Category: New Issues

Manulife Financial has announced:

a Canadian public offering of Non-cumulative Rate Reset Class 1 Shares Series 1 (“Series 1 Preferred Shares”). Manulife will issue eight million Series 1 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 June 3, 2009. Manulife has also granted the underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to closing, to purchase up to an additional two million Series 1 Preferred Shares. The maximum gross proceeds raised under the offering will be $250 million should this option be exercised in full. Manulife intends to file a prospectus supplement to its May 8, 2009 amended and restated base shelf prospectus in respect of this issue.
Holders of the Series 1 Preferred Shares will be entitled to receive a non-cumulative quarterly fixed dividend yielding 5.60% annually, as and when declared by the Board of Directors of Manulife, for the initial period ending September 19, 2014. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 3.23%.

Holders of Series 1 Preferred Shares will have the right, at their option, to convert their shares into Non-cumulative Rate Reset Class 1 Shares Series 2 (“Series 2 Preferred Shares”), subject to certain conditions, on September 19, 2014 and on September 19 every five years thereafter. Holders of the Series 2 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 3.23%.

Approximately half of the net proceeds from the offering will be applied to reduce amounts outstanding under Manulife’s credit facility with Canadian chartered banks and the balance of the net proceeds will be utilized for general corporate purposes.

The first dividend is payable September 19 for $0.41425 based on a June 3 closing … perhaps not as enormously fat as some of us might like, but fat enough to be worth marking the calendars.

What a difference a quarter makes, eh? This issue closes almost exactly three months after MFC.PR.D closed: same structure, 6.60%+456.

Update: I am advised that the deal size has been increased to 14-million shares (=$350-million) with no greenshoe.

Hard on the heels of their 1Q09 Results, Sun Life Financial has brought out a new issue.

Issue: Class A Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 6R

Size: 8-million shares (=$200-million) + 2-million greenshoe (=$50-million)

Dividend: $1.50 (=6.00%) until first Reset Date; GOC 5-Year + 379bp thereafter. First dividend $0.54658 payable Sept 30 – nice and fat, so mark your calendars!

Exchangeable: Every Reset Date into Series 7QR (sic), pays 3-month bills +379, reset quarterly

Redemption: Every Reset Date at $25.00. Series 7QR every reset date at 25.00, 25.50 at all other times.

Reset Date: 2014-6-30 and every five years thereafter.

Closing: 2009-5-20

Update: Press Release

Co-operators General Insurance Company has announced a new issue:

Issue Name: Non-cumulative 5-Year Rate Reset Class E Preference Shares, Series D

Issue Size: 4-million shares (=$100-million) + greenshoe 0.6-million shares (=$15-million)

Dividend: 7.25% until first Reset Date. Reset to 5-Year GOC + 521bp on each Reset Date

First Dividend: Payable 2009-9-30, $0.6505 (lovely and fat! Mark your calendars!)

Reset Dates: 2014-6-30 and every five years thereafter.

Redemption: Every Reset Data at 25.00

Exchangeable: Every Reset Date to Series E, pay 3-month Treasury Bills + 521bp, reset quarterly. Series E is redeemable on Reset Dates at 25.00 and at 25.50 at all other times.

Closing Date: Scheduled for May 22

Nice to see a new issue come out, even if the credit is not tip-top (Pfd-3 by DBRS). The extant PerpetualDiscount, CCS.PR.C closed last night at 15.20-49 to yield 8.38-20%

Update: Press Release.

Royal Bank has announced:

a domestic public offering of $200 million of Non-Cumulative, 5 year rate reset Preferred Shares Series AX.

The bank will issue 8 million Preferred Shares Series AX priced at $25 per share and holders will be entitled to receive non-cumulative quarterly fixed dividend for the initial period ending November 24, 2014 in the amount of $1.525 per share, to yield 6.10 per cent annually. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 3.0 million Preferred Shares at the same offering price.

Subject to regulatory approval, on or after November 24, 2014, the bank may redeem the Preferred Shares Series AX in whole or in part at par. Thereafter, the dividend rate will reset every five years at a rate equal to 4.13 per cent over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series AX will, subject to certain conditions, have the right to convert all or any part of their shares to non-cumulative floating rate preferred shares Series AY (the “Preferred Shares Series AY”) on November 24, 2014 and on November 24 every five years thereafter.

Holders of the Preferred Shares Series AY will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 4.13 per cent. Holders of Preferred Shares Series AY will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series AX on November 24, 2019 and on November 24 every five years thereafter.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is April 29, 2009.

… and very shortly after that announcement, announced:

that as a result of strong investor demand for its domestic public offering of Non-Cumulative, 5 year rate reset Preferred Shares Series AX (the “Preferred Shares Series AX”), the size of the offering has been increased to 12 million shares. The gross proceeds of the offering will now be $300 million. In addition, the bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 1 million Preferred Shares Series AX at a price of $25 per share. The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is April 29, 2009.

The first coupon is another fat one: $0.48884, payable August 24. Mark your calendars – there could be some good trades lying around just before the ex-Date!

This issue is good news for the continued health of the Fixed-Reset market: it marks the first time that a new issue has come out with a lower initial fixed rate and lower reset. The fact that they got advice to the effect that they only needed a week to bring it to market and then increased the issue size shows that – whatever else might be going on in the heads of the buyers – they are not blindly addicted to escalating coupons. A small item of cheer, but cheerful nevertheless.

TD Bank has announced:

that it has entered into an agreement with a group of underwriters led by TD Securities Inc. for an issue of 8 million non-cumulative 5-Year Rate Reset Class A Preferred Shares, Series AK (the Series AK Shares), carrying a face value of $25.00 per share, to raise gross proceeds of $200 million. TDBFG intends to file in Canada a prospectus supplement to its September 29, 2008 base shelf prospectus in respect of this issue.

TDBFG has also granted the underwriters an option to purchase, on the same terms, up to an additional 3 million Series AK Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing. The maximum gross proceeds raised under the offering will be $275 million should this option be exercised in full.

The Series AK Shares will yield 6.25% annually, payable quarterly, as and when declared by the Board of Directors of TDBFG, for the initial period ending July 31, 2014. Thereafter, the dividend rate will reset every five years at a level of 4.33% over the then five-year Government of Canada bond yield.

Holders of the Series AK Shares will have the right to convert their shares into non-cumulative Floating Rate Class A Preferred Shares, Series AL (the Series AL Shares), subject to certain conditions, on July 31, 2014, and on July 31st every five years thereafter. Holders of the Series AL Shares will be entitled to receive quarterly floating dividends, as and when declared by the Board of Directors of TDBFG, equal to the three-month Government of Canada Treasury bill yield plus 4.33%.

The issue is anticipated to qualify as Tier 1 capital for TDBFG and the expected closing date is April 3, 2009. TDBFG will make an application to list the Series AK Shares as of the closing date on the Toronto Stock Exchange.

The first dividend will be payable July 31 and be for $0.50942 based on the anticipated April 3 closing.

It is noteworthy – to me! – that the 433bp spread on this issue is equal to the recent CM.PR.M FixedReset 6.50%+433. This means that I don’t have to fiddle around the HIMIPref™ software so much! Assiduous Readers may recall that design decisions made long before the advent of this flood of FixedResets has made the programmatic definition of differing spread rates a rather fiddlesome thing.

Update, 2009-3-31: TD has announced:

that a group of underwriters led by TD Securities Inc. has exercised its option in full to purchase an additional 3 million non-cumulative 5-Year Rate Reset Class A Preferred Shares, Series AK (the Series AK Shares) carrying a face value of $25.00 per share. This brings the total issue announced on
March 26, 2009, and expected to close April 3, 2009, to 14 million shares and gross proceeds raised under the offering to $350 million. TDBFG has filed in Canada a prospectus supplement to its September 29, 2008 short form base shelf prospectus in respect of this issue.

Royal Bank has announced:

a domestic public offering of $200 million of Non-Cumulative, 5 year rate reset Preferred Shares Series AV.

The bank will issue 8 million Preferred Shares Series AV priced at $25 per share and holders will be entitled to receive non-cumulative quarterly fixed dividend for the initial period ending August 24, 2014 in the amount of $1.5625 per share, to yield 6.25 per cent annually. The bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 3.0 million Preferred Shares at the same offering price.

Subject to regulatory approval, on or after August 24, 2014, the bank may redeem the Preferred Shares Series AV in whole or in part at par. Thereafter, the dividend rate will reset every five years at a rate equal to 4.42 per cent over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series AV will, subject to certain conditions, have the right to convert all or any part of their shares to non-cumulative floating rate preferred shares Series AW (the “Preferred Shares Series AW”) on August 24, 2014 and on August 24 every five years thereafter.

Holders of the Preferred Shares Series AW will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 4.42 per cent. Holders of Preferred Shares Series AW will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series AV on August 24, 2019 and on August 24 every five years thereafter.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is April 1, 2009.

There is a long first dividend: $0.62072 payable August 24, based on the anticipated closing.

Update: RBC has announced:

that as a result of strong investor demand for its domestic public offering of Non-Cumulative, 5 year rate reset Preferred Shares Series AV (the “Preferred Shares Series AV”), the size of the offering has been increased to 13 million shares. The gross proceeds of the offering will now be $325 million. In addition, the bank has granted the Underwriters an option, exercisable in whole or in part, to purchase up to an additional 3 million Preferred Shares Series AV at a price of $25 per share. The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is April 1, 2009.

Update, 2009-4-10: The greenshoe was exercised in full and the issue is worth par value $400-million.

Issue: HSBC Bank Canada Non-Cumulative 5-Year Rate Reset Class 1 Preferred Shares Series E

Size: 5-million shares (=$125-million) + greenshoe 3-million shares (=$75-million)

Dividends: $1.65 p.a. (=6.60%); reset every Exchange Date to 5-Year GOC + 485bp. First dividend payable 2009-6-30 for $0.4125 based on Closing Date.

Closing Date: 2009-3-31

Exchange Dates: 2014-6-30 and every five years thereafter

Exchange: To and from Series F (“Floaters”), which pay 90-day bills + 485bp, reset quarterly

Redemption: Every Exchange Date at $25.00. Floaters are also redeemable at $25.50 at any other valid time; it is not clear to me whether they may be redeemed in the period 2014-6-30 to 2019-6-30:

The Series F Preferred Shares will not be redeemable prior to June 30, 2019.
…
$25.50 in the case of redemptions on any other date on or after June 30, 2014 …

Update: Press Release. I am advised that the issue size has been bumped to 7-million shares + 3-million greenshoe.

Update: Press release on size increase

Update, 2009-4-10: Greenshoe exercised in full, issue size 10-million shares = $250-million.

BMO has announced:

a domestic public offering of $150 million of Non-Cumulative 5-year Rate Reset Class B Preferred Shares Series 21 (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 $75 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 an initial five years, as and when declared by the board of directors of the Bank, payable in the amount of $0.40625 per Preferred Share, to yield 6.50 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 4.58 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 22 on May 25, 2014 and on May 25th of every fifth year thereafter. Holders of the Preferred Shares Series 22 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 4.58 per cent.

The anticipated closing date is March 20, 2009. The net proceeds from the offering will be used by the Bank for general corporate purposes.

This is another one with a fat first dividend: $0.70342 payable August 25 (assuming a March 20 closing) … so circle the summer ex-date in your calendars, because dividend capture could be lucrative!

Update: Woo-hoo! It’s hot-cake city! BMO has announced:

that as a result of strong investor demand for its previously announced domestic public offering of Non-Cumulative 5-year Rate Reset Class B Preferred Shares Series 21 (the “Preferred Shares”), the size of the offering has been increased to 8 million shares. The gross proceeds of the offering will now be $200 million. 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 $75 million of the Preferred Shares exercisable at any time up to two days before closing.

CU Inc. has announced:

it has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets, and including RBC Capital Markets and TD Securities Inc. The underwriters have agreed to buy 6,400,000 6.70% Cumulative Redeemable Preferred Shares Series 2 at a price of $25.00 per share for aggregate gross proceeds of $160,000,000.

The Series 2 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 a rate of $1.675 per share, to yield 6.70% annually. Thereafter, the dividend rate will reset every five years to the then current 5-Year Government of Canada bond yield plus 4.81%. On June 1, 2014, and on June 1 of every fifth year thereafter, the Corporation may redeem the Series 2 Preferred Shares in whole or in part at par.

Holders may elect to convert any or all of their Series 2 Preferred Shares into an equal number of Cumulative Redeemable Preferred Shares Series 3 on June 1, 2014, and on June 1 of every fifth year thereafter. Holders of the Series 3 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 4.81%. The Corporation may redeem the Series 3 Preferred Shares in whole or in part at par.

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 March 27, 2009. 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 2009 capital expenditure programs, to repay existing indebtedness, and for other general corporate purposes.

The initial dividend will be payable June 1 for $0.30288 assuming a March 27 closing.

I am not a big fan of this interlocking preferred share structure – it makes credit analysis more difficult and makes me wonder why they aren’t injecting capital into their operating subs via common equity. I can only assume it’s some kind of regulatory gymnastics:

Rate base for each utility is the aggregate of the AUC approved investment in property, plant and equipment, less accumulated depreciation, and unamortized contributions by utility customers for extensions to plant, plus an allowance for working capital. The utilities earn a return on rate base intended to meet the cost of the debt and preferred share components of rate base and to provide share owners with a fair return on the common equity component of rate base.

The AUC approves rates of return for the debt and preferred share components of rate base based on the actual or forecast weighted average cost of each utility’s debt and preferred shares and establishes the capital structure for each utility.

It is possible – though not spelt out in the press release – that the Series X or Series W preferreds issued by CU Inc.’s subs to CU Inc.’s parent will be redeemed:

The Series W preferred shares are redeemable commencing on March 1, 2008 at the stated value plus a 4% premium for the next 12 months plus accrued and unpaid dividends. The redemption premium declines by 1% in each succeeding 12 month period until March 1, 2012.

The Series X preferred shares are redeemable commencing June 1, 2008 at the stated value plus a 4% premium for the next 12 months plus accrued and unpaid dividends. The redemption premium declines by 1% in each succeeding 12 month period until June 1, 2012.

… in which case this would be a method whereby Canadian Utilities is replacing parent-level debt with subsidiary debt. Assiduous Readers will remember that the proceeds from the CIU.PR.A issue were used to redeem three CU issues.

Still, this should be an interesting issue … a fixed-reset from a utility with a cumulative coupon will be considered attractive by many.

CIBC (aka CM) has announced:

that it had entered into an agreement with a group of underwriters led by CIBC World Markets Inc. for an issue of 8 million non-cumulative Rate Reset Class A Preferred Shares, Series 37 (the “Series 37 Shares”) priced at $25.00 per Series 37 Share to raise gross proceeds of $200 million.

CIBC has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase an additional 3 million Series 37 Shares at the same offering price. Should the underwriters’ option be fully exercised, the total gross proceeds of the financing will be $275 million.

The Series 37 Shares will yield 6.50% per annum, payable quarterly, as and when declared by the Board of Directors of CIBC, for an initial period ending July 31, 2014. On July 31, 2014 and on July 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 4.33%.

Holders of the Series 37 Shares will have the right to convert their shares into non-cumulative Floating Rate Class A Preferred Shares, Series 38 (the “Series 38 Shares”), subject to certain conditions, on July 31, 2014 and on July 31 every five years thereafter. Holders of the Series 38 Shares will be entitled to receive a quarterly floating rate dividend, as and when declared by the Board of Directors of CIBC, equal to the three-month Government of Canada Treasury Bill yield plus 4.33%.

Holders of the Series 38 Shares may convert their Series 38 Shares into Series 37 Shares, subject to certain conditions, on July 31, 2019 and on July 31 every five years thereafter.

The expected closing date is March 6, 2009. The net proceeds of this offering will be used for general purposes of CIBC.

The first dividend is payable July 31, for $0.65445 … long and fat! There may be dividend capture opportunities around the ex-Date!