Enbridge Announces Important Updates on Series 11 Preferred Shares and Upcoming Conversion Rights
Enbridge Inc., a key player in the North American energy sector, recently informed investors that it does not plan to exercise its right to redeem the outstanding Cumulative Redeemable Preference Shares, Series 11 (commonly referred to as Series 11 Shares) on March 1, 2025. This announcement has significant implications for shareholders, as it paves the way for potential conversion options and alterations in dividend rates, vital aspects for investors to monitor closely.
The decision not to redeem the Series 11 Shares allows currentholders the opportunity to convert their shares into Cumulative Redeemable Preference Shares, Series 12 (Series 12 Shares) on a one-for-one basis on the designated date. It’s important for shareholders to be aware of the conditions associated with this conversion right. Specifically, if, after the conversion, the total number of Series 11 Shares falls below 1,000,000, all outstanding shares will be converted into Series 12 Shares automatically. Conversely, if the number of Series 12 Shares drops below 1,000,000 after conversion, then no further conversions will take place.
Currently, there are 20 million Series 11 Shares outstanding, a considerable number that indicates a robust interest from investors. For those who choose to retain their Series 11 Shares, it's essential to understand the financial implications that follow, particularly concerning the dividends used to incentivize holding these vested interests.
Looking into the dividend structures, holders of Series 11 Shares will continue to earn quarterly fixed cumulative preferential cash dividends, provided they are declared by Enbridge’s Board of Directors. For the five-year term commencing from March 1, 2025 to March 1, 2030, the annual dividend rate will be set at 5.477 percent. This figure comprises the five-year Government of Canada bond yield of 2.837 percent alongside an additional spread of 2.64 percent, consistent with the terms agreed upon for the Series 11 Shares.
On the flip side, for any Series 12 Shares issued during this conversion process, holders will be entitled to quarterly floating rate cumulative preferential cash dividends, adjusting the dividend rate every three months based on the annual rate on the most recent three-month Government of Canada treasury bills auction. This floating dividend, for the initial period from March 1, 2025, to June 1, 2025, will be set at 1.41151 percent, also factoring in the additional 2.64 percent relevant to the Series 12 Shares.
Beneficial holders interested in exercising their conversion rights must act quickly, as the conversion period runs from January 30, 2025, until 5:00 PM EST on February 14, 2025. Consequently, it is advisable for shareholders to contact their brokers or intermediaries at their earliest convenience to facilitate these transactions well before the deadline. Should they miss this cutoff like all notices submitted thereafter, they will not be valid, emphasizing a proactive approach.
This recent announcement from Enbridge serves as a vital reminder of the intricacies involved in managing preferred shares, especially regarding conversion rights and dividend rates. Shareholders must remain informed and attentive to any updates that could significantly affect their investment outcomes. Enbridge has continued to position itself as a major player within the energy landscape while navigating the complexities surrounding preferred shares, ensuring that its stakeholders are well-equipped to make informed financial decisions moving forward.
Conversion Rights and Shareholder Options
The decision not to redeem the Series 11 Shares allows currentholders the opportunity to convert their shares into Cumulative Redeemable Preference Shares, Series 12 (Series 12 Shares) on a one-for-one basis on the designated date. It’s important for shareholders to be aware of the conditions associated with this conversion right. Specifically, if, after the conversion, the total number of Series 11 Shares falls below 1,000,000, all outstanding shares will be converted into Series 12 Shares automatically. Conversely, if the number of Series 12 Shares drops below 1,000,000 after conversion, then no further conversions will take place.
Currently, there are 20 million Series 11 Shares outstanding, a considerable number that indicates a robust interest from investors. For those who choose to retain their Series 11 Shares, it's essential to understand the financial implications that follow, particularly concerning the dividends used to incentivize holding these vested interests.
Dividend Rates Explained
Looking into the dividend structures, holders of Series 11 Shares will continue to earn quarterly fixed cumulative preferential cash dividends, provided they are declared by Enbridge’s Board of Directors. For the five-year term commencing from March 1, 2025 to March 1, 2030, the annual dividend rate will be set at 5.477 percent. This figure comprises the five-year Government of Canada bond yield of 2.837 percent alongside an additional spread of 2.64 percent, consistent with the terms agreed upon for the Series 11 Shares.
On the flip side, for any Series 12 Shares issued during this conversion process, holders will be entitled to quarterly floating rate cumulative preferential cash dividends, adjusting the dividend rate every three months based on the annual rate on the most recent three-month Government of Canada treasury bills auction. This floating dividend, for the initial period from March 1, 2025, to June 1, 2025, will be set at 1.41151 percent, also factoring in the additional 2.64 percent relevant to the Series 12 Shares.
Important Dates and Next Steps
Beneficial holders interested in exercising their conversion rights must act quickly, as the conversion period runs from January 30, 2025, until 5:00 PM EST on February 14, 2025. Consequently, it is advisable for shareholders to contact their brokers or intermediaries at their earliest convenience to facilitate these transactions well before the deadline. Should they miss this cutoff like all notices submitted thereafter, they will not be valid, emphasizing a proactive approach.
Conclusion
This recent announcement from Enbridge serves as a vital reminder of the intricacies involved in managing preferred shares, especially regarding conversion rights and dividend rates. Shareholders must remain informed and attentive to any updates that could significantly affect their investment outcomes. Enbridge has continued to position itself as a major player within the energy landscape while navigating the complexities surrounding preferred shares, ensuring that its stakeholders are well-equipped to make informed financial decisions moving forward.
Topics Financial Services & Investing）
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