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Preferred shares basking in the spotlight

TransAlta Corp. is in the market with a new issue of rate reset preferred shares Thursday, just a day after Capital Power Corp. offered $125-million of the same securities.

These companies follow in the footsteps of CU Inc., which raised $75-million a few weeks back, and Great-West Lifeco Inc., which raised $250-million the day before. BAM Split Corp. also recently came with a $110-million issue, and Brookfield had a few more back in October.

Why all this issuance now? Because there's investor demand. Lots of it. TransAlta's $200-million has already been upsized to $250-million in a matter of about two hours. This environment is very similar to when banks were issuing rate reset shares left, right and centre during the financial crisis -- and investors kept gobbling them up.

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TransAlta's rate reset preferred shares pay 4.6 per cent, 203 basis points above 5-year Canada bonds. CIBC World Markets, RBC Capital Markets and Scotia Capital are co-lead managers.

Capital Power's deal was worth $125-million and also paid 4.6 per cent, 217 basis points above 5-year Canada bonds. TD Securities and RBC co-led the offering.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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