PrefBlog

DBRS has announced:

confirmed the following ratings of TransCanada PipeLines Limited (TCPL or the Company): Unsecured Debentures & Notes at A, Preferred Shares – cumulative at Pfd-2 (low) and Junior Subordinated Notes at BBB (high), all with Stable trends.
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The rating confirmations conclude DBRS’s review of the acquisition and reflect the Company’s prudent balancing of financial and business risk factors as demonstrated by today’s announcement of a $1.1 billion common equity issuance with a 15% over-allotment. This will result in a more conservative capital structure than originally envisaged when the proposal was announced on April 1. Most debt issuance should be at the TCPL level, eliminating structural subordination issues. DBRS expects similar prudence will be exercised in any transactions of this nature. DBRS also expects proforma credit metrics to slightly improve from levels achieved at December 31, 2007 (debt to capital of 60% and cash flow to debt of 0.17 times respectively), which should position the Company well for higher capital spending anticipated in the next three to four years associated with its major projects (such as Bruce Power Restart and Keystone). It is noteworthy that most of the Company’s projects are supported by long-term contracts with creditworthy counterparties, providing stability of earnings and cash flow, once completed.

According to TransCanada’s announcement of the equity issue:

it has entered into an agreement with a syndicate of underwriters, led by BMO Capital Markets, RBC Capital Markets, and TD Securities Inc. under which they have agreed to purchase from TransCanada and sell to the public 30,200,000 Common Shares.

The purchase price of $36.50 per Common Share will result in gross proceeds of approximately $1.1 billion. The net proceeds of the offering will be used by TransCanada to partially fund acquisitions and capital projects of the Corporation including, amongst others, the acquisition of the Ravenswood Generating Facility, the construction of the Keystone Oil Pipeline, and for general corporate purposes.

The Common Shares will be offered to the public in Canada and the U.S. through the underwriters or their affiliates. TransCanada has also granted the underwriters an option to purchase up to an additional 4,530,000 Common Shares at a price of $36.50 per Common Share at any time up to 30 days after closing of the offering.

The credit review was previously discussed on PrefBlog.

TCA.PR.Y & TCA.PR.X are both tracked by HIMIPref™ and are included in the PerpetualDiscount index.

This entry was posted on Monday, May 5th, 2008 at 11:32 pm and is filed under Issue Comments. 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.