PrefBlog

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.