PrefBlog

TransCanada Corp. has announced:

that it will issue 12 million cumulative redeemable first preferred shares, series 5 (the “Series 5 Preferred Shares”) at a price of $25.00 per share, for aggregate gross proceeds of $300 million on a bought deal basis to a syndicate of underwriters in Canada led by Scotia Capital Inc., RBC Capital Markets, and BMO Capital Markets.

The holders of Series 5 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.10 per share, payable quarterly on the 30th day of January, April, July and October, as and when declared by the board of directors of TransCanada, yielding 4.40 per cent per annum, for the initial fixed rate period ending January 30, 2016. The first quarterly dividend payment date is scheduled for November 1, 2010. The dividend rate will reset on January 30, 2016 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 1.54 per cent. The Series 5 Preferred Shares are redeemable by TransCanada, at its option, on January 30, 2016 and on January 30 of every fifth year thereafter.

The holders of Series 5 Preferred Shares will have the right to convert their shares into cumulative redeemable first preferred shares, series 6 (the “Series 6 Preferred Shares”), subject to certain conditions, on January 30, 2016 and on January 30 of every fifth year thereafter. The holders of Series 6 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the board of directors of TransCanada, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 1.54 per cent.

TransCanada has granted to the underwriters an option, exercisable at any time up to 48 hours prior to the closing of the offering, to purchase up to an additional two million Series 5 Preferred Shares at a price of $25.00 per share.

The anticipated closing date is June 29, 2010. The net proceeds of the offering will be used to partially fund capital projects, for other general corporate purposes and to reduce short term indebtedness of TransCanada and its affiliates, which short term indebtedness was used to fund TransCanada’s capital program and for general corporate purposes.

The PerpetualDiscounts issued by its subsidiary, TCA.PR.X and TCA.PR.Y, closed last night to yield about 5.85% which, assuming we can consider the credits to be identical, results in a Break Even Rate Shock of 222bp. This compares to 277bp for EMA.PR.A; SLF.PR.G at 384bp. March’s issue of TRP.PR.B was 266bp.

Note, however, that the issuer is playing the calendar game with this issue: the issue terms may imply to the unwary that the GOC 5-Year is now at 2.86%, but these instruments now yield 2.70%, with an implied reset (assuming no change in GOC-5) to 4.24%.

This entry was posted on Thursday, June 17th, 2010 at 11:47 am and is filed under New Issues. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.