BEP.PR.I Soft On Good Volume

Brookfield Renewable Partners L.P. has announced that it has:

completed its previously announced issue of Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 9 (the “Series 9 Preferred Units”). The offering was underwritten by a syndicate led by CIBC Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc.

Brookfield Renewable issued 8,000,000 Series 9 Preferred Units at a price of $25.00 per unit, for total gross proceeds of $200,000,000.

The Series 9 Preferred Units will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BEP.PR.I.

BEP.PR.I is a FixedReset, 5.75%+501M575, announced 2016-5-16. The issue will be tracked by HIMIPref™ but has been relegated to the Scraps subindex on credit concerns.

The prospectus supplement (a public document) is available on the regulator-owned SEDAR with the identifiers “Brookfield Renewable Partners L.P. May 17 2016 19:33:41 ET Prospectus supplement – English PDF 276 K” but I am not permitted to link to it directly since I am mere investor scum without even enough dignity to get a government job. The prospectus notes:

For Canadian federal income tax purposes, holders of Series 9 Preferred Units will be allocated a portion of the taxable income of the Partnership based on their proportionate share of distributions received on their units. The allocation of taxable income to such holders may be less than the distributions received. This difference is commonly referred to as a tax deferred return of capital (i.e., returns that are initially non-taxable but which reduce the adjusted cost base of the holder’s units). See “Certain Canadian Federal Income Tax Considerations” in this Prospectus Supplement for further details. As shown in the table below, the historical 3 year average per unit Canadian dividends, ordinary income and return of capital (i.e., excess of distributions over allocated taxable income) expressed as a percentage of the annual distributions in respect of units of the Partnership for the period 2013 through 2015 were approximately 61%, 20%, and 19%, respectively. Management anticipates the 5 year average per unit Canadian dividend, ordinary income and return of capital will be 50%, 25%, and 25%, respectively, for the period between 2016 and 2021; however, no assurance can be provided this will occur.

So be careful! This isn’t your usual distribution taxation status! See the coverage of the first day of trading of BEP.PR.G for an analytical framework.

BEP.PR.I traded 745,122 shares today (consolidated exchanges) in a range of 24.85-97 before closing at 24.92-95, 5×28. Vital statistics are:

Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 23.12
Evaluated at bid price : 24.92
Bid-YTW : 5.74 %

The TXPR index is up about 35bp since the announcement date, so closing below par suggest a very slight softness in the market’s reception of the issue.

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