PrefBlog

AltaGas Ltd. has announced that it:

is providing updated and final pricing for the reset rates on its currently outstanding Cumulative Redeemable Five-Year Rate Reset Preferred Shares, Series G (the “Series G Shares”) (TSX: ALA.PR.G) and the Cumulative Redeemable Floating Rate Preferred Shares, Series H (the “Series H Shares”) (TSX: ALA.PR.H) as per the prospectus’ dated June 25, 2014. As disclosed in AltaGas’ August 30, 2024 News Release, the Company does not intend to exercise its right to redeem any or all of the currently outstanding Series G or Series H preferred shares on September 30, 2024 (the “Conversion Date”).

As a result, subject to certain conditions, the holders of the Series G Shares have the right to convert all or part of their Series G Shares on a one-for-one basis into Series H Shares on the Conversion Date. Holders who do not exercise their right to convert their Series G Shares into Series H Shares will, subject to automatic conversion in the circumstances described below, retain their Series G Shares. In addition, on the Conversion Date the holders of the Series H Shares have the right to convert all or part of their Series H Shares on a one-for-one basis into Series G Shares. Holders who do not exercise their right to convert their Series H Shares into Series G Shares will, subject to automatic conversion in the circumstances described below, retain their Series H Shares.

With respect to any Series G Shares that are outstanding after the Conversion Date, holders shall be entitled to receive, as and when declared by the Board of Directors of AltaGas, fixed cumulative preferential cash dividends, payable quarterly. The new annual dividend rate applicable to the Series G Shares for the five-year period commencing on and including September 30, 2024 to, but excluding September 30, 2029, will be 6.017 percent. The new dividend rate is equal to the five-year Government of Canada bond yield of 2.957 percent (determined as of today’s final pricing) plus 3.060 percent. This dividend rate is slightly below the estimated dividend rate that was disclosed on August 30, 2024, to reflect the modest decrease in the five-year Government of Canada bond yield.

With respect to any Series H Shares that are outstanding after the Conversion Date, holders shall be entitled to receive, as and when declared by the Board of Directors of AltaGas, quarterly floating rate cumulative preferential cash dividends. The dividend rate applicable to the Series H Shares for the three-month floating rate period commencing on and including September 30, 2024 to, but excluding December 31, 2024, will be 7.265 percent (the “Floating Quarterly Dividend Rate”). This dividend rate is equal to the annual rate of interest for the most recent auction of 90-day Government of Canada treasury bills of 4.205 percent plus 3.060 percent. This dividend rate is unchanged from the rate disclosed in the August 30, 2024 News Release. The Floating Quarterly Dividend Rate will be reset every quarter.

AltaGas reminds the beneficial holders of Series G Shares and Series H Shares who wish to exercise their right of conversion to do so during the updated conversion period from August 31, 2024 to September 13, 2024 until 5:00 pm Eastern Time. As outlined in AltaGas’ August 30, 2024 News Release, beneficial holders should instruct their broker or other nominee to exercise such right accordingly.

ALA.PR.G was issued as a FixedReset, 4.75%+306, that commenced trading 2014-7-3 after being announced 2014-6-23. Notice of extension was announced 2019-8-29. The issue reset at 4.242% effective 2019-9-30. I recommended against conversion. News that some were converted was reported on 2019-9-24; there was, in fact a 14% conversion. A very confused notice of extension was issued on 2024-8-30 and resulted in an exchange of eMails with Investor Relations. The issue is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns. In December, 2018, the issue was downgraded to Pfd-3(low) by DBRS and to P-3 by S&P. DBRS withdrew its rating in November 2021. S&P continues to rate the ALA preferreds at P-3.

ALA.PR.H is a FloatingReset, Bills+306, that arose through a 14% conversion from ALA.PR.G in September, 2019.

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

As noted by Assiduous Reader DR, the company has used a GOC-5 yield of 2.957%, a lower rate than the other issues that reset on 2024-9-3:

Accordingly, I have sent the following eMail to Investor Relations:

I see that you have issued a new press release at https://www.altagas.ca/newsroom/news-releases/altagas-provides-final-pricing-and-dividend-reset-rates-series-g-and-series that corrects your erroneous press release of 2024-8-30 and assume that you also withdraw the information you supplied by eMail on 2024-9-3 (appended below).

However, the revised rate of 6.017% that you have announced implies, as noted in the 2024-9-3 press release, an underlying “five-year Government of Canada bond yield of 2.957 percent (determined as of today’s final pricing)”
I am perplexed by the wording of this information: you refer to the “today’s final pricing”, which is ambiguous regarding the precise time of the measurement. This seems a little odd because the yield you quote, 2.957%, differs from that used by Brookfield Corporation [2.973%, see https://bn.brookfield.com/press-releases/brookfield-announces-reset-dividend-rate-its-series-40-preference-shares ] and Transalta Corporation [also 2.973%, see https://transalta.com/newsroom/transalta-announces-dividend-rates-on-series-g-preferred-shares-and-series-h-preferred-shares/ ].

As you know “Government of Canada Yield” is a defined term in the prospectus:
““Government of Canada Yield” on any date means the yield to maturity on such date (assuming semi-annual compounding) of a Canadian dollar denominated non-callable Government of Canada bond with a term to maturity of five years as quoted as of 10:00 a.m. (Toronto time) on such date and that appears on the Bloomberg Screen GCAN5YR Page on such date; provided that if such rate does not appear on the Bloomberg Screen GCAN5YR Page on such date, then the Government of Canada Yield shall mean the arithmetic average of the yields quoted to AltaGas by two registered Canadian investment dealers selected by AltaGas as being the annual yield to maturity on such date, compounded semi-annually, that a non-callable Government of Canada bond would carry if issued, in Canadian dollars, at 100% of its principal amount on such date with a term to maturity of five years.”

The time of 10:00 a.m. on the Calculation Date is standard for all issues of the same type as ALA.PR.G.

Please let me know precisely how the rate of 2.957% that you used was calculated; if you could send me a screenshot of the applicable GCAN5YR Bloomberg page, that would be appreciated.

Sincerely,

Update, 2024-9-4: I received the following reply:

thanks for your follow up.

The rate quoted was pulled from Bloomberg for the 10 am EST timeline that is standard as you point out.

Here is the screenshot:

and the embedded image was:

Well, I don’t see anything on that image that says “10am”, but regret that I am insufficiently familiar with Bloomberg to know all the various conventions underlying their screen.

Update, 2024-9-6: I have responded to ALA’s Investor Relations with the following eMail:

Thank you for this, but I confess that I am perplexed by your claim that this represents the 10am EST time that is specified in the ALA.PR.G prospectus.

The time stamp near the upper left-hand corner is for 8:18, which is presumably Calgary time and therefore 10:18am EST, significantly after the claimed time. It is of interest that the yield reported in the fourth row of the screenshot (2.958%) differs slightly from that reported in the table (2.957%); it is not clear to me why one figure should be preferred over the other.

I have been advised that the HP (historical price) function for that page is reported for the current day as a snapshot of the then-current time, eighteen minutes-odd after the required time. The prior reset for this issue was also determined in an unusual way (see attached file, ALA_Bloomberg_190903A.jpg) but at least had the saving grace of a 10:00:18 timestamp.

I attach three other screenshots displaying various views of the GCAN5YR page that were available and used by various companies five years ago; I am confident that these, or equivalent, views remain accessible today. You will note that while Bloomberg reports slightly different results for each of the methods chosen, it is clear in each case that the data has been reported as of 10:00am.

Can you provide more support for your claim that this screenshot provides an accurate quote for “the 10 am EST timeline that is standard as you point out”?

Sincerely,

The four screenshots I attached were all taken from the post FixedReset Prospectuses Are Imprecise!.

I have no intention of taking this any further and going to war with the company – Assiduous Readers will have to take the data I’ve reported and do what they will with it!

Update, 2024-9-10: I have received the following from ALA Investor Relations:

Apologies for the confusion around the timestamp for the rate. To further clarify, we connected with the Treasury team and confirmed details. Attached is the Bloomberg screenshot that shows the pricing breakdown which was used for the pref reset. We utilized pricing for 10am EST using the 15 min interval price, which equates to 2.957% that was quoted as the Government of Canada 5-year bond rate in the press release dated September 3, 2024.

Let us know if you have any follow up.

The attached PDF may be inspected by CLICKING HERE.

This entry was posted on Wednesday, September 4th, 2024 at 9:44 am 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.