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AltaGas Ltd.(TSX:ALA) has revealed plans to offer US$900 million in 7.20 percent Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2054. The offering, which is anticipated to close around September 23, 2024, will see the Notes callable from October 15, 2034. To optimize financial management, AltaGas has arranged a cross-currency swap to convert the proceeds and interest costs into Canadian dollars, thereby reducing the effective annual interest rate over the initial decade of the Notes’ life.
The capital raised from this offering is designated to diminish the company's existing senior notes and bank debt. This move is expected to enhance AltaGas' credit metrics, benefiting from the 50 percent equity treatment of hybrid debt.
Notably, the Notes will not be registered under the U.S. Securities Act of 1933 or any other jurisdiction's securities laws and will be offered only to qualified institutional buyers or in offshore transactions per Regulation S. In Canada, the Notes are being offered without a prospectus under specific exemptions, and their transfer is subject to restrictions.
In addition to the Note offering, AltaGas has reported a significant shift in its preferred shares. A total of 10,495 of the 6,885,823 Cumulative Redeemable Five-Year Fixed Rate Reset Preferred Shares, Series G have been converted into Cumulative Floating Rate Preferred Shares, Series H. Conversely, 883,163 of 1,114,177 Series H Shares were converted back into Series G Shares by the deadline of September 13, 2024.
As a result of the conversions, fewer than 1,000,000 Series H Shares are expected to remain as of September 30, 2024. Consequently, the remaining Series H Shares will be automatically converted into Series G Shares at a one-to-one ratio. The Series H Shares will be de-listed from the Toronto Stock Exchange (TSX) following this conversion.
The final dividend on Series H Shares for the period from June 30, 2024, to September 29, 2024, is scheduled for September 27, 2024. Following the conversion, holders of Series G Shares will receive quarterly fixed cumulative preferential cash dividends, with an annual dividend rate of 6.017 percent for the period from September 30, 2024, to September 30, 2029. Series G Shares will remain listed on the TSX under the symbol ALA.PR.G.
