Brookfield Renewable Energy Partners L.P. is came out with a new rate reset preferred shares on November 25, 2015. Ticker symbol: (BEP.PR.G). This one is interested because it is the first I've seen with a minimum reset rate of 5.50% I'm definitely interested, but looking at how 5 year preferreds have been going in general; it's still a tough choice whether I deploy capital into capturing the juicy initial rate with a guaranteed minimum rate at reset.
There may be an element of timing at this present time; as expectations are currently on for the US Fed to start increasing interest rates. Maybe it is a fake out or maybe they will raise rates, but then by how much.
Taking a look.
*Current 5 year rate: 0.91% http://www.marketwatch.com/investing/Bond/TMBMKCA-05Y?countrycode=BX
*Current 90-day rate: 0.48% http://www.marketwatch.com/investing/Bond/TMBMBCA-03M?countrycode=BX
* Probably not so useful to look at rates at this point as we are 5 years out from the reset period. Also, as it is a new issue there will be some volatility in pricing.
Conversion/Redemption Date: January 31, 2021
Period: Quarterly
Series 7
Initial yield @ par $25: 5.50%
Reset Benchmark: 5 year Government of Canada Bond Yield+
Reset Rate: 4.47%
Minimum Reset yield: 5.50%
Series 8 (Conversion)
Initial yield @ par $25: 5.50%
Reset Benchmark: 90-day Canadian Treasury Bill Yield+
Reset Rate: 4.47%
Minimum Reset yield: N/A
Distribution:
Keep in mind this does not pay out a dividend, but will be paying a distribution combing various income types. Taxes will vary.
Prospectus, (S-10):
https://www.brookfieldrenewable.com/_Global/44/img/content/file/2015/Series%207%20Prospectus%20Supplement%20(2).pdf
https://www.brookfieldrenewable.com/content/2015/brookfield_renewable_to_issue_cdn125_million_of_p-43308.html
"HAMILTON, Bermuda, November 17, 2015 – Brookfield Renewable Energy Partners L.P. (TSX: BEP.UN; NYSE: BEP) (“Brookfield Renewable”) today announced that it has agreed to issue 5,000,000 Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 7 (the “Series 7 Preferred Units”) on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., CIBC, RBC Capital Markets and Scotiabank for distribution to the public. The Series 7 Preferred Units will be issued at a price of $25.00 per unit, for gross proceeds of $125,000,000.
Holders of the Series 7 Preferred Units will be entitled to receive a cumulative quarterly fixed distribution yielding 5.50% annually for the initial period ending January 31, 2021. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of (i) the 5-year Government of Canada bond yield plus 4.47%, and (ii) 5.50%. The Series 7 Preferred Units are redeemable on or after January 31, 2021.
Holders of the Series 7 Preferred Units will have the right, at their option, to reclassify their Series 7 Preferred Units into Cumulative Floating Rate Reset Class A Preferred Limited Partnership Units, Series 8 (“Series 8 Preferred Units”), subject to certain conditions, on January 31, 2021 and on January 31 every 5 years thereafter. Holders of Series 8 Preferred Units will be entitled to receive a cumulative quarterly floating distribution at a rate equal to the 90-day Canadian Treasury Bill yield plus 4.47%.
Brookfield Renewable has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 2,000,000 Series 7 Preferred Units which, if exercised, would increase the gross offering size to $175,000,000.
The Series 7 Preferred Units will be offered in all provinces and territories of Canada by way of a supplement to Brookfield Renewable’s existing Canadian short form base shelf prospectus. The Series 7 Preferred Units may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.
Brookfield Renewable intends to use the net proceeds of the issue of Series 7 Preferred Units to repay indebtedness and for general corporate purposes. The offering of Series 7 Preferred Units is expected to close on or about November 25, 2015."
