PrefBlog

TD Securities announced:

Big 8 Split Inc. (the “Company”) announced today the redemption prices for its 585,093 Class B Preferred Shares (“Old Class B Preferred Shares”), 651,155 Class C Preferred Shares (“Old Class C Preferred Shares”) and 1,236,248 Class A Capital Shares (“Old Capital Shares”) currently outstanding which were called for redemption on October 24, 2013 and will be redeemed in accordance with their terms on December 13, 2013.

The Old Class B Preferred Share redemption price is $12.00 per share and the Old Class C Preferred Share redemption price is $12.00 per share, both payable in cash, together with dividends thereon in the amount of $0.2100 per Class B Preferred Share, $0.1725 per Class C Preferred Share, and $0.1275 per Class A Capital Share which have been declared but remain unpaid up to but not including December 13, 2013. The Old Capital Share redemption price is $27.0359 (“Capital Share Redemption Price”) per share, payable either in cash or, if a holder has previously elected, by delivery of a pro rata share of the common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, The Toronto-Dominion Bank, Great-West Lifeco Inc., Manulife Financial Corporation and Sun Life Financial Inc. (the “Portfolio Shares”) and the holder’s pro rata share of the other net assets of the Company. Payments of the redemption prices for the Old Class B Preferred Shares, Old Class C Preferred Shares and Old Capital Shares will be made by the Company on December 13, 2013.

They have also announced:

Big 8 Split Inc. (the “Company”) announced today that it has completed its treasury offering of 1,719,382 Class D Capital Shares, Series 1 (the “Capital Shares”) and 1,719,382 Class D Preferred Shares, Series 1 (the “Preferred Shares”) for aggregate gross proceeds of $38,686,095 The Capital Shares and Preferred Shares will trade on the Toronto Stock Exchange under the symbols BIG.D and BIG.PR.D, respectively.
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The Preferred Shares were offered at a price of $10.00 per share. Holders of Preferred Shares will be entitled to receive quarterly fixed cumulative preferential distributions equal to $0.1125 per Preferred Share, representing a dividend yield on the offering price of the Preferred Shares of 4.50%. The Capital Shares were offered at a price of $12.50 per share. The Capital Shares will provide holders with a leveraged investment, the value of which is linked to changes in the market price of the Portfolio Shares.

The offering was placed through a group of investment dealers co-led by TD Securities Inc., CIBC and Scotiabank, and that includes BMO Capital Markets, National Bank Financial Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

DBRS has assigned a provisional rating of Pfd-2(low) to BIG.PR.D:

DBRS has today finalized the provisional rating of Pfd-2 (low) to the Class D Preferred Shares, Series 1 (the Class D Preferred Shares) issued by Big 8 Split Inc. (the Company) and discontinued the ratings of the Class B Preferred Shares, Series 1 (the Class B Preferred Shares) and the Class C Preferred Shares, Series 1 (the Class C Preferred Shares), which have been fully redeemed.
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The Company has advised DBRS that the initial downside protection available to holders of the Class D Preferred Shares is expected to be approximately 52.7% after the payment of all issuance expenses (based on the minimum offering size). Dividends received on the Portfolio will be used to pay a fixed cumulative quarterly distribution to holders of the Class D Preferred Shares at a rate of 4.50% per annum while holders of the Class D Capital Shares are expected to receive all excess dividend income after the Class D Preferred Share distributions and other expenses of the Company have been paid. Based on the current dividend yield on the Portfolio, the initial Class D Preferred Share dividend coverage ratio is expected to be approximately 1.4 times.

The company’s intention to issue BIG.PR.D was reported on PrefBlog.

BIG.PR.D will not be tracked by HIMIPref™. Regrettably, it is too small an issue to provide any assurance of any liquidity at all.

Royal Bank of Canada has announced:

its intention to redeem all of its issued and outstanding Non-Cumulative 5-Year Rate Reset First Preferred Shares Series AN (the “Series AN shares”), AP (the “Series AP shares”) and AR (the “Series AR shares”) on February 24, 2014, for cash at a redemption price of $25.00 per share.

There are 9,000,000 Series AN shares outstanding, representing $225 million of capital; 11,000,000 Series AP shares outstanding, representing $275 million of capital; and 14,000,000 Series AR shares outstanding, representing $350 million of capital. The redemption of the Series AN, AP and AR shares will be financed out of the general corporate funds of Royal Bank of Canada.

Separately from the redemption price, the final quarterly dividend of $0.390625, for each of the Series AN, AP and AR shares will be paid in the usual manner on February 24, 2014 to shareholders of record on January 27, 2014.

Not bad! $850-million being redeemed all on the same day … that’s pretty close to 1.5% of the entire Canadian preferred share market! The question remains as to whether all this cash will be recycled out of the market, back into extant issues or into new issues … we will see!

Enbridge Inc. has announced:

it has closed its previously announced public offering of Cumulative Redeemable Preference shares, Series 7 (Series 7 Preferred Shares) by a syndicate of underwriters led by Scotiabank, CIBC, RBC Capital Markets, and TD Securities Inc. Enbridge issued 10 million Series 7 Preferred Shares for gross proceeds of $250 million which includes the exercise of the underwriters’ option. The Series 7 Preferred Shares will begin trading on the TSX today under the symbol ENB.PR.J. Proceeds will be used to partially fund capital projects, reduce existing indebtedness and for other general corporate purposes of the Corporation and its affiliates.

ENB.PR.J is a FixedReset, 4.40%+257, announced December 3. The issue will be tracked by HIMIPref™ and is assigned to the FixedResets subindex.

The issue traded 436,827 shares today within a range of 24.76-89, before closing at 24.80-85, 10×28.

ENB.PR.J is rated Pfd-2(low) by DBRS.

Vital statistics are:

Power Financial Corporation has announced:

the successful completion and closing of an offering of 8,000,000 4.20% Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series T (the “Series T Shares”) priced at $25.00 per share to raise gross proceeds of $200 million.

The issue was bought by an underwriting syndicate co-led by BMO Capital Markets, RBC Capital Markets and Scotiabank.

The Series T Shares will be listed and posted for trading on the Toronto Stock Exchange under the symbol “PWF.PR.T”. The net proceeds from the issue will be used to supplement the Corporation’s financial resources and for general corporate purposes. The Corporation intends to redeem all of its $175 million First Preferred Shares, Series M on January 31, 2014.

PWF.PR.T is a FixedReset, 4.20%+237, announced December 2. It will be tracked by HIMIPref™ and is assigned to the FixedReset subindex.

The issue traded 728,130 shares today in a range of 25.22-35 before closing at 25.27-30, 17×96. Vital statistics are:

Fortis Inc. has announced:

that it has entered into an agreement and plan of merger to acquire UNS Energy Corporation (“UNS Energy”) (NYSE:UNS) for US$60.25 per common share in cash, representing an aggregate purchase price of approximately US$4.3 billion, including the assumption of approximately US$1.8 billion of debt on closing (the “Acquisition”). The closing of the Acquisition, which is expected to occur by the end of 2014, is subject to receipt of UNS Energy common shareholder approval and certain regulatory and government approvals, including approval by the Arizona Corporation Commission (“ACC”), Federal Energy Regulatory Commission and compliance with any applicable requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of customary closing conditions.

UNS Energy is a vertically integrated utility services holding company, headquartered in Tucson, Arizona, engaged through three subsidiaries in the regulated electric generation and energy delivery business, primarily in the State of Arizona. UNS Energy’s fiscal 2012 operating revenues totalled approximately US$1.5 billion and, as at September 30, 2013, UNS Energy had total assets of approximately US$4.3 billion. UNS Energy serves approximately 654,000 electricity and gas customers.

Following the Acquisition, based on pro forma financial information as at September 30, 2013, total assets of Fortis will increase by approximately 33.5% to approximately $23.5 billion and regulated utility assets will comprise approximately 92% of total assets. Regulated assets in Canada and the United States will comprise approximately 55% and 34%, respectively, of total assets. The Corporation’s consolidated rate base is expected to increase by approximately US$3 billion at the time of closing of the Acquisition. Following the Acquisition, Fortis utilities will serve more than 3,000,000 electricity and gas customers.

They also announced a big chunk of financing:

its direct wholly owned subsidiary, FortisUS Holdings Nova Scotia Limited (the “Selling Debentureholder”), has agreed to sell $1,594,000,000 aggregate principal amount of 4.00% convertible unsecured subordinated debentures (“Debentures”) of Fortis in a secondary offering on a “bought deal” basis to the public (the “Public Offering”) and separately has agreed to sell $206,000,000 aggregate principal amount of Debentures to certain institutional investors on a private placement basis (the “Private Placement” and together with the Public Offering, the “Offerings”). In connection with the Public Offering, the underwriters have also been granted an over-allotment option to purchase up to an additional $239,100,000 aggregate principal amount of Debentures at the offering price, within 30 days from the date of the closing of the Public Offering solely to cover over-allotments, if any, and for market stabilization purposes.

All Debentures are being sold on an instalment basis at a price of $1,000 per Debenture, of which $333 is payable on the closing of the Offerings and the remaining $667 is payable on a date (“Final Instalment Date”) to be fixed following satisfaction of all conditions precedent to the closing of Fortis’ acquisition of UNS Energy Corporation (NYSE:UNS).
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The Debentures will mature on January 9, 2024 and will bear interest at an annual rate of 4.00% per $1,000 principal amount of Debentures (an effective annual yield of 12.00% based on a first instalment of $333) until and including the Final Instalment Date, after which the interest rate will be 0%.

If the Final Instalment Date occurs on a day that is prior to the first anniversary of the closing of the Offering, holders of Debentures who have paid the final instalment on or before the Final Instalment Date will be entitled to receive, on the business day following the Final Instalment Date, in addition to the payment of accrued and unpaid interest to and including the Final Instalment Date, an amount equal to the interest that would have accrued from the day following the Final Instalment Date to, but excluding, the first anniversary of the closing of the Offering had the Debentures remained outstanding until such date (the “Make-Whole Payment”). No Make-Whole Payment will be payable if the Final Instalment Date occurs on or after the first anniversary of the closing of the Offering.

At the option of investors and provided that payment of the final instalment has been made, each Debenture will be convertible into common shares of Fortis (“Common Shares”) at any time after the Final Instalment Date but prior to maturity or redemption by the Corporation at a conversion price of $30.72 per Common Share, being a conversion rate of 32.5521 Common Shares per $1,000 principal amount of Debentures, subject to adjustment in certain circumstances.

The Debentures will not be redeemable except that Fortis will redeem the Debentures at a price equal to their principal amount plus accrued and unpaid interest following the earlier of: (i) notification to holders that the conditions necessary to approve the acquisition of UNS Energy Corporation will not be satisfied; (ii) termination of the acquisition agreement; and (iii) July 2, 2015, if notice of the Final Instalment Date has not been given to investors on or before June 30, 2015. Upon any such redemption, the Corporation will pay for each Debenture: (i) $333 plus accrued and unpaid interest to the holder of the Instalment Receipt; and (ii) $667 to the Selling Debentureholder on behalf of the holder of the Instalment Receipt in satisfaction of the final instalment. In addition, after the Final Instalment Date, any Debentures not converted may be redeemed by Fortis at a price equal to their principal amount plus unpaid interest, which accrued prior to the Final Instalment Date.

At maturity, Fortis will have the right to pay the principal amount due in Common Shares, which will be valued at 95% of their weighted average trading price on the Toronto Stock Exchange for the 20 consecutive trading days ending five trading days preceding the maturity date.

Mark Chediak and Rebecca Penty of Bloomberg note:

The transaction is Fortis’s second announced purchase of a U.S. utility in the past two years. The company completed its $969 million acquisition of CH Energy Group Inc. in June, after agreeing to freeze rates for New York customers. Fortis has been focused on the U.S. for acquisitions because there are “many more opportunities” than in Canada, where most utilities are owned by the government, Chief Financial Officer Barry Perry said on a conference call last month.

DBRS has announced that it:

has today placed the A (low) Issuer Rating, A (low) Unsecured Debentures and Pfd-2 (low) Preferred Shares ratings of Fortis Inc. (Fortis or the Company) Under Review with Developing Implications. This action follows the announcement that the Company has agreed to acquire UNS Energy Corporation (UNS) for a total consideration of approximately $4.3 billion, including the assumption of $1.8 billion of debt on closing (the Acquisition). The rating action reflects DBRS’s view that the proposed Acquisition would have a modestly negative impact on Fortis’ business risk profile while the impact on the financial risk profile is uncertain since the financing plan has not been finalized.
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The focus of DBRS’s analysis is on Fortis’ non-consolidated capital structure (parent level) and cash flow from the subsidiaries to the parent to service the parent’s debt and corporate expenses. On a non-consolidated basis, the cash flow-to-interest expense ratio was strong at 9.17 times in 9M2013, while debt-to-capital was approximately 21%. DBRS notes that the non-consolidated leverage of 21% is slightly above the acceptable range for a holding company with respect to DBRS’s one-notch criteria. However, this increase is expected to be temporary and the leverage will fall in-line with the current rating category following the completion of the Waneta project. Currently, it is uncertain as to how Fortis plannts to finance the proposed Acquisition. As a result, DBRS has placed the ratings of Fortis Under Review with Developing Implications. DBRS will further review the Company’s financing plan when it is finalized. Upon final review, if the Company finances the proposed Acquisition or any cost overruns of its current projects in such a way that its non-consolidated debt-to-capital structure is significantly above 20% and its other non-consolidated credit metrics deteriorate significantly without corrective action within a reasonable time frame, then negative rating action is likely to occur.

Fortis Inc. has several preferred issues trading on the Toronto Exchange: FTS.PR.E (OperatingRetractible); FTS.PR.F and FTS.PR.J (PerpetualDiscount); and FTS.PR.G, FTS.PR.H and FTS.PR.K (FixedReset).