BIP.PR.D Achieves Small Premium On Excellent Volume

Brookfield Infrastructure has announced:

the completion of its previously announced issue of Cumulative Class A Preferred Limited Partnership Units, Series 7 (“Series 7 Preferred Units”) in the amount of $300,000,000. The offering was underwritten by a syndicate led by CIBC Capital Markets, RBC Capital Markets, Scotiabank, and TD Securities Inc.

Brookfield Infrastructure issued 12,000,000 Series 7 Preferred Units at a price of $25.00 per unit, for total gross proceeds of $300,000,000. Holders of the Series 7 Preferred Units will be entitled to receive a cumulative quarterly fixed distribution yielding 5.00% annually for the initial period ending March 31, 2022. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 3.78%, and (ii) 5.00%. The Series 7 Preferred Units will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BIP.PR.D.

BIP.PR.D is a FixedReset, 5.00%+378M500, ROC + Interest, announced January 19. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

The issue traded 1,272,999 shares today in a range of 25.05-19 before closing at 25.15-17, 10×30. Vital statistics are:

Maturity Type : Limit Maturity
Maturity Date : 2047-01-26
Maturity Price : 23.20
Evaluated at bid price : 25.15
Bid-YTW : 4.88 %

Implied Volatility analysis yields the following chart:

Click for Big

Update, 2017-10-11: Note that according to the prospectus, available on SEDAR under “Brookfield Infrastructure Partners L.P. Jan 19 2017 19:48:49 ET Prospectus (non pricing) supplement – English PDF 525 K”:

The reclassification of a Series 7 Preferred Unit into a Series 8 Preferred Unit or a Series 8 Preferred Unit into a Series 7 Preferred Unit, whether pursuant to an election made by the Resident Holder or pursuant to an automatic reclassification, may be considered to be a disposition of the Series 7 Preferred Unit or Series 8 Preferred Unit by the Resident Holder. The CRA’s position is that the conversion of an interest in a partnership into another interest in the partnership may result in a disposition of the partnership interest by the holder if the conversion results in a significant change in the rights and obligations of the holder in respect of the converted interest, including a significant change in the
percentage interest in the profits of the partnership. Whether or not the reclassification of Series 7 Preferred Units into Series 8 Preferred Units or Series 8 Preferred Units into Series 7 Preferred Units would result in a significant change in the percentage interest of a Resident Holder in the profits of the Partnership is a question of fact that depends upon the facts and circumstances that exist at the time of the reclassification.

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