PrefBlog

Canadian Utilities Limited has announced:

that it has notified the registered shareholder of its Cumulative Redeemable Second Preferred Shares Series FF (“Series FF Preferred Shares”) of a conversion privilege and applicable dividend rates. As a result, subject to certain conditions, the holders of Series FF Preferred Shares will have the right to choose one of the following options with regard to their shares:

To retain any or all of their Series FF Preferred Shares and continue to receive a fixed rate quarterly dividend; or
To convert, on a one-for-one basis, any or all of their Series FF Preferred Shares into Cumulative Redeemable Second Preferred Shares Series GG (“Series GG Preferred Shares”) of Canadian Utilities Limited and receive a floating rate quarterly dividend.
Effective December 1, 2020, the annual dividend rate for the Series FF Preferred Shares is set at 4.50% for the five-year period from and including December 1, 2020 to but excluding December 1, 2025 and the dividend rate for the Series GG Preferred Shares is set at an annual rate of 3.78% for the three-month period commencing December 1, 2020 to but excluding March 1, 2021. The dividend rate for the Series GG Preferred Shares will be reset each quarter. Both rates were calculated according to the terms described in the prospectus supplement of Canadian Utilities Limited dated September 16, 2015.

Beneficial owners of Series FF Preferred Shares who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is 3 p.m. (Calgary time) / 5 p.m. (Toronto time) on November 16, 2020. Any notices received after this deadline will not be valid. As such, it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

The foregoing conversions are subject to the conditions that: (i) if Canadian Utilities Limited determines that there would be less than 2,000,000 Series FF Preferred Shares outstanding on December 1, 2020, then all remaining Series FF Preferred Shares will automatically be converted into Series GG Preferred Shares on December 1, 2020, and (ii) alternatively, if Canadian Utilities Limited determines that there would be less than 2,000,000 Series GG Preferred Shares outstanding on December 1, 2020 after giving effect to conversion notices received, no Series FF Preferred Shares will be converted into Series GG Preferred Shares. If either of these scenarios occurs, Canadian Utilities Limited will issue a news release to that effect on or before November 23, 2020.

Holders of the Series FF Preferred Shares and the Series GG Preferred Shares, as applicable, will have the opportunity to convert their shares again on December 1, 2025, and every five years thereafter as long as the shares remain outstanding.

For more information on the terms of, and risks associated with an investment in, the Series FF Preferred Shares and the Series GG Preferred Shares, please see Canadian Utilities Limited’s prospectus supplement dated September 16, 2015, which can be found under Canadian Utilities Limited’s profile on SEDAR at www.sedar.com.

CU.PR.I is a FixedReset, 4.50%+369M450, that commenced trading 2015-9-24 after being announced 2015-9-14. It is tracked by HIMIPref™ and is assigned to the FixedReset-Premium subindex.

It is of interest to note that CU.PR.I is very expensive relative to CU Straights according to Implied Volatility Theory:

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The Current Yield on the issue is 4.49% vs. a theoretical yield (derived from the Straights) of 4.79% – a price difference of $1.59. To rationalize this, one must assume the market is assigning a very high probability to much higher interest rates in the future.

This entry was posted on Monday, November 2nd, 2020 at 8:08 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.