The Bank of Montreal (BMO) has issued US$1 billion in additional tier 1 limited recourse capital notes (LCRN).
The series six LCRNs have a 6.875% annual interest rate, which will be paid on a quarterly basis. The interest rate will reset every five years, at a rate equal to the US Treasury rate plus 2.976%. They will mature on 26 November 2085.
The notes’ offering is expected to close on 29 July, with proceeds going towards general banking purposes potentially including the redemption of outstanding capital securities or the repayment of other outstanding liabilities.
As of 22 July, BMO has an AA- long-term issuer default rating from Fitch, with a stable outlook.
On or before issuing the LCRNs, BMO will issue series 55 of its non-viability contingency capital (NVCC) non-cumulative five-year fixed-rate rest class B preferred shares, which will be held by Computershare Trust Company of Canada as the BMO LRCN trust trustee.
The LCRNs can be redeemed in whole or in part at the option of the bank each quarter, from 26 November 2030. The bank must receive written approval from the Canadian superintendent of financial institutions within 10-60 days prior.
Citigroup Global Markets, Goldman Sachs & Co, JP Morgan Securities, Barclays Capital and Mizuho Securities USA are joint book-running managers for the offering.
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