November 1999 as a publicly traded investment vehicle to acquire long-life, low cost generating assets which provide stable and sustainable cash distributions to unitholders. Brookfield owns 50.01% of the units on a fully-exchanged basis, with the remaining 49.99% owned by institutional and retail unitholders.

… so this issue should be counted as BAM for issuer concentration calculation purposes.

Update: I understand the deal size has been increased to $250-million.

Update, 2010-2-19: Brookfield press release on increase:

Brookfield Renewable Power Fund (the “Fund”) today announced that as a result of strong investor demand for its previously announced public offering of Class A Preference Shares, Series 1 (the “Series 1 Preferred Shares”), it has agreed to increase the size of the offering from $175 million to $250 million, or from 7 million Series 1 Preferred Shares to 10 million Series 1 Preferred Shares. The issue will be guaranteed by the Fund and will be completed on a bought deal basis to a syndicate of underwriters in Canada led by Scotia Capital Inc., CIBC, RBC Capital Markets and TD Securities Inc. There will not be an over-allotment option, as was previously granted.

DBRS maintains the Pfd-3(high) provisional rating.

Industrial Alliance has announced a new issue.

Issue Name: Industrial Alliance and Financial Services Inc. Non-Cumulative Class A Preferred Shares, Series F

Issue Size: 4-million shares (=$100-million). No greenshoe.

Dividends: 5.90% p.a. (=$1.475), payable quarterly M/J/S/D. Initial dividend payable 2010-6-30 for $0.50110, assuming closing 2010-2-26.

Redemption: From 2015-3-31 to 2016-3-30 @ 26.00
From 2016-3-31 to 2017-3-30 @ 25.75
From 2017-3-31 to 2018-3-30 @ 25.50
From 2018-3-31 to 2019-3-30 @ 25.25
After 2019-3-30 @ 25.00

Comparators are:

The new issue looks expensive – I don’t think it will see much buying from those who understand the principles of the Straight Perpetual Implied Volatility Calculator introduced in the January 2010 PrefLetter!

Update: IAG has issued a rather lengthy press release:

Industrial Alliance Insurance and Financial Services Inc. (“Industrial Alliance” or the “Company”) has today entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and RBC Capital Markets under which the underwriters have agreed to buy, on a bought deal basis, 2,950,000 Common Shares (the “Common Shares”) from Industrial Alliance for sale to the public at a price of $34.00 per Common Share, representing aggregate gross proceeds of $100 million, and 4,000,000 Non-Cumulative Class A Preferred Shares Series F (the “Series F Preferred Shares”) from Industrial Alliance for sale to the public at a price of $25.00 per Series F Preferred Share, representing aggregate gross proceeds of $100 million. The Company has also granted the underwriters an option to buy up to an additional 15% of the Common Shares at the offering price to cover over-allotments, if any.

These share offerings are expected to close on or about February 26, 2010. Their purpose is to increase the Company’s financial flexibility, further improve its balance sheet and provide it with the necessary capital to finance potential acquisitions. The net proceeds of these issues will be added to Industrial Alliance’s capital.

Preferred Shares

The Series F Preferred Shares will yield 5.90% per annum, payable quarterly, as and when declared by the Board of Directors of the Company. The Series F Preferred Shares will not be redeemable prior to March 31, 2015. Subject to regulatory approval, on or after March 31, 2015, Industrial Alliance may, on no less than 30 or more than 60 days’ notice, redeem the Series F Preferred Shares in whole or in part, at the Company’s option, by the payment in cash of $26.00 per Series F Preferred Share if redeemed prior to March 31, 2016, at $25.75 per Series F Preferred Share if redeemed on or after March 31, 2016 but prior to March 31, 2017, at $25.50 per Series F Preferred Share if redeemed on or after March 31, 2017 but prior to March 31, 2018, at $25.25 per Series F Preferred Share if redeemed on or after March 31, 2018 but prior to March 31, 2019 and at $25.00 per Series F Preferred Share if redeemed on or after March 31, 2019, in each case together with all declared and unpaid dividends up to but excluding the date fixed for redemption.

Impact of the Share Issues

According to pro forma data as at December 31, 2009, an issue of $100 million of Common Shares and $100 million of Preferred Shares would increase Industrial Alliance’s solvency ratio from 208% to 226% (228% if the over-allotment is exercised).

These issues will also improve the leeway available to the Company to absorb potential stock market downturns. The Company thus estimates that the solvency ratio will remain above 175% as long as the S&P/TSX stays above about 6,900 points (compared to 7,700 points without these issues) and will remain above 150% as long as the S&P/TSX index stays above about 5,400 points (compared to 6,300 points without these issues).

Notwithstanding the Common Share and Preferred Share offerings, the Company is maintaining its 2010 guidance regarding earnings per share and return on common shareholders’ equity that it gave to the financial markets on February 12, 2010 when it published its results for the fourth quarter of 2009.

Fairfax Financial Holdings has announced:

that it will issue in Canada 8 million Preferred Shares, Series E 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 E will be entitled to receive a cumulative quarterly fixed dividend yielding 4.75% annually for the initial five year period ending March 31, 2015. 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 2.16%.

Holders of Preferred Shares, Series E will have the right, at their option, to convert their shares into Preferred Shares, Series F, subject to certain conditions, on March 31, 2015, and on March 31st every five years thereafter. Holders of the Preferred Shares, Series F 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 2.16%.

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 E 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 February 1, 2010.

The first dividend will be payable March 31 for $0.1887, assuming a 2010-2-1 closing.

Issuer: Groupe Aeroplan Inc.

Issue: Cumulative Rate Reset Preferred Shares, Series 1

Size: 6-million shares (=$150-million) + greenshoe 900,000 shares (=$22.5-million)

Dividend: 6.50% (cumulative) until first Exchange Date. Resets to GOC-5 + 375bp every exchange date. First dividend $0.31164, payable 3/31 assuming 1/20 close.

Exchange: every Exchange Date, to and from floaters. Floaters pay 3-month bills +375, reset quarterly. Either issue may become mandatory if there are insufficient volunteers for the other.

Redemption: every Exchange Date at $25.00. Floaters are the same, and at any other time for $25.50.

Exchange Dates: 2015-3-31 and every five years thereafter

Ratings: Pfd-3 (DBRS); P-3 (S&P)

Update: AER finally got around to issuing its Press Release:

Groupe Aeroplan Inc. (AER: TSX) announced today that it has agreed to issue to a syndicate of underwriters led by CIBC World Markets Inc., RBC Dominion Securities Inc. and TD Securities Inc. as Co-Bookrunners for distribution to the public, 6.0 million cumulative rate reset Preferred Shares, Series 1 (the “Preferred Shares, Series 1”). The Preferred Shares, Series 1 will be issued at a price of C$25.00 per share, for aggregate gross proceeds of C$150 million. Holders of the Preferred Shares, Series 1 will be entitled to receive a cumulative quarterly fixed dividend yielding 6.5% annually for the initial five year period ending March 31, 2015. The dividend rate will be reset on March 31, 2015 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 3.75%. The Preferred Shares, Series 1 will be redeemable by Groupe Aeroplan Inc. on March 31, 2015, and every five years thereafter in accordance with their terms.

Holders of Preferred Shares, Series 1 will have the right, at their option, to convert their shares into cumulative floating rate preferred shares, series 2 (the “Preferred Shares, Series 2”), subject to certain conditions, on March 31, 2015 and on March 31 every five years thereafter. Holders of the Preferred Shares, Series 2 will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.75%.

Groupe Aeroplan Inc. has granted the underwriters an over-allotment option, exercisable in whole or in part anytime up to 30 days following closing, to purchase an additional 900,000 Preferred Shares, Series 1 at the same offering price. Should the over-allotment option be fully exercised, the total gross proceeds of the financing will be C$172.5 million.

The Preferred Shares, Series 1 will be offered by way of a prospectus supplement to the amended and restated base shelf prospectus dated March 26, 2009 filed with the securities regulatory authorities in all provinces and territories of Canada.

The net proceeds of the issue will be used by Groupe Aeroplan Inc. to repay indebtedness, and for general corporate purposes.

Brookfield Properties has announced:

that it has agreed to issue to a syndicate of underwriters led by TD Securities Inc., CIBC, RBC Capital Markets and Scotia Capital Inc., for distribution to the public, six million Preferred Shares, Series N. The Preferred Shares, Series N will be issued at a price of C$25.00 per share, for aggregate proceeds of C$150 million. Holders of the Preferred Shares, Series N will be entitled to receive a cumulative quarterly fixed dividend yielding 6.15% annually for the initial 6 ½-year period ending June 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 3.07%.

Holders of Preferred Shares, Series N will have the right, at their option, to convert their shares into cumulative Preferred Shares, Series O, subject to certain conditions, on June 30, 2016 and on June 30 every five years thereafter. Holders of Preferred Shares, Series O will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.07%.

Brookfield Properties Corporation has granted the underwriters an option, exercisable in whole or in part anytime up to two business days prior to closing, to purchase an additional two million Preferred Shares, Series N at the same offering price. Should the option be fully exercised, the total gross proceeds of the financing will be C$200 million.

The Preferred Shares, Series N will be offered by way of a prospectus supplement to the short-form base shelf prospectus of Brookfield Properties Corporation dated December 15, 2009. The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.

The net proceeds of the issue will be added to the general funds of Brookfield Properties Corporation and be used for general corporate purposes. The offering is expected to close on or about January 20, 2010.

I’ll post more later but basically what I said in the post BPO: Issuer Bid for Retractibles? still goes!

Update: OK, here are the comparables:

So here’s my question: Why would you buy this new issue and hope you’ll get your money back 2016-6-30, when you can buy, f’rinstance, BPO.PR.H and get paid more for less risk?

Update, 2010-1-12: Brookfield Properties has announced:

that as a result of strong investor demand for its previously announced public offering of Preferred Shares, Series N, it has agreed to increase the size of the offering from C$150 million to C$275 million or from 6,000,000 Preferred Shares to 11,000,000 Preferred Shares. There will be no underwriters’ option, as was previously granted.

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.