New Issue: CF FixedReset 5.50%+321

Canaccord Financial has announced:

that it has agreed to issue 4,000,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series A (the “Series A Preferred Shares”) to a syndicate of underwriters led by CIBC World Markets Inc. and Canaccord Genuity Corp., for distribution to the public. The Series A Preferred Shares will be issued at a price of $25.00 per share for aggregate gross proceeds of $100 million. Holders of the Series A Preferred Shares will be entitled to receive fixed, cumulative, preferential dividends payable quarterly, if, as and when declared by the board of directors of Canaccord, and yielding 5.50% annually for the initial period ending on September 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the five year Government of Canada bond yield plus 3.21%.

Holders of Series A Preferred Shares will have the right, at their option, to convert any or all of their shares into an equal number of Cumulative Floating Rate First Preferred Shares, Series B (the “Series B Preferred Shares”), subject to certain conditions, on September 30, 2016 and on September 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled to receive floating rate, cumulative, preferential dividends payable quarterly, if, as and when declared by the board of directors of Canaccord, at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.21%.

Canaccord has also granted the underwriters an option to purchase up to an additional 600,000 Series A Preferred Shares, on the same terms and conditions as the offering, exercisable in whole or in part, for a period of 30 days from the closing date of the offering. If this option is exercised in full, the total gross proceeds to Canaccord will be $115 million.

DBRS Limited has assigned a rating of Pfd-3 (low) for the Series A Preferred Shares.

The net proceeds of the offering will be used for general corporate purposes. The offering is expected to close on or about June 23, 2011, subject to certain conditions, including Toronto Stock Exchange approval, as well as other conditions set forth in an underwriting agreement to be entered into between Canaccord and the underwriters.

Just what we needed! More junk!

Update: DBRS rates Pfd-3(low):

Prior to the issue of the preferred shares, the only non-operating debt was a $15 million subordinated credit facility issued to the Company’s Canadian operating subsidiary, Canaccord Genuity Corp. Growth in larger underwriting opportunities following the acquisition of Genuity, a growing fixed income business, and international acquisition opportunities in the wake of the financial crisis have convinced the Company to increase its available capital in the form of low-cost preferred shares. The new issue is expected to increase the Company’s debt plus preferred share ratio as a percentage of capitalization to 13.2% (14.7% if the $15 million underwriter option is exercised) and the debt plus preferred share ratio to EBITDA to 0.70 times (0.78 times), both of which DBRS regard as being reasonable for the rating notwithstanding the inherently volatile nature of the Company’s business. On the basis of earnings for the fiscal year ended March 31, 2011, the pro forma fixed charge coverage ratio is expected to be in excess of 15 times with no credit for any prospective earnings on the preferred share proceeds