Canoe Financial has announced (bolding from original):
Canoe EIT Income Fund (the “Fund”) (TSX – EIT.UN, EIT.PR.A, EIT.PR.B) announced today that it has closed the previously announced offering of 4.80% Cumulative Redeemable Series 2 Preferred Units (the “Series 2 Preferred Units”). The Series 2 Preferred Units were offered to the public through a syndicate of underwriters led by Scotiabank which also included CIBC Capital Markets, RBC Capital Markets, BMO Capital Markets, TD Securities Inc., National Bank Financial Inc., Industrial Alliance Securities Inc., Canaccord Genuity Corp., and Manulife Securities Incorporated.
The Fund issued 2,800,000 Series 2 Preferred Units at a price of $25.00 per Series 2 Preferred Unit for gross proceeds of $70,000,000. The Fund has also granted the underwriters an option, exercisable at the offering price for a period of 30 days from today’s date, to purchase up to an additional 420,000 Series 2 Preferred Units to cover over-allotments, if any. Holders of the Series 2 Preferred Units will be entitled to fixed cumulative preferential cash distributions of $1.20 per Series 2 Preferred Unit per annum, as and when declared, which will accrue from the date of issue and will be payable quarterly on the 15th day of March, June, September and December in each year with the initial distribution, if declared, payable on June 15, 2018. The Series 2 Preferred Units are listed for trading on the Toronto Stock Exchange under the symbol “EIT.PR.B”.
The Fund intends to use the proceeds from the Offering in accordance with the investment objectives and investment strategies of the Fund, subject to the investment restrictions of the Fund.
The Fund’s regular monthly distribution of $0.10 per unit for unitholders of EIT.UN units remains unchanged. The Fund has maintained the $0.10 per unit monthly distribution since August 2009, through varying market conditions. The Fund’s annual voluntary redemption feature for unitholders of EIT.UN units remains unchanged. Once a date has been set for the 2018 annual redemption, the Fund will issue a news release with the details.
A final short form prospectus dated April 10, 2018 containing important information relating to the Series 2 Preferred Units has been filed with securities commissions or similar authorities in all provinces and territories of Canada. Copies of the final short form prospectus may be obtained from your registered financial advisor using the contact information for such advisor, or from representatives of the underwriters listed above.
EIT.PR.B is a 7-year Retractible, 4.80%, issue. I consider it to be a Split Share since it’s value is derived from an underlying portfolio of equities – it is not an operating company.
The prospectus is not (yet) available on the Canoe Financial website and I am not permitted to link to the public filing directly by the notoriously secretive Canadian Securities Administrators; those who want to see it will have to go through the ‘search’ rigamarole on SEDAR to find “Canoe EIT Income Fund Apr 10 2018 15:34:35 ET Final short form prospectus – English PDF 608 K”.
The prospectus is important because of the unusual tax treatment of distributions for this issue:
Historical Distributions
Set out below are the tax classifications of the historical distributions on the Units of the Fund (which were $0.10 per Unit per month for the entire period presented) for the past five years, and the Manager expects the Series 2 Preferred Units to have a similar breakdown:
| % |
2017 |
2016 |
2015 |
2014 |
2013 |
| Capital gain |
46.79% |
53.10% |
60.92% |
59.89% |
32.73% |
| Actual amount of eligible dividends |
4.75% |
8.89% |
9.29% |
5.33% |
18.18% |
| Actual amount of ineligible dividends |
|
|
|
|
|
| Foreign income, net of tax |
|
|
|
|
|
| Other income |
|
|
|
|
|
| Return of Capital(1) |
48.46% |
38.01% |
29.79% |
34.78% |
49.09% |
| Total |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
| (1) Includes warrants from 2013-2017. |
…
Distributions in any given period may consist of net income, net capital gains and/or returns of capital. The Fund’s income and net taxable gains for the purposes of the Tax Act will be allocated to the holders of Units and Preferred Units in the same proportion as the distributions received by such holders. See “Principal Canadian Federal Income Tax Considerations”.
DBRS has rated the preferreds at Pfd-2(high):
DBRS Limited (DBRS) finalized the provisional rating of Pfd-2 (high) assigned to the Cumulative Redeemable Series 2 Preferred Units (the Series 2 Preferred Units) issued by Canoe EIT Income Fund (the Fund) and confirmed the rating of the previously issued Cumulative Redeemable Series 1 Preferred Units (the Series 1 Preferred Units, collectively with the Series 2 Preferred Units, the Preferred Units).
…
Following the new issue and assuming no capital distributions or special dividends paid, the net asset value of the Fund would have to fall by approximately 77% for the holders of the Preferred Units to be in a loss position. Considering the expected level of downside protection available to holders of the Preferred Units and the composition and diversification of the Fund’s portfolio, DBRS has finalized the provisional rating of Pfd-2 (high) assigned to the Series 2 Preferred Units and confirmed the Series 1 Preferred Units at Pfd-2 (high).
The main constraints to the rating are the following:
(1) The potential grind on the Portfolio arising from redemption rights and distributions to the Units.
(2) The foreign-exchange risk due to the absence of a hedge on some investments in foreign currencies.
(3) The priority of the lenders under the Credit Facility over the Fund’s assets up to the amount of credit outstanding.
The issue traded 330,753 shares today in a range of 24.96-05 before closing at 24.99-00. Vital statistics are:
| EIT.PR.B |
SplitShare |
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2025-03-14
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 4.83 % |
EIT.PR.B Firm on Good Volume
April 17th, 2018Canoe Financial has announced (bolding from original):
EIT.PR.B is a 7-year Retractible, 4.80%, issue. I consider it to be a Split Share since it’s value is derived from an underlying portfolio of equities – it is not an operating company.
The prospectus is not (yet) available on the Canoe Financial website and I am not permitted to link to the public filing directly by the notoriously secretive Canadian Securities Administrators; those who want to see it will have to go through the ‘search’ rigamarole on SEDAR to find “Canoe EIT Income Fund Apr 10 2018 15:34:35 ET Final short form prospectus – English PDF 608 K”.
The prospectus is important because of the unusual tax treatment of distributions for this issue:
DBRS has rated the preferreds at Pfd-2(high):
The issue traded 330,753 shares today in a range of 24.96-05 before closing at 24.99-00. Vital statistics are:
Maturity Type : Soft Maturity
Maturity Date : 2025-03-14
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 4.83 %
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