Pembina Pipeline Corporation has announced:
that it has closed its previously announced public offering of 10,000,000 cumulative redeemable rate reset class A preferred shares, series 1 (the “Series 1 Preferred Shares”) at a price of $25.00 per Series 1 Preferred Share (the “Offering”) for aggregate gross proceeds of $250 million. This includes the previously announced underwriters’ option to purchase an additional 2,000,000 Series 1 Preferred Shares at a price of $25.00 per share, which was exercised in full.
The Offering was first announced on July 17, 2013 when Pembina entered into an agreement with a syndicate of underwriters led by RBC Capital Markets and Scotiabank.
Proceeds from the offering will be used to partially fund capital projects, to reduce short-term indebtedness and for other general corporate purposes of the Company and its affiliates.
The Series 1 Preferred Shares will begin trading on the Toronto Stock Exchange today under the symbol PPL.PR.A.
PPL.PR.A is a FixedReset, 4.25%+247, announced July 17.
The issue will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.
PPL.PR.A traded 207,284 shares today in a wide range of 24.27-73 before closing at 24.61-64, 10×1. I don’t think there’s anything particularly wrong with this issue, or the underwriters’ pricing: it simply got caught up in a very weak market for junk FixedResets.
Vital statistics are:
| PPL.PR.A | FixedReset | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 23.00 Evaluated at bid price : 24.61 Bid-YTW : 4.13 % |
Two (related) quick questions:
1. Why is the Maturity Price $23?
2. Why is YTM lower than the coupon price, given that it trades below par?
1. There is a certain amount of scenario analysis incorporated in my implementation of YTW. If times are good, it will be called; therefore, if it’s not called, times will be not so good.
This is a little hard to justify, and I should really calculate a ‘pure’ YTW and called my computation an ‘adjusted’ YTW, but my implementation seems too work.
This will probably be changed with the next iteration of HIMIPref™, originally scheduled for 2007 and somewhat delayed.
2. The GOC-5 rate is assumed to be 1.65% to perpetuity, therefore the coupon rate after the first reset is assumed to be 4.12%. On top of that, there is the expected capital loss of $1.61 at the limit in thirty years.
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In the right-hand navigation panel of this blog, under “Online Resources” is a link to my “Yield Calculator for Resets (Excel Spreadsheet)”. This will allow you to put in whatever assumptions for end-date, terminal value and coupon after first reset that you wish.
Thanks, James.
(In question #2 above, of course I meant YTW instead of YTM)
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