8-K

ENBRIDGE INC 8-K Report (Jul 13, 2017)

Filed July 13, 2017For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

This Form 6-K filing from Enbridge Inc. (ENB) on July 13, 2017, announces the creation of a new class of shares: Preference Shares, Series 2017-A, also referred to as "Conversion Preference Shares." These shares are established through Articles of Amendment to the company's charter. Notably, these Conversion Preference Shares are designed to be issued upon the automatic conversion of Enbridge's 5.50% Fixed-to-Floating Rate Subordinated Notes Series 2017-A due 2077 under specific "Automatic Conversion Events," primarily related to bankruptcy or insolvency proceedings. The shares have an issue price of $1,000 and carry cumulative preferential cash dividends at a rate tied to the interest rate of the subordinated notes. The filing details the rights and restrictions associated with these shares, including dividend payments, purchase for cancellation, redemption provisions (not before July 15, 2027), liquidation preferences, and restrictions on paying dividends to common shareholders if preference dividends are not met. For investors, the key takeaway is the structural mechanism for converting subordinated debt into equity under adverse financial conditions. While the shares offer a fixed dividend rate tied to the note's interest, the primary trigger for their issuance is a distressed financial situation. The shares rank senior to common shares in terms of dividends and liquidation but are subject to the company's ability to pay, with specific restrictions in place to protect preference shareholders. The shares are issued under the Book-Based System (CDS) and are primarily held in global certificate form, indicating a focus on institutional investors.

Key Highlights

  • 1Enbridge Inc. filed a Form 6-K on July 13, 2017, reporting the creation of new "Preference Shares, Series 2017-A" (Conversion Preference Shares).
  • 2These Conversion Preference Shares are designed to be issued upon the automatic conversion of Enbridge's 5.50% Fixed-to-Floating Rate Subordinated Notes Series 2017-A due 2077 under specific circumstances (Automatic Conversion Events).
  • 3Automatic Conversion Events are primarily triggered by events of bankruptcy, insolvency, or proceedings for winding-up or reorganization.
  • 4The Conversion Preference Shares have an issue price of $1,000 and carry cumulative preferential cash dividends at a rate equivalent to the subordinated notes' interest rate.
  • 5Redemption of these shares is not permitted before July 15, 2027. After this date, Enbridge may redeem them at $1,000 per share plus accrued dividends.
  • 6In the event of liquidation, dissolution, or winding-up, holders of Conversion Preference Shares are entitled to receive $1,000 per share plus accrued and unpaid dividends before any distribution to junior shareholders.
  • 7The shares are primarily held through the Book-Based System (CDS) via a global certificate registered in the name of "CDS & Co.", indicating electronic book-entry ownership.

Frequently Asked Questions

The Conversion Preference Shares will be issued primarily upon the occurrence of 'Automatic Conversion Events.' These events are typically related to bankruptcy, insolvency, or proceedings for the winding-up, dissolution, or reorganization of Enbridge Inc., as defined under Canadian insolvency legislation.

Holders are entitled to cumulative preferential cash dividends, if declared by the board, at a rate equivalent to the interest rate of the 5.50% Fixed-to-Floating Rate Subordinated Notes Series 2017-A. These dividends are payable semi-annually or quarterly, depending on the period, and are preferential to dividends on common shares.

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

In the event of liquidation, dissolution, or winding-up, the holders of Conversion Preference Shares are entitled to receive $1,000 per share plus all accrued and unpaid dividends before any assets are distributed to holders of junior shares (such as common shares). They rank senior to junior shares but may participate rateably with other preference shares on parity in distributions.