Dundee proposes to issue 6% preference shares for 5% preferreds

By Susanna Moon

Chicago, Nov. 24 – Dundee Corp. said it is proposing a preferred share exchange for its series 4 first preference shares with a par value C$17.84 and dividend rate of 5%.

In exchange, holders would receive 0.7136 of a first preference share, series 5, with a par value C$25.00 with a dividend rate of 6%.

The exchange is being proposed under a statutory plan of arrangement under the Business Corporations Act, according to a company press release.

The company has called a meeting for preferred holders to be held in Toronto on Jan. 7.

To go through, the proposal requires at least two-thirds of the votes cast at the meeting.

The company’s board of directors has unanimously determined that the arrangement is fair to the preferredholders and is in the best interests of Dundee, and it recommends that the holders vote in favor of the arrangement resolution, the press release noted.

The company said it has received substantial support for the plan “based on confidential consultations with representatives of significant holders.”

The proposal is conditioned on approval by preferredholders and the Toronto Stock Exchange, as well as dissent rights not having been exercised for more than 10% of the issued and outstanding series 4 preferreds, the company said.

If the arrangement is completed, holders who vote for the proposal may receive consent payments of

• An aggregate of C$0.4014 per preferred, the early consent payment, or 2.25% of par for each series 4 preferred that represents votes for the resolution by Dec. 31, the early deadline, with the intermediary receiving C$0.1784 of the amount, or 1% of par, and the holder receiving C$0.2230 of that amount from its Intermediary, or 1.25% of par; and

• Consent payment of C$0.2676 per series 4 preferred, or 1.5% of par for each series 4 preferred for which votes are cast for the measure after the early deadline with the intermediary receiving C$0.0892 of the amount, representing 0.5% of par, and the holder receiving C$0.1784 of the amount from its intermediary, or 1% of par.

The proxy cut-off time is 9 a.m. ET on Jan. 5.

More details

The company said the proposal provides a number of benefits to the series 4 preferredholders, including a higher dividend rate of 6%, compared with the series 4 preferred dividend of 5%, as well as the adjusted par value of C$25.00 per preferred, aligned with standard market convention.

Also, the series 5 preferreds will be callable at make-whole premium until June 30, 2019.

The series 4 preferreds are redeemable at par plus accrued dividends to but excluding the redemption date.

For the company, by extending the retraction date of the series 4 preferreds through the issue of the series 5 securities to June 30, 2019 from June 30, 2016, that means saving C$107,040,000 for other purposes, the amount needed if the holders exercised the put option beginning June 30, 2016 at the par price of C$17.84 per preferred.

The proposal also provides other benefits such as financial flexibility for future opportunistic business developments and servicing the series 5 preferreds at an “attractive cost of capital,” the company said.

The rights, privileges, restrictions and conditions of the series 5 preferreds will be similar to those of the series 4 preferreds, except that:

• The cumulative dividend rate will be 6% per year, or an annual dividend of C$1.50 per series 5 preferred;

• The series 5 preferreds will be callable at C$25.75 per share before June 30, 2017, at C$25.50 per share from June 30, 2017 to June 30, 2018, at C$25.25 per share from June 30, 2018 to June 30, 2019 and at par of C$25.00 beginning June 30, 2019; and

• The put option date and forced conversion date is June 30, 2019, compared with June 30, 2016.

Series 4 preferredholders are expected to receive a final dividend of C$0.2230 per share, which is expected to be paid on Dec. 31, with a record date of Dec. 17. After that, if the arrangement is completed, holders of series 5 preferreds will receive a quarterly dividend of C$0.3750 per preferred.

GMP Securities LP is the financial adviser and dealer manager. Shorecrest Group Ltd. is the proxy adviser and paying agent.

Dundee is a Toronto-based independent holding company. Through its operating subsidiaries, the company is engaged in diverse business activities in the areas of investment advisory, corporate finance, energy, resources, agriculture, real estate and infrastructure.

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