PrefBlog

I complained earlier regarding the lack of communication regarding the extension and reset of FTS.PR.H.

An officer of Fortis has sent me a copy of the official notification to Computershare:

St. John’s, NL (April 28, 2015):

Effective April 28, 2015, Fortis Inc. (the “Corporation”) announced that it does not intend to exercise its right to redeem all or any part of the currently outstanding Cumulative Redeemable Five-Year Fixed Rate Reset First Preference Shares, Series H of the Corporation (the “Series H shares”) on June I, 2015.

There are currently 10,000,000 Series H shares outstanding.

Subject to certain conditions set out in the short form prospectus of the Corporation dated January 18, 2010 relating to the issuance of the Series H shares, the holders of the Series H shares have the right to convert all or part of their Series H shares, on a one-for-one basis, into Cumulative Redeemable Floating Rate First Preference Shares, Series I of the Corporation (the “Series I shares”) on June l, 2015 (the “Conversion Date”).

On such date, holders who do not exercise their right to convert their Series H shares into Series I shares will continue to hold their Series H shares.

The foregoing conversion right is subject to the following:
i. If the Corporation determines that there would be less than 1,000,000 Series I shares outstanding after the Conversion Date, then holders of Series H shares will not be entitled to convert their shares into Series I; and
ii. Alternatively, if the Corporation determines that there would remain outstanding less than 1,000,000 Series H shares after the Conversion Date, then all remaining Series H shares will automatically be converted into Series I shares on a one-for-one basis on the Conversion Date.

In either case, the Corporation will give written notice to that effect to holders of Series H shares no later than May 25, 2015.

The dividend rate applicable for the Series H shares for the five-year period from and including June 1, 2015 to but excluding June 1, 2020, and the dividend rate applicable to the Series I shares for the three-month period from and including June I, 2015 and ending on and including August 31, 2015, will be determined on May 4, 2015 and notice of such dividend rates shall be provided to the holders of the Series H shares on that day.

Beneficial owners of Series H shares who wish to exercise their conversion right, should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from May 4, 2015 until 5:00 p.m. (Eastern) on May 19, 2015.

Inquiries should be directed to Mr. Jim Spinney, Treasurer, Fortis at 709.737.2902.

Signed:
[signature]
Karl W. Smith
Executive Vice President, Chief Financial Officer

All that was provided regarding the reset was:

St. John’s, NL (May 4, 2015):

Fortis Inc. (the “Corporation”) hereby provides notice to the holders of its Cumulative Redeemable Five Year Fixed Rate Reset First Preference Shares, Series H of the Corporation (the “Series H shares”) of the following dividend rates, in each case payable if, as and when declared by the Board of Directors of the Corporation:

1. $0.15625 per Series H share, being the fixed dividend rate payable quarterly on the first day of’March, June, September and December of each year during the five-year period from and including June 1, 2015 to but excluding June 1, 2020; and

ii. $0.13125 per share on the Cumulative Redeemable Floating Rate First Preference Shares, Series I of the Corporation (the “Series I shares”), being the floating dividend rate applicable to the Series I shares for the 3-month period from and including June 1, 2015 and ending on and including August 31, 2015,

in each case determined in accordance with the corresponding rights, privileges, conditions and restrictions attached to the Series H shares and Series I shares, respectively, as a class, as set out in the short form prospectus of the Corporation dated January 18, 20 I 0 relating to the issuance of the Series H shares.

Inquiries should be directed to Mr. Jim Spinney, Treasurer, Fortis at 709.737.2902.

Signed:
[signature]
Karl W. Smith
Executive Vice President, Chief Financial Officer

The officer explained:

Fortis has provided the conversion notification as well as the new yields and notification deadlines to the official shareholders of Series H – that being CDS (Computershare). CDS confirmed that they have notified the brokers who in turn should notify the beneficial bondholders.

Well, that’s the good old book-based system for you! There’s only one registered shareholder – and as noted earlier, the prospectus states:

The Corporation will, on the Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series H First Preference Shares.

So, sure, the method they’ve chosen appears to be legal enough to my non-securities-lawyer eyes … but why do they do it this way? They are diligent enough to have a web page dedicated to their preferred shares, which includes links to the prospectuses … and that’s very good! That puts them a cut above most issuers. But why not take that one extra step and communicate with holders – and, more importantly, prospective holders – regarding details of the reset? BCE includes links to notices of this kind on their preferred share page – how difficult could it be to send a copy of notices of this nature to ‘the website guy’ who is already in charge of putting up the press releases?

So anyway, yeah, FTS.PR.H will reset at a dividend rate of 2.50% paid on par value, “a stunning 41% reduction in dividend from the original 4.25%” as reported earlier. FTS.PR.I will float at 145bp over three-month bills, reset quarterly. Holders of FTS.PR.H must notify the company through their broker and Computershare by 5:00 p.m. (Eastern) on May 19, 2015; but note that your broker’s internal deadline will be earlier than this; and also note that May 18 is the Victoria Day holiday in most of Canada and most brokers will be closed. So if you intend to convert, make sure you check with your broker regarding their internal deadlines!

I will post with my recommendation regarding whether or not to convert next week.

This entry was posted on Friday, May 8th, 2015 at 4:09 pm and is filed under Better Communication, Please!, 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.