PrefBlog

Birchcliff Energy has announced:

that it has entered into an agreement with a syndicate of underwriters, which have agreed to purchase, on a bought deal basis, 1.6 million preferred units (“Preferred Units”) at a price of $25.00 per Preferred Unit, for total gross proceeds of $40 million (the “Offering”).

Each Preferred Unit will consist of one Cumulative 5-Year Rate-Reset Preferred Share, Series A (the “Series A Preferred Shares”) and 3 common share purchase warrants issued by Birchcliff (the “Warrants”), with each Warrant providing the right to purchase one (1) common share in the capital of Birchcliff (“Common Shares”) at an exercise price of $8.30 per Common Share for a period of two years. The syndicate of underwriters is co-led by GMP Securities L.P., Cormark Securities Inc. and National Bank Financial Inc., and includes HSBC Securities (Canada) Inc., Raymond James Ltd., Macquarie Group Ltd. and Peters & Co. Limited.

The Series A Preferred Shares will pay cumulative dividends of $2.00 per share per annum, payable quarterly if, as and when declared by Birchcliff’s board of directors (with the first quarterly dividend to be paid on September 30, 2012 (or the next business day)), for the initial five year period ending September 30, 2017. The dividend rate will be reset on September 30, 2017 and every five years thereafter at a rate equal to the five-year Government of Canada bond yield plus 6.83 per cent. The Series A Preferred Shares will be redeemable by the issuer on or after September 30, 2017, in accordance with their terms.

Holders of the Series A Preferred Shares will have the right, at their option, to convert their shares into Cumulative Floating Rate Preferred Shares, Series B (the “Series B Preferred Shares”) subject to certain conditions, on September 30, 2017 and on September 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 6.83 per cent, if, as and when declared by Birchcliff’s board of directors.

The Preferred Units will be offered for sale to the public in each of the provinces of Canada other than Quebec pursuant to a short form prospectus to be filed with Canadian securities regulatory authorities in such provinces. The Offering is scheduled to close on or about August 8, 2012, subject to certain conditions, including obtaining all necessary regulatory approvals.

The market said Supersize me!

Birchcliff has increased the size of its previously announced bought deal preferred unit offering to $50 million, from $40 million. Birchcliff will issue a total of two (2) million preferred units (“Preferred Units”) at a price of $25.00 per Preferred Unit, for total gross proceeds of $50 million (the “Offering”).

This issue will not be tracked by HIMIPref™

• It is too small
• It has no credit rating. As I have noted before, I am very much in favour of issues having credit ratings – not because I can’t take my own view and not because I worship the credit rating agencies, but because a credit rating and downgrade thereof serves as a public flashpoint that serves to increase pressure on the company to take drastic measures, if necessary, when things go wrong.

Thanks to Assiduous Reader mpisni for bringing this issue to my attention.

This entry was posted on Wednesday, July 18th, 2012 at 11:13 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.