BC Ferries to Release $250 million of Bonds

[Scott]

Can anyone translate for us laymen who barely passed Math 12 let alone Accounting 101? Is there any significance to this or is it normal operating proceedure for a private company?

[Low Light Mike]

re:
www.bcferries.com/news/files/07-022bcftoissue250minbonds.pdf

For Immediate Release
07-022 March 16, 2007

BC FERRIES TO ISSUE $250 MILLION OF BONDS

VICTORIA – BC Ferries announced today that it has entered into an agency agreement with a syndicate of investment banks to issue $250 million of its senior secured bonds. The bonds will bear interest at 5.021% and will be for a term of 30 years. The issue is expected to close March 20, 2007.

- 30 -

Media Contact:
BC Ferries, Communications
Victoria: [phone]

[Low Light Mike]

They are selling bonds to investors.....very long term.

An "agency agreement" is common, it's basically the mechanism for investment-banks to sell the bonds to their customers/clients. The agency-agreement would specify the commissions that the agents would earn on the bond sale.

The rate is 5.021%, for a 30 year term. Most of the buyers are likely institutional investors, such as pension plans or mutual funds.

Why would BCFS do this? To raise some cash. It's a common way to raise cash, in order to finance an extensive capital expansion/renewal program, such as the one that BCFS is embarking on.

I think this is a good thing....instead of BCFS simply going to the Province, and increasing "our" Provincial public debt.

[Neil]

I sure can't explain it, but I'm thinking that if Flugel Horn can now afford to fly in to ferry fan meets, he might be lining up to buy some of those bonds. Oh, to be a C.A. in Nanaimo, apparently...

[Low Light Mike]

We could start a "Ferry Fan Mutual Fund", that invests solely in maritime-shipping related bonds and stocks.

Too bad we can't go back in time to invest in Harbourlynx....

But seriously now, I'm curious as to what types of mutual funds would be interested in buy these long-bonds. Would it be a type of higher-risk "Canadian opportunity fund" style of mutual fund?

Check your 2007 2nd Quarter mutual funds reports, to see if perhaps you own part of a BC Ferries bond in your investments...........

[Low Light Mike]

Here's a link to a law-firm webpage, that explains some of BCFS's previous bond issues (this is not a new thing for BCFS...)

www.mccarthy.ca/150/legal_03.asp

Apparantly, the proceeds from the previous bond offerings were used to pay off debt to the Province.

So it looks like this is part of a series of steps to transfer the debt from public to private re ferries.

[Low Light Mike]

Here's Standard & Poors' rating of BC Ferries:

- BCFS rates an A- (as opposed to AAA, or AA, or A+, etc).

Here's what these ratings mean:

AAA
An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.


AA
An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.


A
An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

[Scott]

So does this mean that BC Ferries is still publicly owned? Bonds are different from shares, right? Bond holders don't have a say in how a company is run, shareholders do - but how else are they different? What happens if the NDP gets in and makes BC Ferries a crown corp. again? Would the bonds probably be paid off by the government?

[Political Incorrectness]

I can tell you the answer to the first question, you got the hammer's on the mark

[Dane]

admin said:

So does this mean that BC Ferries is still publicly owned? Bonds are different from shares, right? Bond holders don't have a say in how a company is run, shareholders do - but how else are they different? What happens if the NDP gets in and makes BC Ferries a crown corp. again? Would the bonds probably be paid off by the government?

The Bond is probably through BCFC? which still exists.

[Northern Exploration]

Well they raised it.

www.bcferries.com/news/files/07-023bcferriesraises250minbonds.pdf

[Low Light Mike]

Another bond issue done this week, indicating that there is still a market willing to invest in BCFS.

Keep in mind that apart from ferry fares & ancillary sales revenue and Government subsidies, this is the only other major source of raising cash in order to fund the vessel replacement program.

=========================

For Immediate Release
08-085 December 19, 2008
BC FERRIES RAISES $140 MILLION IN BOND FINANCING

VICTORIA - BC Ferries announced the closing of a $140 million senior secured bond issue today.

The privately placed bonds, which are rated A (low) by DBRS and A- by Standard & Poor’s, were sold to institutional investors across Canada. The bonds bear interest at 6.214% per annum, and are due December 19, 2013.

“It is a positive reflection on BC Ferries that we have successfully completed this major bond transaction in view of the recent turmoil in global financial markets,” stated BC Ferries’ Chief Financial Officer Rob Clarke. “We continue to make strides in implementing our capital renewal program, and this bond offering is an important part of this ongoing initiative.”

The bond syndicate included CIBC World Markets, RBC Capital Markets, BMO Capital Markets, TD Securities Inc. and Scotia Capital Inc.
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