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AQN.PR.A’s reset rate was announced last week, but there was a problem: it looked like the company calculated the rate on the wrong day.

Following the lead of Assiduous Reader longtimelurker, I wrote the following eMail to Algonquin Power Investor Relations last week:

I understand from your press release at https://investors.algonquinpower.com/news-market-information/news/news-details/2023/Algonquin-Power–Utilities-Corp.-Announces-Dividend-Rates-on-Cumulative-Rate-Reset-Preferred-Shares-Series-A-and-Cumulative-Floating-Rate-Preferred-Shares-Series-B/default.aspx that the new dividend rate for AQN.PR.A has been set at 6.469%, based on a spread to five-year Canadas of 2.94% and, therefore, an implied yield of 3.529% for the Canadas.

According to the prospectus for the issue at [Link redacted because (i) it doesn’t work any more and (ii) links to SEDAR+ documents continue to violate the Terms of Use. Public documents are TOP SECRET!] :

i) “Subsequent Fixed Rate Period” means for the initial Subsequent Fixed Rate Period, the period from and including December 31, 2018 to, but excluding, December 31, 2023 and for each succeeding Subsequent Fixed Rate Period, the period commencing on the day immediately following the end of the immediately preceding Subsequent Fixed Rate Period to, but excluding, December 31 in the fifth year thereafter.

ii) “Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.

Since the first day of the “Subsequent Fixed Rate Period” just calculated is December 31, 2023, the “Fixed Rate Calculation Date” must be December 1, 2023, and

iii) “Annual Fixed Dividend Rate” means, for any Subsequent Fixed Rate Period, the annual rate (expressed as a percentage rounded to the nearest one hundred-thousandth of one percent (with 0.000005% being rounded up)) equal to the sum of the Government of Canada Yield on the applicable Fixed Rate Calculation Date plus 2.94%.

I find it surprising that your implied GOC rate of 3.529% is at such variance with another issuer, Capital Power Corporation, which in a press release December 1 (the day of calculation) announced a rate implying a GOC yield of 3.63%, while your press release was issued December 4.

Can you please confirm the “Fixed Rate Calculation Date” used for the calculation of the reset date for AQN.PR.A ?

Two follow-ups later, I received a reply:

You are correct; we have provided CDS with an amended notice for delivery to participants that updates the rate to 6.576% (an increase of 10.7 basis points), being the rate as of December 1, 2023.

So all’s well that ends well.

This entry was posted on Monday, December 11th, 2023 at 10:48 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.