PrefBlog

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!

Royal Bank has announced:

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

The bank will issue 8.0 million Preferred Shares Series AT 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 AT in whole or in part at par. Thereafter, the dividend rate will reset every five years at a rate equal to 4.06 per cent over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series AT 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 AU (the “Preferred Shares Series AU”) on August 24, 2014 and on August 24 every five years thereafter.

Holders of the Preferred Shares Series AU 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 4.06 per cent. Holders of Preferred Shares Series AU will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series AT 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 March 9, 2009.

The first dividend will be payable August 24, for $0.71918. That’s a long, fat first dividend! Mark your calendars – there could be some interesting dividend capture opportunities!

TD Bank Financial Group 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 AI (the Series AI 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 AI 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 AI 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 4.15% over the then five-year Government of Canada bond yield.

Holders of the Series AI Shares will have the right to convert their shares into non-cumulative Floating Rate Class A Preferred Shares, Series AJ (the Series AJ Shares), subject to certain conditions, on July 31, 2014, and on July 31st every five years thereafter. Holders of the Series AJ 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 4.15%.

The issue is anticipated to qualify as Tier 1 capital for TDBFG and the expected closing date is March 6, 2009. TDBFG will make an application to list the Series AI Shares as of the closing date on the Toronto Stock Exchange.

The first dividend (if declared!) will be payable April 30, 2009, for $0.23545 based on a March 6 closing.

Update, 2009-3-4: 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 AI (the Series AI Shares) carrying a face value of $25.00 per share. This brings the total issue announced on February 25, 2009, and expected to close March 6, 2009, to 11 million shares and gross proceeds raised under the offering to $275 million. TDBFG has filed in Canada a prospectus supplement to its September 29, 2008 short form base shelf prospectus in respect of this issue.

Fresh from denying speculation regardng a common equity raise, Manulife Financial has entered into a bought-deal arrangement to issue Fixed-Resets:

Issue: Non-Cumulative Rate Reset Class A Preferred Shares, Series 4

Size: 8-million shares (=$200-million). Greenshoe for another 3-million shares (=$75-million) exercisable up to two days prior to closing.

Dividends: Fixed rate 6.60% (=$1.65 p.a.) until first Exchange Date; 5-Year Canadas +456bp thereafter, reset every Exchange Date. Floaters pay 3-month bills +456bp, reset quarterly. First Dividend $0.48370 payable 2009-6-19, based on Closing Date.

Exchange: Every Exchange Date to and from Series 5 (“Floaters”).

Exchange Date: June 19, 2014, and every five years thereafter.

Redemption: Every Exchange Data at $25.00. Floaters are also redeemable at $25.50 at all other times.

Closing Date: March 4, 2009

Update: MFC press release.

Update, 2009-2-26: Selling like hotcakes!

Manulife Financial Corporation (“Manulife”) today announced that as a result of strong investor demand for its previously announced Canadian public offering of Non-cumulative 5-Year Rate Reset Class A Preferred Shares, Series 4 (“Series 4 Preferred Shares”), the size of the offering has been increased to 14 million shares. The gross proceeds of the offering will now be $350 million. The offering will be underwritten by a syndicate of investment dealers led by RBC Capital Markets and CIBC World Markets and is anticipated to qualify as Tier 1 capital for Manulife. The expected closing date for the offering is March 4, 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 four million Series 4 Preferred Shares. The maximum gross proceeds raised under the offering will be $450 million should this option be exercised in full. Manulife intends to file a prospectus supplement to its March 12, 2007 base shelf prospectus in respect of this issue.

The net proceeds of the offering will be used primarily for general corporate purposes and the balance will be used to reduce the amount outstanding under Manulife’s credit facility with Canadian banks.

Canadian Western Bank has announced:

that it has entered into an agreement with a group of underwriters led by Genuity Capital Markets to issue 2,600,000 Preferred Units (the “Public Offering Preferred Units”) on a bought deal basis for total proceeds of $65 million. The Public Offering Preferred Units each consist of one Non-Cumulative 5-Year Rate Reset Preferred Share, Series 3 (the “Series 3 Preferred Shares”) in the capital of the Bank with an issue price of $25.00 per share and 1.78 common share purchase warrants (each whole warrant a “Warrant”). Each Warrant will be exercisable at a price of $14.00 to purchase one common share in the capital of the Bank for five years. The Bank has also granted the underwriters an option to purchase, on the same terms, up to an additional 390,000 Public Offering Preferred Units. This option is exercisable in whole or in part by the underwriters at any time up to 30 days following the closing of the offering. The maximum gross proceeds raised under the public offering would be $74.75 million should this option be exercised in full.

The Bank has also received commitments from institutional investors, including Fairfax Financial Holdings Limited and certain pension fund clients of Alberta Investment Management Corporation, to purchase 5,400,000 Preferred Units (the “Private Placement Preferred Units”) by way of a private placement for total proceeds of $135 million. The Private Placement Preferred Units will consist of one Series 3 Preferred Share and 1.7857 Warrants. The Warrants will have the same terms at those issued under the public offering.

The private and public offerings are subject to a number of conditions, including the concurrent closing of the other. The private placement is also subject to the approval of the Minister of Finance.

The Series 3 Preferred Shares yield 7.25% annually, payable quarterly, as and when declared by the Board of Directors of CWB for an initial period ending April 30, 2014. Thereafter, the dividend rate will reset every five years at a level of 500 basis points over the then five-year Government of Canada bond yield. Holders of Series 3 Preferred Shares will, subject to certain conditions, have the option to convert their shares to Non-Cumulative Floating Rate Preferred Shares, Series 4 (the “Series 4 Preferred Shares”) on April 30, 2014 and on April 30 every five years thereafter. Holders of the Series 4 Preferred Shares will be entitled to a floating quarterly dividend rate equal to the 90-day Canadian Treasury Bill Rate plus 500 basis points, as and when declared by the Board of Directors of CWB.

The Preferred Shares Series 3 and the Preferred Shares Series 4 are anticipated to qualify as Tier 1 capital for the Bank and the closing date will be subject to the timing of the approval from the Minister of Finance. CWB will make an application to list the warrants and the Series 3 Preferred Shares as of the closing date on the Toronto Stock Exchange. CWB’s Tier 1 capital ratio was 8.9% and its total capital ratio was 13.5% as of October 31, 2008. On the assumption that $200 million of preferred units are issued through these offerings, the pro forma Tier 1 and total capital ratios as of October 31, 2008 would be approximately 11.2% and 15.8%, respectively.

Well, there’s some things going on here that I don’t understand. Why are “certain pension fund clients of Alberta Investment Management Corporation” purchasing units? Is it for flipping? Regional Pride? A sweetheart deal? Stupidity? Why would a non-taxable investor buy these things? I want to know the answer. We’ve had quite enough market-rigging by regional government-sponsored pension funds and their allies in Canada recently, thank you very much.

I also want to know why there isn’t a credit rating on these things. CWB’s recent issue of sub-debt was not and is not rated. Why isn’t CWB lifting its skirts for the rating agencies? CWB certainly looks well capitalized at this point, but I want a little public pressure in bad times for the bank to clean itself up; and the most trustworthy sparkplug for this public pressure remains the credit rating agencies.

This issue will not be tracked by HIMIPref™.

CIBC 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 35 (the “Series 35 Shares”) priced at $25.00 per Series 35 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 35 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 35 Shares will yield 6.5% per annum, payable quarterly, as and when declared by the Board of Directors of CIBC, for an initial period ending April 30, 2014. On April 30, 2014 and on April 30 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 4.47%.

Holders of the Series 35 Shares will have the right to convert their shares into non-cumulative Floating Rate Class A Preferred Shares, Series 36 (the “Series 36 Shares”), subject to certain conditions, on April 30, 2014 and on April 30 every five years thereafter. Holders of the Series 36 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 4.47%.

Holders of the Series 36 Shares may convert their Series 36 Shares into Series 35 Shares, subject to certain conditions, on April 30, 2019 and on April 30 every five years thereafter.

The expected closing date is February 4, 2009. The net proceeds of this offering will be used for general purposes of CIBC.

Update, 2009-2-3: CIBC announced on January 27:

that as a result of strong investor demand for its domestic public offering of non-cumulative Rate Reset Class A Preferred Shares, Series 35 (the “Series 35 Shares”), the size of the offering has been increased to 10 million shares. The gross proceeds of the offering will now be $250 million.

In addition, CIBC has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase up to an additional 3 million Series 35 Shares at a price of $25.00 per share. Should the underwriters’ option be fully exercised, the total gross proceeds of the financing will be $325 million.

The issue is set to close tomorrow and trade with the symbol CM.PR.L
The first dividend will be payable April 28 for $0.37842 based on closing Feb. 4

National Bank has announced:

that it has entered into an agreement with a group of underwriters led by National Bank Financial Inc. for an issue on a bought deal basis of 4 million non-cumulative 5-year rate reset first preferred shares series 26 (the “Series 26 Preferred Shares”), at a price of $25.00 per share, to raise gross proceeds of $100 million.

National Bank has also granted the underwriters an option to purchase, on the same terms, up to an additional 3 million Series 26 Preferred Shares. This option is exercisable in whole or in part by the underwriters at any time up to one business day prior to closing. The maximum gross proceeds raised under the offering will be $175 million should this option be exercised in full.

The Series 26 Preferred Shares will yield 6.60% annually, payable quarterly, as and when declared by the Board of Directors of National Bank, for the initial period ending February 15, 2014. The first of such dividends, if declared, shall be payable on May 15, 2009. Thereafter, the dividend rate will reset every five years at a level of 479 basis points over the then 5-year Government of Canada bond yield.

Holders of the Series 26 Preferred Shares will have the right to convert their shares into an equal number of non-cumulative floating rate first preferred shares series 27 (the “Series 27 Preferred Shares”), subject to certain conditions, on February 15, 2014, and on February 15th every five years thereafter. Holders of the Series 27 Preferred Shares will be entitled to receive quarterly floating dividends, as and when declared by the Board of Directors of National Bank, equal to the 90-day Government of Canada Treasury Bill rate plus 479 basis points.

The net proceeds of the offering will be used for general corporate purposes and are expected to qualify as Tier 1 capital for National Bank. The expected closing date is on or about January 30, 2009. National Bank intends to file in Canada a prospectus supplement to its December 5, 2008 base shelf prospectus in respect of this issue.

National Bank will make an application to list the Series 26 Preferred Shares and the Series 27 Preferred Shares as of the closing date on the Toronto Stock Exchange.

The initial dividend will be $0.47918 payable May 15 based on an anticipated closing January 30.