TRP.PR.C To Reset At 2.263%

TransCanada Corporation has announced [although not yet on their website]:

that it has notified the registered shareholder of the applicable dividend rates for Cumulative Redeemable First Preferred Shares, Series 5 (Series 5 Shares) and the Cumulative Redeemable First Preferred Shares, Series 6 (Series 6 Shares). The rates were calculated today, in accordance with the process defined in the prospectus supplement dated June 17, 2010.

As previously announced in our news release dated December 15, 2015, holders of the Series 5 Shares have the right on January 30, 2016 to convert on a one-for-one basis, any or all of their Series 5 Shares into Series 6 Shares and receive a floating rate quarterly dividend, or retain any or all of their Series 5 Shares and receive a new fixed rate quarterly dividend.

Should a holder of Series 5 Shares choose to retain their shares, such shareholders will receive the new annual fixed dividend rate applicable to the Series 5 Shares of 2.263 per cent for the five-year period commencing January 30, 2016 to, but excluding, January 30, 2021.

Should a holder of Series 5 Shares choose to convert their shares to Series 6 Shares, given that the conversion date of January 30, 2016 is not a business day, the conversion will be effective on the next business day, February 1, 2016. As a result, such shareholders will retain their Series 5 Shares until February 1 and receive the new annual fixed dividend rate for such shares for two days, January 30 and 31. Holders of Series 6 Shares will receive the floating quarterly dividend rate applicable to the Series 6 Shares of 2.037 per cent for the quarterly floating rate period commencing effective February 1, 2016 to, but excluding, April 30, 2016. The floating quarterly dividend rate will be reset every quarter.

Beneficial owners of Series 5 Shares are reminded that those who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is 5 p.m. (EDT) on January 15, 2016.

For more information on the terms of, and risks associated with an investment in the Series 5 Shares and the Series 6 Shares, please see the Corporation’s prospectus supplement dated June 17, 2010 which is available on or on the Corporation’s website.

The company’s decision to extend the issue was previously reported on PrefBlog.

TRP.PR.C has been a FixedReset, 4.40%+154, that commenced trading 2010-6-29 after being announced 2010-6-17. The reset to 2.263% thus represents a dividend cut of 49%. Ouch!

As noted in the press release, the deadline for notification to the company of a desire to convert to the FloatingReset issue is January 15, 2016, at 5pm EDT. However, brokerage deadlines will normally be a day or two in advance; they will usually attempt to exercise the conversion if notified between the two deadlines, but only on ‘best-efforts’ basis and only if the shareholder grovels in a sufficiently entertaining fashion.

Accordingly, I will make a recommendation regarding the conversion after the market close on January 11. Given market conditions, it is highly probable that the recommendation will be to hold TRP.PR.C … but market conditions can change!

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