PrefBlog

AltaGas Ltd. has announced (confusing bits bolded):

that it does not intend to exercise its right to redeem any or all of its currently outstanding Cumulative Redeemable Five-Year Rate Reset Preferred Shares, Series G (the “Series G Shares”) (TSX: ALA.PR.G) or the Cumulative Redeemable Floating Rate Preferred Shares, Series H (the “Series H Shares”) (TSX: ALA.PR.H) on September 30, 2024 (the “Conversion Date”).

As a result, subject to certain conditions, the holders of the Series G Shares have the right to convert all or part of their Series G Shares on a one-for-one basis into Series H Shares on the Conversion Date. Holders who do not exercise their right to convert their Series G Shares into Series H Shares will, subject to automatic conversion in the circumstances described below, retain their Series G Shares.

In addition, on the Conversion Date the holders of the Series H Shares have the right to convert all or part of their Series H Shares on a one-for-one basis into Series G Shares. Holders who do not exercise their right to convert their Series H Shares into Series G Shares will, subject to automatic conversion in the circumstances described below, retain their Series H Shares.

The foregoing conversion rights are subject to the conditions that: (i) if AltaGas determines that after giving effect to all conversions there would be less than 1,000,000 Series G Shares outstanding after the Conversion Date, then all remaining Series G Shares will automatically be converted into Series H Shares on a one-for-one basis on the Conversion Date; and (ii) if AltaGas determines that after giving effect to all conversions there would be less than 1,000,000 Series H Shares outstanding after the Conversion Date, then all remaining Series H Shares will automatically be converted into Series G Shares on a one-for-one basis on the Conversion Date. There are currently 6,885,823 Series G Shares and 1,114,177 Series H Shares outstanding.

With respect to any Series G Shares that are outstanding after the Conversion Date, holders shall be entitled to receive, as and when declared by the Board of Directors of AltaGas, fixed cumulative preferential cash dividends, payable quarterly. The new annual dividend rate applicable to the Series G Shares for the five-year period commencing on and including September 30, 2024 to, but excluding, September 30, 2029 will be 3.025 percent, being equal to the sum of the five-year Government of Canada bond yield determined as of today plus 3.060 percent.

With respect to any Series H Shares that are outstanding after the Conversion Date, holders shall be entitled to receive, as and when declared by the Board of Directors of AltaGas, quarterly floating rate cumulative preferential cash dividends. The dividend rate applicable to the Series H Shares for the three-month floating rate period commencing on and including September 30, 2024 to, but excluding, December 31, 2024 will be 4.205 percent, being equal to the sum of the annual rate of interest for the most recent auction of 90 day Government of Canada treasury bills plus 3.060 percent (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial holders of Series G Shares and Series H Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right during the conversion period, which runs from August 31, 2024 until 5:00 p.m. (Toronto time) on September 15, 2024. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps. Any notices received after this deadline will not be valid.

Subject to the terms and conditions of the Series G Shares and Series H Shares and AltaGas’ right to redeem such shares, holders of the Series G Shares and the Series H Shares will have the opportunity to convert their shares again on September 30, 2029, and every five years thereafter as long as the Series G Shares and Series H Shares remain outstanding.

The bolded parts of this press release are confusing: they don’t add up and as far as I can tell the reset rates will be set on Tuesday. To come to this conclusion, take a deep breath and go to the incredibly shitty SEDAR+ website, swear a lot and eventually find the document: “AltaGas Ltd. / AltaGas Ltd. (000050274) Prospectus (non pricing) supplement – English.pdf 25 Jun 2014 17:41 EDTJune 25 2014 at 17:41:08 Eastern Daylight Time Alberta 430 KB Generate URL”

Therein, we find:

“Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.

and

“Subsequent Fixed Rate Period” means, for the initial Subsequent Fixed Rate Period, the period from and including September 30, 2019 to, but excluding, September 30, 2024, and for each succeeding Subsequent Fixed Rate Period means the period from and including the day immediately following the last day of the immediately preceding Subsequent Fixed Rate Period to, but excluding, September 30 in the fifth year thereafter.

and

Business Day
If any day on which any dividend on the Series G Shares is payable by AltaGas or on or by which any other action is required to be taken by AltaGas is not a Business Day, then such dividend shall be payable and such other action may be taken on or by the next succeeding day that is a Business Day.

So the first day of the next “Subsequent Fixed Rate Period” is September 30, 2024. The “Fixed Rate Calculation Date” is thirty days prior to that, which is September 0, expressed more conventionally as August 31. August 31 is Saturday, hence not a business day, so the calculation is performed on the next business day, September 3.

So I believe the rate will be calculated Tuesday, after the long weekend, when we may hope that people at AltaGas have resumed thinking about what they’re doing.

I have sent the following eMail to Investor Relations:

Your press release at https://www.altagas.ca/newsroom/news-releases/altagas-provides-notice-series-g-and-series-h-preferred-shares-conversion contains the following sentence: “The new annual dividend rate applicable to the Series G Shares for the five-year period commencing on and including September 30, 2024 to, but excluding, September 30, 2029 will be 3.025 percent, being equal to the sum of the five-year Government of Canada bond yield determined as of today plus 3.060 percent.”

As the five-year Government of Canada bond yield is nowhere near -0.035%, I believe this to be an error. Further, I believe that the reset is actually to be calculated on Tuesday September 3, this being the business day following the 30th day prior to the reset date of September 30 – that is, August 31, a non-business day.

Please advise whether this is correct.

ALA.PR.G was issued as a FixedReset, 4.75%+306, that commenced trading 2014-7-3 after being announced 2014-6-23. Notice of extension was announced 2019-8-29. The issue reset at 4.242% effective 2019-9-30. I recommended against conversion. News that some were converted was reported on 2019-9-24; there was, in fact a 14% conversion. The issue is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns. In December, 2018, the issue was downgraded to Pfd-3(low) by DBRS and to P-3 by S&P. DBRS withdrew its rating in November 2021. S&P continues to rate the ALA preferreds at P-3.

ALA.PR.H is a FloatingReset, Bills+306, that arose through a 14% conversion from ALA.PR.G in September, 2019.

Thanks to Assiduous Reader IrateAR for bringing this to my attention, and to Niagara for pointing out arithmetic errors.

Update, 2024-9-3: I have received the following communication from TA:

Apologies for the confusion, the rate applicable for the Series G shares is equal to the Government of Canada 5-year bond which is currently quoted at 3.025% plus the applicable spread of 3.06%. This would deliver a total rate of 6.085%.

The rate applicable for the Series H shares, is determined by adding the currently quoted Government of Canada 90-day T-bill rate of 4.205% plus the applicable spread of 3.06% for a total rate of 7.265%.

Further, to your question regarding the reset date, anything later than Aug 30 would be outside the minimum 30 day notice period. Hope this helps.

Please let us know if you have any further questions.

I have responded with the following query:

I refer you to the prospectus for ALA.PR.G, issued in June, 2014.

‘Subsequent Fixed Rate Period’ is a defined term:
“Subsequent Fixed Rate Period” means, for the initial Subsequent Fixed Rate Period, the period from and including September 30, 2019 to, but excluding, September 30, 2024, and for each succeeding Subsequent Fixed Rate Period means the period from and including the day immediately following the last day of the immediately preceding Subsequent Fixed Rate Period to, but excluding, September 30 in the fifth year thereafter.
Therefore, the first day of the next ‘Subsequent Fixed Rate Period’ is September 30, 2024.

‘Fixed Rate Calculation Date’ is also a defined term:
“Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.

Therefore the Fixed Rate Calculation Date applicable to the upcoming Subsequent Fixed Rate Period is August 31, 2024 – a Saturday and therefore not a business day.

There is also a specification of what happens when a scheduled action falls on a non-business day:
Business Day
If any day on which any dividend on the Series G Shares is payable by AltaGas or on or by which any other action is required to be taken by AltaGas is not a Business Day, then such dividend shall be payable and such other action may be taken on or by the next succeeding day that is a Business Day.

Therefore the action taken – calculating the rate applicable to the upcoming Subsequent Fixed Rate period is the next succeeding day that is a Business Day, which is today, September 3.

Can you please advise how your interpretation of the prospectus differs from the above?

I have not yet received an answer to my eMail. With respect to their claim about a 30 day notice period, the following paragraphs are in the prospectus:

AltaGas shall, not more than 60 days and not less than 30 days prior to the applicable Series G Conversion Date, give notice to the then registered holders of the Series G Shares of the conversion right. On the 30th day prior to each Series G Conversion Date, AltaGas shall give notice to the then registered holders of the Series G Shares of the Annual Fixed Dividend Rate for the Series G Shares for the next succeeding Subsequent Fixed Rate Period and the Floating Quarterly Dividend Rate for the Series H Shares for the next succeeding Quarterly Floating Rate Period.

…
Notice of any redemption of Series G Shares will be given by AltaGas not more than 60 days and not less than 30 days prior to the date fixed for redemption. If less than all of the outstanding Series G Shares are at any time to be redeemed, the shares so to be redeemed shall be redeemed pro rata (disregarding fractions).

So there has to be 30 days notice of the conversion right and 30 days notice of redemption; as far as I can tell, there is no notice period required for the announcement of the reset rates.

In 2019, they handled the situation by notifying of extension in late August and announcing the reset rate in September. It is not clear to me why they did not repeat this procedure last year; I will ask tomorrow if I have not received an answer to today’s query.

Equitable Bank has announced (in its 24Q3 Earnings Release):

EQB preferred share redemption

• On September 30, 2024, EQB will redeem all of the 2,911,800 outstanding shares of its Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 3 (the “Series 3 Preferred Shares”). The redemption price per share for the Series 3 Preferred Shares will be $25.00 for each Series 3 Preferred Share of the Company.
• The Series 3 Preferred Shares are currently listed for trading on the Toronto Stock Exchange under the symbol EQB.PR.C and will be de-listed from the TSX, as at the close of trading on September 30, 2024. Beneficial holders of Series 3 Preferred Shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds.

EQB.PR.C was issued as a FixedReset, 6.35%+478 in the summer of 2014. It reset to 5.969% effective 2019-09-30. The issue has not been tracked by HIMIPref™ as there has been no credit rating for the preferreds (although one has been obtained for the LRCNs). As I wrote at time of issue:

This issue is unrated and will not be tracked by HIMIPref™. This is not because I worship the Credit Rating Agencies and am unable to do anything without them; it is because I feel that a public announcement by the CRAs of imminent downgrades do an admirable job of concentrating the minds of management and the directors on fixing the problem. Such announcements by Hymas Investment Management Inc. or Joe Blogger do not carry the same weight.

Thanks to Assiduous Reader IrateAR for bringing this to my attention!

TransAlta Corporation has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding cumulative redeemable rate reset first preferred shares Series G (“Series G Shares”) (TSX: TA.PR.J) on September 30, 2024 (the “Conversion Date”).

As a result, the holders of the Series G Shares will have the right to convert all or any of their Series G Shares into cumulative redeemable floating rate first preferred shares Series H of the Company (“Series H Shares”) on the basis of one Series H Share for each Series G Share on the Conversion Date subject to the terms and conditions of the Series G Shares, including those described in the prospectus supplement dated August 8, 2014 relating to the issuance of the Series G Shares.

The dividend rate applicable to the Series G Shares for the 5-year period from and including September 30, 2024, to but excluding September 30, 2029, and the dividend rate applicable to the Series H Shares for the 3-month period from and including September 30, 2024, to but excluding December 31, 2024, will be determined and announced by the Company by way of a news release on September 3, 2024.

As provided in the terms of the Series G Shares, if TransAlta determines after reviewing all Series G Shares tendered for conversion into Series H Shares that: (i) there would remain outstanding on September 30, 2024, less than 1,000,000 Series G Shares, all remaining Series G Shares shall be converted automatically into Series H Shares on a one-for one basis effective September 30, 2024; or (ii) there would remain outstanding after September 30, 2024, less than 1,000,000 Series H Shares, the holders of Series G Shares shall not be entitled to convert their shares into Series H Shares effective September 30, 2024. There are currently 6,600,000 Series G Shares outstanding.

The Series G Shares are issued in “book entry only” form and must be purchased or transferred through a participant in the CDS depository service (“CDS Participant”). All rights of holders of Series G Shares must be exercised through CDS or the CDS Participant through which the Series G Shares are held. The deadline for the registered shareholder to provide notice of exercise of the right to convert Series G Shares into Series H Shares is 3:00 p.m. (MST) / 5:00 p.m. (EST) on September 16, 2024. Any notices received after this deadline will not be valid. As such, holders of Series G Shares who wish to exercise their right to convert their shares should contact their broker or other intermediary for more information and it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

If TransAlta does not receive an election notice from a holder of Series G Shares during the time fixed therefore, then the Series G Shares shall be deemed not to have been converted (except in the case of an automatic conversion). Holders of the Series G Shares and the Series H Shares will have the opportunity to convert their shares again on September 30, 2029, and every five years thereafter as long as the shares remain outstanding.

The Toronto Stock Exchange (TSX) has conditionally approved the listing of the Series H Shares effective upon conversion.

Listing of the Series H Shares is subject to TransAlta fulfilling all the listing requirements of the TSX.

TA.PR.J was issued as a FixedReset, 5.30%+380, that commenced trading 2014-8-14 after being announced 2014-8-6. The issue reset at 4.988% effective September 30, 2019. I recommended against conversion and there was no conversion. The issue is tracked by HIMIPref™ and has been assigned to the Scraps index on credit concerns. It continues to be rated P-4(high by S&P but remains at Pfd-3(low) with DBRS.

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!