PrefBlog

The Empire Life Insurance Company has announced:

that it has filed a preliminary short form prospectus (the “Prospectus”) in connection with an offering of Limited Recourse Capital Notes, Series 1 (Subordinated Indebtedness) (the “Notes”). The offering will be conducted on an agency basis by a syndicate of dealers co-led by Scotia Capital Inc., CIBC World Markets Inc. and RBC Dominion Securities Inc., as Joint Bookrunners and Co-Lead Managers, along with BMO Nesbitt Burns Inc., National Bank Financial Inc. and TD Securities Inc., as Co-Managers (collectively, the “Agents”).

If issued, the Notes will bear interest at a fixed rate to be determined by Empire Life and the Agents in the context of the market, payable semi-annually, for the initial period ending on but excluding April 17, 2026. Thereafter, the interest rate on the Notes will reset every five years. The offering will be priced in the context of the market with the price and other final terms to be determined at the time of entering into a formal agency agreement with the Agents for the offering. The Notes will mature on April 17, 2081.

Concurrently with the issuance of the Notes, Empire Life will issue Non-Cumulative 5-Year Fixed Rate Reset Preferred Shares, Series 5 (the “Preferred Shares Series 5”) to be held by Computershare Trust Company of Canada as trustee for a newly-formed trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the Notes when due, the recourse of each Note holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of Preferred Shares Series 5 except in limited circumstances.

Empire Life may redeem the Notes during the period from March 17 to and including April 17, commencing in 2026 and every five years thereafter, only upon the redemption by Empire Life of the Preferred Shares Series 5 held in the Limited Recourse Trust, in accordance with the terms of such shares and with the prior written approval of the Superintendent of Financial Institutions (Canada) (the “Superintendent”), in whole but not in part on not less than 15 nor more than 60 days’ prior notice.

The purpose of the sale of the Notes is to enlarge Empire Life’s Tier 1 capital base with a view to optimizing Empire Life’s capital structure within the parameters prescribed by the Superintendent for regulatory capital requirements. The net proceeds from the sale of the Notes, if issued, will be used for general corporate purposes and to redeem Empire Life’s outstanding Non-Cumulative Rate Reset Preferred Shares, Series 1, expected to occur on April 17, 2021, subject to a formal notice being delivered.

The closing of the offering will be subject to certain conditions including, but not limited to, the execution of a formal agency agreement. The Prospectus contains important information relating to the offering and is still subject to completion or amendment. For more information, potential investors should read the Prospectus, which is available on Empire Life’s SEDAR profile at www.sedar.com. There will not be any sale or acceptance of an offer to buy the Notes until a receipt for a final short form prospectus has been issued.

OK, so Empire Life will issue LRCNs at an interest rate yet to be determined. And DBRS assigned a provisional rating of BBB(high) without commenting on the structure.

The interesting thing is, the existence of insurer LRCNs is yet to be determined, although the promise was given by OSFI many, many nap times ago. So this kinda looks like EML and its dealer friends are forcing the issue. Snap it up a little, OSFI! Post-employment plums can always be plucked by persons on another pillar!

Update: 2021-2-11:LRCN size and price announced:

The Empire Life Insurance Company (“Empire Life” or the “Company”) (TSX: EML.PR.A) today announced the size and pricing of its previously announced offering of Limited Recourse Capital Notes, Series 1 (Subordinated Indebtedness) (the “Notes”). Empire Life intends to issue $200 million aggregate principal amount of Notes, which will bear interest at a fixed rate of 3.625%, payable semi-annually, for the initial period ending on but excluding April 17, 2026. Thereafter, the interest rate on the Notes will reset every five years at a rate equal to the 5-year Government of Canada Yield plus 3.082%. The Notes will mature on April 17, 2081.

As previously announced, the offering will be conducted on an agency basis by a syndicate of dealers co-led by Scotiabank, CIBC Capital Markets and RBC Capital Markets, as Joint Bookrunners and Co-Lead Managers, along with BMO Capital Markets, National Bank Financial Markets and TD Securities, as Co-Managers. The expected closing date of the offering of the Notes is on or about February 17, 2021.

In connection with the issuance of the Notes, Empire Life will issue Non-Cumulative 5-Year Fixed Rate Reset Preferred Shares, Series 5 (the “Preferred Shares Series 5”) to be held by Computershare Trust Company of Canada as trustee for a newly-formed trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the Notes when due, the recourse of each Note holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of the Preferred Shares Series 5 except in limited circumstances.

Empire Life may redeem the Notes during the period from March 17 to and including April 17, commencing in 2026 and every five years thereafter, only upon the redemption by Empire Life of the Preferred Shares Series 5 held in the Limited Recourse Trust, in accordance with the terms of such shares and with the prior written approval of the Superintendent of Financial Institutions (Canada) (the “Superintendent”), in whole but not in part, on not less than 15 nor more than 60 days’ prior notice.

The purpose of the sale of the Notes is to enlarge Empire Life’s Tier 1 capital base with a view to optimizing Empire Life’s capital structure within the parameters prescribed by the Superintendent for regulatory capital requirements. As previously announced, the net proceeds from the sale of the Notes will be used for general corporate purposes and to redeem Empire Life’s outstanding Non-Cumulative Rate Reset Preferred Shares, Series 1, expected to occur on April 17, 2021, subject to a formal notice being delivered.

The closing of the offering will be subject to certain conditions. For more information, potential investors should read the final short form prospectus relating to the offering of the Notes and the distribution of the Preferred Shares Series 5, which is available on Empire Life’s SEDAR profile at www.sedar.com.

Pembina Pipeline Corporation has announced:

that it has closed its previously announced offering of $600 million of 4.80% Fixed-to-Fixed Rate Subordinated Notes, Series 1 due January 25, 2081 (the “Offering”). The Company also announced its intention to redeem its issued and outstanding Cumulative Redeemable Minimum Rate Reset Class A Preferred Shares, Series 11 (TSX: PPL.PR.K) (the “Series 11 Shares”) on March 1, 2021.

Closing of Hybrid Note Offering

Pembina expects to use the net proceeds of the Offering to fund the redemption of its outstanding Series 11 Shares and its Cumulative Redeemable Minimum Rate Reset Class A Preferred Shares, Series 13 (TSX: PPL.PR.M), to repay other outstanding indebtedness, as well as for general corporate purposes.

The subordinated notes were offered through a syndicate of underwriters, co-led by RBC Capital Markets, CIBC Capital Markets, Scotiabank and TD Securities, under Pembina’s short form base shelf prospectus dated December 30, 2020, as supplemented by a prospectus supplement dated January 12, 2021.

Pembina announced that they were considering this step in mid-January and confirmed the intent a few days later.

PPL.PR.K was issued as a FixedReset, 5.75%+500M575 that commenced trading 2016-1-15 after being announced 2016-1-6.

Standard & Poor’s has announced:

• Atlantic Power Corp. (APC) announced it has entered into an agreement to be acquired by I Squared Capital for $3.03 per share.
• The ratings on our ‘BB-‘ issuer credit rating on APC are unchanged and we are placing the company’s ratings on CreditWatch with negative implications.
• At the same time, we are placing the issue-level ratings on APLP Holdings L.P.’s term loan B, $180 million revolving credit facility, and Atlantic Power L.P.’s C$210 million medium-term notes on CreditWatch with negative implications.
• We are also placing the preferred shares at Atlantic Power Preferred Equity Ltd. (APLP) on CreditWatch with negative implications.
• The CreditWatch placements capture our view that the new sponsor could alter the capital structure.

S&P Global Ratings today took the rating actions listed above. Pro forma for the transaction, Atlantic Power’s financial policy will be determined by I Squared, which we would most likely designate a financial sponsor. We typically expect financial sponsors to use leverage to fund transactions to achieve returns. Consequently, ratings are generally lower for financial sponsor-owned companies than strategically owned entities. However, I Squared indicated it plans to redeem some debt and reorganize APC’s capital structure. We will monitor and reassess financial policy, forward leverage, and any changes to the business strategy as we obtain additional clarity on I Squared’s plan and as the transaction approaches financial close.

Following the necessary approvals by APC’s board, shareholders, and regulators, we anticipate common shareholders will receive $3.03 per share at the close of the transaction. The unsecured convertible debt due Jan. 31, 2025, will be converted to common shares for $3.03, plus accrued and unpaid interest. The company’s senior secured term loan will also be redeemed at 101% of principal. Atlantic Power Preferred’s shares will be redeemed for C$22 each in cash. Atlantic Power L.P.’s 5.95% medium term notes due June 23, 2036, will be redeemed for consideration equal to 106.071% of the principal amount plus accrued and unpaid interest at financial close.

The CreditWatch listing reflects the likelihood that I Squared’s financial policy will inform the rating on Atlantic Power pro forma for the transaction. We would most likely classify I Squared as a financial sponsor. Consequently, any rating implications will depend on the forward capital structure, our assessment of the business strategy, and most important how we assess I Squared’s financial policy with regard to APC. We will likely resolve the CreditWatch when the transaction closes, projected for the second quarter of 2021.

Affected issues are AZP.PR.A, AZP.PR.B and AZP.PR.C.

I have previously reported the proposed redemption at $22 of these issues.