New Issue: TRP FixedReset 4.00%+238

TransCanada Corporation has announced:

that it will issue 12 million cumulative redeemable first preferred shares, series 7 (the “Series 7 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 co-led by Scotiabank, BMO Capital Markets and RBC Capital Markets.

The holders of Series 7 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.00 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. The Series 7 Preferred Shares will yield 4.0 per cent per annum for the initial fixed rate period ending April 30, 2019 with the first dividend payment date scheduled for April 30, 2013. The dividend rate will reset on April 30, 2019 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 2.38 per cent. The Series 7 Preferred Shares are redeemable by TransCanada, at its option, on April 30, 2019 and on April 30 of every fifth year thereafter at a price of $25.00 per share plus accrued and unpaid dividends.

The holders of Series 7 Preferred Shares will have the right to convert their shares into cumulative redeemable first preferred shares, series 8 (the “Series 8 Preferred Shares”), subject to certain conditions, on April 30, 2019 and on April 30 of every fifth year thereafter. The holders of Series 8 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the board of directors of TransCanada, at an annualized rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 2.38 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 7 Preferred Shares at a price of $25.00 per share.

The anticipated closing date is March 4, 2013. The net proceeds of the offering will be used for 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 Series 7 Preferred Shares will be offered to the public in Canada pursuant to a prospectus supplement that will be filed with securities regulatory authorities in Canada under TransCanada’s short form base shelf prospectus dated November 14, 2011. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

It will be noted that this issue is vastly superior to the other TRP FixedResets:

  • TRP.PR.A 4.60%+192, Friday 25.80-85
  • TRP.PR.B 4.00%+128, Friday 24.77-84
  • TRP.PR.C 4.40%+154, Friday 25.75-83

Update:: Holy smokes! Monster-size me!

TransCanada Corporation (TSX, NYSE: TRP) (TransCanada) today announced that as a result of strong investor demand for its previously announced offering of cumulative redeemable first preferred shares, series 7 (the “Series 7 Preferred Shares”), the size of the offering has been increased to 24 million shares. The offering no longer includes the previously granted underwriters’ option. The aggregate gross proceeds of the offering will now be $600 million. The syndicate of underwriters is co-led by Scotiabank, BMO Capital Markets and RBC Capital Markets.

The anticipated closing date is March 4, 2013. The net proceeds of the offering will be used for 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.

Update, 2013-2-26: Rated Pfd-2(low) by DBRS.

4 Responses to “New Issue: TRP FixedReset 4.00%+238”

  1. […] PrefBlog Canadian Preferred Shares – Data and Discussion « New Issue: TRP FixedReset 4.00%+238 […]

  2. coolmesh says:

    I was wondering based on what criteria you find this new offering coming out next week superior to their current offerings like TRP.PR.B. To my untrained eye they are rather similar? Any prediction on what the opening price might be and whether it would still be superior given one may have to pay a premium verses the less then par price of TRP.PR.B?
    I liked your video interview….definitely an Oscar contender in the category Best Beard of 2013.

  3. jiHymas says:

    The answer is in the Issue Reset Spreads:

    TRP.PR.A 4.60%+192, Friday 25.80-85
    TRP.PR.B 4.00%+128, Friday 24.77-84
    TRP.PR.C 4.40%+154, Friday 25.75-83

    If an issue is presumed not to be called, the Issue Reset Spread is extremely important in valuation – between 3 and 4 times as important as the initial dividend rate.

    The new issue resets at +238, more than a point higher than TRP.PR.B and well over the levels of the other TRP issues.

    Assuming that the current Five Year Canada Yield of about 1.40% is maintained forever, then TRP.PR.B will reset at 2.68% and the current dividend of $1 will be reduced by one-third to $0.67

    The new issue, under such conditions, will reset to 3.78% and the current dividend of $1 will be reduced to $0.945, a much more palatable rate.

  4. […] is a FixedReset, 4.00%+238, announced February 25 at $300-million and quickly monster-sized to $600-million. Only BCE.PR.K is a bigger issue in […]

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