Fairfax Financial Holdings Ltd. is increasing the size of its previously announced offering of Preferred Shares, Series 1, in response to strong investor demand.

The Toronto-based financial services holding company said Monday that the size of the offering has been increased to 10 million shares. The aggregate gross proceeds will now be $250 million.

Fairfax (TSX:FFH) intends to use the net proceeds of the offering to augment its cash position, to increase short term investments and marketable securities held at the holding company level, to retire outstanding debt and other corporate obligations from time to time, and for general corporate purposes. The offering is expected to close on or about October 5.

The shares will be issued to the public at a price of $25 per share and holders will be entitled to receive a cumulative quarterly fixed dividend yielding 5% annually for the initial five year period ending Dec. 31, 2015. Thereafter, the dividend rate will be reset every five years at a rate equal to the then current 5-year Government of Canada bond yield plus 2.85%.

Holders of Preferred Shares, Series I will have the right, at their option, to convert their shares into Preferred Shares, Series J, subject to certain conditions, on Dec. 31, 2015, and on December 31 every five years thereafter. Holders of the Preferred Shares, Series J will be entitled to receive cumulative quarterly floating dividends at a rate equal to the then current three-month Government of Canada Treasury Bill yield plus 2.85%.

The offering will be underwritten on a bought deal basis to a syndicate of Canadian underwriters led by BMO Capital Markets, CIBC World Markets Inc., RBC Capital Markets and Scotia Capital Inc.

Fairfax has granted the underwriters an option, exercisable in whole or in part at any time up to 9:00 ET on the date that is two business days prior to the closing date, to purchase an additional 2 million Preferred Shares, Series I at the same offering price for additional gross proceeds of $50 million.

IE