DBRS Assigns Final Rating of Pfd-3 (high) to Veresen Inc.’s New Preferred Issue, Confirms Stable Trend

DBRS has today finalized its provisional rating of Pfd-3 (high) on Veresen Inc.’s $200 million of cumulative redeemable preferred shares, Series A (the Series A Preferred Shares). On February 3, 2012 (see related press release), DBRS assigned a provisional rating of Pfd-3 (high) and placed it Under Review with Developing Implications. Concurrent with the successful issuance of the Series A Preferred Shares, DBRS has removed Veresen’s Senior Unsecured Notes and Preferred Shares ratings from Under Review with Developing Implication and confirmed them with a Stable trend. With the issuance of preferred shares, DBRS is comfortable with the Company’s funding strategy, which includes appropriate measures to maintain a reasonable financial profile while executing its growth strategy.

The Series A Preferred Shares have an annual dividend rate of 4.40%, payable quarterly, for the initial fixed-term period ending September 30, 2017. The dividend rate will reset on September 30, 2017, and every five years thereafter at a rate equal to the sum of the five-year Government of Canada bond yield plus 2.92%. The Series A Preferred Shares are redeemable by Veresen on September 30, 2017, and on September 30 every five years thereafter. The holders of the Series A Preferred Shares will have the right, at their option, to convert their shares into cumulative redeemable preferred shares, Series B (Series B Preferred Shares), subject to certain conditions, on September 30, 2017, and on September 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled to receive cumulative quarterly dividends at a rate equal to the sum of the 90-day Government of Canada Treasury bill yield plus 2.92%.

The DBRS rating is based on the expectation that the Series A Preferred Shares will rank equally with any future preferred shares issued by the Company. Net proceeds from the offering will be used to partially fund the Cutbank Ridge transaction (see press release dated December 7, 2011), to reduce existing indebtedness and for general corporate purposes.

The Series A Preferred Shares were issued under the prospectus supplement dated February 7, 2012, to Veresen’s short-form base shelf prospectus dated August 22, 2011.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating North American Pipeline and Diversified Energy Companies, which can be found on the DBRS website under Methodologies.