PrefBlog

Power Financial Corporation has announced:

that it has agreed to issue 8,000,000 Non-Cumulative First Preferred Shares, Series V (the “Series V Shares”) on a bought deal basis, for gross proceeds of $200 million. The Series V Shares will be priced at $25.00 per share and will carry an annual dividend yield of 5.15%. Closing is expected to occur on or about May 26, 2017. The issue will be underwritten by a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc.

Power Financial has also granted the underwriters an option to purchase an additional 2,000,000 Series V Shares at the same offering price. Should the underwriters’ option be exercised fully, the total gross proceeds of the Series V Share offering will be $250 million.

Proceeds from the issue will be used to supplement Power Financial’s financial resources and for general corporate purposes.

They later announced:

that due to strong demand, the underwriters have exercised their option to purchase an additional 2,000,000 Non-Cumulative First Preferred Shares, Series V (the “Series V Shares”), which increases the size of the previously announced bought deal public offering to 10,000,000 Series V Shares for gross proceeds of $250 million. The Series V Shares will be priced at $25.00 per share and will carry an annual dividend yield of 5.15%. Closing is expected to occur on or about May 26, 2017. The issue will be underwritten by a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc.

Implied Volatility analysis (as derived for Straight Perpetuals) suggests that the issue is fairly priced:

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Note, however, that the implied volatility is very high at 31%, and therefore it might be expected that the higher-coupon, higher-yielding issues are the better bet, being expected to outperform on a flattening (lowering of implied volatility). However, the five issues with the highest coupons are all currently callable and are all trading with a negative yield to worst.

ECN Capital Corp. has announced:

that it has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets, CIBC Capital Markets, National Bank Financial Inc., RBC Capital Markets and TD Securities Inc. The underwriters have agreed to buy 4,000,000 Cumulative 5-Year Minimum Rate Reset Preferred Shares, Series C (the “Series C Preferred Shares”) at a price of $25.00 per share for aggregate gross proceeds of $100,000,000. The net proceeds are expected to be used to originate and finance, directly and indirectly, finance assets, to fund future acquisitions and for general corporate purposes.
ECN Capital has granted the underwriters an option to purchase at the offering price up to an additional 1,000,000 Series C Preferred Shares exercisable, in whole or in part, at any time up to 48 hours prior to closing of the offering. Should the option be fully exercised, the total gross proceeds of the Series C Preferred Share offering will be $125,000,000.

The Series C Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable by quarterly installments for an initial period of five years, as and when declared by the Board of Directors of the Corporation, at a rate of $1.5625 per share per annum, to yield 6.25% annually. Thereafter, the dividend rate will reset every five years to the sum of the then current 5-Year Government of Canada Bond yield and 5.19%, provided that, in any event, such sum shall not be less than 6.25%. On June 30, 2022, and on June 30 of every fifth year thereafter, the Corporation may redeem the Series C Preferred Shares in whole or in part at par.

Holders will have the right to elect to convert all or any of their Series C Preferred Shares into an equal number of Cumulative Floating Rate Preferred Shares, Series D (the “Series D Preferred Shares”) on June 30, 2022, and on June 30 of every fifth year thereafter. Holders of the Series D Preferred Shares will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of the Corporation, equal to the sum of the then current 3-month Government of Canada Treasury Bill yield and 5.19%. On June 30, 2027 and on June 30, of every fifth year thereafter (a “Series D Redemption Date”), the Corporation may redeem the Series D Preferred Shares in whole or in part at par. On any other date that is not a Series D Redemption Date after June 30, 2022, the Corporation may redeem the Series D Preferred Shares in whole or in part by the payment of $25.50 for each share to be redeemed.

The offering is being made only in the provinces of Canada by means of a prospectus supplement to the Corporation’s base shelf prospectus. The closing date of the offering is expected to be on or about May 25, 2017.

DBRS has assigned a Pfd-3(low) rating to the issue:

The rating reflects the Company’s solid franchise as a leading commercial lender and lessor in North America with strong origination platforms and sound risk management across multiple asset classes. The rating also considers the solid earnings generation derived from the franchise, producing more than sufficient pre-provision earnings to absorb the cost of credit with a solid cushion to absorb potentially higher losses that would be expected through the cycle, as well as unexpected losses. Funding is appropriate and aligned with the asset base, while leverage is considered low compared to peers. The Company’s reliance on secured forms of wholesale funding and execution risks associated with the Company’s evolving strategy to become more “asset-lite”, as well as the potential for entry into new business activities currently constrain the ratings.

Intact Financial Corporation has announced:

that it has entered into an agreement with a syndicate of underwriters led by CIBC Capital Markets together with BMO Capital Markets, National Bank Financial and TD Securities Inc. pursuant to which the underwriters have agreed to purchase, on a bought deal basis, 5,000,000 Non-Cumulative Class A Shares, Series 5 (the “Series 5 Shares”) from Intact for sale to the public at a price of $25.00 per Series 5 Share, representing aggregate gross proceeds of $125 million.

Intact has granted the underwriters an underwriters’ option to purchase up to an additional 1,000,000 Series 5 Shares at the same offering price. Should the underwriters’ option be fully exercised, the total gross proceeds of the Series 5 Shares offering will be $150 million.

The Series 5 Shares will yield 5.20% per annum, payable quarterly, as and when declared by the Board of Directors of the Company. The Series 5 Shares will not be redeemable prior to June 30, 2022. On and after June 30, 2022, Intact may, on not less than 30 nor more than 60 days’ notice, redeem for cash the Series 5 Shares in whole or in part, at the Company’s option, at $26.00 per share if redeemed on or after June 30, 2022 and prior to June 30, 2023; $25.75 per share if redeemed on or after June 30, 2023 and prior to June 30, 2024; $25.50 per share if redeemed on or after June 30, 2024 and prior to June 30, 2025; $25.25 per share if redeemed on or after June 30, 2025 and prior to June 30, 2026; and $25.00 per share if redeemed on or after June 30, 2026, in each case together with all declared and unpaid dividends up to but excluding the date of redemption.

The Series 5 Share offering is expected to close on May 24, 2017. The net proceeds will be used to partially fund the previously announced acquisition of OneBeacon Insurance Group, Ltd. If the acquisition does not close, the net proceeds will be used for general corporate purposes.

They later announced:

that due to strong demand, the underwriters have exercised their option to purchase an additional 1,000,000 Non-Cumulative Class A Shares, Series 5 (the “Series 5 Shares”), which increases the size of the previously announced offering to 6,000,000 Series 5 Shares in aggregate, to be offered on a bought deal basis to a syndicate of underwriters led by CIBC Capital Markets together with BMO Capital Markets, National Bank Financial and TD Securities Inc. The Series 5 Shares will be issued at a price of $25.00 per Series 5 Share, representing aggregate gross proceeds of $150 million. The Series 5 Shares will yield 5.20% per annum. The Series 5 Share offering is expected to close on May 24, 2017.

Intact recently raised $754-million to fund its purchase of OneBeacon Insurance Group, Ltd..

As this issue is not NVCC compliant, it will be analyzed as a DeemedRetractible. Note, however, that this carries more uncertainty than it does with most other insurers because Intact is a P&C insurer, not a life company.