Industrial Alliance Insurance and Financial Services Inc. has entered into an agreement with a syndicate of underwriters led by Scotia Capital Inc. to buy $100 million of preferred shares, the Quebec City-based insurer announced Monday.

The underwriters have agreed to buy, on a bought deal basis, 4 million Non-Cumulative 5-Year Rate Reset Class A Preferred Shares Series C from Industrial Alliance for sale to the public at a price of $25 per Series C Preferred Share.

Industrial Alliance has granted an option to the underwriters to purchase up to an additional 600,000 Series C Preferred Shares, representing $15 million at the issue price.

The Series C Preferred Share offering is expected to close on or about Nov. 25. The net proceeds will be used for general corporate purposes and will be added to Industrial Alliance’s capital base.

According to pro forma data as at Sept. 30, a $100 million preferred share issue will increase Industrial Alliance’s solvency ratio from 200% to 210% and a $115 million issue will increase it from 200% to 212%.

Holders of the Series C Preferred Shares will be entitled to receive a non-cumulative quarterly fixed dividend of 38.75¢ per Series C Preferred Share, yielding 6.20% per year, as and when declared by the board of directors of Industrial Alliance, for an initial period ending Dec. 31, 2013.

On Dec. 31, 2013 and on Dec. 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 3.38%. Holders of the Series C Preferred Shares will have the right to convert their shares into Non-Cumulative Floating Rate Class A Preferred Shares Series D, subject to certain conditions and the company’s right to redeem the Series C Preferred Shares as described below, on December 31, 2013 and on December 31 every five years thereafter.

Holders of the Series D Preferred Shares will be entitled to receive a quarterly non-cumulative floating rate dividend, as and when declared by the Board of Directors of the Company, equal to the 90-day Government of Canada Treasury Bill Rate plus 3.38%. Holders of the Series D Preferred Shares will have the right to convert their shares into Series C Preferred Shares, subject to certain conditions and the company’s right to redeem the Series D Preferred Shares as described below, on Dec. 31, 2018 and on Dec. 31 every five years thereafter.

The Series C Preferred Shares will not be redeemable by Industrial Alliance prior to Dec. 31, 2013. On Dec. 31, 2013 and on Dec. 31 every five years thereafter, Industrial Alliance may, subject to certain conditions (including regulatory approval), redeem all or any part of the Series C Preferred Shares at a cash redemption price per share of $25 together with all declared and unpaid dividends.

The company may redeem all or any part of the Series D Preferred Shares at a cash redemption price per share of $25 together with all declared and unpaid dividends in the case of redemptions on Dec. 31, 2018 and on Dec. 31 every five years thereafter or $25.50 together with all declared and unpaid dividends in the case of redemptions on any other date after Dec. 31, 2013.

IE