AltaGas Ltd. has announced:
its intention to redeem – in accordance with the terms of the Cumulative Redeemable 5-Year Rate Reset Preferred Shares, Series E (the “Series E Shares”) as set out in the Company’s articles – all of its 8,000,000 issued and outstanding Series E Shares on December 31, 2023 (the “Redemption Date”) for a redemption price equal to $25.00 per Series E Share, together with all accrued and unpaid dividends to, but excluding, the Redemption Date (the “Redemption Price”), less any tax required to be deducted or withheld by the Company.
As outlined in the November 10, 2023 press release, AltaGas intends to use the net proceeds from the $200 million of 8.90% Fixed-to-Fixed Rate Subordinated Notes, Series 3 due November 10, 2083 to redeem or repurchase its outstanding Series E Shares.
The Company has provided notice today of the Redemption Price and the Redemption Date to the sole registered holder of the Series E Shares in accordance with the terms of the Series E Shares as set out in the Company’s articles. Non-registered holders of Series E Shares should contact their broker or other intermediary for information regarding the redemption process for the Series E Shares in which they hold a beneficial interest. The Company’s transfer agent for the Series E Shares is Computershare Investor Services Inc. Questions regarding the redemption process may be directed to Computershare Investor Services Inc. at 1-800-564-6253 or by email to corporateactions@computershare.com.
This is a bit of an anticlimax, since they already announced the closing of an issuance of hybrid notes to fund it:
AltaGas Ltd. (“AltaGas” or the “Company”) (TSX: ALA) today announced that it has closed its previously announced offering of $200 million of 8.90% Fixed-to-Fixed Rate Subordinated Notes, Series 3 due November 10, 2083 (the “Offering”).
The Company intends to use the net proceeds of the Offering to redeem or repurchase its outstanding cumulative redeemable five-year rate reset preferred shares, series E (TSX: ALA.PR.E) (the “Series E Preferred Shares). Series E Preferred Share dividends are not deductible for tax purposes and are subject to part 6.1 tax at 40 percent. As a result of the Offering, based on current rates, AltaGas expects to save approximately $10 million or $0.01 of annual earnings per share during the initial five-year term of the subordinated notes due to lower taxes and financing charges relative to what the reset rate would have been on the Series E Preferred Share dividends.
The subordinated notes are being offered through a syndicate of underwriters, co-led by CIBC Capital Markets and RBC Capital Markets, under AltaGas’ short form base shelf prospectus dated March 31, 2023, as supplemented by a prospectus supplement dated November 7, 2023.
These subordinated/hybrid notes look a lot like LRCNs but have a step-up in interest rate, which would disqualify them from being Tier 1 Capital for banks and insurers.
ALA.PR.E was issued as a FixedReset, 5.00%+317, that commenced trading 2013-12-13 after being announced 2013-12-4. The 2018-11-28 notice of extension was reported on PrefBlog. The issue reset at 5.393% effective December 31, 2018. I recommended against conversion and there was no conversion. The company announced earlier in November that it was considering redemption. The issue is tracked by HIMIPref™ but is relegated to the Scraps – FixedReset Discount subindex due to credit concerns.
Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention!
Hi Guys,
Today was a good day for preferreds. My top 11 gainers were all preferreds. Any idea why?
Ferris
I guess the whole pref market did great today because the possibility of more companies taking up the same strategy ALA did? Thus more prefs could be redeemed?
I guess the whole pref market did great today because the possibility of more companies taking up the same strategy ALA did?
There was a long, interesting and informative discussion of the potential for such a pop in the comments to the post ALA.PR.E Redemption Considered
I’d thought the pop was maybe due to the reversal on the proposal to change tax treatment of preferred share dividends when held by financial institutions. https://www.osler.com/en/resources/regulations/2023/federal-budget-briefing-2023#subsection10
I’d thought the pop was maybe due to the reversal on the proposal to change tax treatment of preferred share dividends when held by financial institutions. https://www.osler.com/en/resources/regulations/2023/federal-budget-briefing-2023#subsection10
I’d thought the pop was maybe due to the reversal on the proposal to change tax treatment of preferred share dividends when held by financial institutions.
Maybe, but I haven’t seen anything to indicate a reversal. See two comments by peet on my original post.
A reversal would, I think, be bad policy. I am all in favour of the intention to stop the exploitation of this tax rule by writing swaps against a dividend-paying position, but against stopping the ‘flow-through’ of dividends received as part of a normal investment strategy.
> Maybe, but I haven’t seen anything to indicate a reversal
It was in the recently released “fall economic statement”. As per Osler:
Budget 2023 proposed to deny the dividend received deduction under the ITA in respect of dividends received by financial institutions on shares that are mark-to-market property. The Statement proposes an exception to this measure for dividends received on “taxable preferred shares.” This exception, along with the rest of the measure, would apply to dividends received on or after January 1, 2024.
https://www.osler.com/en/resources/regulations/2023/fall-economic-statement-2023#Section-3
Tweet where I learned about it: https://twitter.com/TSXDivStock/status/1727326149095969164?t=4ofuXwMppjTulam6RGsxfA&s=19
[…] Thanks to Assiduous Reader Jason for bringing this to my attention! […]