The Toronto-Dominion Bank has announced:
an inaugural Basel III-compliant domestic public offering of Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 1 (the “Series 1 Shares”).
TD has entered into an agreement with a group of underwriters led by TD Securities Inc. to issue, on a bought deal basis, 12 million Series 1 Shares at a price of $25.00 per share to raise gross proceeds of $300 million. TD has also granted the underwriters an option to purchase, on the same terms, up to an additional 2 million Series 1 Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing.
The Series 1 Shares will yield 3.90% annually, payable quarterly, as and when declared by the Board of Directors of TD, for the initial period ending October 31, 2019. Thereafter, the dividend rate will reset every five years at a level of 2.24% over the then five-year Government of Canada bond yield.
Subject to regulatory approval, on October 31, 2019 and on October 31 every 5 years thereafter, TD may redeem the Series 1 Shares, in whole or in part, at $25.00 per share. Subject to TD’s right of redemption, holders of the Series 1 Shares will have the right to convert their shares into Non-Cumulative Floating Rate Preferred Shares, Series 2 (the “Series 2 Shares”), subject to certain conditions, on October 31, 2019, and on October 31 every five years thereafter. Holders of the Series 2 Shares will be entitled to receive quarterly floating dividends, as and when declared by the Board of Directors of TD, equal to the three-month Government of Canada Treasury bill yield plus 2.24%.
The expected closing date is June 4, 2014. TD will make an application to list the Series 1 Shares as of the closing date on the Toronto Stock Exchange. The net proceeds of the offering will be used for general corporate purposes.
They later announced:
that as a result of strong investor demand for its previously announced Basel III-compliant domestic public offering of Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 1 (the “Series 1 Shares”), the size of the offering has been increased to 20 million Series 1 Shares. The gross proceeds of the offering will now be $500 million. The offering will be underwritten by a group of underwriters led by TD Securities Inc.
The expected closing date is June 4, 2014. TD will make an application to list the Series 1 Shares as of the closing date on the Toronto Stock Exchange. The net proceeds of the offering will be used for general corporate purposes.
Given that TD.PR.S and TD.PR.Y both have Issue Reset Spreads below 170bp and are trading well above par, this issue looks extremely cheap at first glance. But TD.PR.S and TD.PR.Y are not NVCC compliant, so there is considerable less likelihood that they’ll be outstanding after 2021-1-31. So make of it what you will.
Click For Big
Update: Pfd-2 from DBRS. Note that this is one notch below the NVCC-non-compliant issues.