New Issue: LB FixedReset, 5.85%+513, NVCC

Laurentian Bank of Canada has announced:

that it has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets, TD Securities Inc. and RBC Capital Markets (collectively, the “Underwriters”), under which the Underwriters have agreed to buy on a bought deal basis an aggregate of 4 million Non-Cumulative Class A Preferred Shares, Series 15 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 15”), at a price of $25.00 per Preferred Share Series 15 for gross proceeds of $100 million (the “Offering”). Laurentian has granted to the Underwriters an option to purchase up to an additional 2 million Preferred Shares Series 15 exercisable at any time up to 48 hours before closing. Should the option be fully exercised, the total gross proceeds of the Preferred Shares Series 15 offering will be $150 million. The Preferred Shares Series 15 will be offered for sale to the public in each of the provinces of Canada pursuant to a prospectus supplement to Laurentian’s short form base shelf prospectus dated November 10, 2014, which supplement will be filed with Canadian securities regulatory authorities in all Canadian provinces.

Holders of Preferred Shares Series 15 will be entitled to receive non-cumulative preferential fixed quarterly dividends for the initial period ending on, but excluding, June 15, 2021, as and when declared by the board of directors of the Bank, payable in the amount of $1.4625 per Preferred Share Series 15, to yield 5.85 per cent annually.

Thereafter, the dividend rate will reset every five years to be equal to the 5-Year Government of Canada Bond Yield plus 5.13 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 15 into an equal number of Non-Cumulative Class A Preferred Shares, Series 16 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 16”) on June 15, 2021 and on June 15 every five years thereafter. Holders of the Preferred Shares Series 16 will be entitled to receive non-cumulative preferential floating rate quarterly dividends, as and when declared by the board of directors of the Bank, equal to the then 3-month Government of Canada Treasury Bill yield plus 5.13 per cent. The Offering is expected to close on or about March 17, 2016 and is subject to Laurentian receiving all necessary regulatory approvals.

The net proceeds of the Offering will be added to Laurentian’s general funds and will be used for general corporate purposes.

Laurentian has one other NVCC-compliant FixedReset outstanding, LB.PR.H, 4.30%+255, resetting 2019-6-15, bid at 16.15 to yield 5.38% to perpetuity. The new issue yields 5.78% (assuming an end-price of 23.14) so the new issue offers a yield pick-up of 40bp for a spread increase of 258bp; this is more or less in line with other series of issues.

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