New Issue: IAG 5.90% Straight

Industrial Alliance has announced a new issue.

Issue Name: Industrial Alliance and Financial Services Inc. Non-Cumulative Class A Preferred Shares, Series F

Issue Size: 4-million shares (=$100-million). No greenshoe.

Dividends: 5.90% p.a. (=$1.475), payable quarterly M/J/S/D. Initial dividend payable 2010-6-30 for $0.50110, assuming closing 2010-2-26.

Redemption: From 2015-3-31 to 2016-3-30 @ 26.00
From 2016-3-31 to 2017-3-30 @ 25.75
From 2017-3-31 to 2018-3-30 @ 25.50
From 2018-3-31 to 2019-3-30 @ 25.25
After 2019-3-30 @ 25.00

Comparators are:

IAG Straights 2010-2-17
Ticker Dividend Quote, 2/17 Bid Yield to Worst
IAG.PR.A 1.15 19.87-96 5.89%
IAG.PR.E 1.50 25.41-59 5.92%
Based on call 2019-1-30 at 25.00
IAG.PR.? 1.475 25.00
Issue Price
5.92%

The new issue looks expensive – I don’t think it will see much buying from those who understand the principles of the Straight Perpetual Implied Volatility Calculator introduced in the January 2010 PrefLetter!

Update: IAG has issued a rather lengthy press release:

Industrial Alliance Insurance and Financial Services Inc. (“Industrial Alliance” or the “Company”) has today entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and RBC Capital Markets under which the underwriters have agreed to buy, on a bought deal basis, 2,950,000 Common Shares (the “Common Shares”) from Industrial Alliance for sale to the public at a price of $34.00 per Common Share, representing aggregate gross proceeds of $100 million, and 4,000,000 Non-Cumulative Class A Preferred Shares Series F (the “Series F Preferred Shares”) from Industrial Alliance for sale to the public at a price of $25.00 per Series F Preferred Share, representing aggregate gross proceeds of $100 million. The Company has also granted the underwriters an option to buy up to an additional 15% of the Common Shares at the offering price to cover over-allotments, if any.

These share offerings are expected to close on or about February 26, 2010. Their purpose is to increase the Company’s financial flexibility, further improve its balance sheet and provide it with the necessary capital to finance potential acquisitions. The net proceeds of these issues will be added to Industrial Alliance’s capital.

Preferred Shares

The Series F Preferred Shares will yield 5.90% per annum, payable quarterly, as and when declared by the Board of Directors of the Company. The Series F Preferred Shares will not be redeemable prior to March 31, 2015. Subject to regulatory approval, on or after March 31, 2015, Industrial Alliance may, on no less than 30 or more than 60 days’ notice, redeem the Series F Preferred Shares in whole or in part, at the Company’s option, by the payment in cash of $26.00 per Series F Preferred Share if redeemed prior to March 31, 2016, at $25.75 per Series F Preferred Share if redeemed on or after March 31, 2016 but prior to March 31, 2017, at $25.50 per Series F Preferred Share if redeemed on or after March 31, 2017 but prior to March 31, 2018, at $25.25 per Series F Preferred Share if redeemed on or after March 31, 2018 but prior to March 31, 2019 and at $25.00 per Series F Preferred Share if redeemed on or after March 31, 2019, in each case together with all declared and unpaid dividends up to but excluding the date fixed for redemption.

Impact of the Share Issues

According to pro forma data as at December 31, 2009, an issue of $100 million of Common Shares and $100 million of Preferred Shares would increase Industrial Alliance’s solvency ratio from 208% to 226% (228% if the over-allotment is exercised).

These issues will also improve the leeway available to the Company to absorb potential stock market downturns. The Company thus estimates that the solvency ratio will remain above 175% as long as the S&P/TSX stays above about 6,900 points (compared to 7,700 points without these issues) and will remain above 150% as long as the S&P/TSX index stays above about 5,400 points (compared to 6,300 points without these issues).

Notwithstanding the Common Share and Preferred Share offerings, the Company is maintaining its 2010 guidance regarding earnings per share and return on common shareholders’ equity that it gave to the financial markets on February 12, 2010 when it published its results for the fourth quarter of 2009.

2 Responses to “New Issue: IAG 5.90% Straight”

  1. […] PrefBlog Canadian Preferred Shares – Data and Discussion « New Issue: IAG 5.90% Straight […]

  2. […] IAG has two Straight issues outstanding, IAG.PR.A and IAG.PR.E; and one FixedReset, IAG.PR.C. They are currently marketting a new issue of 5.90% Straights. […]

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