Brookfield Renewable Energy Partners L.P. has announced:
that it has extended the expiry time of its offer to exchange each issued and outstanding Class A Preference Share, Series 5 of Brookfield Renewable Power Preferred Equity Inc. (TSX:BRF.PR.E) with an annual dividend rate of 5.00% (collectively, the “Series 5 Preferred Shares”) for one newly issued Class A Preferred Limited Partnership Unit, Series 5 of Brookfield Renewable with an annual distribution rate of 5.59% (the “Exchange Offer”) to 5:00 p.m. (Toronto Time) on January 20, 2016.
The Exchange Offer is being extended pursuant to an amendment and restatement of Brookfield Renewable’s prospectus supplement dated November 9, 2015 to its short form base shelf prospectus dated May 12, 2015 (the “Amended and Restated Prospectus Supplement”). Full details of the Exchange Offer are contained in the Amended and Restated Prospectus Supplement, which will be filed with securities regulatory authorities in each of the provinces and territories of Canada and mailed to holders of Series 5 Preferred Shares (“Series 5 Preferred Shareholders”) as required under applicable Canadian securities laws on or about December 23, 2015. Copies of the Amended and Restated Prospectus Supplement will be available on SEDAR at www.sedar.com and on Brookfield Renewable’s website at www.brookfieldrenewable.com at such time. Series 5 Preferred Shareholders are urged to evaluate carefully all information in the Exchange Offer, including risk factors, and to consult their own investment, tax and legal advisors.
Computershare Investor Services Inc. is the Depositary for the Exchange Offer and D.F. King Canada, a division of CST Investor Services Inc., is the Information Agent. Any questions or requests for assistance concerning the Exchange Offer or further information about tendering to the Exchange Offer should be directed to the Depositary at 1-800-564-6253 (toll free in North America) or 1-514-982-7555, or by e-mail at corporateactions@computershare.com; or to the Information Agent at 1-800-332-4904 (toll free in North America) or 1-201-806-7301, or by e-mail at inquiries@dfking.com.
Copies of the Amended and Restated Prospectus Supplement may be obtained free of charge upon request to the Depositary or the Information Agent. Series 5 Preferred Shareholders whose Series 5 Preferred Shares are registered in the name of a broker, investment dealer, bank, trust company or other nominee should contact such nominee for assistance in depositing their Series 5 Preferred Shares to the Exchange Offer.
The original offer was reported in PrefBlog in the post BRF.PR.E: Coercive Exchange Offer. Readers will know I consider the offer coercive because there is no mechanism whereby holders of BRF.PR.E may ensure they receive the original deal; BRF.PR.E could be delisted by the issuer without compensation to a stubborn holder, which could have serious consequences, particular for those who hold the issue in a registered account.
The press release makes reference to an “Amended and Restated Prospectus Supplement, which will be filed with securities regulatory authorities … on or about December 23, 2015.” When I’ve had a chance to look at it, I’ll comment.
Some readers may be interested to learn that Barry Critchley wrote a sadly garbled version of the exchange offer in his piece Brookfield Renewable and Dundee show that pref shares may not be preferred:
Next Friday, Brookfield Renewable preferred shareholders have to decide on an exchange offer whereby they swap their five-per-cent securities issued in 2013 for 5.59-per-cent Series 5 preferred units offered by Brookfield Renewable Power Preferred Equity, a different but related issuer.
It seems the market — and $175 million of these perpetual prefs were issued — has given its judgement: the prefs hit a six-month low during the week. The prefs, now yielding 6.75 per cent, have traded down since the November announcement of the offer.
Those prefs came with certain terms, specifically that they couldn’t be redeemed prior to April 30, 2018. After that date, the issuer was required to pay a premium that declines to $25 “on or after April 30, 2022.”
It appears holders won’t be getting any of those potential benefits if more than two-thirds of the holders tend into the offer.
The proposal has upset some holders, with one suggesting Brookfield Renewable “seems to be urging current owners of the shares to redeem for a lesser product which they pretend is a better investment.”
For example, the Series 5 preferred units “do not have a fixed maturity date and are not redeemable at the option of the holders of Series 5 Preferred Units,” according to a Brookfield Renewable circular. “The ability of a holder to liquidate its holdings of Series 5 Preferred Units may be limited.”
The circular also said that the exchange offers holders increased distributions, substantially similar other terms and conditions, unanimous board recommendation and a fairness opinion. Calls to the company seeking further comment were not returned.
This is the second such change recently. Is this a new trend?
It seems these are not entirely legal. The terms of the shares are changed by the company and the holders have very limited or no choice. That seriously remove confidence in the preferred share market as a whole, for me. Can you please comment on this troubling trend?
My guess is that the BRF issue poses some kind of problem for Brookfield. Maybe tax or covenant related (Brookfield does nothing unless tax advantageous to them, just look at the tax structure of BRF). It is getting in the way of Brookfield doing something (for their own benefit, $$ involved you can be certain) and they want to get rid of it, but as cheaply as possible, although it is odd it is only this issue. Vote no and let them improve the offer if one holds these.
The DC issue I think is far more serious. They do not want to pay them out given their very difficult financial situation, despite the fact their consolidated balance sheet appears to have the cash to do so. That is a major warning sign to me.
These two issues are cases where prefs are “getting in the way” of management doing what it wants or needs to do, so the solution seems to be to try and renegotiate the prefs in a heavy handed manner. It is legal to the extent pref holders agree, but given how few people will vote makes it a very uncertain outcome. What is needed is a proxy company/individual to specialize for shareholders in prefs, but probably not a big profit margin in doing that. At least Mr. Hymas and others publicly bring the actions to light.
Im worried about the precedent, and the impact this can have on the stability of the preferred share market in Canada, which has already lost a lot of stability for many other, some quite uncertain, reasons. It basically makes the prospectus just ‘a scrap of paper.’ Especially considering how people are being paid to vote yes, and brokers are being paid to encourage people to vote yes.
It seems these are not entirely legal. The terms of the shares are changed by the company and the holders have very limited or no choice. That seriously remove confidence in the preferred share market as a whole, for me.
It’s perfectly legal. All the company needs is a majority vote; and you may be interested to know that OSFI has encouraged the banks to bring votes to holders of their suddenly-NVCC-non-compliant paper such that the paper will become NVCC-compliant. Given current conditions in the preferred share market, though, I suspect that such efforts will not succeed.
A change of terms is always a possibility for any issue, but on the whole it happens less than bankruptcy, which is pretty rare itself. You can only hope that the company will care enough about its reputation that it won’t be too abusive, and that shareholders will vote down any really bad plans, and that you are diversified enough that a really foul change of terms of an issue you hold will not be crippling.
My guess is that the BRF issue poses some kind of problem for Brookfield. Maybe tax or covenant related
That’s my guess too, but I can’t support it in any way!
The DC issue I think is far more serious. They do not want to pay them out given their very difficult financial situation, despite the fact their consolidated balance sheet appears to have the cash to do so. That is a major warning sign to me.
I agree. I think they’ll redeem with shares if push comes to shove.
These two issues are cases where prefs are “getting in the way” of management doing what it wants or needs to do, so the solution seems to be to try and renegotiate the prefs in a heavy handed manner.
The ability to vote and be treated as equity-like in votes is sometimes very important.
An example where it almost worked out in preferred shareholders’ favour was the BCE/Teachers’ deal, in which preferred shareholders’ approval was required for the plan of arrangement to go through; therefore, the company decided to redeem the shares instead, which made it one of those instances in which preferred shareholders had to be treated better than debtholders. Sadly, the deal ultimately failed.
It basically makes the prospectus just ‘a scrap of paper.’ Especially considering how people are being paid to vote yes, and brokers are being paid to encourage people to vote yes.
Well, the prospectus gives a procedure for change. Nobody ever reads it, but from time to time it is important.
I don’t like consent fees, regardless of to whom they are paid.
Thanks again for the info.
I guess I just have to hope the big pref holders vote for my interest. I know my vote won’t make much of a difference.