Canadian Utilities Limited has announced:
it has closed its previously announced public offering of Cumulative Redeemable Second Preferred Shares Series FF, by a syndicate of underwriters co-led by BMO Capital Markets and RBC Capital Markets, and including TD Securities Inc., Scotiabank, CIBC, Canaccord Genuity Corp., and GMP Securities L.P. Canadian Utilities Limited issued 10,000,000 Series FF Preferred Shares for gross proceeds of $250,000,000. The Series FF Preferred Shares will begin trading on the TSX today under the symbol CU.PR.I. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.
CU.PR.I is a FixedReset, 4.50%+369M450, announced September 14. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.
The issue traded 973,025 shares today (consolidated exchanges) in a range of 24.97-19 before closing at 25.08-12, 24×26. Vital statistics are:
| CU.PR.I | FixedReset | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-24 Maturity Price : 23.18 Evaluated at bid price : 25.08 Bid-YTW : 4.39 % |
I was wondering why you gave this issue a maturity price of 23.18 rather than 25. I didn’t notice that in the issue details.
This is a “Limit Maturity”, meaning the issue is assumed to remain extant in thirty years time and must therefore be assigned a price by the analytical system in lieu of calculating an actual yield to perpetuity. Issues for which an interim call is a significant possibility generally have their terminal price assigned a value somewhat lower than their current price. Details are explained in PrefLetter.
The most important part of this issue is after 5 years the reset can not be less than 4.50 %. I think more of this kind of issue will be forthcoming.
Well, I think you’re quite right regarding the idea that more issues with minimum resets will be coming (one more was announced on Thursday).
However, I question how important it is. At present, government rates are historically low and preferreds are almost-historically cheap (judging by the Seniority Spread and indicators of FixedReset pricing vs. PerpetualDiscounts).
+369bp is an enormous spread for a good quality credit like CU. My feeling is much the same as it was with the bank issues of 2008-10 … the spreads were so high that the issues were certain to be called unless the crisis lasted ridiculously long.
But who knows? You might be right, and the new feature certainly seems very popular.