Pembina Pipeline Corporation has announced:
that it has entered into an agreement with a syndicate of underwriters, led by Scotiabank and RBC Capital Markets, pursuant to which the underwriters have agreed to purchase from Pembina 6,000,000 cumulative redeemable rate reset class A preferred shares, Series 5 (the “Series 5 Preferred Shares”) at a price of $25.00 per share for distribution to the public.
The holders of Series 5 Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.25 per share, payable quarterly on the 1st day of March, June, September and December, as and when declared by the Board of Directors of Pembina, yielding 5.00 per cent per annum, for the initial fixed rate period to but excluding June 1, 2019. The first quarterly dividend payment date is scheduled for March 1, 2014. The dividend rate will reset on June 1, 2019 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 3.00 per cent. The Series 5 Preferred Shares are redeemable by Pembina, at its option, on June 1, 2019 and on June 1 of every fifth year thereafter at a price of $25.00 per share plus accrued and unpaid dividends.
The holders of Series 5 Preferred Shares will have the right to convert their shares into cumulative redeemable floating rate class A preferred shares, Series 6 (the “Series 6 Preferred Shares”), subject to certain conditions, on June 1, 2019 and on June 1 of every fifth year thereafter. The holders of Series 6 Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of Pembina, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 3.00 per cent.
Pembina 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 2,000,000 Series 5 Preferred Shares at a price of $25.00 per share.
Proceeds from the offering will be used to partially fund Pembina’s 2014 capital expenditure program, including capital expenditures relating to Pembina’s current expansion and growth projects, to reduce indebtedness under the Corporation’s credit facilities and for general corporate purposes of the Corporation and its affiliates.
Closing of the offering is expected on January 16, 2014, subject to customary closing conditions.
The offering is being made by means of a prospectus supplement under the short form base shelf prospectus filed by the Corporation on February 22, 2013 in each of the provinces of Canada.
The offering must have gone well – they later announced:
that as a result of strong investor demand for its previously announced offering of cumulative redeemable rate reset class A preferred shares, Series 5 (the “Series 5 Preferred Shares”), the size of the offering has been increased to 10 million shares. The offering no longer includes the previously granted underwriters’ option. The aggregate gross proceeds will be $250 million.
Understandable … there was a pretty good new issue concession on this offering compared to the extant issues:
| PPL FixedResets | ||||
| Ticker | Initial Dividend | Issue Reset Spread | Exchange Date | Quote 2014-1-6 |
| PPL.PR.A | 1.0625 | 247 | 2018-12-1 | 24.61-65 |
| PPL.PR.C | 1.175 | 260 | 2019-3-1 | 25.11-40 |
| PPL.PR.? | 1.25 | 300 | 2019-6-1 | 25.00 Issue Price |
The extant issues got whacked today, down 40-50 cents each.
Update: Pfd-3 from DBRS.