Manulife Financial Corporation has announced (although not yet on their website):
a Canadian public offering of Non-cumulative Rate Reset Class 1 Shares Series 21 (“Series 21 Preferred Shares”). Manulife will issue 12 million Series 21 Preferred Shares priced at $25 per share to raise gross proceeds of $300 million. The offering will be underwritten by a syndicate of investment dealers co-led by RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc. and is anticipated to qualify as Tier 1 capital for Manulife. Manulife has also granted the underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to closing, to purchase up to an additional 2 million Series 21 Preferred Shares at the same offering price. The maximum gross proceeds raised under the offering will be $350 million should this option be exercised in full. The expected closing date for the offering is February 25, 2016. Manulife intends to file a prospectus supplement to its December 17, 2015 base shelf prospectus in respect of this issue.
Holders of the Series 21 Preferred Shares will be entitled to receive a non-cumulative quarterly fixed dividend yielding 5.60 per cent annually, as and when declared by the Board of Directors of Manulife, for the initial period ending June 19, 2021. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 4.97 per cent.
Holders of Series 21 Preferred Shares will have the right, at their option, to convert their shares into Non-cumulative Rate Reset Class 1 Shares Series 22 (“Series 22 Preferred Shares”), subject to certain conditions, on June 19, 2021 and on June 19 every five years thereafter. Holders of the Series 22 Preferred Shares will be entitled to receive non-cumulative quarterly floating dividends, as and when declared by the Board of Directors of Manulife, at a rate equal to the three-month Government of Canada Treasury Bill yield plus 4.97 per cent.
Manulife intends to use the net proceeds from the offering for general corporate purposes, including future refinancing requirements.
They later announced (also not on their website):
that as a result of strong investor demand for its previously announced Canadian public offering of Non-cumulative Rate Reset Class 1 Shares Series 21 (“Series 21 Preferred Shares”), the size of the offering has been increased to 16 million shares. The gross proceeds of the offering will now be $400 million. The offering will be underwritten by a syndicate of investment dealers co-led by RBC Capital Markets, Scotia Capital Inc. and TD Securities Inc. and is anticipated to qualify as Tier 1 capital for Manulife. The expected closing date for the offering is February 25, 2016.
Manulife has also granted the underwriters an option, exercisable in whole or in part at any time up to 30 days following the closing of the offering, to purchase up to an additional 1 million Series 21 Preferred Shares at the same offering price, for the purpose of covering over-allotments, if any. The maximum gross proceeds raised under the offering will be $425 million should this option be exercised in full. Manulife intends to file a prospectus supplement to its December 17, 2015 base shelf prospectus in respect of this issue.
Manulife intends to use the net proceeds from the offering for general corporate purposes, including future refinancing requirements.
So that’s a nice sized issue!
As this issue is from an insurer and there is no provision for conversion into common shares at the option of the issuer, I consider this to be subject to my Deemed Retraction policy; accordingly I have placed a maturity entry dated 2025-1-31 at par in the call schedule of this instrument for analytical purposes. Note that this approach is due to analysis and there is no contractual provision in the terms of issue for any such maturity.
Based on Implied Volatility analysis, the issue looks rather expensive:
Click for Big
This issue made me think we should be prepared to see PWF, GWO and or SLF issues. SLF fixed-resets were strong yesterday though – then SLF announced $350 Million in 10 year 3.1% variable rate sub debentures. Seems like a smarter / cheaper choice in this market.