PrefBlog

Aimia Inc. has announced:

that its Board of Directors has authorized the launch of a substantial issuer bid (the “Offer”) pursuant to which Aimia will offer to purchase for cancellation up to 100% of its Cumulative Rate Reset Preferred Shares, Series 1 (the “Series 1 Shares”), Cumulative Rate Reset Preferred Shares, Series 3 (the “Series 3 Shares”) and Cumulative Floating Rate Preferred Shares, Series 4 (the “Series 4 Shares” and collectively with the Series 1 Shares and the Series 3 Shares, the “Preferred Shares”) in consideration for senior unsecured notes (the “Notes”). The Company further announces the execution of a support agreement (the “Support Agreement”) with Phillips Hager and North (“PH&N”), the largest holder of Preferred Shares, to tender all of its 7.2 million Preferred Shares under the Offer.

The launch of Offer will mark the first initiative introduced as a result of Aimia’s strategic review process designed to unlock the Company’s value.

As agreed with PH&N under the Support Agreement:
(i) The Offer will be based on the following exchange considerations:
• Series 1 Shares: $17.00 per Series 1 Share;
• Series 3 Shares: $17.50 per Series 3 Share; and
• Series 4 Shares: $18.4375 per Series 4 Share.
(ii) The Notes will:
• Have a par value of $100, and be issued at a value of 97% to par;
• Bear interest at a coupon of 9.75%, payable semi-annually; and
• Mature in five years with no annual amortization payments.
(iii) Subject to limited conditions, Aimia will have the option to pay interest in kind, for a premium of 150 basis points to the cash coupon interest rate, any time.
(iv) The Notes will be senior unsecured obligations of the Company

Assuming that all preferred shareholders tender to the Offer, the Offer will result in (i) approximately $8 million in annual cash savings when comparing the annual preferred dividends and Part VI.1 tax to the annual cash coupon interest payments, and (ii) approximately $65 million gain on the transaction, based on the exchange value of the Notes and the carrying value of the Preferred Shares exchanged net of transaction fees. Aimia considers this transaction as accretive to Common shareholders as (i) it reduces cash outflows on an annual basis, (ii) it increases the net asset value for Common shareholders and (iii) provides a payment in kind option on the interest related to Notes.

TD Securities Inc. is acting as financial advisor to Aimia with respect to the Offer.

The Offer referred to in this news release has not yet commenced. This news release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell Preferred Shares. An offer to purchase the Preferred Shares in consideration for Notes will only be made pursuant to a formal offer to purchase and issuer bid circular, together with the related letter of transmittal and notice of guaranteed delivery (the “Offer Documents”). The Offer Documents, which will contain the terms and conditions of the Offer and instructions for tendering Preferred Shares, are expected to be sent to shareholders and filed with the applicable Canadian securities regulatory authorities and made available on SEDAR+ at www.sedarplus.ca within the next 30 days. The Offer will not be made to, nor will tenders be accepted from or on behalf of, holders of Preferred Shares in any jurisdiction in which the making or acceptance of offers to purchase Preferred Shares for Notes would not be in compliance with the laws of that jurisdiction. None of Aimia, its Board of Directors or TD Securities Inc. makes any recommendation to shareholders as to whether to tender or refrain from tendering any or all of their Preferred Shares to the Offer. Shareholders are urged to read the Offer Documents, when available, carefully and in their entirety, and to consult their own financial, tax and legal advisors and to make their own decisions with respect to participation in the Offer.

Affected issues are AIM.PR.A, AIM.PR.C and AIM.PR.D.

AIM.PR.A is a FixedReset, 4.50%+375, assigned to the Scraps-FixedReset (Discount) subindex. It commenced trading as AER.PR.A with an initial dividend rate of 6.50% on 2010-1-20 after being announced 2010-1-12. AIM.PR.A changed its ticker from AER.PR.A in October, 2011. The first extension was reported on PrefBlog and the reset to 4.50% was announced 2015-3-2. I recommended against conversion. There was a 43% conversion to the FloatingReset, AIM.PR.B in 2015. The 2020 extension was announced 2020-2-25. AIM.PR.A will reset to 4.802% effective 2020-3-31; at that time I opined that a decision on whether to convert or hold should be made according to each investor’s circumstances.

AIM.PR.B commenced trading 2015-3-31 as the result of the 43% conversion from AIM.PR.A noted above. I opined that a decision on whether to convert or hold should be made according to each investor’s circumstances. AIM.PR.B ceased to exist on 2020-3-31 as there was a total conversion back to AIM.PR.A.

AIM.PR.C was issued as a FixedReset, 6.25%+420, that commenced trading 2014-1-15 after being announced 2014-1-6. The extension was announced 2019-2-26. AIM.PR.C reset at 6.011% effective 2019-3-31 (not 6.01%, as stated in the original press release) I recommended against conversion and there was no conversion. Notice of extension was provided in 2024. The issue is tracked by HIMIPref™ but relegated to the Scraps-FixedReset (Discount) subindex on credit concerns.

AIM.PR.D is a FloatingReset, Bills+420, that arose from a 2024 conversion from AIM.PR.C:

Aimia Inc. (TSX: AIM) (“Aimia” or the “Company”) announced today that 2,706,112 of its 4,355,263 currently outstanding Cumulative Redeemable Rate Reset First Preferred Shares, Series 3 (“Series 3 Shares”) were tendered for conversion, on a one-for-one basis, into Cumulative Redeemable Floating Rate First Preferred Shares, Series 4 (“Series 4 Shares”) after having taken into account all election notices following the March 18, 2024 conversion deadline. As a result, on April 1, 2024, the Company will have 1,649,151 Series 3 Shares issued and outstanding and 2,706,112 Series 4 Shares issued and outstanding.

The Series 3 Shares will continue to be listed on the Toronto Stock Exchange (“TSX”) under the symbol AIM.PR.C. The Series 4 Shares will begin trading on the TSX on April 1, 2024 under the symbol AIM.PR.D, subject to the Company fulfilling all the listing requirements of the TSX. The TSX has conditionally approved the listing of the Series 4 Shares effective upon conversion.

The Series 3 Shares will pay fixed cumulative preferential cash dividends on a quarterly basis, for the five-year period from and including March 31, 2024 to but excluding March 31, 2029, if, as when declared by the Board of Directors of Aimia based on the annual fixed dividend rate of 7.773%, being equal to the five-year Government of Canada bond yield plus 4.20%, as determined in accordance with the rights, privileges, restrictions and conditions attaching to the Series 3 Shares.

The Series 4 Shares will pay quarterly floating rate cumulative preferential cash dividends for the five-year period from and including March 31, 2024 to but excluding June 30, 2024, if, as when declared by the Board of Directors of Aimia at the dividend rate of 9.181%, being equal to the three-month Government of Canada Treasury Bill yield plus 4.20% per annum, calculated on the basis of the actual number of days in such quarterly period divided by 365, as determined in accordance with the rights, privileges, restrictions and conditions attaching to the Series 4 Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

For more information on the terms and risks associated with an investment in the Series 3 Shares and the Series 4 Shares, please refer to Aimia’s prospectus supplement dated January 8, 2014, which is available on SEDAR+.

All inquiries regarding the conversion of Aimia’s Series 3 Shares should be directed to the Company’s Transfer Agent, TSX Trust Company at 1-800-387-0825 or
shareholderinquiries@tmx.com.

This looks like a pretty skimpy offer and the market wasn’t particularly impressed, with the TMX reporting that AIM.PR.A (Series 1) traded 1,900 shares at a VWAP of 16.74 and AIM.PR.C (Series 3) trading 1,700 at VWAP 18.14. AIM.PR.D didn’t trade at all. Maybe PH&N has been desperately trying to dump these puppies for years and has finally given up!

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