PrefBlog

It has just been announced that:

Kinder Morgan, Inc. (NYSE: KMI – News) today announced it has entered into a definitive agreement to sell Terasen Inc. to Fortis Inc. (Toronto: FTS – News), a Canadian-based company with investments in regulated distribution utilities, for approximately C$3.7 billion including cash and assumed debt.

Fortis has the three captioned preferred issues rated Pfd-3(high) by DBRS and P-2(low) by S&P. No reaction to the news from the agencies as yet, but I’ll keep everyone posted!

Update & Bump : Standard and Poors have placed Fortis on Credit Watch Positive, due to a (virtually?) simultaneous sale of equity subscription receipts:

Terasen’s petroleum pipeline business will not be included in the acquisition. Fortis also announced that it has agreed to a bought deal that will result in at least C$1 billion in new equity being issued via subscription receipts. The equity will be used to finance the C$1.4 billion cash portion of the acquisition.
     “We believe the acquisition, if completed, will not deteriorate and could even improve Fortis’ credit quality,” said Standard & Poor’s credit analyst Kenton Freitag.

Update: DBRS has confirmed Fortis at Pfd-3(high):

From a financial risk perspective, DBRS would anticipate a modest decline in consolidated interest coverage metrics, given the existing levels of debt at the acquired entities; however, DBRS anticipates a modest improvement in non-consolidated credit metrics, given that the transaction is predominantly equity financed, coupled with the historical strength of TGI’s dividends. 

Overall, DBRS views the predominantly equity-financed acquisition of regulated assets as a good strategic fit for Fortis. Given the financial and business risk impacts described above, DBRS views the proposed transaction as credit neutral to slightly credit positive, as reflected in the confirmation of the ratings.

Update (for navigation purposes) : FTS.PR.F is a relatively recent issue.

Update and bump: Fortis has announced:

that it has closed its bought deal offering of Subscription Receipts (the “Offering”) underwritten by a syndicate of underwriters led by CIBC World Markets Inc., Scotia Capital Inc. and TD Securities Inc. (the “Underwriters”), resulting in gross proceeds to the Corporation of $1,151,150,000.

Fortis entered into an agreement, on February 26, 2007, with the Underwriters under which they agreed to purchase from Fortis and sell to the public 38,500,000 Subscription Receipts at $26.00 each for gross proceeds to the Corporation of $1,001,000,000. The Underwriters have exercised their over-allotment option and purchased an additional 5,775,000 Subscription Receipts at a purchase price of $26.00 each for gross proceeds from the over-allotment option to the Corporation of $150,150,000.

So … maybe we will be seeing an upgrade!

S&P has upgraded TD Bank … upgrading banks seems to have become something of a habit for ratings agencies lately!

The credit rating has been improved to “AA−/Stable/A−1+” from “A+/Positive/A−1”. Canadian Dollar preferred shares have been improved to “A” from “A-“. It’s not entirely clear to me whether the Preferred Share National Scale Ratings (P-1(low), currently) have been changed or not, but I suspect not.

More later.

Later, more: S&P have issued their press release:

(Standard & Poor’s) March 15, 2007–Standard & Poor’s Ratings Services today said it raised its ratings on The Toronto-Dominion Bank (TD Bank), including the long-term counterparty credit rating to ‘AA-‘ from ‘A+’. At the same time, Standard & Poor’s raised its counterparty credit rating on TD Banknorth, NA to ‘AA-‘ from ‘A’ and its counterparty credit rating on TD Banknorth Inc. to ‘AA-‘ from ‘A-‘. The proposed privatization of TD Banknorth and its strong strategically important status resulted in the lift in the rating notching. The equalization of the ratings on TD Banknorth, NA and TD Banknorth Inc. reflects the expectation that TD Bank would support the holding company, TD Banknorth Inc., as much as the operating bank. The outlook is stable.

It does not appear that the NSR Preferred Share Rating has changed.