Enbridge Inc. has announced:
that it does not intend to exercise its right to redeem its currently outstanding Cumulative Redeemable Preference Shares, Series B (Series B Shares) (TSX: ENB.PR.B) or its right to redeem its currently outstanding Cumulative Redeemable Preference Shares, Series C (Series C Shares) (TSX: ENB.PR.C) on June 1, 2022. As a result, subject to certain conditions, the holders of the Series B Shares have the right to convert all or part of their Series B Shares on a one-for-one basis into Series C Shares on June 1, 2022 and the holders of the Series C Shares have the right to convert all or part of their Series C Shares on a one-for-one bases into Series B Shares on June 1, 2022. Holders who do not exercise their right to convert their Series B Shares into Series C Shares will retain their Series B Shares and holders who do not exercise their right to convert their Series C Shares into Series B Shares will retain their Series C Shares.
The foregoing conversion rights are subject to the conditions that: (i) if Enbridge, after taking into account all Series B Shares and all Series C Shares tendered for conversion, determines that there would be less than 1,000,000 Series B Shares outstanding after June 1, 2022, then all remaining Series B Shares will automatically be converted into Series C Shares on a one-for-one basis on June 1, 2022 and no Series C Shares will be converted into Series B Shares; and (ii) alternatively, if Enbridge, after taking into account all Series B Shares and all Series C Shares tendered for conversion, determines that there would be less than 1,000,000 Series C Shares outstanding after June 1, 2022, then all remaining Series C Shares will automatically be converted into Series B Shares on a one-for-one basis on June 1, 2022 and no Series B Shares will be converted into Series C Shares. There are currently 18,269,812 Series B Shares outstanding and 1,730,188 Series C Shares outstanding.
With respect to any Series B Shares that remain outstanding after June 1, 2022, including any Series B Shares issued pursuant to the conversion of the Class C Shares, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The new annual dividend rate applicable to the Series B Shares for the five-year period commencing on June 1, 2022 to, but excluding, June 1, 2027 will be 5.202 percent, being equal to the five-year Government of Canada bond yield of 2.802 percent determined as of today plus 2.40 percent in accordance with the terms of the Series B Shares.
With respect to any Class C Shares that remain outstanding after June 1, 2022, including any Series C Shares issued pursuant to the conversion of the Class B Shares, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The dividend rate applicable to the Series C Shares for the three-month floating rate period commencing on June 1, 2022 to, but excluding, September 1, 2022 will be 0.95277 percent, based on the annual rate on three month Government of Canada treasury bills for the most recent treasury bills auction of 1.38 percent plus 2.40 percent in accordance with the terms of the Series C Shares (the Floating Quarterly Dividend Rate). The Floating Quarterly Dividend Rate will be reset every quarter.
Beneficial holders of Series B Shares and Series C Shares who wish to exercise their respective rights of conversion during the conversion periods applicable to the Series B Shares and the Series C Shares, each of which runs from May 2, 2022, until 5:00 p.m. (EST) on May 17, 2022, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary time to complete the necessary steps. Any notices received after this deadline will not be valid.
ENB.PR.B was issued as a FixedReset, 4.00%+240, that commenced trading 2011-9-30 after being announced 2011-9-21. It reset to 3.415% in 2017; I recommended against conversion; but there was an 8% conversion to the FloatingReset, ENB.PR.C, anyway.
ENB.PR.C is a FloatingReset, 3-Month Bills+240, that arose via partial conversion from ENB.PR.B in 2017.
So, the .85 annual dividend on ENB.PR.B now goes to $1.30. Based on the last traded price, this leaves holders with a 6.9% yield. James, you previously mentioned that issuers can, and often do, extend reset dates by up to a year and a half over the stated 5 year term, . . . these guys apparently pulled the trigger the minute it was legally possible. To be expected, since any delay in resetting would just further extend the reset dividend to the upside. Investors might look to this particular issue if the concern over a reset delay is worrisome. The ongoing Tiff & Jerome media event will almost guarantee that will not happen any time soon!
I forgot to thank you for posting this reset update, along with your ongoing timely pref information. The fact that these pref issues have not really responded to this is any material way at this point is proof positive that this blog, and those who contribute to it remain on the leading edge of this kind of priceless information. It’ll probably take a few weeks for the “professional” market to see that a 7% dividend is suddenly available . . . and that it might not be a bad investment. Thank you again, James.
issuers can, and often do, extend reset dates by up to a year and a half over the stated 5 year term
I think that’s usually not the case. What the issuers typically do is have the initial reset date more than five years from the initial issue date. But all dates are clearly specified in the prospectus- initial dividend dates, reset dates and the number of days’ notice to be given for reset and redemption.
In this case, both CU and ENB had to give a notice of at least 30 days and no more than 60 days before June 1, 2022, so both of them did on the last possible date.
James, you previously mentioned that issuers can, and often do, extend reset dates by up to a year and a half over the stated 5 year term,
I have never heard of a single instance of this. Reset dates are specified in the prospectus and I have never seen an issue in which there has been any mechanism for the delay of a specified reset date.
skeptical has it right: the FIRST reset date is specified in the prospectus, with all others following at five year intervals. The timing of the FIRST reset date is therefore set according to the whim of the issuer, and the time from issue date to FIRST reset date has historically been up to six and a half years.
Update: Note that there is no law about this. Somebody could issue something that gives the issuer some kind of option regarding reset dates, which need not be every five years and need not have their first reset date withing 6.5 years of issue time. Nobody would go to jail. But such an issue would be very expensive because no informed person would buy it without analyzing the option, coming up with some guess as to how much such optionality was worth, adding a margin to this presumed value in case of errors, and adjusting the guess of fair value before buying it. It would be difficult to find underwriters for an egregious departure from the normal terms of issue … the big boys have a nice little market going that brings in fees on a steady basis (in normal times!) and will be deathly afraid that if they make it more complicated in an effort to screw their customers they’ll find themselves hoist with their own petard.
Hi folks. Been lurking here a while, and finally registered to post a comment. Before I continue, thank you especially to James, as well as to all Assiduous Readers, for the useful insight and commentary about the Canadian prefs market.
And so… given that ENB is supposed to give notice at least 30 days before a reset date, where then is the similar press release for the Enbridge U.S.-pay issue ENB.PR.U, which also resets June 1, 2022? The May 2 press release didn’t mention this issue and there isn’t another just for ENB.PR.U.
where then is the similar press release for the Enbridge U.S.-pay issue ENB.PR.U
It will reset effective September 1, as it did in 2017, and therefore the rate should be announced at the beginning of August.
Note that you can search for specific tickers by typing the ticker symbol into the search box and clicking “search”. Some issues, of course, get an awful lot of hits but fortunately the site software reports posts in which the search term is in the headline preferentially to those for which it is just in the post’s text … something I bear in mind when composing headlines!
Hi James. I was referring to the imminent reset for ENB.PR.U (“Series J”, resetting June 1), not the forthcoming reset for ENB.PF.U (“Series L”, resetting September 1). Symbols too similar! ENB.PR.U’s last reset was announced in April 2017, and while the blog doesn’t have a post headlining that ENB.PR.U reset specifically, it was mentioned alongside ENB.PR.B’s 2017 reset at https://prefblog.com/?p=34809, and covered initially at https://prefblog.com/?p=18428.
Hi James. I was referring to the imminent reset for ENB.PR.U (“Series J”, resetting June 1), not the forthcoming reset for ENB.PF.U (“Series L”, resetting September 1).
Oops! I don’t see anything about ENB.PR.U, either. I have sent an eMail to Investor Relations and will find out what’s going on with the issue.