TransCanada Corporation today announced that:
it has entered into an agreement with a syndicate of underwriters, led by BMO Capital Markets, RBC Capital Markets, and TD Securities Inc. under which they have agreed to purchase from TransCanada and sell to the public 39,470,000 Subscription Receipts.The purchase price of $38.00 per Subscription Receipt will result in gross proceeds of approximately $1.5 billion. The net proceeds of the offering will be used by TransCanada towards financing the proposed acquisition of the American Natural Resources Company and ANR Storage Company (collectively, ANR). TransCanada announced the acquisition of ANR together with the acquisition of an additional interest in Great Lakes Gas Transmission Limited Partnership for a total of approximately US$3.4 billion, including US$457 million of assumed debt, on December 22, 2006.
TransCanada has also granted the Underwriters an option to purchase up to an additional 5,920,500 Subscription Receipts at a price of $38.00 per Subscription Receipt at any time up to 30 days after closing of the offering.
On closing of the ANR acquisition, the Subscription Receipts will automatically be exchanged on a one-to-one basis for common shares of TransCanada without any further action on the part of the holder and without payment of additional consideration.
Readers will recall that DBRS placed these issues Under Review with Developing Implications in December:
DBRS estimates that, on a pro forma consolidated basis, the Company’s debt-to-capital ratio (62% on a DBRS-adjusted basis as at September 30, 2006) would rise to 69% on a 100% debt-financed basis.
However, given new common equity worth $1.5-billion against a total price on the acquisition of about CAD $4-billion, it would appear that the debt-to-capital ratio will be materially unchanged … but note that I have not done a credit analysis or read any fine print!
I’ll update this post when we see what DBRS has to say.
[…] DBRS today confirmed that TransCanada Pipeline’s preferred issues will remain rated Pfd-2(low), as foreshadowed when equity financing was announced. The rating confirmations reflect the realization of TCPL’s intention as stated at the time of the proposal to finance the acquisitions with substantial amount of equity to maintain its current credit standing. The recent subscription receipt issuance of C$1.5 billion will result in TCPL’s key credit metrics being maintained at similar levels as at December 31, 2006. DBRS estimates consolidated debt-to-capital ratio of approximately 63% to 64% and cash flow debt ratio of 0.17 times on a pro-forma basis (DBRS adjusted). These credit ratios are based on TC Pipe being consolidated into TCPL as in the prior year. The equity issuance removes the previous concern of potential weakening of TCPL’s financial profile during the interim debt financing of the acquisitions at closing. […]