8-K

ENBRIDGE INC 8-K Report (May 21, 2014)

Filed May 21, 2014For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. filed a Form 6-K on May 21, 2014, to report a Certificate of Amendment regarding the issuance of two new series of preference shares: Cumulative Redeemable Preference Shares, Series 11 and Series 12. Each series comprises 20,000,000 shares. These new preference shares are designed with specific dividend structures, redemption features, and conversion rights, primarily intended to facilitate potential future exchanges with each other and to provide fixed or floating dividend rates based on prevailing interest rates. The Series 11 Preference Shares are set to pay a fixed cumulative preferential cash dividend of $1.10 per share annually during an initial fixed rate period until March 1, 2020. Thereafter, the dividend rate will adjust every five years, linked to the Government of Canada five-year yield plus a spread of 2.64%. The Series 12 Preference Shares, in contrast, will have a floating quarterly dividend rate, which is the 3-month Government of Canada Treasury Bill rate plus a spread of 2.64%. Both series have a liquidation preference of $25.00 per share plus accrued dividends.

Key Highlights

  • 1Enbridge Inc. is issuing two new series of preference shares: Series 11 and Series 12, with 20,000,000 shares each.
  • 2Series 11 Preference Shares will have a fixed dividend of $1.10 per share annually until March 1, 2020, then convert to a floating rate based on Government of Canada yield.
  • 3Series 12 Preference Shares will have a floating dividend rate based on 3-month Government of Canada Treasury Bills plus a 2.64% spread.
  • 4Both Series 11 and Series 12 Preference Shares have a redemption price of $25.00 per share plus accrued dividends, with redemption allowed from March 1, 2020, for Series 11 and after March 1, 2020, for Series 12.
  • 5Holders of Series 11 Preference Shares have the right to convert them into Series 12 Preference Shares on specific dates starting March 1, 2020.
  • 6Holders of Series 12 Preference Shares have the right to convert them into Series 11 Preference Shares on specific dates starting March 1, 2025.
  • 7Both series rank equally with other preference shares and senior to common shares in terms of dividends and liquidation distributions.

Frequently Asked Questions

The primary purpose appears to be to offer investors different dividend structures (fixed vs. floating) and to provide flexibility within Enbridge's capital structure. The convertible nature of these shares between Series 11 and Series 12 also suggests a strategic aim to manage future financing costs and potentially align with market interest rate environments.

Series 11 Preference Shares will initially pay a fixed cumulative annual dividend of $1.10 per share until March 1, 2020. After this date, the dividend will adjust every five years based on the Government of Canada five-year yield plus 2.64%. Series 12 Preference Shares will pay a floating quarterly dividend rate, calculated as the 3-month Government of Canada Treasury Bill rate plus 2.64%.

Series 11 Preference Shares can be redeemed starting March 1, 2020, and every five years thereafter, at $25.00 per share plus accrued dividends. Series 12 Preference Shares can be redeemed on or after March 1, 2025, at $25.00 per share plus accrued dividends, or on other dates after March 1, 2020, at $25.50 per share plus accrued dividends.

Yes, holders of Series 11 Preference Shares can convert them into Series 12 Preference Shares starting March 1, 2020, and every five years thereafter. Holders of Series 12 Preference Shares can convert them into Series 11 Preference Shares starting March 1, 2025, and every five years thereafter. The conversion ratio is one-for-one.