Brookfield Renewable Energy Partners L.P. has announced:
that it has agreed to issue 5,000,000 Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 7 (the “Series 7 Preferred Units”) on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., CIBC, RBC Capital Markets and Scotiabank for distribution to the public. The Series 7 Preferred Units will be issued at a price of $25.00 per unit, for gross proceeds of $125,000,000.
Holders of the Series 7 Preferred Units will be entitled to receive a cumulative quarterly fixed distribution yielding 5.50% annually for the initial period ending January 31, 2021. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of (i) the 5-year Government of Canada bond yield plus 4.47%, and (ii) 5.50%. The Series 7 Preferred Units are redeemable on or after January 31, 2021.
Holders of the Series 7 Preferred Units will have the right, at their option, to reclassify their Series 7 Preferred Units into Cumulative Floating Rate Reset Class A Preferred Limited Partnership Units, Series 8 (“Series 8 Preferred Units”), subject to certain conditions, on January 31, 2021 and on January 31 every 5 years thereafter. Holders of Series 8 Preferred Units will be entitled to receive a cumulative quarterly floating distribution at a rate equal to the 90-day Canadian Treasury Bill yield plus 4.47%.
Brookfield Renewable has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 2,000,000 Series 7 Preferred Units which, if exercised, would increase the gross offering size to $175,000,000.
The Series 7 Preferred Units will be offered in all provinces and territories of Canada by way of a supplement to Brookfield Renewable’s existing Canadian short form base shelf prospectus. The Series 7 Preferred Units may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.
Brookfield Renewable intends to use the net proceeds of the issue of Series 7 Preferred Units to repay indebtedness and for general corporate purposes. The offering of Series 7 Preferred Units is expected to close on or about November 25, 2015.
I am assuming that since these are referred to as “Preferred Units” that the distributions will be characterized as a mixture of dividends, ordinary income and return of capital, but I have not yet been able to confirm this; but this would be consistent with the new security they are offering in exchange for BRF.PR.E.
Update, 2015-11-19: The company announced on November 18:
that as a result of strong investor demand for its previously announced offering, the underwriters have exercised their option to increase the size of the offering to 7,000,000 Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 7 (the “Series 7 Preferred Units”). The Series 7 Preferred Units will be issued at a price of C$25.00 per share, for gross proceeds of C$175,000,000 pursuant to a prospectus supplement filed today. The Series 7 Preferred Units are being offered on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., CIBC, RBC Capital Markets and Scotiabank for distribution to the public.
According to Scotia:
. This is an L.P offering – therefore the distribution is taxed as a mix of dividend, income, and return of capital as we have seen with previous LP rate reset preferred shares. Calculations assume that 50% of the distribution will be considered dividend, 25% return of capital and 25% income for the next 5years
They also wrote: This 5.50% first reset Jan 31, 2021 (5yrs) – equates to a 5.40% full dividend corporate pref share.
P.S. I ordered a few for my RSP just to avoid having to deal with the additionnal tax paperwork (which often comes in late) structures like this require.
I get the same figure as Scotia, in the calculations performed in the first-day-of-trading post.