PrefBlog

Capital Power Corporation has announced:

that it is considering an offering of hybrid subordinated debt securities (the “Notes”) in Canada under its short form base shelf prospectus dated June 10, 2022.

If a successful offering is priced and completed, the Company intends to allocate an amount equal to the net proceeds from the sale of the Notes to repay certain amounts drawn on the Company’s credit facilities (which include amounts drawn for the acquisition of a 50% interest in New Harquahala Generating Company, LLC, and a 100% interest in CXA La Paloma, LLC, and related expenses, development purposes and in respect of ongoing operations), to potentially redeem all of the Company’s outstanding Cumulative Minimum Rate Reset Preferred Shares, Series 11 (TSX: CPX.PR.K) (the “Preferred Shares”), and for general corporate purposes.

There is no certainty that Capital Power will ultimately complete the offering being considered, or as to the timing or terms on which such an offering might be completed. This press release does not constitute a notice of redemption of the Preferred Shares and there is no certainty that the Company will redeem the Preferred Shares.

A preliminary prospectus supplement to the Company’s short form base shelf prospectus dated June 10, 2022 in respect of the potential offering of Notes has been filed with the securities regulatory authorities in each of the provinces and territories of Canada. Any potential offering, if and when launched, would only be made pursuant to a final prospectus supplement to the short form base shelf prospectus of the Company dated June 10, 2022. The short form base shelf prospectus and preliminary prospectus supplement contain important detailed information about the Notes. Copies of these documents are available electronically on the System for Electronic Document Analysis and Retrieval + at www.sedarplus.ca. Investors should read the short form base shelf prospectus and preliminary prospectus supplement, or any final prospectus supplement, before making an investment decision.

CPX.PR.K was issued as a FixedReset 5.75%+415M575 issue that commenced trading 2019-5-16 after being announced 2019-5-7. It has been tracked by HIMIPref™ but relegated to the Scraps – FixedReset (Discount) subindex on credit concerns.

Whether or not a redemption comes to pass, I suggest that this is good news for the Canadian preferred share market. The fact that the company can even consider redeeming the preferred issue using proceeds of an issue on the hybrid bond market is at least a small sign that refinancing there is not restricted to investment-grade banks – even the junkier issuers can participate! Of course, the massive 415bp spread over GOC-5 – and the minimum reset guarantee – make this an easier decision than most, but at least it’s another data point to reinforce the indication provided by ALA in November, 2023 that such money was available.

Thanks to Assiduous Reader IrateAR for bringing this to my attention!

This entry was posted on Tuesday, May 14th, 2024 at 9:29 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.