Pembina Pipeline Corporation Provides Notice of Series 3 Preferred Share Conversion Right and Announces Reset Dividend Rates
- Pembina Pipeline Corporation has decided not to redeem its outstanding Series 3 Shares on March 1, 2024.
- Holders of Series 3 Shares have the option to convert them into Series 4 Shares on a one-for-one basis on March 1, 2024.
- The annual dividend rates for Series 3 and Series 4 Shares have been determined.
- Beneficial holders of Series 3 Shares have until February 15, 2024, to exercise their right of conversion.
- None.
Insights
The decision by Pembina Pipeline Corporation to not redeem its Series 3 Shares could be indicative of the company's capital management strategy and liquidity position. By allowing the Series 3 Shares to remain outstanding, Pembina may be signaling confidence in its ability to meet dividend obligations without needing to reduce its outstanding preferred shares. The fixed cumulative preferential cash dividends for the Series 3 Shares, set at 6.019 percent, are competitive when compared to the five-year Government of Canada bond yield plus 2.60 percent. This could attract income-focused investors seeking stable dividend payouts.
However, the floating rate for the Series 4 Shares, starting at 7.631 percent, suggests a higher risk premium and could reflect market expectations of rising interest rates. Investors might interpret this as a potential for increased cost of capital for Pembina, which could impact its financial flexibility. The conversion option provides investors with a choice to adapt to changing interest rate environments, which could affect the demand for Pembina's preferred shares in the secondary market.
The announcement by Pembina may have implications for investor sentiment and the company's stock market performance. Preferred shares are often considered a hybrid between debt and equity, offering features like predictable income and priority over common shares in the event of liquidation. The terms set forth for the Series 3 and Series 4 Shares, including the conversion rights and dividend rates, could influence the attractiveness of these securities to both retail and institutional investors.
Market dynamics, such as the prevailing interest rate environment and investor appetite for fixed-income securities, will play a significant role in determining the extent to which the Series 3 Shares are converted into Series 4 Shares. The conversion mechanism provides flexibility for shareholders but also introduces an element of uncertainty regarding the future composition of Pembina's capital structure. Monitoring the conversion rate could provide insights into market perception of Pembina's financial health and the broader economic context.
The terms and conditions governing the Series 3 and Series 4 Shares, as outlined in the prospectus supplement, are legally binding and ensure clarity for investors regarding their rights and the company's obligations. The automatic conversion clause, triggered if the outstanding shares fall below 1,000,000 post-conversion, is a legal mechanism that can influence the company's capital structure and requires careful consideration by shareholders.
Furthermore, the stipulated deadlines and procedural requirements for conversion emphasize the importance of timely action by shareholders and intermediaries. The legal framework surrounding these securities ensures that investors are well-informed of their options and the potential implications of their investment decisions, which is critical for maintaining market integrity and investor trust.
As a result of the decision not to redeem the Series 3 Shares, and subject to certain terms of the Series 3 Shares, the holders of the Series 3 Shares will have the right to elect to convert all or part of their Series 3 Shares on a one-for-one basis into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 4 of Pembina ("Series 4 Shares") on March 1, 2024 (the "Conversion Date"). Holders who do not exercise their right to convert their Series 3 Shares into Series 4 Shares will retain their Series 3 Shares.
As provided in the terms of the Series 3 Shares: (i) if Pembina determines that there would remain outstanding immediately following the conversion less than 1,000,000 Series 3 Shares, then all remaining Series 3 Shares will be automatically converted into Series 4 Shares on a one-for-one basis effective as of the Conversion Date; or (ii) if Pembina determines that there would be less than 1,000,000 Series 4 Shares outstanding immediately following the conversion, no Series 3 Shares will be converted into Series 4 Shares on the Conversion Date. There are currently 6,000,000 Series 3 Shares outstanding.
With respect to any Series 3 Shares that remain outstanding after the Conversion Date, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate for the Series 3 Shares for the five-year period from and including March 1, 2024, to, but excluding, March 1, 2029, will be 6.019 percent, being equal to the five-year Government of
With respect to any Series 4 Shares that may be issued on the Conversion Date, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate applicable to the Series 4 Shares for the three-month floating rate period from and including March 1, 2024, to, but excluding, June 1, 2024, will be 7.631 percent, being equal to the annual rate of interest for the most recent auction of 90-day Government of
Beneficial holders of Series 3 Shares who wish to exercise their right of conversion during the conversion period, which runs from January 31, 2024, until 3:00 pm (MT) / 5:00 pm (ET) 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 with the time to complete the necessary steps. Any notices received after this deadline will not be valid.
As previously announced, the dividend payable on March 1, 2024, to holders of the Series 3 Shares of record on February 1, 2024, will be
About Pembina
Pembina Pipeline Corporation is a leading energy transportation and midstream service provider that has served
Purpose of Pembina: We deliver extraordinary energy solutions so the world can thrive.
Pembina is structured into three Divisions: Pipelines Division, Facilities Division and Marketing & New Ventures Division.
Pembina's common shares trade on the
Forward-Looking Information and Statements
This news release contains certain forward-looking information and statements (collectively, "forward-looking statements"), including forward-looking statements within the meaning of the "safe harbor" provisions of applicable securities legislation, that are based on Pembina's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In some cases, forward-looking statements can be identified by terminology such as "continue", "anticipate", "schedule", "will", "expects", "estimate", "potential", "planned", "future", "outlook", "strategy", "protect", "trend", "commit", "maintain", "focus", "ongoing", "believe" and similar expressions suggesting future events or future performance.
In particular, this news release contains forward-looking statements relating to, without limitation, the conversion rights, future dividend rates and payment terms for the Series 3 Shares and the Series 4 Shares. The forward-looking statements are based on certain assumptions that Pembina has made in respect thereof as at the date of this news release regarding, among other things: the success of Pembina's operations and growth projects; prevailing commodity prices, margins, volumes and exchange rates; that Pembina's future results of operations will be consistent with past performance and management expectations in relation thereto; the availability of capital to fund future capital requirements relating to existing assets and projects; future operating costs; that all required regulatory and environmental approvals can be obtained on the necessary terms in a timely manner; prevailing regulatory, tax and environmental laws and regulations; maintenance of operating margins; and the availability of coverage under Pembina’s insurance policies (including in respect of Pembina’s business interruption insurance policy).
Although Pembina believes the expectations and material factors and assumptions reflected in these forward-looking statements are reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. These forward-looking statements are not guarantees of future performance and are subject to a number of known and unknown risks and uncertainties including, but not limited to: the regulatory environment and decisions; Indigenous and landowner consultation requirements; the impact of competitive entities and pricing; reliance on third parties to successfully operate and maintain certain assets; the strength and operations of the oil and natural gas production industry and related commodity prices; non-performance or default by counterparties to agreements which Pembina or one or more of its affiliates has entered into in respect of its business; actions by governmental or regulatory authorities; the ability of Pembina to acquire or develop the necessary infrastructure in respect of future development projects; fluctuations in operating results; adverse general economic and market conditions in
This list of risk factors should not be construed as exhaustive. Readers are cautioned that events or circumstances could cause actual results to differ materially from those predicted, forecasted or projected. The forward-looking statements contained in this news release speak only as of the date hereof. Pembina does not undertake any obligation to publicly update or revise any forward-looking statements or information contained herein, except as required by applicable laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
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For further information:
Investor Relations
(403) 231-3156
1-855-880-7404
e-mail: investor-relations@pembina.com
www.pembina.com
Source: Pembina Pipeline Corporation
FAQ
What is the decision announced by Pembina Pipeline Corporation regarding its Series 3 Shares?
What are the options available to holders of Series 3 Shares?
What is the deadline for beneficial holders of Series 3 Shares to exercise their right of conversion?
What is the annual dividend rate for the Series 3 Shares?
What is the annual dividend rate for the Series 4 Shares?
