PrefBlog

The Toronto-Dominion Bank has announced:

the pricing of a U.S. public offering of US$750 million 7.250% Fixed Rate Reset Limited Recourse Capital Notes, Series 4 (Non-Viability Contingent Capital (NVCC)) (the “LRCNs”). The LRCNs will be registered with the U.S. Securities and Exchange Commission (the “SEC”).

The LRCNs will bear interest at a rate of 7.250 per cent annually, payable quarterly, for the initial period ending on, but excluding, July 31, 2029. Thereafter, the interest rate on the LRCNs will reset every five years at a rate equal to the prevailing U.S. Treasury Rate plus 2.977 per cent. The LRCNs will mature on July 31, 2084. The expected closing date of the offering is July 3, 2024, subject to customary closing conditions.

Concurrently with the issuance of the LRCNs, TD will issue 750,000 Non-Cumulative 7.250% Fixed Rate Reset Preferred Shares, Series 31 (Non-Viability Contingent Capital (NVCC)) (“Preferred Shares Series 31”) to be held by Computershare Trust Company of Canada, as trustee for TD LRCN Limited Recourse Trust™ (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the LRCNs when due, the recourse of each LRCN holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of Preferred Shares Series 31 except in limited circumstances.

TD may redeem the LRCNs on July 31, 2029, and once every quarter-end thereafter, with the prior written approval of the Superintendent of Financial Institutions (Canada), in whole or in part on not less than 10 days’ and not more than 60 days’ prior notice to the LRCN holders.

The net proceeds from this transaction will be used for general corporate purposes, which may include the redemption of outstanding capital securities and/or the repayment of other outstanding liabilities. The proceeds from this transaction are expected to qualify as “Additional Tier 1” capital of TD for regulatory purposes.

TD Securities, Citigroup, Goldman Sachs & Co. LLC, Wells Fargo Securities, Truist Securities and US Bancorp are the joint book-running managers on the issue.

A registration statement relating to the offering has been filed with the SEC and is effective. This press release does not constitute an offer to sell, or a solicitation of an offer to buy, these securities in the United States or in any other jurisdiction where such offer, solicitation or sale would be unlawful. The offering may be made only by means of a prospectus supplement and the accompanying prospectus.

Copies of the preliminary prospectus supplement and the accompanying prospectus for the offering may be obtained free of charge by visiting EDGAR on the SEC’s website at www.sec.gov. Alternatively, copies of the final prospectus supplement, when available, and the accompanying prospectus may also be obtained by contacting TD Securities (USA) LLC at 1-855-495-9846, Citigroup Global Markets Inc. at 1-800-831-9146, Goldman Sachs & Co. LLC at 1-866-471-2526, Wells Fargo Securities, LLC at 1-800-645-3751, Truist Securities, Inc. at 1-800-685-4786 and U.S. Bancorp Investments, Inc. at 1-877-558-2607.

As noted by Assiduous Reade IrateAR, this is sufficient size to redeem both TD.PF.M (18-million shares = CAD 450-million par value) and TD.PF.B (20-million shares = 500-million par value), given that USD 750-million comes to just over CAD 1-billion at current exchange rates. Both issues are redeemable 2024-7-31. TD.PF.M will come as no surprise at all, given its Issue Reset Spread of +356, but TD.PF.B … well, it’s Issue Reset Spread is a mere +227 and while it’s been trading at a much lower yield to perpetuity than its siblings for some time, it was nevertheless up 2.21% on the day (close/close). A nice win for the speculators!

I will, however, note that TD was careful not to name any specific issues when disclosing that uses for the funds raised “may include the redemption of outstanding capital securities” and nothing specific regarding either of the two issues identified as possible redemption fodder has yet been announced. So don’t get too excited just yet.

However, I continue to be encouraged by this LRCN issuance … every issue that comes out reinforces the belief that the preferred share market is cheap, cheap, cheap!

Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Rate Reset Class A Preferred Shares Series 51 (Non-viability contingent capital (NVCC)) (Series 51 shares) (TSX: CM.PR.Y), for cash. The redemption will occur on July 31, 2024. The redemption price is $25.00 per Series 51 share.

The $0.321875 quarterly dividend announced on May 30, 2024 will be the final dividend on the Series 51 shares and will be paid on July 29, 2024, covering the period to July 31, 2024, to shareholders of record on June 28, 2024.

Holders of the Series 51 shares should contact the financial institution, broker or other intermediary through which they hold the shares to confirm how they will receive their redemption proceeds.

CM.PR.Y was issued as a FixedReset, 5.15%+362, NVCC, that commenced trading 2019-6-4 after being announced 2019-5-24. This redemption was foreshadowed by CM’s issuance of LRCNs “for general corporate purposes, which may include the redemption of outstanding capital securities of CIBC”, which was interpreted by the Street as meaning redemption of CM.PR.O and CM.PR.Y – although CM.PR.Y, with its Issue Reset Spread of +362bp, has long been considered a prime candidate for redemption. It is tracked by HIMIPref™ and has been assigned to the FixedReset (Discount) subindex.

Thanks to Assiduous Readers PS and IrateAR for bringing this to my attention!

Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Rate Reset Class A Preferred Shares Series 39 (Non-viability contingent capital (NVCC)) (Series 39 shares) (TSX: CM.PR.O), for cash. The redemption will occur on July 31, 2024. The redemption price is $25.00 per Series 39 share.

The $0.232063 quarterly dividend announced on May 30, 2024 will be the final dividend on the Series 39 shares and will be paid on July 29, 2024, covering the period to July 31, 2024, to shareholders of record on June 28, 2024.

Holders of the Series 39 shares should contact the financial institution, broker or other intermediary through which they hold the shares to confirm how they will receive their redemption proceeds.

CM.PR.O was issued as a FixedReset, 3.90%+232, NVCC-compliant, that commenced trading 2014-6-11 after being announced 2014-6-2. The extension was announced 2019-6-12. The issue reset At 3.713% effective July 31, 2019. I recommended against conversion and there was no conversion. This redemption was foreshadowed by CM’s issuance of LRCNs “for general corporate purposes, which may include the redemption of outstanding capital securities of CIBC”, which was interpreted by the Street as meaning redemption of CM.PR.O and CM.PR.Y. CM.PR.O is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

Thanks to Assiduous Readers PS and IrateAR for bringing this to my attention!

Canadian Imperial Bank of Commerce has announced:

a domestic public offering of $500 million of 6.987% Limited Recourse Capital Notes Series 4 (Non-Viability Contingent Capital (NVCC)) (Subordinated Indebtedness) (the “LRCNs”). The LRCNs will be sold through a dealer syndicate led by CIBC Capital Markets.

The LRCNs will bear interest at a rate of 6.987% annually, payable semi-annually, for the initial period ending on, but excluding, July 28, 2029. Thereafter, the interest rate on the LRCNs will reset every five years at a rate equal to the prevailing 5-year Government of Canada Yield plus 3.70%. The LRCNs will mature on July 28, 2084. The expected closing date of the offering is June 25, 2024.

In connection with the issuance of the LRCNs, CIBC will issue Non-Cumulative 5-Year Fixed Rate Reset Class A Preferred Shares Series 58 (Non-Viability Contingent Capital (NVCC)) (the “Series 58 Shares”) to be held by Computershare Trust Company of Canada as trustee of CIBC LRCN Limited Recourse Trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the LRCNs when due, the recourse of each LRCN holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets held in respect of the LRCNs, which will consist of Series 58 Shares except in limited circumstances.

CIBC may redeem the LRCNs during the period from June 28 to and including July 28, commencing on June 28, 2029 and every five years thereafter with the prior written approval of the Superintendent of Financial Institutions Canada, in whole or in part on not less than 10 nor more than 60 days’ prior notice.

The net proceeds to CIBC from the sale of the LRCNs will be used for general corporate purposes, which may include the redemption of outstanding capital securities of CIBC, and/or the repayment of other outstanding liabilities of CIBC.

The LRCNs will be offered by way of a prospectus supplement to the bank’s short form base shelf prospectus dated September 23, 2022, to be filed on or about June 19, 2024 with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada.

Access to the prospectus supplement, the corresponding base shelf prospectus and any amendment thereto in connection with this offering is provided in accordance with securities legislation relating to procedures for providing access to a shelf prospectus supplement, a base shelf prospectus and any amendment thereto. The prospectus supplement, the base shelf prospectus and any amendment thereto in connection with this offering will be accessible within two business days at www.sedarplus.com.

An electronic or paper copy of the shelf prospectus supplement, the corresponding base shelf prospectus and any amendment to the documents may be obtained, without charge, from CIBC World Markets Inc., by contacting 416-594-8515 or email at Mailbox.CIBCDebtSyndication@cibc.com, by providing the contact with an email address or address, as applicable.

This came as pleasant news to holders of CM.PR.O, scheduled to reset at +232 effective 2024-7-31: it closed today at 24.88, up 2.77% from yesterday’s close. Market reaction for CM.PR.Y, scheduled to reset at +362 on 2024-7-31, was much more restrained: it closed at 25.10, up 0.32%; but, of course, with an Issue Reset Spread of +362, redemption has been considered pretty likely for a while.

In either case, it isn’t over until the fat lady sings, so don’t nobody go mortgaging any farms to try and squeeze a nickel out of the potential for redemption!

Thanks to Assiduous Readers IrateAR and niagara for bringing this to my attention!