PrefBlog

Veresen Inc. has announced:

it has entered into a suite of separate agreements to sell its power generation business for $1.18 billion.

Veresen has maximized the value of its power business by selling the assets in three separate packages.
…
Each of the agreements is subject to closing adjustments and conditions customary in transactions of this nature. Closing is expected to occur during the second quarter of 2017 subject to the receipt of all necessary approvals. Veresen anticipates the minimal amount of cash taxes arising from the sale of the power business will be recovered in the following year. The company expects to update its 2017 guidance for the divestiture of the power business upon the closing of the sale process. TD Securities Inc. acted as the company’s sole financial advisor on this divestiture.

… and Capital Power Corporation has announced:

that it has entered into an agreement to acquire the thermal power business of Veresen Inc., consisting of two gas-fired generation facilities and two waste heat assets.

Under the terms of the agreement, Capital Power will acquire 284 megawatts (MW, net) of generation from two natural gas-fired power assets in Ontario consisting of the 84 MW East Windsor Cogeneration Centre (East Windsor) and a 50% interest in the 400 MW York Energy Centre (York Energy), and will operate both facilities. Both East Windsor and York Energy are under long-term power purchase agreements (PPAs) with the Ontario Independent Electricity System Operator (IESO, A rated) with original terms expiring in 2029 and 2032, respectively. Both assets earn revenue through fixed capacity payments partly indexed to inflation and are compensated for operations and maintenance, and fuel (commodity and transportation) as well as start-up costs. Additionally, East Windsor is under a long-term steam supply agreement with Ford Motor Company (BBB rated).
…
The purchase price for the acquisition is $225 million in total cash consideration, subject to working capital adjustments and other closing adjustments, and the assumption of $275 million of project level debt (proportionate basis). Capital Power expects to finance the transaction through existing cash and its credit facilities. The transaction is expected to close in the second quarter of 2017, subject to regulatory approvals and satisfaction of closing conditions.

The acquisition is expected to increase adjusted funds from operations (AFFO) by an estimated $24 million in the first full year of operations, which will be accretive by 25 cents per share reflecting a 7% increase. The acquisition is expected to be accretive to earnings by 11 cents per share during its first full year of operations. The projected annual EBITDA generated by the assets is estimated to be $55 million per year.

With respect to VSN, DBRS comments:

DBRS had placed Veresen’s ratings Under Review with Negative Implications on August 4, 2016, following the Company’s announcement that it would sell its power generation business, suspend its Premium Dividend and Dividend Reinvestment Plan (DRIP) and maintain its current dividend payout. Proceeds from the sale of the power business will be invested to develop Veresen’s midstream projects in the core natural gas and natural gas liquids infrastructure business. DBRS believes that this announcement negatively affects Veresen’s business risk profile. Please refer to the DBRS press releases “DBRS Places Veresen Inc.’s Ratings Under Review with Negative Implications,” dated August 4, 2016, and “DBRS Maintains Veresen Inc.’s Ratings Under Review with Negative Implications Status,” dated November 18, 2016. DBRS notes that today’s announcement by the Company is consistent with its announcement on August 4, 2016. Consequently, DBRS is maintaining the Under Review with Negative Implications status on Veresen’s ratings. DBRS will further review the details relating to the sale transactions as they become available and aims to resolve the Under Review with Negative Implications status after the sale transactions have closed in Q2 2017.

With respect to CPX, DBRS comments:

DBRS views the Acquisition as having a modestly positive impact on CPC’s Business Risk Assessment factors as (1) the Acquisition assets are supported by long-term PPAs with highly rated counterparties; (2) cash flow from the Acquisition assets is expected to be stable reflecting the nature of capacity contract payments, which account for approximately 80% of the revenues of the Acquisition assets; and (3) the assets being located outside of Alberta also provides CPC with additional geographic diversification, away from the heightened political risk in the province. However, DBRS views the impact of the Acquisition to be modestly negative on CPC’s credit ratios as a result of additional debt from the Acquisition. Overall, DBRS does not view the Acquisition as having either a material positive or negative impact on CPC’s rating.

DBRS notes that CPC’s rating remains BBB with a Negative trend due to Alberta’s challenging wholesale power market environment and heightened political risk for the power market in Alberta. DBRS expects the Negative trend to be resolved upon the completion of its annual review of the Company, which is anticipated to occur in March 2017.

DBRS’ Review Negative of VSN was reported on PrefBlog here and here. The Negative Trend noted by DBRS with respect to CPX does not affect the preferred shares.

Affected VSN issues are VSN.PR.A, VSN.PR.C and VSN.PR.E.

Affected CPX issues are CPX.PR.A, CPX.PR.C, CPX.PR.E and CPX.PR.E.

BPO.PR.E settled today, but I was unable to find a press release. Which is not to say that there is no press release, of course – Brookfield’s website is an incredibly poorly designed labyrinth, although it looks really cool and groovy and awesome, man. Have another spliff, bro!

BPO.PR.E is a FixedReset, 5.10%+396M510, announced 2017-2-9. It will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The issue traded 697,623 shares today in a range of 24.92-02 before closing at 24.99-00, 10×188. Vital statistics are:

DBRS formally assigned a Pfd-3 rating to the issue:

DBRS Limited (DBRS) has today assigned a rating of Pfd-3 with a Stable trend to the $275 million Class AAA Preference Shares, Series EE (Series EE Preferred Shares), issued by Brookfield Office Properties Inc. (Brookfield).

The Series EE Preferred Shares will rank equally and rateably with Brookfield’s existing Class AAA preference shares and in priority of the Company’s Class B preferred shares and common shares.

DBRS understands that the net proceeds from the sale of the Series EE Preferred Shares will be used for general corporate purposes, which may include the redemption of existing preferred shares.

Implied Volatility analysis suggests that the issue is a little expensive, but it will be noted that in addition to all the usual assumptions made in this analysis, this conclusion also depends on the assumption that the issues with a reset-floor are equivalent to issues without a reset floor … which is somewhat controversial!

Click for Big

Quadravest has announced:

Financial 15 Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form prospectus in each of the provinces of Canada with respect to an offering of Preferred Shares and Class A Shares of the Company. The offering will be co-led by National Bank Financial Inc., CIBC, RBC Capital Markets, Scotia Capital Inc., and will also include BMO Capital Markets, GMP Securities L.P., Canaccord Genuity Corp., Raymond James, Desjardins Securities Inc., Echelon Wealth Partners, Mackie Research Capital Corporation and Manulife Securities Incorporated.

The Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.25% and the Class A Shares will be offered at a price of $10.50 per Class A Share to yield 14.37%.

The closing price on the TSX of each of the Preferred Shares and the Class A Shares on February 14, 2017 was $10.24
and $10.79, respectively.

Since inception of the Company, the aggregate dividends paid on the Preferred Shares have been $6.94 per share and the aggregate dividends paid on the Class A Shares have been $16.00 per share, for a combined total of $22.94. All
distributions to date have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The net proceeds of the offering will be used by the Company to invest in an actively managed, high quality portfolio
consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal	National Bank of Canada	Bank of America Corp.
The Bank of Nova Scotia	Manulife Financial Corporation	Citigroup Inc.
Canadian Imperial Bank of Commerce	Sun Life Financial Services of Canada Inc.	Goldman Sachs Group Inc.
Royal Bank of Canada	Great-West Lifeco Inc.	JP Morgan Chase & Co.
The Toronto-Dominion Bank	CI Financial Corp.	Wells Fargo & Co.

The Company’s investment objectives are:

Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends currently in
the amount of 5.25% annually, to be set by the Board of Directors annually subject to a minimum of 5.25% until 2020; and
ii. on or about the termination date, currently December 1, 2020 (subject to further 5 year extensions thereafter), to pay the holders of the Preferred Shares $10.00 per Preferred Share.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends in an amount to be determined by the Board of the Directors; and
ii. to permit holders to participate in all growth in the net asset value of the Company above $10 per Unit, by paying holders on or about the termination date of December 1, 2020 (subject to further 5 year extensions thereafter) such amounts as remain in the Company after paying $10 per Preferred Share.

The sales period of this overnight offering will end at 9:00 a.m. EST on February 16, 2017.

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

Update, 2017-2-17: The offering appears to have been successful:

Financial 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight marketing of up to 2,980,000 Preferred Shares and up to 2,980,000 Class A Shares of the Company. The total proceeds of the offering are expected to be approximately $61.1 million.