PrefBlog

Dundee Corporation has announced:

it has provided notice in accordance with the provisions of the articles of amendment of the Corporation dated February 8, 2016 (the “Articles of Amendment”) that effective May 15, 2019 (the “Conversion Date”) it intends to convert all of the outstanding first preference shares, series 5 (the “Series 5 Shares”) of the Corporation into fully paid, non-assessable and freely tradable class A subordinate voting shares (the “Subordinate Voting Shares”) of the Corporation.

“We believe our decision to convert the Series 5 Shares into class A subordinate voting shares is prudent and aligned with the best interests of the Corporation and its stakeholders,” said Jonathan Goodman, Executive Chairman of the Corporation. “This conversion allows us to maintain financial flexibility and balance sheet strength to support our longer-term strategic objectives.”

The number of Subordinate Voting Shares into which the Series 5 Shares of each registered holder will be converted will be equal to the product of:

(a) the number obtained when:

i. $25.48, being the applicable redemption price of $25.25 per Series 5 Share on the Conversion Date, plus an amount equal to all accrued and unpaid dividends per Series 5 Share up to but excluding the date fixed for conversion (less any tax required to be deducted and withheld by the Corporation),

is divided by

ii. the greater of: (A) $2.00, and (B) 95% of the weighted average trading price of the Subordinate Voting Shares on the TSX for the 20 consecutive trading days ending on the fourth day prior to the Conversion Date, or, if such fourth day is not a trading day, the immediately preceding trading day (the greater of such amounts being, the “Weighted Price”),

with the result of the calculation being rounded upward to the nearest 1/100 of a Subordinate Voting Share; and

(b) the number of Series 5 Shares of the registered holder being converted.

The Company expects to issue approximately 42 million Subordinate Voting Shares in connection with the conversion of the 3,294,938 outstanding Series 5 shares.

Where a fraction of a Subordinate Voting Share would otherwise be issuable on conversion of Series 5 Shares, the Corporation will adjust such fractional interest by payment by cheque in an amount equal to the then market price of such fractional interest computed on the basis of the Weighted Price, as determined in respect of the Conversion Date.

From and after the Conversion Date, the registered holders of Series 5 Shares so converted will cease to be entitled to dividends on such Series 5 Shares or to exercise any of the rights of holders of Series 5 Shares in respect of such shares except the right to receive therefor the whole number of Subordinate Voting Shares to which they are entitled and payment with respect to a fraction of a Subordinate Voting Share as contemplated in the Articles of Amendment, and the registered holder thereof will become a registered holder of Subordinate Voting Shares of record, effective on the Conversion Date.

ISSUER BID

The Company also announced that in connection with the conversion of the Series 5 Shares, it is considering the implementation of a normal course issuer bid or a substantial issuer bid in respect of its Subordinate Voting Shares, which would commence, subject to board of director and regulatory approvals, following the Conversion Date.

This press release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell Subordinate Voting Shares. Any solicitation to sell or offer to buy Subordinate Voting Shares will only be made in accordance with applicable securities laws and the rules of the Toronto Stock Exchange.

DC.PR.E came into existence by an exchange from DC.PR.C, after an initial proposal in November, 2015 that attracted some press coverage and an exhortation to consider exercising dissent rights. This led to reconsideration by Dundee despite a rather peculiar endorsement from a proxy advisor and led to a sweeter offer that attracted further commentary. Finally, the company announced a ringing endorsement from the shareholders … or perhaps it would be better to say “the shareholders’ advisors”, since the proxy solicitation fee was so high! DC.PR.E commenced trading 2016-2-12.

Accellerating losses in 2018 led to shareholder pressure for a means to avoid a redemption of the issue for cash prior to the scheduled 2019-6-30 retraction date.

I note the sentence in the press release that the company “expects to issue approximately 42 million Subordinate Voting Shares in connection with the conversion of the 3,294,938 outstanding Series 5 shares.” I note that the company has 57,985,136 shares of DC.A outstanding … fortunately, however, the founding family controls the company through multiple voting shares, so this destruction of shareholder value won’t have as much adverse effect on them as might otherwise be the case.

Valener Inc. has announced that it:

and Noverco Inc. (“Noverco”), the controlling partner of Energir, L.P., announced today that they have entered into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which Noverco will acquire indirectly all of the issued and outstanding common shares of Valener (the “Common Shares”) for $26.00 per Common Share in cash and all of the issued and outstanding Cumulative Rate Reset Preferred Shares, Series A of Valener (the “Preferred Shares”) for $25.00 per Preferred Share in cash plus accrued and unpaid dividends (the “Arrangement”).

Transaction Highlights

• Cash consideration of $26.00 per Common Share represents a premium of approximately 30% to the closing price per Common Share on December 12, 2018 (the day prior to Noverco’s initial approach to Valener regarding a potential transaction) and approximately 10% to the all-time high closing price per Common Share of $23.67 observed on March 22, 2019.
• Cash consideration of $25.00 per Preferred Share represents a premium of approximately 18% to the closing price per Preferred Share on December 12, 2018.
• The acquisition of all of the outstanding Common Shares and Preferred Shares implies a total enterprise value for Valener of approximately $1.2 billion, including the assumption of existing indebtedness.
• 100% cash consideration provides immediate liquidity and certainty of value for holders of Common Shares and holders of Preferred Shares.
• BMO Capital Markets and TD Securities provided opinions that, subject to the assumptions, limitations and qualifications contained therein, the cash consideration to be received is fair from a financial point of view to the holders of Common Shares and the holders of Preferred Shares; further, cash consideration to be received by holders of Common Shares falls within the fair market value range of $24.00 to $28.50 per Common Share established by TD Securities as independent valuator.

…
Under the Arrangement, it is proposed that the Preferred Shares will also be acquired by Noverco. Pursuant to the Arrangement Agreement, holders of Preferred Shares will be asked to vote on the Arrangement as a separate class. However, completion of the Arrangement is not conditional on receipt of such approval. If the requisite approval from holders of Preferred Shares is not obtained, such Preferred Shares will be excluded from the Arrangement and remain outstanding in accordance with their terms. For the Preferred Shares to be included in the Arrangement, the resolution approving the Arrangement must be approved by holders of not less than 66 2/3% of Preferred Shares present in person or by proxy at the Special Meeting.

That’s a nice little windfall for holders of VNR.PR.A, which closed at 21.31-73 today, after trading 310 shares!

The issue commenced trading 2012-6-6 as a FixedReset, 4.35%+281, after being announced 2012-5-15. It reset to 4.62% effective 2017-10-15. I recommended against conversion and there was no conversion to FloatingResets. The issue is tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

Brompton Group has announced:

Life & Banc Split Corp. (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively).

The sales period for this overnight offering will end at 9:00 a.m. (ET) on Thursday, March 28, 2019. The offering is expected to close on or about April 4, 2019 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Class A Shares will be offered at a price of $8.10 per Class A Share for a distribution rate of 14.8% on the issue price, and the Preferred Shares will be offered at a price of $10.00 per Preferred Share for a yield to maturity of 5.46%.(1) The closing price on the TSX for each of the Class A and Preferred Shares on March 26, 2019 was $8.23 and $10.17, respectively. The Class A and Preferred Share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company (calculated as at March 25, 2019), as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The Company invests in a portfolio (the “Portfolio”) consisting of common shares of the six largest Canadian banks and the four major publicly traded Canadian life insurance companies:

The Bank of Nova Scotia	Royal Bank of Canada
National Bank of Canada	Industrial Alliance Insurance and Financial Services Inc.
The Toronto-Dominion Bank	Great-West Lifeco Inc.
Canadian Imperial Bank of Commerce	Manulife Financial Corporation
Bank of Montreal	Sun Life Financial Inc.

The investment objectives for the Class A Shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per Class A Share and to provide the opportunity for growth in the net asset value per Class A Share.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.13625 per Preferred Share ($0.545 per annum), and to return the original issue price plus accrued dividends (if any) to holders of Preferred Shares on October 30, 2023.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank.

The sum of the Capital Units NAVPS and the Preferred Share NAVPS is 17.79, while the new Whole Units are offered at 18.10, so the premium is about 1.7% – smaller than most offerings we’ve seen in the past while, but still worth doing (especially if you earn management fees on the total)!

Update, 2019-3-28: The offering went well:

Life & Banc Split Corp. (the “Company”) is pleased to announce a successful overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively). Gross proceeds of the offering are expected to be approximately $25.5 million. The offering is expected to close on or about April 4, 2019 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (the “TSX”). The Company has granted the Agents (as defined below) an over-allotment option, exercisable for 30 days following the closing date of the offering, to purchase up to an additional 15% of the number of Class A Shares and Preferred Shares issued at the closing of the offering.

Standard & Poor’s has announced:

• •Atlantic Power Corp.’s (APC) leverage improved in 2018 and we believe the Boston-based publicly traded power generation company’s deleveraging trend is likely to continue, supported by the predictability of cash flows from power purchase agreements (PPAs) in the portfolio.
• •We expect APC to complete the acquisition of two biomass projects in South Carolina with long-term PPAs during the second half of 2019, which will help mitigate some recontracting risk.
• •S&P Global Ratings is affirming our ‘B+’ issuer credit rating, our ‘BB-‘ issue-level rating on APC’s senior term loan B, senior revolving credit facility, and medium-term notes, and our ‘CCC+’ issue-level rating on the preferred shares.
• •Our ‘2’ recovery rating on all debt tranches is unchanged, indicating our expectation for substantial recovery (70%-90%; rounded estimate: 80%) in the event of a default.
• •The positive outlook reflects a possibility that we could upgrade APC by one notch because we believe the company can achieve our adjusted debt to EBITDA of below 5x in the next 12 months.

…
If APC meets our adjusted debt-to-EBITDA projection of below 5x, it would likely be supported by deleveraging through excess cash flow sweep on the term loan B in line with management’s guidance and by demonstrating its ability to continue extending expiring PPAs. The rating could also improve if the company continues to pursue growth opportunities while maintaining S&P Global Ratings’ adjusted leverage.

We could revise the outlook back to stable if our adjusted debt to EBITDA indicates an increasing trend above 5x on a sustained basis. This may be due to the inability to recontract expiring or obtain new PPAs, aggressive growth strategy through incremental debt issuances, or higher-than-expected operating costs to maintain power assets in the portfolio, creating volatility in cash flows available for debt service.

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