Category: New Issues

Canadian Imperial Bank of Commerce has announced:

that it had entered into an agreement with a group of underwriters led by CIBC Capital Markets for an issue of 16 million Basel III-compliant Non-cumulative Rate Reset Class A Preferred Shares Series 47 (Non-Viability Contingent Capital (NVCC)) (the “Series 47 Shares”) priced at $25.00 per Series 47 Share to raise gross proceeds of $400 million.

CIBC has granted the underwriters an option to purchase up to an additional two million Series 47 Shares at the same offering price, exercisable at any time up to two days prior to closing. Should the underwriters’ option be fully exercised, the total gross proceeds of the financing will be $450 million.

The Series 47 Shares will yield 4.5% per annum, payable quarterly, as and when declared by the Board of Directors of CIBC, for an initial period ending January 31, 2023. On January 31, 2023, and on January 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 2.45%.

Subject to regulatory approval and certain provisions of the Series 47 Shares, on January 31, 2023 and on January 31 every five years thereafter, CIBC may, at its option, redeem all or any part of the then outstanding Series 47 Shares at par.

Subject to the right of redemption, holders of the Series 47 Shares will have the right to convert their shares into Non-cumulative Floating Rate Class A Preferred Shares Series 48 (Non-Viability Contingent Capital (NVCC)) (the “Series 48 Shares”), subject to certain conditions, on January 31, 2023 and on January 31 every five years thereafter. Holders of the Series 48 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 2.45%.

Holders of the Series 48 Shares may convert their Series 48 Shares into Series 47 Shares, subject to certain conditions, on January 31, 2028 and on January 31 every five years thereafter.

The expected closing date is January 18, 2018. CIBC will make an application to list the Series 47 Shares as of the closing date on the Toronto Stock Exchange. The net proceeds of this offering will be used for general purposes of CIBC.

This issue looks quite expensive to me, according to Implied Volatility Analysis:

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We see in this chart many of the same features we saw when reviewing the recent BPO new issue and yesterday’s BEP issue:

• The curve is very steep, with Implied Volatility equal to 40% (a ridiculously large figure), and
• The extant issues ar trading near par

The ludicrously high figure of Implied Volatility is something I take to mean that the underlying assumption of the Black-Scholes model, that of no directionality of prices, is not accepted by the market; the market seems to be taking the view that since things seem rosy now, they will always be rosy and everything will trade near par in the future.

I balk at ascribing a 100% probability to this outcome. There may still be a few old geezers amongst the Assiduous Readers of this blog who can still (faintly) remember the Great Bear Market of 2014-16, in which quite a few similar assumptions made earlier turned out to be slightly inaccurate.

For the long term, I suggest that any change in the slope of the curve will be a flattening, with a very high degree of confidence. This will imply that the higher-spread issues will outperform the lower-spread issues.

All told, though, I have no hesitation in slapping an ‘Expensive’ label on this issue – according to the Implied Volatility analysis shown above, the theoretical price of the new issue is 24.26.

Brookfield Renewable Partners L.P. has announced:

that it has agreed to issue 8,000,000 Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 13 (the “Series 13 Preferred Units”) on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., BMO Capital Markets, CIBC Capital Markets, RBC Capital Markets and Scotiabank for distribution to the public. The Series 13 Preferred Units will be issued at a price of $25.00 per unit, for gross proceeds of $200,000,000.

Holders of the Series 13 Preferred Units will be entitled to receive a cumulative quarterly fixed distribution yielding 5.00% annually for the initial period ending April 30, 2023. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of (i) the 5-year Government of Canada bond yield plus 3.00%, and (ii) 5.00%. The Series 13 Preferred Units are redeemable on April 30, 2023 and on each Series 13 Reclassification Date (as defined below) thereafter.

Holders of the Series 13 Preferred Units will have the right, at their option, to reclassify their Series 13 Preferred Units into Cumulative Floating Rate Reset Class A Preferred Limited Partnership Units, Series 14 (“Series 14 Preferred Units”), subject to certain conditions, on April 30, 2023 and on April 30 every 5 years thereafter (each a “Series 13 Reclassification Date”). Holders of Series 14 Preferred Units will be entitled to receive a cumulative quarterly floating distribution at a rate equal to the 90-day Canadian Treasury Bill yield plus 3.00%.

Brookfield Renewable has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 2,000,000 Series 13 Preferred Units which, if exercised, would increase the gross offering size to $250,000,000.

The Series 13 Preferred Units will be offered in all provinces and territories of Canada by way of a supplement to Brookfield Renewable’s existing Canadian short form base shelf prospectus. The Series 13 Preferred Units may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

Brookfield Renewable intends to use the net proceeds of the issue of Series 13 Preferred Units to repay indebtedness. The offering of Series 13 Preferred Units is expected to close on or about January 16, 2018.

They later announced:

that as a result of strong investor demand for its previously announced offering, the underwriters have exercised their option to increase the size of the offering to 10,000,000 Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 13 (the “Series 13 Preferred Units”) to be offered on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., BMO Capital Markets, CIBC Capital Markets, RBC Capital Markets and Scotiabank. The Series 13 Preferred Units will be issued at a price of $25.00 per unit, for gross proceeds of $250,000,000.

This issue looks quite expensive to me, but quantifying the degree of richness is difficult. According to Implied Volatility Analysis:

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We see in this chart many of the same features we saw when reviewing the recent BPO new issue:

• The curve is very steep, with Implied Volatility equal to 40% (a ridiculously large figure), and
• Each of the extant issues is trading at a premium

The ludicrously high figure of Implied Volatility is something I take to mean that the underlying assumption of the Black-Scholes model, that of no directionality of prices, is not accepted by the market; in turn, I suggest that this reflects a rather touching faith that the existence of a minimum rate guarantee on reset also indicates that the issues will never, ever trade below par. There will be a lot of long faces when this test gets failed in the future!

However, for the long term, I suggest that any change in the slope of the curve will be a flattening, with a very high degree of confidence. This will imply that the higher-spread issues will outperform the lower-spread issues.

Complicating the above analysis is a high probability that the three extant issues will each be called at the first opportunity. I will certainly agree that this is likely to happen, but I balk at ascribing a 100% probability to this outcome. There may still be a few old geezers amongst the Assiduous Readers of this blog who can still (faintly) remember the Great Bear Market of 2014-16, in which quite a few similar assumptions made earlier turned out to be slightly inaccurate.

All told, though, I have no hesitation in slapping a ‘Very Expensive’ label on this issue.

Kinder Morgan Canada Limited has announced (although not yet on their website):

that it has entered into an agreement with a syndicate of underwriters led by CIBC Capital Markets, Scotiabank, RBC Capital Markets and TD Securities (together, the “Underwriters”) pursuant to which the Underwriters have agreed to purchase from the Company, 8,000,000 cumulative redeemable minimum rate reset preferred shares, Series 3 (the “Series 3 Preferred Shares”) at a price of $25.00 per share for distribution to the public.

The Company has granted to the Underwriters an option, exercisable at any time up to 48 hours prior to the closing of the offering, to purchase up to an additional 2,000,000 Series 3 Preferred Shares at a price of $25.00 per share.

The Company intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership, which intends to subsequently use such proceeds to, directly or indirectly, finance the development, construction and completion of the Trans Mountain Expansion Project and Base Line Terminal project as well as potential future growth opportunities, to repay indebtedness and for general corporate purposes.

The holders of Series 3 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.3000 per share, payable quarterly on the 15th day of February, May, August and November as and when declared by the Board of Directors of the Company, yielding 5.20 percent per annum at the issue price, for the initial fixed rate period to but excluding February 15, 2023 (the “Initial Fixed Rate Period”). The first quarterly dividend payment date is scheduled for February 15, 2018 and is anticipated to be in the amount of $0.22082 per share (assuming closing of the offering on December 15, 2017). The dividend rate will reset on February 15, 2023 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 3.51 percent, provided that, in any event, such rate shall not be less than 5.20 percent per annum. The Series 3 Preferred Shares are redeemable by the Company, at its option, on February 15, 2023 and on February 15 of every fifth year thereafter at a price of $25.00 per share plus accrued and unpaid dividends.

The holders of Series 3 Preferred Shares will have the right to convert their shares into cumulative redeemable floating rate preferred shares, Series 4 (the “Series 4 Preferred Shares”), subject to certain conditions, on February 15, 2023 and on February 15 of every fifth year thereafter. The holders of Series 4 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of the Company, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 3.51 percent.

Closing of the offering is expected to occur on December 15, 2017, subject to customary closing conditions.

The offering is being made under a prospectus supplement to the base shelf prospectus of the Company dated July 28, 2017 (together, the “Prospectus”). Copies of the Prospectus may be obtained from Canadian Imperial Bank of Commerce, Commerce Court, Toronto, Ontario M5L 1A2, Telephone (416) 980-3096, The Bank of Nova Scotia, Scotia Plaza, 44 King Street West, Toronto, Ontario M5H 1H1, Telephone: (416) 866-3672, Royal Bank of Canada, 200 Bay Street, 4th Floor, North Tower, Toronto, Ontario, M5J 2W7, Telephone (416) 955-7803 and The Toronto-Dominion Bank, Toronto-Dominion Centre, Toronto, Ontario M5K 1A2, Telephone: (416) 308-6963. Investors should read the Prospectus, and the documents incorporated therein by reference, in their entirety, before making an investment decision.

The issue even made the Globe & Mail, presumably because of controversy about the Trans Mountain Pipeline:

Kinder Morgan Canada Ltd. is selling $200-million in shares even as the company dials back spending and warns of additional delays to its marquee Trans Mountain pipeline expansion.

The unit of Houston-based Kinder Morgan Inc. said Wednesday that it is selling eight million preferred units at $25 each in a bought deal to major banks, with proceeds earmarked to help finance the $7.4-billion pipeline expansion to Canada’s West Coast.

The offering comes despite warnings the 590,000-barrel-a-day expansion project could see oil shipments commence nine months later than originally planned. This week, the company said delays could extend beyond September, 2020, further driving up costs.

Enbridge Inc. has announced:

that it has entered into an agreement with a group of underwriters to sell $400 million Cumulative Redeemable Minimum Rate Reset Preference Shares, Series 19 (the “Series 19 Preferred Shares”) at a price of $25.00 per share for distribution to the public. Closing of the offering is expected on or about December 11, 2017.

The holders of Series 19 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.225 per share, payable quarterly on the first day of March, June, September and December, as and when declared by the Board of Directors of Enbridge. The Series 19 Preferred Shares are expected to yield 4.90 percent per annum for the initial fixed rate period to, but excluding, March 1, 2023. The first quarterly dividend payment date is scheduled for March 1, 2018. The dividend rate will reset on March 1, 2023 and every five years thereafter at a rate equal to the sum of the then five-year Canadian Government bond yield plus 3.17 percent, provided that, in any event, such rate shall not be less than 4.90 percent per annum. The Series 19 Preferred Shares are redeemable by Enbridge, at its option, on March 1, 2023 and on March 1 of every fifth year thereafter.

The holders of Series 19 Preferred Shares will have the right to convert their shares into Cumulative Redeemable Preference Shares, Series 20 (the “Series 20 Preferred Shares”) on March 1, 2023 and on March 1 of every fifth year thereafter, subject to certain conditions. The holders of Series 20 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of Enbridge, at a rate equal to the sum of the 90-day Government of Canada Treasury bill rate plus 3.17 percent.

Enbridge has granted to the underwriters an option to purchase up to an additional four million Series 19 Preferred Shares at a price of $25.00 per share, exercisable at any time up to 48 hours prior to the closing of the offering.

The offering is being made only in Canada by means of a prospectus supplement to the base shelf prospectus of the Company dated September 14, 2017. Proceeds are expected to be used to partially fund capital projects, to reduce existing indebtedness and for other general corporate purposes of the Company and its affiliates.

The syndicate of underwriters is led by Scotiabank, BMO Capital Markets, CIBC Capital Markets, and National Bank Financial.

This issue looks extraordinarily expensive to me! According to Implied Volatility analysis:

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With the parameters shown, the theoretical value of the new issue is 23.17, roughly equivalent to the BPO new issue. Critics will be quick to point out that in this calculation there is zero value assigned to the minimum rate guarantee … but I’d say that’s about right!

Pembina Pipeline Corporation has announced (on 2017-11-28):

that it has entered into an agreement with a syndicate of underwriters co-led by RBC Capital Markets, CIBC World Markets, and Scotiabank (together, the “Underwriters”) pursuant to which the Underwriters have agreed to purchase from Pembina 12,000,000 cumulative redeemable minimum rate reset class A preferred shares, Series 21 (the “Series 21 Preferred Shares”) at a price of $25.00 per share for distribution to the public.

The holders of Series 21 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.225 per share, payable quarterly on the 1st day of March, June, September and December, as and when declared by the Board of Directors of Pembina, yielding 4.90 percent per annum, for the initial fixed rate period to but excluding March 1, 2023. The first quarterly dividend payment date is scheduled for March 1, 2018. The dividend rate will reset on March 1, 2023 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 3.26 percent, provided that, in any event, such rate shall not be less than 4.90 percent per annum. The Series 21 Preferred Shares are redeemable by Pembina, at its option, on March 1, 2023 and on March 1 of every fifth year thereafter at a price of $25.00 per share plus accrued and unpaid dividends.

The holders of Series 21 Preferred Shares will have the right to convert their shares into cumulative redeemable floating rate class A preferred shares, Series 22 (the “Series 22 Preferred Shares”), subject to certain conditions, on March 1, 2023 and on March 1 of every fifth year thereafter. The holders of Series 22 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of Pembina, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 3.26 percent.

Pembina has granted to the Underwriters an option, exercisable at any time up to 48 hours prior to the closing of the offering, to purchase up to an additional 4,000,000 Series 21 Preferred Shares at a price of $25.00 per share.

Closing of the offering is expected on December 7, 2017, subject to customary closing conditions.

The Company intends to use the net proceeds from the Offering to reduce indebtedness of the Company under its credit facilities. The indebtedness of the Company under the Credit Facilities was incurred in the normal course of business to fund the Company’s capital program, and to fund a portion of the cash consideration payable to former common shareholders of Veresen Inc. (“Veresen”) pursuant to the plan of arrangement with Veresen which closed on October 2, 2017.

The offering is being made by means of a prospectus supplement under the short form base shelf prospectus filed by the Company on July 27, 2017 in each of the provinces of Canada.

It looks expensive to me! According to Implied Volatility analysis:

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With the parameters shown, the theoretical value of the new issue is 24.27. Critics will be quick to point out that in this calculation there is zero value assigned to the minimum rate guarantee … but I’d say that’s about right!

These straw-men critics I have created will also have to explain why the two other Floor-Rate FixedResets (PPL.PR.K and PPL.PR.M) are cheap according to this analysis. It can be done – just assume that spreads on those two issues are so large that the floor doesn’t matter any more – but one way or another, it’s another example of the asymmetry of returns on issues priced near par working against the investor.

Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P., has announced:

that it has agreed to issue to a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities Inc., for distribution to the public, ten million Cumulative Minimum Rate Reset Class AAA Preference Shares, Series II (the “Preferred Shares, Series II”). The Preferred Shares, Series II will be issued at a price of C$25.00 per share, for aggregate proceeds of C$250 million. Holders of the Preferred Shares, Series II will be entitled to receive a cumulative quarterly fixed dividend yielding 4.85% annually for the initial period ending December 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of (i) the five-year Government of Canada bond yield plus 3.23% and (ii) 4.85%.

Holders of Preferred Shares, Series II will have the right, at their option, to convert their shares into Cumulative Floating Rate Class AAA Preference Shares, Series JJ (the “Preferred Shares, Series JJ”), subject to certain conditions, on December 31, 2022 and on December 31 every five years thereafter. Holders of Preferred Shares, Series JJ will be entitled to receive cumulative quarterly floating dividends at a rate equal to the 90-day Government of Canada Treasury Bill yield plus 3.23%.

The Series II Shares and Series JJ Shares will be fully and unconditionally guaranteed, jointly and severally, as to: (i) the payment of dividends, as and when declared, (ii) the payment of amounts due on redemption, and (iii) the payment of amounts due on the liquidation, dissolution or winding-up of Brookfield Office Properties, by the following entities: Brookfield Property Partners L.P., Brookfield Property L.P., Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, BPY Bermuda Holdings II Limited, BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited.

Brookfield Office Properties 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 2,000,000 Preferred Shares, Series II at the same offering price. Should the option be fully exercised, the total gross proceeds of the financing will be C$300 million.

The Preferred Shares, Series II will be offered in all provinces of Canada by way of a supplement to Brookfield Office Properties’ existing Canadian short form base shelf prospectus dated August 29, 2016.

The net proceeds of the issue will be used by Brookfield Office Properties for general corporate purposes. The offering is expected to close on or about December 7, 2017.

This issue looks extraordinarily expensive to me! According to Implied Volatility analysis:

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With the parameters shown, the theoretical value of the new issue is 23.12. Critics will be quick to point out that in this calculation there is zero value assigned to the minimum rate guarantee … but I’d say that’s about right!

However, when the graph is examined more closely, it does look as if the Floor issues are on a different line with a steeper slope than the non-Floor issues. So let’s try disaggregating the data:

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It’s an interesting idea that bears watching in the future. The Implied Volatility of the “Floor” series is extremely high, indicating that the Black-Scholes assumptions do not hold, which I usually take to mean implies a strong belief in the directionality of future prices, e.g., that all issues will be called and hence are all expected to gravitate towards par. Regretably, all extant ‘floor’ issues (BPO.PR.C, BPO.PR.E, BPO.PR.G) have relatively high spreads (518, 396 and 374bp, respectively) and are trading above par, which may be contaminating the data.

Harvest Portfolios Group Inc. has announced:

that Big Pharma Split Corp. (the “Company”) has completed its initial public offering (the “Offering”) of 1,360,000 Preferred Shares and 1,360,000 Class A Shares for aggregate gross proceeds of $34 million. The Company has granted the Agents (as defined below) an over-allotment option, exercisable for a period of 30 days from today’s date, to purchase up to an additional 204,000 Preferred Shares and up to an additional 204,000 Class A Shares. The Class A Shares and the Preferred Shares will commence trading today on the Toronto Stock Exchange under the symbols “PRM” and “PRM.PR.A”, respectively.

The Company will invest in an initially equally-weighted portfolio (the “Portfolio”) of ten issuers comprised of equity securities selected by Harvest from a universe of pharmaceutical issuers that at the time of investment and immediately following each semi-annual reconstitution and rebalancing: (i) are listed on a North American exchange; (ii) pay a dividend; and (iii) have options in respect of its equity securities that, in the opinion of Harvest, are sufficiently liquid to permit Harvest to write options in respect of such securities (the “Investable Universe”). The Portfolio will be comprised primarily of the largest (as determined by market capitalization calculated in US$) pharmaceutical issuers in the Investable Universe. In order to seek to generate additional returns, Harvest may write call options each month in respect to some or all of the equity securities in the Portfolio.

The investment objectives for the Preferred Shares are to provide their holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.125 per Preferred Share ($0.50 per annum or 5.0% per annum on the $10.00 issue price) until December 31, 2022 (the “Maturity Date”) and to return of the original issue price to holders on the Maturity Date.

The investment objectives for the Class A Shares are to provide their holders with regular monthly cash distributions targeted to be $0.1031 per Class A Share ($1.2372 per annum or 8.25% per annum on the $15.00 issue price) and with the opportunity for growth in net asset value per Class A Share.

Harvest is the manager, portfolio manager and promoter of the Company.

The syndicate of agents for the Offering is being co-led by BMO Capital Markets, CIBC Capital Markets and Scotiabank and also includes National Bank Financial Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Echelon Wealth Partners Inc., Industrial Alliance Securities Inc., Mackie Research Capital Corporation and PI Financial Corp. (collectively, the “Agents”).

For additional information: Please visit www.harvestportfolios.com, e-mail info@harvestportfolios.com or call toll free 1-866-998-8298.

The SplitShare Corporation has its own web-page.

The preferred shares have been rated Pfd-3(high) by DBRS:

The Class A Share distributions are subject to the asset coverage test, which does not permit any distributions to holders of the Class A Shares if the net asset value (NAV) of the Company falls below $15.00 or if the dividends of the Preferred Shares are in arrears.
…
Based on current asset coverage of 2.4 times (x), the net asset value of the Company would have to fall by approximately 57.5% for the holders of the Preferred Shares to be in a loss position. The initial dividend coverage ratio is 0.4x. To supplement Portfolio income, the manager will engage in call option writing.

On maturity, the holders of the Preferred Shares will be entitled to the value of the Portfolio up to the face value of the Preferred Shares and any accrued but unpaid dividends in priority to the holders of the Class A Shares.
The credit quality of the Portfolio is strong, though it is concentrated in the health-care sector. Nevertheless, the underlying companies from the indicative Portfolio have a consistent dividend paying history. The Company’s NAV may be sensitive to volatility of prices of the Portfolio securities as well as changes in the dividend policies of the underlying companies and the health-care industry-specific risks. In assigning the Pfd-3 (high) rating, DBRS has taken into account (1) the level of downside protection available to holders of the Preferred Shares, (2) the Portfolio quality, (3) potential foreign-exchange risk because the income received on the Portfolio will not be hedged and (4) stated distributions to the Class A Shares.

This issue will not be tracked by HIMIPref™ as it is too small to allow for reasonable expectations of efficient tradability. But here’s hoping they build it up!

Partners Value Split Corp. has announced (although not yet on their website):

that it has entered into an agreement to sell 5,000,000 Class AA Preferred Shares, Series 8 (the “Series 8 Preferred Shares”) to a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets, and TD Securities Inc. on a bought deal basis.

The Series 8 Preferred Shares will be issued at a price of $25.00 per share, for gross proceeds of $125,000,000. The Series 8 Preferred Shares will carry a fixed coupon of 4.80% and will have a final maturity of September 30, 2024. The Series 8 Preferred Shares have a provisional rating of Pfd-2 (low) from DBRS. The net proceeds of the offering will be used to redeem the Company’s outstanding Class AA Preferred Shares, Series 5 and to pay a special dividend to holders of the Company’s capital shares.

The Company has granted the underwriters an option, exercisable in whole or part prior to closing, to purchase up to an additional 1,000,000 Series 8 Preferred Shares at the same offering price, which, if exercised, would increase the gross offering size to $150,000,000. Closing of the offering is expected to occur on or about September 18, 2017.

The Company owns a portfolio consisting of 79,740,966 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. Brookfield Asset Management Inc. is a global alternative asset manager with over US$250 billion in assets under management. For more than 100 years Brookfield has owned and operated assets on behalf of shareholders and clients with a focus on property, renewable energy, infrastructure and private equity. Brookfield has a range of public and private investment products and services which leverage its expertise and experience. Brookfield Shares are co-listed on the New York Stock Exchange under the symbol “BAM”, the TSX under the symbol “BAM.A” and the NYSE Euronext under the symbol “BAMA”.

David Clare, Vice President, will be available at (647) 503-6516 to answer any questions regarding the offering.

The Series 5 shares which are being redeemed have the ticker PVS.PR.C, which was originally traded as BNA.PR.E, which commenced trading 2010-12-10 after being announced 2010-11-22. It has a 4.85% coupon and has 4,999,000 shares outstanding.

4.80% on the new issue looks like a very nice coupon on the new issue, compared with yields on the company’s other issues of PVS.PR.B, 4.01% to 2019-1-10; PVS.PR.D, 4.36% to 2021-10-8; and PVS.PR.E, 4.56% to maturity 2022-10-31, although the YTW scenario is a current call at 26.00 (which can be triggered if BAM is taken over). The coupon is equal to that of EIT.PR.A, quoted today at 25.00-50; 4.81-4.45%, as yesterday’s 25.45 closing bid was vaporized. Mind you, EIT.PR.A’s low on the day was 25.42 on volume of 2,713 shares.

Brookfield Asset Management Inc. has announced:

that it has agreed to issue 10,000,000 Class A Preferred Shares, Series 48 on a bought deal basis to a syndicate of underwriters led by CIBC Capital Markets, RBC Capital Markets, Scotiabank, and TD Securities Inc. for distribution to the public. The Preferred Shares, Series 48 will be issued at a price of C$25.00 per share, for gross proceeds of C$250,000,000. Holders of the Preferred Shares, Series 48 will be entitled to receive a cumulative quarterly fixed dividend yielding 4.75% annually for the initial period ending December 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 3.10% and (ii) 4.75%.

Brookfield has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 2,000,000 Preferred Shares, Series 48 which, if exercised, would increase the gross offering size to C$300,000,000. The Preferred Shares, Series 48 will be offered in all provinces of Canada by way of a supplement to Brookfield’s existing short form base shelf prospectus. The Preferred Shares, Series 48 may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

Brookfield intends to use the net proceeds of the issue of Preferred Shares, Series 48 for general corporate purposes. The offering of Preferred Shares, Series 48 is expected to close on or about September 13, 2017.

They later announced:

that as a result of strong investor demand for its previously announced offering, the underwriters have exercised their option to increase the size of the offering to 12,000,000 Class A Preferred Shares, Series 48. The Preferred Shares, Series 48 will be issued at a price of C$25.00 per share, for gross proceeds of C$300,000,000. The Preferred Shares, Series 48 are being issued on a bought deal basis to a syndicate of underwriters led by CIBC Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc. for distribution to the public.

The Preferred Shares, Series 48 will be offered in all provinces of Canada by way of a supplement to Brookfield’s existing short form base shelf prospectus. The Preferred Shares, Series 48 may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

Brookfield intends to use the net proceeds of the issue of Preferred Shares, Series 48 for general corporate purposes. The offering of Preferred Shares, Series 48 is expected to close on or about September 13, 2017.

It looks expensive to me! According to Implied Volatility analysis:

Click for Big

With the parameters shown, the theoretical value of the new issue is 24.20. Critics will be quick to point out that in this calculation there is zero value assigned to the minimum rate guarantee … but I’d say that’s about right!

Kinder Morgan Canada Limited has announced (although not yet on their website):

that it has entered into an agreement with a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities (together, the “Underwriters”) pursuant to which the Underwriters have agreed to purchase from the Company, 8,000,000 cumulative redeemable minimum rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”) at a price of $25.00 per share for distribution to the public.

The Company has granted to the Underwriters an option, exercisable at any time up to 48 hours prior to the closing of the offering, to purchase up to an additional 2,000,000 Series 1 Preferred Shares at a price of $25.00 per share.

The Company intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership, which intends to subsequently use such proceeds to, directly or indirectly, finance the development, construction and completion of the Trans Mountain Expansion Project and Base Line Terminal project as well as potential future growth opportunities, to repay indebtedness and for general corporate purposes.

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 on the 15th day of February, May, August and November, as and when declared by the Board of Directors of the Company, yielding 5.25 per cent per annum at the issue price, for the initial fixed rate period to but excluding November 15, 2022 (the “Initial Fixed Rate Period”). The first quarterly dividend payment date is scheduled for November 15, 2017. The dividend rate will reset on November 15, 2022 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 3.65 per cent, provided that, in any event, such rate shall not be less than 5.25 percent per annum. The Series 1 Preferred Shares are redeemable by the Company, at its option, on November 15, 2022 and on November 15 of every fifth year thereafter at a price of $25.00 per share plus accrued and unpaid dividends.

The holders of Series 1 Preferred Shares will have the right to convert their shares into cumulative redeemable floating rate preferred shares, Series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on November 15, 2022 and on November 15 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 of the Company, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 3.65 percent.

Closing of the offering is expected on August 15, 2017, subject to customary closing conditions.

The offering is being made under a prospectus supplement to the base shelf prospectus of the Company dated July 28, 2017 (together, the “Prospectus”). Copies of the Prospectus may be obtained from The Bank of Nova Scotia, Scotia Plaza, 44 King Street West, Toronto, Ontario M5H 1H1, Telephone: (416) 866-3672, Canadian Imperial Bank of Commerce, Commerce Court, Toronto, Ontario M5L 1A2, Telephone (416) 980-3096, Royal Bank of Canada, 200 Bay Street, 4th Floor, North Tower, Toronto, Ontario, M5J 2W7, Telephone (416) 955-7803 and The Toronto-Dominion Bank, Toronto-Dominion Centre, Toronto, Ontario M5K 1A2, Telephone: (416) 308-6963. Investors should read the Prospectus, and the documents incorporated therein by reference, before making an investment decision.

They later announced:

that as a result of strong investor demand for its previously announced offering of cumulative redeemable minimum rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”), the size of the offering has been increased to 12,000,000 shares. The offering no longer includes the previously granted underwriters’ option. The aggregate gross proceeds of the offering will now be $300 million. The syndicate of underwriters is led by Scotiabank, CIBC Capital Markets, RBC Capital Markets, and TD Securities.

Nice to see a new issuer … too bad it’s junk! S&P calls it P-3(high):

S&P Global Ratings said today it assigned its ‘BB+’ (P-3 (High) Canadian National Scale Preferred Share Rating) issue-level rating to Kinder Morgan Canada Ltd.’s (KML) cumulative redeemable minimum rate reset preferred shares, series 1.

Update, 2017-08-08: Pfd-3(high) [Provisional] from DBRS:

DBRS Limited (DBRS) has today assigned a provisional rating of Pfd-3 (high) with a Stable trend to Kinder Morgan Canada Limited’s (KML or the Company) proposed issuance of Cumulative Redeemable Minimum Rate Reset Preferred Shares, Series 1 (Series 1 Preferred Shares).

DBRS has not assigned an Issuer Rating to KML; however, the Series 1 Preferred Shares rating is based on the credit profile of Kinder Morgan Cochin ULC (KMU; rated BBB (high) with a Stable trend). KMU is KML’s operating subsidiary, which operates the Company’s Canadian energy infrastructure assets, including the existing Trans Mountain Pipeline, the $7.4 billion Trans Mountain Expansion Project (TMEP), the Puget Sound pipeline, the Canadian portion of Cochin pipeline as well as various terminal, rail and storage facilities.

KML intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership (KMLP; 100% owner of KMU) through Kinder Morgan Canada GP Inc. (KMCGP; 100% owned by KML). KMLP in turn intends to use such proceeds to finance the development, construction and completion of TMEP and the Base Line Terminal project as well as potential future growth opportunities, to repay indebtedness and for general corporate purposes. KMLP receives all dividends paid by KMU. KMLP’s preferred units mirror the terms and conditions of the Series 1 Preferred Shares issued by KML. The dividends due on the Series 1 Preferred Shares are matched by the dividends paid on the preferred units of KMLP to which KML subscribes. Dividends on KMLP’s preferred units have priority over dividends paid on KMLP’s common units and are distributed through KMCGP to KML for further distribution to holders of KML’s Series 1 Preferred Shares. KMLP and KMCGP have no debt. The rating on KML’s Series 1 Preferred Shares is therefore linked to KMU’s rating and any change in KMU’s rating could affect the rating of the Series 1 Preferred Shares.