8-K

ENBRIDGE INC 8-K Report (May 18, 2012)

Filed May 18, 2012For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. filed a Form 6-K on May 18, 2012, to report a Certificate of Amendment to its articles concerning the issuance of two new series of preference shares: Series L and Series M. These new share series are designed as Cumulative Redeemable Preference Shares, each with a liquidation preference of US$25.00 per share. The Series L Preference Shares are initially set to pay a fixed cumulative preferential cash dividend of US$1.00 per share annually, payable quarterly. This fixed rate period extends until September 1, 2017, after which the dividend rate will be subject to adjustments based on U.S. Government Bond Yields plus a spread. The Series L shares are redeemable by Enbridge starting September 1, 2017, at US$25.00 per share, plus accrued dividends. Conversely, the Series M Preference Shares are structured with a floating dividend rate, tied to the T-Bill Rate plus a spread, also payable quarterly. These shares are redeemable by Enbridge starting September 1, 2022, with a redemption price of US$25.00 per share plus accrued dividends, though an additional premium may apply for redemptions between September 1, 2017, and September 1, 2022. Both series carry restrictions on Enbridge's ability to pay dividends on common shares or redeem junior securities if dividends on these preference shares are not paid in full. The filing also details conversion rights between Series L and Series M shares, tax implications, and provisions for book-entry systems.

Key Highlights

  • 1Enbridge Inc. is issuing two new series of preference shares: Cumulative Redeemable Preference Shares, Series L and Series M.
  • 2Both Series L and Series M preference shares have a liquidation preference of US$25.00 per share.
  • 3Series L Preference Shares initially offer a fixed annual dividend of US$1.00 per share, payable quarterly, with a fixed rate period until September 1, 2017.
  • 4Series M Preference Shares will pay a floating quarterly dividend rate based on the T-Bill Rate plus a spread.
  • 5Redemption of Series L shares by Enbridge can commence on September 1, 2017, at US$25.00 per share plus accrued dividends.
  • 6Redemption of Series M shares by Enbridge can commence on September 1, 2022, at US$25.00 per share plus accrued dividends (with potential premium if redeemed earlier post-2017).
  • 7Holders of Series L shares have the right to convert them into Series M shares starting September 1, 2017, and holders of Series M shares can convert into Series L shares starting September 1, 2022.

Frequently Asked Questions

This filing (a Form 6-K, actually) is to report a Certificate of Amendment to Enbridge Inc.'s articles of incorporation, formally establishing two new series of preference shares: Series L and Series M. This action signifies the creation and terms of these new share classes.

The main differences lie in their dividend structures and redemption/conversion timelines. Series L has an initial fixed dividend rate until September 1, 2017, after which it adjusts based on U.S. Government Bond Yields. Series M has a floating dividend rate tied to the T-Bill Rate. Series L shares can be redeemed starting September 1, 2017, while Series M shares can be redeemed starting September 1, 2022. Conversion rights between the two series also have different start dates.

In the event of liquidation, dissolution, or winding-up of Enbridge Inc., holders of both Series L and Series M Preference Shares are entitled to receive US$25.00 per share, plus any accrued and unpaid dividends, before any distribution is made to holders of junior shares (like common shares).

Yes, the terms of both Series L and Series M Preference Shares include restrictions. Enbridge cannot declare or pay dividends on its common shares or other junior shares, nor can it redeem or reduce capital for junior shares, unless all accrued and declared dividends on the Series L and Series M Preference Shares (and any other parity shares) have been paid in full.