Seeking to maintain strong capital ratios, Royal Bank of Canada is issuing $225 million worth of new preferred shares, the company announced on Monday.

RBC will issue nine million non-cumulative, five year rate reset Preferred Shares Series AN priced at $25 per share. It also granted the underwriters an option to purchase up to an additional four million preferred shares at the same price.

The offering, which is expected to close Dec. 8, follows $300 million of preferred shares issued earlier this quarter by RBC, which combine for a total of $525 million in new Tier 1 capital.

“We routinely undertake funding transactions to maintain strong capital ratios and a cost effective capital structure,” RBC said in a statement. “Net proceeds from this transaction will be used for general business purposes.”

Holders of the new shares will be entitled to receive quarterly fixed dividends of $1.5625 until February 24, 2014, yielding 6.25% annually.

Thereafter, the dividend rate will reset every five years at a rate equal to 3.5% over the 5-year Government of Canada bond yield. The preferred shareholders will have the right to convert the shares to non-cumulative floating rate preferred shares Series AO on February 24, 2014 and on February 24 every five years thereafter, subject to certain conditions.

Holders of the AO series shares will be entitled to receive a quarterly dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 3.5%.

Subject to regulatory approval, RBC may redeem the shares at par on or after February 24, 2014.

The offering will be underwritten by a syndicate led by RBC Capital Markets.

IE