Canadian Utilities has announced an issue of Cumulative (!) Redeemable Preferred Shares Series 1.
Issue size is 4.6-million shares priced at $25.00 for gross proceeds of $115-million.
Dividends are 4.60% per annum ($1.15), payable quarterly, cumulative (!), payable on the first day of March/June/September/December. The initial dividend of $0.13863 will be paid on June 1, based on the anticipated closing date of April 18, 2007.
The call schedule is:
| CU 4.60% Redemptions | ||
| From | To | Price |
| 2012-06-01 | 2013-5-31 | $26.00 |
| 2013-06-01 | 2014-05-31 | 25.75 |
| 2014-06-01 | 2015-05-31 | 25.50 |
| 2015-06-01 | 2016-05-31 | 25.25 |
| 2016-06-01 | Infinite Date | 25.00 |
These are rated at Pfd-2(high) by DBRS and P-2 (high) by S&P.
The material I have indicates that the proceeds will be used to finance capital expenditures and for other general corporate purposes … but I wonder! CU.PR.T is currently callable at $25.00 with a dividend rate of $1.475 p.a. (issue size 2,277,675 according to the TSX) and CU.PR.V is currently callable at $25.00 with a dividend rate of $1.325 p.a. (issue size 2,146,730 : ibid). I have previously complained that these issues appear to be surviving due solely to regulatory boneheadism … but perhaps a ray of sunlight has penetrated Canadian capital markets. However, there is more boneheadism in heaven and earth than is dreamt of in my philosophy. We shall see.
More later.
Update : DBRS has confirmed on their site that the new issue is rated Pfd-2(high).
Interestingly, they have a different understanding of the use of proceeds from the issue than the one I saw (my bolding):
The net proceeds of the Preferred Shares are expected to be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of CU Inc.’s subsidiaries, ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.
I don’t think CU.PR.T & CU.PR.V will last very much longer. And, if you look at the issue sizes and account for underwriting fees of about 3%, you might decide that “general corporate purposes” consist largely of buying a new pencil.
