PrefBlog

DBRS has announced that it:

has today placed the BBB Issuer Rating and the Medium-Term Notes (MTNs) rating and the Pfd-3 Preferred Shares – Cumulative rating of AltaGas Ltd. (AltaGas or the Company) Under Review with Developing Implications. These rating actions follow the announcement that the Company has agreed to acquire WGL Holdings Inc. (WGL) for a total consideration of CAD 8.4 billion, including assumption of CAD 2.4 billion of debt (the Acquisition). The Acquisition is subject to WGL shareholders and certain regulatory and government approvals. The Acquisition is expected to close by the end of the second quarter of 2018.
…
DBRS notes that there is execution risk associated with the Acquisition. In addition to a shifting political climate in the United States, there is execution risk associated with regulatory, government hurdles and the financing plan. The expectation of the Acquisition closing in approximately 18 months considers the regulatory and political risks. Regulatory approvals are required from three separate public utility commissions in Virginia, Maryland and District of Columbia, the Federal Energy Regulatory Commission (FERC), the Committee on Foreign Investment in the United States (CFIUS), and expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of customary closing conditions. There is also execution risk with respect to generating expected proceeds from the proposed sale of AltaGas assets to finance the acquisition.

WGL has a reasonably healthy financial profile supported largely by its diverse and growing regulated utility operations. On a pro forma basis, DBRS expects initial pressure on AltaGas consolidated credit metrics at the close of the Acquisition in 2018 as a result of higher debt levels, including debt at WGL. Ratings could be pressured should the timing and amount of asset sales envisaged in the preliminary financing plan not materialize, as this could result in higher leverage. There is also currency risk associated with the USD 4.95 billion bridge credit facility. As the financing plan at closing of the Acquisition could change based on the timing, amounts and execution of the planned asset sales, the impact on the Company’s financial risk assessment (FRA) is uncertain at this time.

DBRS has placed the ratings of AltaGas Under Review with Developing Implications, considering the execution risks and uncertainties surrounding the financing plan. As noted in the latest DBRS rating report dated November 14, 2016, DBRS expects AltaGas to fund its growth projects and acquisitions with a prudent mix of debt and equity in order to maintain the company’s debt-to-capital ratio in the low 50% range. DBRS will further review the Company’s ratings as more information becomes available and aims to resolve the Under Review status of the ratings once financing details are known and the Acquisition has closed.

AltaGas has several issues of preferred shares outstanding, the most recently issued being ALA.PR.I, which commenced trading in November, 2015. Affected issues are ALA.PR.A, ALA.PR.B, ALA.PR.E, ALA.PR.G and ALA.PR.I.

Implied Volatility analysis yields the following chart:

Brookfield Infrastructure has announced:

the completion of its previously announced issue of Cumulative Class A Preferred Limited Partnership Units, Series 7 (“Series 7 Preferred Units”) in the amount of $300,000,000. The offering was underwritten by a syndicate led by CIBC Capital Markets, RBC Capital Markets, Scotiabank, and TD Securities Inc.

Brookfield Infrastructure issued 12,000,000 Series 7 Preferred Units at a price of $25.00 per unit, for total gross proceeds of $300,000,000. Holders of the Series 7 Preferred Units will be entitled to receive a cumulative quarterly fixed distribution yielding 5.00% annually for the initial period ending March 31, 2022. 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 3.78%, and (ii) 5.00%. The Series 7 Preferred Units will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BIP.PR.D.

BIP.PR.D is a FixedReset, 5.00%+378M500, ROC + Interest, announced January 19. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

The issue traded 1,272,999 shares today in a range of 25.05-19 before closing at 25.15-17, 10×30. Vital statistics are:

Implied Volatility analysis yields the following chart:

Update, 2017-10-11: Note that according to the prospectus, available on SEDAR under “Brookfield Infrastructure Partners L.P. Jan 19 2017 19:48:49 ET Prospectus (non pricing) supplement – English PDF 525 K”:

The reclassification of a Series 7 Preferred Unit into a Series 8 Preferred Unit or a Series 8 Preferred Unit into a Series 7 Preferred Unit, whether pursuant to an election made by the Resident Holder or pursuant to an automatic reclassification, may be considered to be a disposition of the Series 7 Preferred Unit or Series 8 Preferred Unit by the Resident Holder. The CRA’s position is that the conversion of an interest in a partnership into another interest in the partnership may result in a disposition of the partnership interest by the holder if the conversion results in a significant change in the rights and obligations of the holder in respect of the converted interest, including a significant change in the
percentage interest in the profits of the partnership. Whether or not the reclassification of Series 7 Preferred Units into Series 8 Preferred Units or Series 8 Preferred Units into Series 7 Preferred Units would result in a significant change in the percentage interest of a Resident Holder in the profits of the Partnership is a question of fact that depends upon the facts and circumstances that exist at the time of the reclassification.