Energy Retailer Just Energy Corp. Sells a Juicy Fix-to-Floating Issue
By: Tim McPartland,
Canadian energy reseller Just Energy Corp. (NYSE:JE) has sold a new 4 million share fixed-to-floating rate preferred offering with an initial fixed coupon of 8.50%.
Just Energy is a reseller of both electricity and natural gas in most of Canada and in 14 U.S. states. JE does not produce energy, but simply is the seller to 2,000,000 customers. The company was formed to take advantage of the deregulation of energy suppliers that has occurred in many states and Canadian provinces. Deregulation gives consumers the choice of who is their energy supplier. The company was formed in 1997 and has annual revenue of over $4 billion.
This new preferred stock issue will have a fixed coupon rate of 8.50% until 3/31/2022 at which point it will begin to float at a rate of 6.48% plus the 5 year mid market swap rate, plus ½%. Typically the floating portion is based on 3 month Libor, but in this case a different metric is used. The best source we have found for the 5 year mid market swap rate is here. The key rate we focus on when evaluating fixed to floating rate issues is the fixed base portion of the floating rate. 6.48% is an excellent base rate and ensures that future coupon payments will remain fairly high.
Potential investors should be aware that there is a likelihood that your broker will withhold 15% of your dividend for Canadian withholding. While we believe they would be incorrect in doing so you will need to check with your broker to determine your own circumstances. Additionally we have noted in the past that some brokerage firms attempt to charge an added fee for purchase of a foreign stock. Again this should not be tolerated by the investor as standard trade fees should be applied.
This issue is now trading on the OTC Grey market under the ticker of JENGF and is trading around $25.60.
To get more information on preferred stocks and exchange traded debt (baby bonds), screen them, set up your own portfolio and receive email alerts, go to www.preferred-stock.com now.