TC Energy Corporation has announced:
that it does not intend to exercise its right to redeem its Cumulative Redeemable First Preferred Shares, Series 1 (Series 1 Shares) and Cumulative Redeemable First Preferred Shares, Series 2 (Series 2 Shares) on Dec. 31, 2024. As a result, subject to certain conditions:
(a) the holders of Series 1 Shares have the right to choose one of the following options with regard to their shares:
1. to retain any or all of their Series 1 Shares and continue to receive a fixed rate quarterly dividend; or
2. to convert, on a one-for-one basis, any or all of their Series 1 Shares into Series 2 Shares and receive a floating rate quarterly dividend, and
(b) the holders of Series 2 Shares have the right to choose one of the following options with regard to their shares:
1. to retain any or all of their Series 2 Shares and continue to receive a floating rate quarterly dividend; or
2. to convert, on a one-for-one basis, any or all of their Series 2 Shares into Series 1 Shares and receive a fixed rate quarterly dividend.
Should a holder of Series 1 Shares choose to retain their shares, such shareholders will receive the new annual fixed dividend rate applicable to Series 1 Shares of 4.939 per cent for the five-year period commencing Dec. 31, 2024 to, but excluding, Dec. 31, 2029. Should a holder of Series 1 Shares choose to convert their shares to Series 2 Shares, holders of Series 2 Shares will receive the floating quarterly dividend rate applicable to the Series 2 Shares of 5.401 per cent for the three-month period commencing Dec. 31, 2024 to, but excluding, Mar. 31, 2025. The floating dividend rate will be reset every quarter.
Should a holder of Series 2 Shares choose to retain their shares, such shareholders will receive the floating quarterly dividend rate applicable to Series 2 Shares of 5.401 per cent for the three-month period commencing Dec. 31, 2024 to, but excluding, Mar. 31, 2025. The floating dividend rate will be reset every quarter. Should a holder of Series 2 Shares choose to convert their shares to Series 1 Shares, holders of Series 1 Shares will receive the new fixed quarterly dividend rate applicable to the Series 1 Shares of 4.939 per cent for the five-year period commencing Dec. 31, 2024 to, but excluding, Dec. 31, 2029.
Beneficial owners of Series 1 Shares and Series 2 Shares who want to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is 5 p.m. (EST) on Dec. 16, 2024. Any notices received after this deadline will not be valid. As such, it is recommended that this be done well in advance of the deadline in order to provide the broker or other nominee with time to complete the necessary steps.
Beneficial owners of Series 1 or Series 2 Shares who do not provide notice or communicate with their broker or other nominee by the deadline will retain their respective Series 1 Shares or Series 2 Shares, as applicable, and receive the new dividend rate applicable to such shares, subject to the conditions stated below.
The foregoing conversions are subject to the conditions that: (i) if TC Energy determines that there would be less than one million Series 1 Shares outstanding after Dec. 31, 2024, then all remaining Series 1 Shares will automatically be converted into Series 2 Shares on a one-for-one basis on Dec. 31, 2024, and (ii) if TC Energy determines that there would be less than one million Series 2 Shares outstanding after Dec. 31, 2024, then all of the remaining outstanding Series 2 Shares will automatically be converted into Series 1 Shares on a one-for-one basis on Dec. 31, 2024. In either case, TC Energy will issue a news release to that effect no later than Dec. 23, 2024.
Holders of Series 1 Shares and Series 2 Shares will have the opportunity to convert their shares again on Dec. 31, 2029 and in every fifth year thereafter as long as the shares remain outstanding. For more information on the terms of, and risks associated with an investment in the Series 1 Shares and the Series 2 Shares, please see the prospectus supplement dated Sept. 22, 2009 which is available on sedarplus.ca or on our website.
About TC Energy
We’re a team of 6,500+ energy problem solvers connecting the world to the energy it needs. Our extensive network of natural gas infrastructure assets is one-of-a-kind. We seamlessly move, generate and store energy and deliver it to where it is needed most, to homes and businesses in North America and across the globe through LNG exports. Our natural gas assets are complemented by our strategic ownership and low-risk investments in power generation.TC Energy’s common shares trade on the Toronto (TSX) and New York (NYSE) stock exchanges under the symbol TRP. To learn more, visit us at TCEnergy.com.
TRP.PR.A commenced trading 2009-9-30 after being announced 2009-9-22. It commenced life as a FixedReset, 4.60%+192, that reset to 3.266% effective 2014-12-31. Assiduous Readers may recall that I have blamed the 2014 reset of TRP.PR.A for what we might now call ‘the first half’ of the current bear market. I recommended conversion to TRP.PR.F in 2014 and there was a conversion rate of about 62%. The company announced the extension to 2024 on 2019-11-21. TRP.PR.A reset at 3.479% effective 2019-12-31. I recommended holding, or converting to, TRP.PR.A and there was a 23% net conversion to that issue.
TRP.PR.F commenced trading 2014-12-31 after a partial conversion from TRP.PR.A.
So the magic number is 3.019%
Any comments/predictions is 3 months rate will average above this number for the next 5 years?
Any holders of these issues?
What are your conversion plans?
So the magic number is 3.019%
Any comments/predictions is 3 months rate will average above this number for the next 5 years?
I have no idea and I claim that anybody who does claim to have a good idea is a charlatan. Financial markets form a chaotic system and trying to make predictions detailed enough to be useful over the long term is like trying to predict the weather.
I will suggest there are two rational methods to choose one over the other:
(i) You may have personal financial circumstances that make one type of rate better than the other kind of rate for achieving your goals given a wide range of potential scenarios of the future; or
(ii) You have good reason to believe that in the very short term, one issue will trade higher than the other; you can then ensure that you hold that issue and treat it as a normal, tradeable portfolio security after the conversion.
For some details regarding how to assess method (ii), I suggest you look at the post IFC.PR.A, BAM.PF.J, BAM.PR.Z, BPO.PR.I : Convert or Hold?, looking at the paragraph commencing “The most logical way to analyze …”. Links to an article I wrote a while ago and to a calculator (which you will need to update before use) are included.
Not sure what I’m doing on this one.
– I think TRP.PR.A reset at a 5-year of 3.019 and it’s now 2.91 so that’s a small point for A. You get to see what happens for another 10 days or so before making a decision so you may as well use it.
– I see resets currently trading expensive relative to their floaters. The only ones where the floater is trading at a premium to their cashflows have limited shares outstanding (ENB.PR.G, FN.PR.B, ALA.PR.B etc). There’s a lot of TRP.PR.F out there so holding A and trying to switch to F would be my suggestion for approach (ii).
– The reset tends to be more liquid also.
– TRP.PR.F is potentially a TXPR index addition for January though so if you’re into that sort of thing you could choose F and hope to sell before/during the rebalance demand.
i predict with 100% certainty, that the 5 year canada bond yield will be lower today than yesterday. my prediction is only good until i click the submit button. … lol
i own some trp.a. i’m keeping it. bought it lower, so, don’t really care. it’s a great dividend. so im’ happy.
So the magic number is 3.019%
Pardon my ignorance, but what does it mean? Does it refer to an issue spread or GoC 5 year rate?
Thanks
skeptical. 4.939 – 1.92 = 3.019
trp is using 3.019 as the 5 year rate for rest.
Thanks Nestor.
Lots of investors converted from the floater (TRP.PR.F) to the fixed rate reset (TRP.PR.A):
https://www.tcenergy.com/announcements/2024/2024-12-23-tc-energy-provides-results-of-series-1-and-series-2-conversion-elections/
[…] holding, or converting to, TRP.PR.A and there was a 23% net conversion to that issue. TRP.PR.A reset to 4.939% in […]
I think this really puts the TRP.PR.B’s in play. With the deep discount to par, the ultimate reset will be 1.75X the change in GOC5. If the GOC5 doesn’t change this would imply a 7.6% reset so I think the market is implying a lower GOC5. Since the US 5 yr. is already 4.47 and rising, colour me skeptical. I am buying the B’s. With lower GOC5 already priced in, I see little downside and potential large upside.
Any credit concerns with this one?. It was downgraded by DBRS last year.
https://dbrs.morningstar.com/research/417662/dbrs-morningstar-downgrades-ratings-on-transcanada-pipelines-limited-nova-gas-transmission-ltd-and-trans-quebec-maritimes-pipeline-inc-to-bbb-high-and-tc-energy-corporation-to-pfd-3-high
DrT…
5 year Canada’s are 140 bpts less than US.
10 year Canada’s are 131 bpts less …
historically, this is the widest spread i’ve got on record. at least for the last 32 years. and i would imagine, probably longer than that.
personally, i don’t think this makes sense. the bank of Canada may soon come to a realization that it’s made another mistake.
either the US is about to go into a severe recession and the FED has to lower rates by 200-300 bpts like soon…,
or Canadian rates have to rise substantially
or the loonie continues to tank to 60 cents, or lower.
(or a combination of these last two)
historically, i would expect Canadian rates to be higher than US rates.
that hasn’t been the case always… so, i would say, with the US 5 year at 4.46% today … Canadian 5 year rates should be 4.50-5.50%
otherwise, loonie keeps dropping..
Dr T, why would you say that there is little downside? There is ALWAYS potential downside. TRP.PR.B was trading around $10 early last November when the 5yr GOC was yielding about 4%. Using the 4% GOC5yr at a $10 pricing implied a 13%+ yield upon reset. The FR-5yr spreads back then were huge. Who is to say that will not happen again? If we see a big sell-off in stock markets, it will be risk-off in all markets, incl prefs.
niagara, let’s say the economy tanks and the GOC5 goes to 2.5%. Then in 5 months the rate resets to 6.63% at the current price. That looks pretty attractive in a recession. I think there’s too much debt and inflation to worry about a lower rate than that. Look what’s happening to long US rates. I’ve become bipolar with my rate resets. I’m buying recently reset ones to lock in a good rate for 5 years and I’m buying ones like this with near term resets for protection from higher rates.
Nestor
You are right, the spread between the rates in Canada and the US is much higher than it has been in decades.
However, one of the key differences is the real estate market. You can lock in your mortgage for 30 years in the US so many home owners do not care about rates whereas in Canada, every 5 years at the latest you get a new rate so if rates jump, it is much more painful for the households here and therefore, for the economy.
Yomgui, i agree there are differences.
I also don’t think the job of the central bank is to target or protect real estate investors. If they had been doing their job years ago, we wouldn’t be in this mess.
DrT says:
December 29, 2024 at 12:03 pm
I think this really puts the TRP.PR.B’s in play.
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well done DrT…
anything resetting in the next 3-12 months has done very well last few weeks. especially trp.b and trp.c