Brookfield Infrastructure Partners Prices Preferred Issue

Brookfield Infrastructure Partners (BIP) has priced there new preferred unit offering.

The issue priced at 5.125%–about where the guesses were at yesterday.

The issue is investment grade–although low investment grade at BBB- from S&P.

This issue should trade immediately under OTC grey market ticker BIPPF. I plan to buy a taste of this issue for a long term holding.

The pricing term sheet can be read here.

20 thoughts on “Brookfield Infrastructure Partners Prices Preferred Issue”

  1. A quick warning for Fidelity traders. I picked up 1000 units @ $25.35 and incurred a $50 foreign settlement fee. It was my fault I didn’t catch the commission since I have the trading preview screen disabled. I spoke with a Fidelity rep who stated that whoever delivered the units to Fidelity (underwriter?) didn’t use the automated system and that the units were delivered manually, thus the fee. In other words, if you trade BIPPF on Fidelity, you’re gonna pay $100 bucks round trip commission. That puts my cost basis @ $25.45 so I think I’ll be fine…

    1. directed at tim or any body else, i’ve been trying to buy some of this for 2 days my broker just emailed said its trading in canada otc market and not availible? this was to eventually be on nyse and denominated in us dollars

      I’ve been watching since yesterday on some site OTC pinksheet sent my broker an email when price was 25.10, since his secretary said he’s tied up in meetings? what is the straight dope/ thanks mike

      1. I was able to buy BIPPF online no problem via Fidelity.
        It’s trading like any other new issue typically does in the OTC grey market

          1. Yes, unfortunately I did

            I think if we waited until it hit the NYSE the foreign fee would disappear. But i did not want to run the risk of the price running up before that happens. I may shoot them an email if that happens and ask that they reverse it

      2. Sadly, calling brokers about such issues rarely gets you anything. More often than not the info given is wrong. Apologies to any current or retired brokers but too many are just lazy.

        BIPPF is NOT a Canadian issue. The issuer is not Canadian, it’s not registered with the Canadian version of the SEC and won’t trade on a Canadian exchange. And it’s not denominated in C$.

        Your broker gets a zero in my book.

        Truth is the issuer is a Bermudian partnership, the issue is denominated in US$, is SEC registered, will trade on the NYSE under a standard ticker, and is currently trading on the US OTC. Only hitch is the OTC assigned it a “F” ticker. That “F” ticker is why some brokerages won’t trade it, and why Vanguard thinks they need a $50 foreign transaction fee.

        If you press the point with the broker, you will likely win out but it’s probably a Pyrrhic victory.

  2. Please forgive my ignorance, but why is this a better buy at 25+ with a 5.125% coupon than BPYPO trading at $21.68 with a 6.375% coupon?

    1. Malcolm – the two issues are both “Brookfield” but very different.

      BIP owns infrastructure – rails, water, transportation, data, etc. Pref are rated BBB-. BIP is probably one of the great long term plays in the marketplace. My preferred way to play BIP is with BIPC, the corporate equivalent of the partnership. No K-1, it is aimed at U.S. investors.

      BPY is a property REIT and been punished in the marketplace by the current sentiment against many REIT segments. The prefs are rated BB+ and the entity is on negative credit watch.

      The yield differentials are justified by the fundamentals but the 3 BPY issues are good spec buys in my opinion.

      1. Thanks for the clarification Bob-in-DE, I suspected something like that but overwhelmed at the moment and didn’t have time to do a comparison myself. Saved me some time. Thank you!

  3. One problem I am seeing with this new issue is the $50 foreign trade fee that Vanguards wants. It shouldn’t be but it is. This is an SEC registered issues, US$ denominated, and will trade on the NYSE on a standard ticker (no “F”). The OTC symbol should not have the “F” either.

    I could probably get it fixed but that would require an hour long call to Vanguard, which I’m not going to do.

    I see TDA will let me buy it without the fee (but with commission) but my qualified accounts are all at Vanguard.

  4. K-1s….. Americans are supposed to have an exemption on filing for IRA holdings if amount earned is under 1,000. And (again supposedly) if any taxes due it’s up to custodian to pay. In actuality they are MESSY. I know someone who got a tax bill from IRS for a hundred dollars due to a small kkr position in Ira. HE WAS EXEMPT. Me and his cpa told him so. He said he didn’t want to talk to them so he just paid it.

    The other risk is if there is a debt restriction due to bankruptcy. It’s possible to get a k1 far in excess of interest earned. There was a popular energy Co that did this not long ago. Sorry can’t remember the name but it’s failure was the precursor to chk et all going down

    1. If you prefer – to clarify a few points I add the following …

      The only tax at issue for a K-1 issuer held in a qualified account is UBTI. No other form of income is taxable in a qualified account.

      If UBTI within the qualified account exceeds $1,000, it will be taxed. The form is filed by the custodian and the custodian uses the investor’s money to pay the tax.

      The solution is simple: don’t buy issues that will generate large amounts of UBTI in a qualified account. PREFERREDs rarely if ever generate UBTI. Generally, the entire distribution will show up as “guaranteed payment” on line 4, and no UBTI, which is reported on line 20.

      1. Yeah thanks for clarifying exactly right it’s 1,000 exemption on UBTI always appreciate your insights….. . I made decision not to do any k1’s again. Just too much of a hassle to have people call me may 1st asking what this notification of a k1 all about when they’ve already filed the taxes!!

    1. Mike–this is a copy and paste from Bob-in-DE yesterday.

      In reply to Potter.
      RE: BIP preferred …..

      To those that may be interested, this represents a first for BIP – a US$ denominated preferred unit that will trade on the NYSE. No OTC symbol required. All the other BIP prefs are C$ issues trading on the TSX, some with OTC symbols.

      The issuer is a Bermudian partnership and as pointed out will issue a K-1. If K-1s scare you, you won’t be interested either. But if not, the best place to put this would be a qualified account (IRA, etc). Assuming the taxes are handled properly, you will have no withholding, and I can tell you there won’t be any UBTI. Brookfield entities are very tax savvy and understand the tax implications and structure their companies for best tax consequences for investors.

      You should read the prospectus on the subject of taxes in any event. The risk of US tax treatment is raised in every Brookfield prospectus.

      I own large amounts of another Brookfield Bermudian partnership in a Roth.

      1. I appreciate that very much Tim (and Bob) — I guess I didn’t know if Fidelity would automatically withhold something, but that’s prolly a better question for them!

        1. Hey Mike, we got 2 Mikes commenting on the same or at least similar topics hope Tim and Bob aren’t totally confused

    2. BIP is a Bermudian entity, and Bermuda has no income tax, so no withholding.

      Or shouldn’t be. When I first bought BRENF (also a Bermudian partnership) in a Roth it was initially withheld. A couple calls to Vanguard got it fixed.

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