PrefBlog

TransAlta Corporation has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding cumulative redeemable rate reset first preferred shares Series E (“Series E Shares”) (TSX: TA.PR.H) on September 30, 2022 (the “Conversion Date”).

As a result and subject to certain conditions set out in the prospectus supplement dated August 3, 2012 relating to the issuance of the Series E Shares, the holders of the Series E Shares will have the right to convert all or any of their Series E Shares into cumulative redeemable floating rate first preferred shares Series F of the Company (“Series F Shares”) on the basis of one Series F Share for each Series E Share on the Conversion Date.

With respect to any Series E Shares that remain outstanding after September 30, 2022, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board of Directors of TransAlta. The annual dividend rate for the Series E Shares for the five-year period from and including September 30, 2022 to but excluding September 30, 2027, will be 6.89400%, being equal to the five-year Government of Canada bond yield of 3.24400% determined as of today plus 3.65000%, in accordance with the terms of the Series E Shares.

With respect to any Series F Shares that may be issued on September 30, 2022, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board of Directors of TransAlta. The annual dividend rate for the 3-month floating rate period from and including September 30, 2022 to but excluding December 31, 2022 will be 6.96800%, being equal to the annual rate for the most recent auction of 90-day Government of Canada Treasury Bills of 3.31800% plus 3.65000%, in accordance with the terms of the Series E Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

As provided in the terms of the Series E Shares, if TransAlta determines after reviewing all Series E Shares tendered for conversion into Series F Shares that: (i) there would remain outstanding on September 30, 2022, less than 1,000,000 Series E Shares, all remaining Series E Shares shall be converted automatically into Series F Shares on a one-for one basis effective September 30, 2022; or (ii) there would remain outstanding after September 30, 2022, less than 1,000,000 Series F Shares, the holders of Series E Shares shall not be entitled to convert their shares into Series F Shares effective September 30, 2022. There are currently 9,000,000 Series E Shares outstanding.

The Series E Shares are issued in “book entry only” form and must be purchased or transferred through a participant in the CDS depository service (“CDS Participant”). All rights of holders of Series E Shares must be exercised through CDS or the CDS Participant through which the Series E Shares are held. The deadline for the registered shareholder to provide notice of exercise of the right to convert Series E Shares into Series F Shares is 3:00 p.m. (MST) / 5:00 p.m. (EST) on September 15, 2022. Any notices received after this deadline will not be valid. As such, holders of Series E Shares who wish to exercise their right to convert their shares should contact their broker or other intermediary for more information and 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.

If TransAlta does not receive an election notice from a holder of Series E Shares during the time fixed therefor, then the Series E Shares shall be deemed not to have been converted (except in the case of an automatic conversion). Holders of the Series E Shares and the Series F Shares will have the opportunity to convert their shares again on September 30, 2027, and every five years thereafter as long as the shares remain outstanding.

As previously announced on July 27, 2022, holders of Series E shares as of the record date of September 1, 2022 will receive a dividend of $0.32463 payable on September 30, 2022, in respect of the period starting from and including June 30, 2022 up to but excluding September 30, 2022, regardless of whether the holder elects to convert their Series E Shares into Series F Shares on the Conversion Date.

The Toronto Stock Exchange (TSX) has conditionally approved the listing of the Series F Shares effective upon conversion. Listing of the Series F Shares is subject to TransAlta fulfilling all the listing requirements of the TSX.

TA.PR.H was issued as a FixedReset, 5.00%+365, that commenced trading 2012-8-10 after being announced 2012-8-2. It reset to 5.194% in 2017; I recommended against conversion; and there was no conversion. The issue is tracked by HIMIPref™ but has been assigned to the Scraps index on credit concerns.

Assiduous Reader DR points out by eMail that there’s something of a mystery regarding the reset rate: the company used 3.244% as the GOC-5 base, which is somewhat different from the investing.com indication of around 3.28%. This sort of difference is often due to different benchmarks being used, but investing.com uses the 1.25% of 2027-3-1 which is the same as the Bank of Canada. I can only surmise that Bloomberg uses a different bond – perhaps the 2.75% of 2027-9-1, which had 12-billion outstanding at the end of July after an auction on 2022-7-20, with another one scheduled for 2027-9-22.

This entry was posted on Wednesday, August 31st, 2022 at 9:26 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.