PrefBlog

Mosaic Capital Corporation has announced:

that it has filed and received a receipt for a preliminary short form prospectus in connection with a C$25,000,000 marketed public offering (the Offering”) of units (“Units”) of Mosaic. The Offering will be conducted on a reasonable best efforts basis through a syndicate of agents co-led by Clarus Securities Inc. and Canaccord Genuity Corp. and including Raymond James Ltd., National Bank Financial Inc. and Mackie Research Capital Corporation (the “Agents”). Mosaic has agreed to grant to the Agents an over-allotment option to purchase that number of additional Units equal to 15% of the Units sold pursuant to the Offering at the Offering Price for a period ending 30 days following the closing of the Offering.

Each Unit is comprised of one preferred security in the capital of Mosaic and one quarter (0.25) of one common share purchase warrant (a “Warrant”). Each full Warrant will entitle the holder to purchase one common share (a “Common Share”) in the capital of Mosaic for an exercise price of C$15.50 for 18 months following completion of the Offering. In the event that the 20-day volume weighted average price of the Common Shares listed on the TSX Venture Exchange is equal to or above C$18.00, the expiry date of the Warrants shall be accelerated to a date that is 30 days after notice is given by Mosaic.

The Units will be offered in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland by short form prospectus.

The net proceeds from the Offering will be used to fund Mosaic’s future acquisitions that fit Mosaic’s acquisition criteria and for general corporate purposes.

The Offering is expected to close on or about June 18th, 2014, subject to customary conditions and all regulatory approvals including the approval of the TSX Venture Exchange and of applicable securities regulatory authorities.

According to the Preliminary Prospectus available on SEDAR dated 2014-6-3:

The terms and conditions of the Preferred Securities to be issued pursuant to the Offering will be governed by the indenture dated April 29, 2011 (the “Preferred Securities Indenture”) and will bear the same terms as the issued and outstanding Preferred Securities of Mosaic which are traded on the TSX Venture Exchange (the “Exchange”) under the symbol “M.PR.A”. On June 2, 2014, the last trading day prior to the date of this short form prospectus, the closing price of the Preferred Securities on the Exchange was $11.35. See “Trading Price and Volume”.

The Preferred Securities are undated, perpetual securities having no fixed maturity date or redemption date. Each Preferred Security carries an entitlement to a monthly distribution in the amount of $0.0833 ($1.00 per annum) which is payable monthly in arrears on or about the 15th day of the succeeding month. The first monthly distribution on the Preferred Securities to be issued in connection with the Offering will be paid on or about the 15th day of the month following their issuance. Monthly distributions are cumulative but may be indefinitely deferred by Mosaic. For Canadian income tax purposes, the monthly distribution in respect of the Preferred Securities is considered interest income in the hands of the recipient. The Preferred Securities are unsecured and subordinated obligations of Mosaic ranking pari passu among themselves but subordinated and postponed to all of Mosaic’s senior indebtedness. The Preferred Securities do not carry any voting rights and may be redeemed or purchased for cancellation at any time by Mosaic. See “Details of the Offering – Preferred Securities” and “Certain Canadian Federal Income Tax Considerations” for particulars pertaining to the Preferred Securities.
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Principal Amount
Each Preferred Security represents $10 in principal amount.
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The Preferred Securities are undated, perpetual securities having no fixed maturity date or redemption date. The Preferred Securities are not redeemable by the holder at any time or in any circumstances. Notwithstanding any default of Mosaic under the terms of the Preferred Securities Indenture (including any default in the payment of interest), the principal amount under any or all of the Preferred Securities will only become due and payable upon a liquidation, dissolution or bankruptcy of Mosaic.
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The Preferred Securities are unsecured and subordinated obligations of Mosaic ranking pari passu among themselves but subordinated and postponed to all indebtedness, liabilities and obligations of Mosaic which, by the terms of the instrument creating or evidencing such indebtedness, liabilities or obligations, is not expressed to rank in right of payment in subordination to or pari passu with the indebtedness evidenced by the Preferred Securities or any of them. The obligations under the Preferred Securities rank senior to the Common Shares.
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The Preferred Securities are redeemable by Mosaic at any time at Mosaic’s option, in whole or in part (in which case they will be redeemed on a pro-rata basis), upon payment in respect of each Preferred Security of the “Redemption Price” which means, in respect of each Preferred Security, the greater of: (i) the amount of $10 dollars, being the principal amount thereof; and (ii) the market price (as defined in the Preferred Securities Indenture) of such Preferred Security; and, in each case, shall also include all accrued and unpaid interest on such Preferred Security (including any unpaid deferred interest, if any) up to but excluding the date of redemption. Mosaic will satisfy the Redemption Price by way of cash payment to the holders of Preferred Securities being redeemed.
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Each Preferred Security bears simple interest at a rate of 10% per annum from the date of issuance upon the $10 principal amount thereof which, therefore, gives rise to an entitlement to a monthly distribution in the amount of $0.0833 ($1.00 per annum) which is payable monthly in arrears on or about the 15th day of the succeeding month. Interest payable on the Preferred Securities is cumulative and non-compounding. Each period from and including the first day of a month to and including the last day of the month is herein referred to as an “Interest Period”. The current Interest Period is one month. Subject to the terms of the Preferred Securities Indenture, Mosaic may change the Interest Period in its discretion provided that it shall be no greater than six months in duration. Holders of Preferred Securities of record on June 30, 2014 will be entitled to receive distributions for the June Interest Period.

Thanks to Assiduous Reader AP for alerting me to this. The TSX Venture Exchange is something I don’t pay a lot of attention to, but since I had the information in my lap, I thought I’d pass it on.

M.PR.A is not tracked by HIMIPref™ as it does not have a credit rating. This is not because I can’t come to my own views regarding credit quality, or because I worship the Credit Rating Agencies, but because I feel the threat of an imminent downgrade from a major agency does an excellent job of focussing the minds of the directors and management that they have a problem that really should be addressed. A ‘Review-Negative’ by Hymas Investment Management does not have quite the same effect.

This entry was posted on Friday, June 6th, 2014 at 2:41 am and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.