PrefBlog

Algonquin Power & Utilities Corp. (“APUC” in the press release) has announced:

that it will issue 4.8 million cumulative rate reset preferred shares, Series A (the “Series A Shares”) at a price of $25.00 per share, for aggregate gross proceeds of $120 million, on a bought deal basis to a syndicate of underwriters in Canada led by Scotiabank and TD Securities Inc.

The holders of the Series A Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.125 per share, payable quarterly, as and when declared by the board of directors of APUC. The Series A Shares will yield 4.5% per cent annually, for the initial six-year period ending on December 31, 2018. The first of such dividends, if declared, shall be payable on December 31, 2012, and shall be $0.1603 per Series A Share, based on the anticipated closing of the offering on November 9, 2012. The dividend rate will be reset on December 31, 2018 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 2.94%. The Series A Shares are redeemable by APUC, at its option, on December 31, 2018 and on December 31st of every five years thereafter.

The holders of Series A Shares will have the option to convert all or any of their Series A Shares into Cumulative Floating Rate Preferred Shares, Series B (the “Series B Shares”) of APUC on the basis of one Series B Share for each Series A Share converted, subject to certain conditions, on December 31, 2018 and on December 31 every five years thereafter. The holders of the Series B Shares will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the board of directors of APUC, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 2.94%.

The net proceeds of the offering will be used to fund the equity portion of the acquisition of two wind farms (Minonk and Senate) in the United States and for general corporate purposes.

Chief Financial Officer, David Bronicheski commented “With the imminent conversion of our final series of convertible debentures to equity, our first series of preferred shares opens another source of capital to fund our growth and further lowers our cost of capital.”

The Series A Shares will be offered to the public in Canada by way of a short-form prospectus of APUC.

It is my understanding that this issue will be rated P-3 by S&P, Pfd-3(low) by DBRS.

Update: S&P has assigned a rating of BBB- with a positive outlook to the company:

• •We are assigning our ‘BBB-‘ long-term corporate credit rating to Algonquin Power & Utilities Corp.
• •The rating reflects our consolidated rating approach and our opinion on its two subsidiaries, Ontario-based independent power generator Algonquin Power Co. and U.S.-based regulated utility Liberty Utilities Co.
• •The positive outlook reflects our assessment of an increasing proportion of relatively stable cash flows that Liberty’s regulated utilities support.

…
The positive outlook reflects our assessment of an increasing proportion of relatively stable cash flows that Liberty’s regulated utilities support. The outlook also reflects our expectations that APUC will achieve sustained adjusted funds from operations (AFFO)-to-total debt of 15%-20%, with Liberty’s regulated cash flow supporting 40%-50% of its consolidated cash flows by 2014. We could raise the rating a notch upon the company’s meeting these expectations. Conversely, if it does not meet our expectations or its sustained AFFO-to-debt falls below 15% during our two-year outlook horizon, we would revise the outlook to stable.

The preferred rating is, as reported above, P-3.

Update, 2012-11-3:Pfd-3 low by DBRS.

This entry was posted on Thursday, October 25th, 2012 at 12:21 pm 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.