PPL.PR.A Whacked on Adequate Volume

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:

Maturity Type : Limit Maturity
Maturity Date : 2043-07-26
Maturity Price : 23.00
Evaluated at bid price : 24.61
Bid-YTW : 4.13 %

5 Responses to “PPL.PR.A Whacked on Adequate Volume”

  1. adrian2 says:

    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?

  2. jiHymas says:

    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.


    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.

  3. adrian2 says:

    Thanks, James.

    (In question #2 above, of course I meant YTW instead of YTM)

  4. […] DBRS rating of Pfd-3(low) is now official. As was the case with Friday’s closing of PPL.PR.A, I don’t believe the price decline has anything to do with the specifics of the issue, or […]

  5. […] offering actually seems fairly priced, considering that PPL.PR.A resets at +247 and trades a little under […]

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