FSV.PR.U: Some To Be Redeemed, The Rest Converted

FirstService Corporation has announced:

plans to simplify its capital structure by eliminating all of its 7% Cumulative Preference Shares, Series 1 (the “Preferred Shares”) and to pay a dividend on its Subordinate Voting Shares and Multiple Voting Shares (together, the “Common Shares”). All amounts are in US dollars.

Currently, there are 5,230,634 Preferred Shares outstanding. The Preferred Shares will be eliminated on May 3, 2013 (the “Redemption Date”) in a two-step process. First, there will be a partial redemption for cash of 1,569,190 Preferred Shares (representing 30% of the outstanding Preferred Shares) on a pro rata basis for $25.00 per share plus accrued and unpaid dividends of $0.1582 per share, net of any tax required to be deducted or withheld by FirstService. Second, immediately following the partial redemption, the balance of 3,661,444 Preferred Shares (representing 70% of the initially outstanding Preferred Shares) will be converted by FirstService into Subordinate Voting Shares. A Notice of Redemption and Conversion has been mailed to holders of Preferred Shares in accordance with the terms of Preferred Shares.

Partial Redemption of Preferred Shares

On May 3, 2013, 1,569,190 Preferred Shares will be redeemed by FirstService for $25.00 per share plus accrued and unpaid dividends of $0.1582 per share, net of any tax required to be deducted or withheld by FirstService (the “Redemption Price”), for expected total redemption consideration of $39.5 million. The accrued and unpaid dividends reflect the period of March 31, 2013 to the day prior to the redemption date. The Preferred Shares to be redeemed will be selected on a pro rata basis (disregarding fractions).

Conversion of Preferred Shares Remaining after Partial Redemption

On May 3, 2013, immediately after the partial redemption of the Preferred Shares, the remaining 3,661,444 Preferred Shares will be converted into fully paid, non-assessable and freely tradable Subordinate Voting Shares of FirstService. The number of Subordinate Voting Shares to be received for each Preferred Share converted is determined in accordance with a formula set out in the terms of the Preferred Shares, wherein the Redemption Price of each Preferred Share is divided by 95% of the weighted average trading price of the Subordinate Voting Shares traded on NASDAQ for the twenty consecutive trading days ending on the fourth day prior to the conversion date. No fractional Subordinate Voting Shares will be issued. FirstService will satisfy any such fractional interest with a payment based on the market price of such fractional interest. FirstService expects that, based on current trading prices, approximately 3.0 million Subordinate Voting Shares will be issued on the conversion, resulting in a total of approximately 31.8 million Subordinate Voting Shares outstanding following the conversion. The Preferred Shares will be de-listed from trading on the TSX at the close of trading on the Redemption Date.

The formal notice of redemption and conversion is also available on FirstService’s website.

FSV.PR.U was last mentioned on PrefBlog when DBRS put the rating on Review-Developing in 2008. DBRS discontinued the rating in 2010.

The common stock, FSV, is now trading in the range of $34.00, implying that preferred shareholders will receive approximately 0.75 subordinate voting shares per preferred – not bad, since the preferreds were distributed as a stock dividend on the basis of one preferred for every five SVS in 2007.

FSV.PR.U has not been tracked by HIMIPref™.

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