Brookfield Office Properties Inc. has announced:
that it has agreed to issue to a syndicate of underwriters led by TD Securities Inc., CIBC Capital Markets, RBC Capital Markets and Scotiabank, for distribution to the public, ten million Cumulative Minimum Rate Reset Class AAA Preference Shares, Series GG (the “Preferred Shares, Series GG”). The Preferred Shares, Series GG will be issued at a price of C$25.00 per share, for aggregate proceeds of C$250 million. Holders of the Preferred Shares, Series GG will be entitled to receive a cumulative quarterly fixed dividend yielding 4.85% annually for the initial period ending June 30, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of (i) the five-year Government of Canada bond yield plus 3.74% and (ii) 4.85%.
Holders of Preferred Shares, Series GG will have the right, at their option, to convert their shares into Cumulative Floating Rate Class AAA Preference Shares, Series HH (the “Preferred Shares, Series HH”), subject to certain conditions, on June 30, 2022 and on June 30 every five years thereafter. Holders of Preferred Shares, Series HH will be entitled to receive cumulative quarterly floating dividends at a rate equal to the 90-day Government of Canada Treasury Bill yield plus 3.74%.
The Series GG Shares and Series HH Shares will be fully and unconditionally guaranteed, jointly and severally, as to: (i) the payment of dividends, as and when declared, (ii) the payment of amounts due on redemption, and (iii) the payment of amounts due on the liquidation, dissolution or winding-up of Brookfield Office Properties, by the following entities: Brookfield Property Partners L.P., Brookfield Property L.P., Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, BPY Bermuda Holdings II Limited, BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited.
Brookfield Office Properties has granted the underwriters an option, exercisable in whole or in part anytime up to two business days prior to closing, to purchase an additional 2,000,000 Preferred Shares, Series GG at the same offering price. Should the option be fully exercised, the total gross proceeds of the financing will be C$300 million.
The Preferred Shares, Series GG will be offered in all provinces of Canada by way of a supplement to Brookfield Office Properties’ existing Canadian short form base shelf prospectus dated August 29, 2016.
The net proceeds of the issue will be used for general corporate purposes which may include the redemption of existing preferred shares. The offering is expected to close on or about May 4, 2017.
The reference to possibly using proceeds to redeem extant preferred shares may mean that BPO.PR.J, which was partially redeemed 2017-3-29 will finally disappear. But we will see!
The issue seems quite expensive to me:
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Of course, promoters will protest that I think it’s expensive because I’m assigning zero value to the minimum rate guarantee, a practice for which I have been criticized in the past. And, of course, it should be clear that as has been remarked:
I guess you mean by that that you CURRENTLY do not give much value to this feature given your conviction that interest rates will go up in the upcoming years (what we have been hearing for a quite a while now)?
So take it as you will!