Enbridge (NASDAQ:ENB) has priced the baby bonds which we wrote about earlier today at a fixed coupon of 6.375% for the 1st 5 years.
As we noted earlier the notes will trade with 3 different floating rate structures.
The coupon floats at 3 month Libor plus 3.593% starting in April 2023 until April 2028 at which point the coupon floats at 3 month Libor plus a spread of 3.843%. Beginning in April 2043 the coupon will float at 3 month Libor plus a spread of 4.593%.
The bonds become optionally redeemable in 2023.
The notes have a maturity date in 2078 and thus in spite of the floating rate structure there will be plenty of interest rate risk in the shares.
Enbridge is a very large and profitable Canadian midstream energy company and the baby bonds are rated investment grade by S&P, and just below investment grade by Moody’s.
Note that these baby bonds can be automatically converted to preferred stock if Enbridge were to become insolvent or to file bankruptcy. While the likelihood of this occurring is remote the provision is a negative to holders as it would move holders to a lower position in the capital stack.
We will be leaving these shares alone for now, but they may be right for someone.
Being baby bonds there will likely be no OTC Grey Market trading taking place.