Enbridge Provides Notice of Series P Preferred Shares Conversion Right and Announces Reset Dividend Rates
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Insights
The decision by Enbridge Inc. not to redeem its Series P Shares and the conditions attached to the conversion rights into Series Q Shares suggest a strategic move to manage its capital structure. The fixed cumulative preferential cash dividends for Series P Shares and the floating rate for Series Q Shares indicate a balance in Enbridge's approach to attracting different investor preferences. The fixed rate of 5.918 percent, tied to the five-year Government of Canada bond yield, provides a predictable return for income-focused investors, while the floating rate for Series Q Shares, adjusted quarterly, may appeal to those anticipating interest rate fluctuations.
From a financial perspective, the decision not to redeem these shares could imply that Enbridge is opting to maintain its current level of equity to avoid the potential costs associated with issuing new equity or debt. The conversion feature provides flexibility in Enbridge's capital financing and may act as a financial lever to optimize its cost of capital over time.
Enbridge's announcement regarding its preference shares is a reflection of broader market conditions and investor sentiment. The new annual dividend rate for Series P Shares is competitive, potentially making them an attractive investment vehicle in a low-interest-rate environment. Furthermore, the floating rate for Series Q Shares could be seen as a hedge against potential interest rate increases, which would benefit holders if rates rise.
Investor response to this news will likely depend on their outlook on interest rates and their investment strategy. Those with a long-term perspective may find the stability of the Series P Shares appealing, while more active traders might prefer the potential upside of the Series Q Shares with their floating dividend rate.
Legally, Enbridge's adherence to the terms set forth in the conditions of the Series P Shares demonstrates its commitment to contractual obligations and provides transparency to shareholders. The specific conditions regarding the minimum number of shares that must remain outstanding post-conversion ensures that Enbridge retains control over the process, which could prevent excessive dilution of shares or unwanted shifts in share class balances.
The timeframe provided for the conversion process and the requirement for beneficial holders to communicate with their brokers indicates a structured and orderly approach to the conversion, reducing potential legal complications and ensuring an equitable opportunity for all eligible shareholders to exercise their rights.
The foregoing conversion right is subject to the conditions that: (i) if Enbridge determines that there would be less than 1,000,000 Series P Shares outstanding after March 1, 2024, then all remaining Series P Shares will automatically be converted into Series Q Shares on a one-for-one basis on March 1, 2024; and (ii) alternatively, if Enbridge determines that there would be less than 1,000,000 Series Q Shares outstanding after March 1, 2024, no Series P Shares will be converted into Series Q Shares. There are currently 16,000,000 Series P Shares outstanding.
With respect to any Series P Shares that remain outstanding after March 1, 2024, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The new annual dividend rate applicable to the Series P Shares for the five-year period commencing on March 1, 2024 to, but excluding, March 1, 2029 will be 5.918 percent, being equal to the five-year Government of
With respect to any Series Q Shares that may be issued on March 1, 2024, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The dividend rate applicable to the Series Q Shares for the three-month floating rate period commencing on March 1, 2024 to, but excluding, June 1, 2024 will be 1.89279 percent, based on the annual rate on three month Government of
Beneficial holders of Series P Shares who wish to exercise their right of conversion during the conversion period, which runs from January 31, 2024 until 5:00 p.m. (EST) on February 15, 2024, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary time to complete the necessary steps. Any notices received after this deadline will not be valid.
Forward-Looking Statements
Forward-looking information, or forward-looking statements, have been included in this news release to provide information about Enbridge, including statements with respect to the conversion of all or part of the Series P Shares into Series Q Shares on March 1, 2024, the annual dividend rate that will apply to any outstanding Series P Shares on March 1, 2024, the quarterly dividend rate that will apply to any outstanding Series Q Shares on March 1, 2024, and the declaration of dividends by the Board of Directors of Enbridge. This information may not be appropriate for other purposes. Although Enbridge believes these forward-looking statements are reasonable based on the information available on the date such statements are made and on processes used to prepare the information, such statements are not guarantees of future events and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual events to differ materially from those expressed or implied by such statements. Material assumptions include assumptions about whether holders of Series P Shares will exercise their right to convert their Series P Shares into Series Q Shares.
Enbridge's forward-looking statements are subject to risks and uncertainties, including, but not limited to those risks and uncertainties discussed in this news release and in the Company's other filings with Canadian and
Enbridge's future course of action depends on management's assessment of all information available at the relevant time. Except to the extent required by applicable law, Enbridge assumes no obligation to publicly update or revise any forward-looking statements made in this news release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to Enbridge or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements.
At Enbridge, we safely connect millions of people to the energy they rely on every day, fueling quality of life through our North American natural gas, oil or renewable power networks and our growing European offshore wind portfolio. We're investing in modern energy delivery infrastructure to sustain access to secure, affordable energy and building on two decades of experience in renewable energy to advance new technologies including wind and solar power, hydrogen, renewable natural gas and carbon capture and storage. We're committed to reducing the carbon footprint of the energy we deliver, and to achieving net zero greenhouse gas emissions by 2050. Headquartered in Calgary, Alberta, Enbridge's common shares trade under the symbol ENB on the Toronto (TSX) and New York (NYSE) stock exchanges. To learn more, visit us at enbridge.com
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SOURCE Enbridge Inc.
FAQ
What is the new annual dividend rate for Series P Shares?
What type of dividends will holders of Series Q Shares receive?
When is the conversion period for Series P Shares?
What happens if Enbridge determines that there would be less than 1,000,000 Series P Shares outstanding after March 1, 2024?
How can beneficial holders of Series P Shares exercise their right of conversion?
