8-K

ENBRIDGE INC 8-K Report (Dec 16, 2016)

Filed December 16, 2016For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. filed a Form 6-K on December 16, 2016, to report a Certificate of Amendment related to the issuance of Preference Shares, Series 2016-A, also referred to as Conversion Preference Shares. This filing details the terms and conditions governing these new preference shares, which are designed to be convertible under specific "Automatic Conversion Event" scenarios, primarily related to financial distress or insolvency. The Conversion Preference Shares have a stated issue price of $1,000 and are entitled to cumulative preferential cash dividends at a rate tied to the interest rate of the 6.00% Fixed-to-Floating Subordinated Notes Series 2016-A due 2077. Key provisions outline the redemption rights, which are restricted until January 15, 2027, after which Enbridge may redeem the shares at $1,000 plus accrued dividends. The shares also have liquidation preferences and restrictions on paying dividends or making capital distributions on junior shares unless all preference dividends are current. The filing also addresses tax implications and the shares' operation within a book-based system, indicating they will primarily be held electronically through CDS.

Key Highlights

  • 1Enbridge Inc. announced the creation of Preference Shares, Series 2016-A (Conversion Preference Shares).
  • 2These shares have an issue price of $1,000 per share.
  • 3Dividends are cumulative, preferential, and tied to the rate of the 6.00% Fixed-to-Floating Subordinated Notes Series 2016-A.
  • 4Redemption of these shares is not permitted before January 15, 2027; thereafter, redemption is at $1,000 plus accrued dividends.
  • 5An 'Automatic Conversion Event' is defined, primarily relating to insolvency or bankruptcy proceedings, which would trigger conversion of Subordinate Notes into these Preference Shares.
  • 6The shares carry a liquidation preference of $1,000 per share plus accrued dividends.
  • 7Restrictions are in place to prevent dividends or capital distributions on junior shares if preference dividends are not fully paid.

Frequently Asked Questions

The Conversion Preference Shares (Preference Shares, Series 2016-A) were created through a Certificate of Amendment filed by Enbridge Inc. They are a new class of preferred stock with specific terms and conditions. Their creation is closely linked to the 6.00% Fixed-to-Floating Subordinated Notes Series 2016-A; under certain 'Automatic Conversion Events' (primarily related to financial distress or insolvency), the subordinate notes may automatically convert into these preference shares.

The dividend rate for the Conversion Preference Shares is referred to as the 'Perpetual Preference Share Rate,' which is the same as the interest rate that would have accrued on the Subordinate Notes had they not been converted. Dividends are cumulative and preferential. Payment dates are Semi-Annual (January 15 and July 15) until January 15, 2027, and then Quarterly (January 15, April 15, July 15, October 15) thereafter.

Enbridge cannot redeem the Conversion Preference Shares before January 15, 2027. On or after this date, the company may redeem all or any part of the outstanding shares at a redemption price of $1,000 per share, plus any accrued and unpaid dividends.

In the event of a Liquidation Distribution (liquidation, dissolution, or winding-up), holders of Conversion Preference Shares are entitled to receive $1,000 per share plus all accrued and unpaid dividends. This payment ranks senior to distributions made to holders of junior shares.