PrefBlog

Transalta Corporation has announced:

it has completed its public offering of 9,000,000 Cumulative Redeemable Rate Reset First Preferred Shares, Series E (the “Series E Shares”) at a price of $25.00 per Series E Share.

The offering, previously announced on August 2, 2012, resulted in gross proceeds to TransAlta of $225 million. 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 Corporation and its affiliates.

The Series E Shares were offered to the Canadian public through a syndicate of underwriters led by CIBC, RBC Capital Markets and Scotiabank by way of a prospectus supplement that was filed with securities regulatory authorities in Canada under TransAlta’s short form base shelf prospectus dated November 15, 2011.

Holders of Series E Shares are entitled to receive a cumulative quarterly fixed dividend yielding 5.00% annually for the initial period ending September 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 3.65%. Holders of Series E Shares will have the right, at their option, to convert their shares into Cumulative Redeemable Rate Reset First Preferred Shares, Series F (the “Series F Shares”), subject to certain conditions, on September 30, 2017 and on September 30 every five years thereafter. Holders of Series F 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 3.65%. The Series E Shares are listed on the Toronto Stock Exchange under the ticker symbol TA.PR.H.

They announced on August 3:

that further to its bought deal financing (the “Offering”) announced on August 2, 2012, the syndicate of underwriters led by CIBC, RBC Capital Markets and Scotiabank have exercised the underwriters’ option (the “Option”) granted to them. Pursuant to the exercise of the Option, TransAlta Corporation will issue an additional 3,000,000 Cumulative Redeemable Floating Rate Reset First Preferred Shares, Series E (the “Series E Shares”) for aggregate gross proceeds of $75 million, bringing the aggregate gross proceeds of the Offering to $225 million.

TA.PR.H is a FixedReset, 5.00%+365, announced August 2. The issue will be tracked by HIMIPref™ but assigned to the Scraps index on credit concerns.

TA was recently downgraded to P-3 by S&P and placed on Review-Developing by DBRS.

TA.PR.H traded 236,734 shares today in a range of 24.70-85 before closing at 24.70-73, 3×16. Vital statistics are:

DBRS has announced that it:

has today published an updated report on Capital Power Corporation (CPC or the Company). The Company’s Preferred Shares rating is based on the credit quality of its subsidiary, Capital Power L.P. (CPLP; rated BBB by DBRS). The one-notch differential in the ratings of CPC and CPLP reflects structural subordination at CPC, which is largely dependent on its own resources and dividends from CPLP. Dividends from CPLP could be curtailed if the viability of CPLP needs to be safeguarded.
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DBRS is increasingly concerned about the continued challenging merchant power market environment that could materially add to the Company’s existing challenges in the medium term. In addition, the Sundance Unit 1 and 2 restarts, which are expected in late 2013, could place more pressure on the merchant power market environment in Alberta. The continued downward pressure on natural gas prices, which make natural gas combined-cycle plants more cost effective in terms of both capital and fuel costs, are expected to pressure CPLP’s merchant power earnings.

CPC has no debt issued at the parent level and is not expected to issue any debt in the foreseeable future. The Company has $122 million of preferred shares outstanding as of June 30, 2012. Preferred shares, as a percentage of common equity, are within the 20% threshold (defined as the percentage of preferred shares outstanding divided by total equity, excluding preferreds). For the six months ended June 30, 2012, CPC distributed $3 million to its preferred shareholders and $37 million to its common shareholders ($6 million and $51 million to preferred and common shareholders, respectively for fiscal 2011).

DBRS confirmed CPX.PR.A at Pfd-3(low) on July 24.

CPX.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

BCE Inc. has announced:

BCE Inc. will, on September 1, 2012, continue to have Cumulative Redeemable First Preferred Shares, Series AA outstanding if, following the end of the conversion period on August 22, 2012, BCE Inc. determines that at least 2.5 million Series AA Preferred Shares would remain outstanding. In such a case, as of September 1, 2012, the Series AA Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on an annual fixed dividend rate equal to 3.45%.

BCE.PR.A is interconvertible with BCE.PR.B on September 1, and notice of conversion is required to be with BCE by August 22, 2012. Note that brokerages and other custodians will have deadlines slightly in advance of this – so if contemplating conversion, find out your deadline immediately! The Notice of Conversion was discussed on PrefBlog.

I recommend that holders of BCE.PR.A convert to BCE.PR.B. The total dividends paid over the next five years will greater for the latter issue if the average prime rate exceeds 3.45% (provided that this issue continues to pay 100% of prime, which it will do unless the current price of $21 increases to over $25). This condition will be met if prime increases steadily to 4% at the end of five years. This is a reasonably good bet, even with the Fed announcing continued financial repression through the end of 2014. Additionally, I judge the chance of an overshoot of this figure to be much greater than the chance of an extreme undershoot; in other words, I judge the chances of average prime being 5% to be much greater than the chance of average prime being 2%.