National Bank of Canada has announced:
that it has entered into an agreement with a group of underwriters led by National Bank Financial Inc. for the issuance on a bought deal basis of 12 million non-cumulative 5-year rate reset first preferred shares series 38 (non-viability contingent capital (NVCC)) (the “Series 38 Preferred Shares”) at a price of $25.00 per share, to raise gross proceeds of $300 million.
National Bank has granted the underwriters an option to purchase, on the same terms, up to an additional 4 million Series 38 Preferred Shares. This option is exercisable in whole or in part by the underwriters at any time up to two business days prior to closing. The gross proceeds raised under the offering will be $400 million should this option be exercised in full.
The Series 38 Preferred Shares will yield 4.45% annually, payable quarterly, as and when declared by the Board of Directors of National Bank, for the initial period ending November 15, 2022. The first of such dividends, if declared, shall be payable on November 15, 2017. Thereafter, the dividend rate will reset every five years at a level of 343 basis points over the then 5-year Government of Canada bond yield. Subject to regulatory approval, National Bank may redeem the Series 38 Preferred Shares in whole or in part at par on November 15, 2022 and on November 15 every five years thereafter.
Holders of the Series 38 Preferred Shares will have the right to convert their shares into an equal number of non-cumulative floating rate first preferred shares series 39 (non-viability contingent capital (NVCC)) (the “Series 39 Preferred Shares”), subject to certain conditions, on November 15, 2022, and on November 15 every five years thereafter. Holders of the Series 39 Preferred Shares will be entitled to receive quarterly floating dividends, as and when declared by the Board of Directors of National Bank, equal to the 90-day Government of Canada Treasury Bill rate plus 343 basis points.
The net proceeds of the offering will be used for general corporate purposes and added to National Bank’s capital base. The expected closing date is on or about June 13, 2017. National Bank intends to file in Canada a prospectus supplement to its November 21, 2016 base shelf prospectus in respect of this issue.
They later announced:
that as a result of strong investor demand for its previously announced domestic public offering of non-cumulative 5-year rate reset first preferred shares series 38 (non-viability contingent capital (NVCC)) (the “Series 38 Preferred Shares”), the underwriters have exercised their option to purchase an additional 4,000,000 Series 38 Preferred Shares. The size of the offering has been increased to 16 million shares for gross proceeds of $400 million. The offering will be underwritten by a syndicate led by National Bank Financial Inc. The expected closing date is on or about June 13, 2017.
The net proceeds of the offering will be used for general corporate purposes and added to National Bank’s capital base.
Implied Volatility analysis for FixedResets suggests that this issue should be regarded as expensive:
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The theoretical price of the new issue is 24.25.