Brookfield Renewable Partners L.P. has announced:
that it has agreed to issue 5,000,000 5.50% Cumulative Perpetual Class A Preferred Limited Partnership Units, Series 18 (the “Series 18 Preferred Units”) on a bought deal basis to a syndicate of underwriters led by CIBC Capital Markets, BMO Capital Markets, National Bank Financial Inc., RBC Capital Markets, Scotiabank and TD Securities Inc. for distribution to the public. The Series 18 Preferred Units will be issued at a price of C$25.00 per unit, for gross proceeds of C$125,000,000.
Holders of the Series 18 Preferred Units will be entitled to receive a fixed cumulative quarterly distribution yielding 5.50% annually. The Series 18 Preferred Units will be redeemable by Brookfield Renewable on and after April 30, 2027.
Brookfield Renewable has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 1,000,000 Series 18 Preferred Units which, if exercised, would increase the gross offering size to C$150,000,000.
The Series 18 Preferred Units will be offered in all provinces and territories of Canada by way of a prospectus supplement to Brookfield Renewable’s existing Canadian short form base shelf prospectus dated August 20, 2021. Once filed, the prospectus supplement will be available on Brookfield Renewable’s profile on SEDAR at www.sedar.com. The Series 18 Preferred Units may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.
Brookfield Renewable intends to use the net proceeds from this offering to finance and/or refinance investments made in renewable power generation assets or businesses and to support the development of clean energy technologies that constitute Eligible Investments, including the potential redemption of all or a portion of the Partnership’s Class A Preferred Limited Partnership Units, Series 11 on April 30, 2022.
The offering of Series 18 Preferred Units is expected to close on or about April 14, 2022.
I haven’t seen the prospectus supplement yet, but prospective purchasers should bear in mind that the distributions from these Preferred Units will almost certainly be relatively complex. See the BEP tax information page and especially the link to the 2021 Canadian Taxable Income Calculation (Preferred) MS-Excel spreadsheet at the bottom of this page.
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Hi James/Others
A quick question: Historically what has been the highest rate offered for an investment grade perpetual that you can recall?
Thanks so much!
Hi skeptical! In recent times, $1.50 on $25 par (6%), is the highest I can recall on a bank or utility pref. If you go back to the 80’s, before the telco takeovers … I seem to recall some 6.5% perpetuals on $100 par issues by companies like BC Tel, Quebectel, etc.
If you’re wondering if 5.5% is the “peak” in this cycle … tough call, but I’d bet on seeing something north of 6% this time, although the “reset” feature, and some of these loose redemption statements tends to gray it up a bit. A straight pref at 6%, “investment “ grade? Maybe, but first hint that it can be improved on by the issuer, it will be redeemed … and re-issued in some inferior form.
Bottom line for me is to pass on new issues at this point, and look to discounted quality on a bonafide buying opp! 🙂
The highest fixed rate (the fixing may be for only five years) I have on record is the Crown Life Insurance Co. $2.50 Cl I Pr ‘A’, CLA.PR.A, issued 1984-10-5 and redeemed at par 2001-12-21.
The highest I have recorded since 1993-12-31 (when backtesting began) was Suncor Energy Inc. 9.05% Pfd. Sec., which paid interest.
The highest dividend-paying issue on my record, since 1993-12-31 and paying dividends, was Gentra Inc Pr Series “G”, GTA.PR.G, paying 2.125, issued 1997-9-11.
The highest dividend-paying issue on my record, since 2000-01-01 was DC.PR.E, which commenced trading 2016-2-12 and arose by exchange from DC.PR.C, which had a par value of 17.84 paying 0.89, from 2014-9-30 (see the history of this issue). There was also TD.PR.K, which commenced trading 2000-12-14, paying 1.8375, which arose by exchange from CFS.PR.B, CT Financial Services Inc. Series ‘4’ Pr, issued 1993-6-2.
The highest dividend-paying new issue on my record since 2000-1-1 was BNA.PR.D, BAM Split Corp. Cl ‘AA’ Series 4 Pr, paying 1.8125, which commenced trading 2009-7-9. See here … but of course, that was a split-share.
And … what you’ve all been waiting for … the highest semi-fixed rate on a perpetual investment-grade new issue since 2000-01-01 was … BAM.PR.P a FixedReset 7.00%+445
NA.PR.J, National Bank of Canada 1st Pr Series ’13’, was a Straight Perpetual, commencing trading 2000-7-13, paying $1.60. See https://www.prefblog.com/wp-content/uploads/2007/09/0011_Pre.pdf
Wow. Thanks James for this treasure of historical insight.
Deeply appreciated.
Just a reminder that the “investment grade” label on a preferred share implies a minimum rating of P1. The issues James describes were P2 for the life insurance and National Bank issues, P3 on the BAM issues, and I believe the DC prefs were either classified as P3 or “junk”. Hence, the higher dividend rates. I believe utility prefs now make up the majority of investment grade issues, since the telcos have been replaced by “media/conglomerates”. James, are the major banks (BNS, TD, etc.) now graded P1? I believe even those have traditionally been in the P2 class, and hence not investment grade. Not sure
Just a reminder that the “investment grade” label on a preferred share implies a minimum rating of P1.
The phrase “investment grade” is not well defined. I consider issues with a DBRS rating of Pfd-2(low) or better to be investment-grade, based on the DBRS definition of Pfd-2;
The ‘notching’ of preferred share ratings due to structural subordination will take preferred shares (from issuers with an ‘A’ rating on the senior debt) down to, but generally not past, the rough equivalent of BBB-, which is accepted as the lower limit of ‘investment-grade’ for bonds.
See, for example, the ratings applicable to LRCNs issued by RBC according to the prospectus:
The Notes are backed by the Preferred Shares, so the ratings are equivalent.
S&P is more forthcoming, providing a handy mapping of the “National Scale Preferred Share Rating” onto the “Global Scale Preferred Share Rating”, mapping P-2(low) onto BBB-.
Long ago, DBRS referred to “investment grade” explicitly, making the concepts of ‘notching’ and ‘investment grade’ explicit. However, I do recall them referring to Pfd-3(low) as ‘investment grade’ at one point.
As I say, it’s a poorly defined term and there’s no profit for the credit rating agencies in making their definitions more clear. However, when I refer to ‘investment grade’ on preferred shares, I mean Pfd-2(low)/P-2(low) or better.
Many thanks for the insights there; no question pref rating has always been not very well defined. Just wanted to take this opportunity to let you know that this blog has been a “go to” place for me for many years. If there’s a piece of pref related detail needed, it’s articulated here . . . if it’s not here, then it probably isn’t anywhere! You’ve been doing this a long time, and I’m pretty sure you have more “fans” than the chat volume in this forum would suggest. Many thanks for the ongoing hard work, James, and your readiness to share it here . . . just don’t bother thinking about retirement any time soon, please!
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