TC Energy provides results of Series 1 and Series 2 conversion elections

Rhea-AI Summary

TC Energy announced the results of its preferred shares conversion elections. 42,200 of its 14,577,184 Series 1 Shares will convert to Series 2 Shares, while 3,889,020 of its 7,422,816 Series 2 Shares will convert to Series 1 Shares on December 31, 2024. After conversion, TC Energy will have 18,424,004 Series 1 Shares and 3,575,996 Series 2 Shares outstanding.

The Series 1 Shares will pay a fixed quarterly dividend at an annualized rate of 4.939%, while Series 2 Shares will pay a floating rate quarterly dividend, initially set at 5.401% for the period from December 31, 2024, to March 31, 2025. Both share classes will maintain their TSX listings under TRP.PR.A and TRP.PR.F symbols.

Positive

• Fixed dividend rate of 4.939% established for Series 1 Shares
• Attractive floating rate dividend of 5.401% for Series 2 Shares in first quarter

Negative

• None.

Insights

Fixed Income Analyst

TC Energy's preferred share conversion results reveal strategic positioning by shareholders in response to interest rate expectations. The significant net movement of 3.85 million shares from Series 2 (floating rate) to Series 1 (fixed rate) at a 4.939% fixed dividend rate suggests investors are locking in yields, anticipating potential rate cuts in 2024-2025.

The new fixed rate of 4.939% for Series 1 shares compared to the initial 5.401% floating rate for Series 2 shares demonstrates a 46.2 basis point spread. This preference for fixed-rate securities aligns with market expectations of declining interest rates, as investors seek to secure current yield levels for the next five years.

Think of this like choosing between a fixed-rate mortgage and an adjustable-rate mortgage - more homeowners opt for fixed rates when they believe interest rates will fall. Similarly, preferred shareholders are showing a clear preference for locking in returns rather than riding the floating rate wave.

Financial Risk Analyst

The conversion outcome materially shifts TC Energy's preferred share structure, with Series 1 fixed-rate shares now representing 83.7 of the combined series (18.4 million shares) versus Series 2 floating-rate shares at 3.6 million. This recalibration reduces the company's exposure to interest rate volatility in its preferred share obligations, effectively decreasing cash flow uncertainty.

For retail investors, this corporate action is like watching a weather vane for interest rate sentiment - the strong preference for fixed-rate shares signals that sophisticated investors are betting on lower rates ahead. The locked-in dividend rate of 4.939% for five years provides predictable income streams, though holders forgo potential upside if rates remain elevated longer than expected.

CALGARY, Alberta, Dec. 23, 2024 (GLOBE NEWSWIRE) -- News Release – TC Energy Corporation (TSX:TRP) (NYSE:TRP) (TC Energy or the Company) today announced that 42,200 of its 14,577,184 fixed rate Cumulative Redeemable First Preferred Shares, Series 1 (Series 1 Shares) have been elected for conversion on Dec. 31, 2024, on a one-for-one basis, into floating rate Cumulative Redeemable First Preferred Shares, Series 2 (Series 2 Shares); and 3,889,020 of its 7,422,816 Series 2 Shares have been elected for conversion, on a one-for-one basis, into Series 1 Shares.

As a result of the conversions, TC Energy will have 18,424,004 Series 1 Shares and 3,575,996 Series 2 Shares issued and outstanding. The Series 1 Shares and Series 2 Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbols TRP.PR.A and TRP.PR.F, respectively.

The Series 1 Shares will pay on a quarterly basis for the five-year period beginning on Dec. 31, 2024, as and when declared by the Board of Directors of TC Energy, a fixed dividend at an annualized rate of 4.939 per cent.

The Series 2 Shares will pay a floating rate quarterly dividend for the five-year period beginning on Dec. 31, 2024, as and when declared by the Board of Directors of TC Energy. The dividend rate for the Series 2 Shares for the first quarterly floating rate period commencing Dec. 31, 2024 to but excluding Mar. 31, 2025 is 5.401 per cent and will be reset every quarter.

Holders of Series 1 Shares and Series 2 Shares will have the opportunity to convert their shares again on Dec. 31, 2029 and in every fifth year thereafter as long as the shares remain outstanding. For more information on the terms of, and risks associated with an investment in the Series 1 Shares and the Series 2 Shares, please see the prospectus supplement dated Sept. 22, 2009 which is available on sedarplus.ca or on our website.

About TC Energy
We’re a team of 6,500+ energy problem solvers connecting the world to the energy it needs. Our extensive network of natural gas infrastructure assets is one-of-a-kind. We seamlessly move, generate and store energy and deliver it to where it is needed most, to homes and businesses in North America and across the globe through LNG exports. Our natural gas assets are complemented by our strategic ownership and low-risk investments in power generation.

TC Energy’s common shares trade on the Toronto (TSX) and New York (NYSE) stock exchanges under the symbol TRP. To learn more, visit us at TCEnergy.com.

FORWARD-LOOKING INFORMATION
This release contains certain information that is forward-looking and is subject to important risks and uncertainties (such statements are usually accompanied by words such as "anticipate", "expect", "believe", "may", "will", "should", "estimate", "intend" or other similar words). Forward-looking statements in this document are intended to provide TC Energy security holders and potential investors with information regarding TC Energy and its subsidiaries, including management's assessment of TC Energy's and its subsidiaries' future plans and financial outlook. All forward-looking statements reflect TC Energy's beliefs and assumptions based on information available at the time the statements were made and as such are not guarantees of future performance. As actual results could vary significantly from the forward-looking information, you should not put undue reliance on forward-looking information and should not use future-oriented information or financial outlooks for anything other than their intended purpose. We do not update our forward-looking information due to new information or future events, unless we are required to by law. For additional information on the assumptions made, and the risks and uncertainties which could cause actual results to differ from the anticipated results, refer to the most recent Quarterly Report to Shareholders and Annual Report filed under TC Energy’s profile on SEDAR+ at www.sedarplus.ca and with the U.S. Securities and Exchange Commission at www.sec.gov.

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Media Inquiries:
Media Relations
media@tcenergy.com
403-920-7859 or 800-608-7859

Investor & Analyst Inquiries:
Gavin Wylie / Hunter Mau
investor_relations@tcenergy.com
403-920-7911 or 800-361-6522

PDF available: http://ml.globenewswire.com/Resource/Download/4311d849-2771-488f-9221-617500731acf

FAQ

What are the new dividend rates for TRP Series 1 and Series 2 preferred shares?

Series 1 shares will pay a fixed dividend rate of 4.939% annually, while Series 2 shares will pay a floating rate, initially set at 5.401% for the period from December 31, 2024, to March 31, 2025.

How many TRP preferred shares were converted in December 2024?

42,200 Series 1 shares converted to Series 2, and 3,889,020 Series 2 shares converted to Series 1 shares.

What is the total number of TRP preferred shares outstanding after the conversion?

After the conversion, TC Energy will have 18,424,004 Series 1 Shares and 3,575,996 Series 2 Shares outstanding.

When is the next conversion opportunity for TRP preferred shareholders?

The next conversion opportunity for both Series 1 and Series 2 shareholders will be on December 31, 2029, and every fifth year thereafter.