PrefBlog

The Bank of Montreal has announced:

a domestic public offering of $250 million of Non-Cumulative 5-year Rate Reset Class B Preferred Shares Series 25 (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 $50 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 the initial period ending August 25, 2016, as and when declared by the board of directors of the Bank, payable in the amount of $0.24375 per Preferred Share, to yield 3.90 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 1.15 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 26 on August 25, 2016 and on August 25 of every fifth year thereafter. Holders of the Preferred Shares Series 26 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 1.15 per cent.

The anticipated closing date is March 11, 2011. The net proceeds from the offering will be used by the Bank for general corporate purposes.

There is a long first coupon on this ($0.4461 payable August 25) so mark your calendars – there might be some trading opportunities!

I haven’t seen anything definitive yet, but I believe this will be the first issue with the new NVCC Clause; I will be most interested to see just exactly what it looks like.

They also announced a announced a new issue of sub-debt:

it intends to issue subordinated indebtedness under its Canadian Medium Term Note Program. The issue, the Series G Medium Term Notes, First Tranche, is a $1.5 billion public offering due 2021. Interest on this issue is payable semi-annually at a fixed rate of 3.979% until July 8, 2016, and at a floating rate equal to the rate on 3 month CDOR plus 1.09% (paid quarterly) thereafter to maturity.

Bank of Montreal may, at its option, with the prior approval of the Office of the Superintendent of Financial Institutions Canada, redeem the subordinated indebtedness, in whole or in part, on not less than 30 days and not more than 60 days notice to registered holders, at any time or from time to time on or after July 8, 2016 at par together with accrued and unpaid interest to but excluding the date fixed for redemption.

The net proceeds of the offering, which is expected to close on March 9, 2011, will be used for general corporate purposes of Bank of Montreal.

This makes things doubly interesting, because OSFI expects different treatment of different levels of capital should the NVCC clause be triggered. I presume they’ve consulted with OSFI regarding the wording of the two clauses; these issues could well set the paradigm.

Update, 2011-3-8: The sub-debt prospectus supplement on SEDAR (Mar 4 2011 Prospectus supplement – English) states:

The Notes may not fully qualify as non-common Tier 2 capital under new Canadian bank capital guidelines.

The Basel Committee on Banking Supervision has announced new international bank capital adequacy rules (commonly called Basel III) which will amend the existing Basel II capital management framework. The Office of the Superintendent of Financial Institutions of Canada (‘‘OSFI’’) has announced that it plans to adopt the new Basel III rules for purposes of Canadian bank capital guidelines. Under the new Basel III rules, effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments issued by a bank must have, either in their contractual terms and conditions or by way of statute in the issuer’s home country, a clause requiring a full and permanent conversion into common shares of such bank upon certain trigger events at the point where such bank is determined to be no longer viable. The Notes as a result may not fully qualify as non-common Tier 2 capital under the new capital rules as no such conversion mechanism exists. For purposes of being included in the Bank’s regulatory capital under the new capital rules, the Notes would be phased out beginning January 31, 2013 (their recognition will be capped at 90% of total Tier 2 capital from January 1, 2013, with the cap reducing by 10% in each subsequent year). As a result, the Bank may, with the prior approval of the Superintendent, redeem the Notes in accordance with their terms.

The similarly available prospectus for the preferreds states:

Under the new Basel III rules, effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments issued by a bank must have, either in their contractual terms and conditions or by way of statute in the issuer’s home country, a clause requiring a full and permanent conversion into common shares of such bank upon certain trigger events at the point where such bank is determined to be no longer viable. The Preferred Shares Series 25 as a result may not fully qualify as non-common Tier 1 capital under the new capital rules as no such conversion mechanism exists. As a result, the Bank may, with the prior approval of the Superintendent, redeem the Preferred Shares Series 25 in accordance with their terms.
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The Basel Committee on Banking Supervision has announced new international bank capital adequacy rules (commonly called Basel III) which will amend the existing Basel II capital management framework. The Office of the Superintendent of Financial Institutions of Canada (‘‘OSFI’’) has announced that it plans to adopt the new Basel III rules for purposes of Canadian bank capital guidelines. Under the new Basel III rules, effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments issued by a bank must have, either in their contractual terms and conditions or by way of statute in the issuer’s home country, a clause requiring a full and permanent conversion into common shares of such bank upon certain trigger events at the point where such bank is determined to be no longer viable. The Preferred Shares Series 25 and, if and when issued, the Preferred Shares Series 26 as a result may not fully qualify as non-common Tier 1 capital under the new capital rules as no such conversion mechanism exists. For purposes of being included in the Bank’s regulatory capital under the new capital rules, the Preferred Shares Series 25 and the Preferred Shares Series 26 would be phased out beginning January 31, 2013 (their recognition will be capped at 90% of total Tier 1 capital from January 1, 2013, with the cap reducing by 10% in each subsequent year). As a result, the Bank may, with the prior approval of the Superintendent, redeem the Preferred Shares Series 25 and the Preferred Shares Series 26, if any, in accordance with their respective terms.

Bell Aliant has announced:

that its subsidiary Bell Aliant Preferred Equity Inc. (the “Company”) will be issuing 10,000,000 Cumulative Rate Reset Preferred Shares, Series A (the “Series A Preferred Shares”), at a price of $25.00 per Series A Preferred Share, for aggregate gross proceeds of $250 million on a bought deal basis to a syndicate of underwriters led by BMO Capital Markets and Scotia Capital Inc.

The underwriters have been granted an over-allotment option to purchase an additional 1,500,000 Series A Preferred Shares at the offering price. Should the over-allotment option be fully exercised, the total gross proceeds of the Series A Preferred Share offering will be $287.5 million.

The Series A Preferred Shares will pay cumulative dividends of $1.2125 per share per annum, yielding 4.85%, payable quarterly (with the first quarterly dividend to be paid June 30, 2011), for the initial five year period ending March 31, 2016. The dividend rate will be reset on March 31, 2016 and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus 2.09%. The Series A Preferred Shares will be redeemable by the issuer on or after March 31, 2016, in accordance with their terms.

Holders of the Series A Preferred Shares will have the right, at their option, to convert their shares into Cumulative Floating Rate Preferred Shares, Series B, (the “Series B Preferred Shares”) subject to certain conditions, on March 31, 2016 and on March 31 every five years thereafter. Holders of the Series B 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 2.09%.

The Series A Preferred Shares will be offered for sale to the public in each of the provinces and territories of Canada pursuant to a short form prospectus to be filed with Canadian securities regulatory authorities in all Canadian provinces and territories. The offering is scheduled to close on or about March 9, 2011, subject to certain conditions, including obtaining all necessary regulatory approvals.

The net proceeds of this offering will be used to fund a voluntary $200 million contribution to Bell Aliant’s pension plans and for general corporate purposes, including the repayment of indebtedness under Bell Aliant’s commercial paper program and the financing of fibre-to-the-home (FTTH) and other investments.

DBRS comments:

DBRS has today assigned a rating of Pfd-3 (high), with a Stable trend, to Bell Aliant Preferred Equity Inc.’s preferred share issuance totalling $250 million (the Preferred Shares) with a $37.5 million over-allotment option. The Preferred Shares are cumulative five-year rate reset preferred shares with an initial dividend rate of 4.85%.

This share issuance was initiated by Bell Aliant Preferred Equity Inc. today for settlement on or around March 9, 2011.

The preferred shares will be fully and unconditionally guaranteed by Bell Aliant Regional Communications Inc. (Bell Aliant GP), the general partner and guarantor of Bell Aliant Regional Communications, Limited Partnership (Bell Aliant LP; rated BBB (high)/R-1 (low) by DBRS) and its debt obligations.

While normally this type of corporate structure would raise the issue of structural subordination relative to Bell Aliant LP, DBRS believes that provisions undertaken between the various entities – as part of inter-company loans and guarantees – mitigate this concern while appropriately ranking the preferred shares behind the senior indebtedness of Bell Aliant LP and Bell Aliant GP. (Bell Aliant GP has no external debt outstanding.)

DBRS expects Bell Aliant Preferred Equity Inc. to indirectly lend the proceeds to Bell Aliant LP. With the proceeds, Bell Aliant LP intends to make a lump-sum voluntary payment to certain pension plans and use the remainder for general corporate purposes, including the repayment of indebtedness and the financing of investments and acquisitions.

Update 2011-03-09: Closing delayed until 3/15.

GMP Capital has announced:

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

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

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

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

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

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

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

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

The Series B Preferred Shares will be offered for sale to the public in each of the provinces of Canada pursuant to a short form prospectus to be filed with Canadian securities regulatory authorities in all Canadian provinces.

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

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

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

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

Rona Inc. has announced:

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

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

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

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

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

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

Tom Kiladze of the Globe reports:

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

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

S&P rates them P-3:

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

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

DBRS rates them Pfd-3:

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

Brookfield Asset Management has announced:

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

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

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

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

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

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

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

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

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

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

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

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

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

RioCan Real Estate Investment Trust has announced:

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

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

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

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

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

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

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

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

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

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

DBRS rates it Pfd-3(high).

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

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

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

First National Financial Corporation has announced:

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

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

Holders of the Series 1 Preferred Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.65% annually for the initial period ending March 31, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada yield plus 2.07%.

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

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

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

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

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

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

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

Transalta Corporation has announced:

that it has agreed to issue to a syndicate of underwriters led by CIBC, RBC Capital Markets and Scotia Capital Inc. for distribution to the public 8,000,000 Cumulative Rate Reset First Preferred Shares, Series A (the “Series A Shares”). The Series A Shares will be issued at a price of $25.00 per Series A Share, for aggregate gross proceeds of $200 million. Holders of the Series A Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.60% annually for the initial period ending March 31, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 2.03%.

Holders of Series A Shares will have the right, at their option, to convert their shares into Cumulative Rate Reset First Preferred Shares, Series B (the “Series B Shares”), subject to certain conditions, on March 31, 2016 and on March 31 every five years thereafter. Holders of the Series B Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 2.03%.

TransAlta Corporation has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase up to an additional 2,000,000 Series A Shares at the same offering price. The Series A Shares will be offered by way of prospectus supplement under the short form base shelf prospectus of TransAlta Corporation dated October 19, 2009. The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.

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

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

TransAlta Corporation (TSX:TA) (NYSE:TAC) has increased its previously announced bought deal financing to $250 million. TransAlta Corporation has agreed to issue to a syndicate of underwriters led by CIBC, RBC Capital Markets and Scotia Capital Inc. for distribution to the public 10,000,000 Cumulative Rate Reset First Preferred Shares, Series A (the “Series A Shares”). The Series A Shares will be issued at a price of $25.00 per Series A Share, for aggregate gross proceeds of $250 million.
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TransAlta Corporation has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase up to an additional 2,000,000 Series A Shares at the same offering price.