Pembina Pipeline Corporation is pleased to announce that it has successfully closed its previously announced debt offering of CAD 225 million in aggregate principal amount of 5.95 % Fixed‑to‑Fixed Rate Subordinated Notes, Series 2 (the “Series 2 Notes”), which mature on June 6, 2055 (the “Offering”). This closing marks a key step in Pembina’s capital management strategy and is intended to be seamlessly integrated with a related redemption of its outstanding preferred shares.
Structure and Underwriting of the Offering
Pembina conducted the offering under its short form base shelf prospectus, initially filed on December 13, 2023, and supplemented by a prospectus supplement dated October 8, 2025. Through this structure, the Company obtained the flexibility to issue the securities under a shelf regime, streamlining regulatory clearance and enabling timely execution.
The distribution of the Series 2 Notes was managed via a syndicate of underwriters. Leading the syndicate were CIBC Capital Markets, BMO Capital Markets, and Scotiabank, serving as co‑leads. Their involvement underscores the confidence of market participants in Pembina’s credit profile, strategic outlook, and the strength of the subsector in which it operates. The underwriters assisted in marketing, subscription coordination, stabilization, and distribution across institutional investors.
By closing the Offering, Pembina has locked in long-term fixed financing at a coupon rate of 5.95 %, thereby extending its debt maturity profile and enhancing its ability to manage capital structure over the long term. The subordinated nature of the Notes places them lower in the capital structure relative to Pembina’s senior debt, which is consistent with the risk/return profile demanded by fixed‑income investors in this tier. The fixed‑to‑fixed rate structure means that the coupon is set at issuance (5.95 %) and remains fixed through maturity (i.e., it does not reset or float), providing certainty to both Pembina and investors.
Use of Proceeds: Redemption of Series 9 Preferred Shares & Corporate Purposes
As previously disclosed, Pembina intends to deploy the net proceeds from the Offering toward:
- Redeeming all outstanding “Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 9” (TSX: PPL.PR.I) (the “Series 9 Class A Preferred Shares”), on the upcoming Redemption Date of December 1, 2025, at a Redemption Price of CAD 25.00 per share, less any required withholding taxes or deductions;
- Allocating any residual funds for general corporate purposes, which may include working capital, capital expenditures, refinancing of other obligations, or strategic investments.
The total funds required to redeem the Series 9 Class A Preferred Shares will equal CAD 225 million — exactly matching the principal amount of the Offering, prior to deduction of underwriting discounts, fees, and other issuance costs. This precise alignment underscores the Company’s intention for net proceeds to cover the full redemption burden, minimizing reliance on additional funding sources.
Final Dividend, Redemption Mechanics & Investor Guidance
Pembina previously announced that on December 1, 2025, it will pay a dividend of CAD 0.268875 per Series 9 Class A Preferred Share to holders of record as of November 3, 2025. That dividend is designated to be the final quarterly dividend on those Series 9 shares. After the payment of this dividend, Pembina expects that no accrued but unpaid dividends remain on those shares as of the Redemption Date.
Key implications and mechanics include:
- Once the December 1 dividend is paid, the Series 9 Class A Preferred Shares will be redeemed, extinguishing the outstanding preferred shares in full.
- Holders with registered (i.e. directly recorded) shares will receive formal notice — Pembina has, as of today, delivered the notice of Redemption Price and Redemption Date to the sole registered holder in accordance with the terms laid out in Pembina’s articles of amalgamation (dated October 2, 2017).
- For non‑registered (beneficial) holders—that is, investors holding shares through brokers, custodians, or intermediaries—no additional action is required to effect redemption. Nonetheless, such holders should contact their broker, custodian, or other intermediary should they have any questions regarding the redemption process for their beneficial holdings.
- Pembina’s transfer agent for the Series 9 Class A Preferred Shares is Computershare Investor Services Inc. Queries regarding the mechanics or processing of redemption can also be directed to Computershare’s dedicated line (1‑800‑564‑6253) or via email at corporateactions@computershare.com.
As the Series 9 shares are being redeemed, investors should confirm their holdings, monitor communications from intermediaries, ensure that their accounts are properly registered, and review any tax or withholding implications, particularly in cross‑border or institutional holdings.
Legal and Regulatory Disclaimers
Pembina’s announcement includes the following important disclaimers relevant to securities law and investor considerations:
- This release does not constitute an offer to sell or a solicitation of an offer to buy the Series 2 Notes in any jurisdiction.
- The Series 2 Notes have not been approved or disapproved by any regulatory authority, nor has any such authority passed judgment on the merits of the securities.
- The Series 2 Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), nor the securities laws of any U.S. state. Accordingly, they may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined under U.S. securities laws). This restriction reflects standard cross-border issuance constraints and ensures compliance with applicable securities regulation.
Investors and market participants should rely only on the public disclosure documents, including the base shelf prospectus and related supplements, before making any investment decision. Pembina and its agents make no representation regarding the availability or suitability of the Series 2 Notes in any jurisdiction.
Contextual Rationale & Strategic Considerations
To provide a broader perspective, the redemption of preferred shares via issuance of subordinated notes is a strategic maneuver often used by infrastructure and midstream companies to optimize their cost of capital, mitigate dilution, and manage capital structure flexibly. In Pembina’s case, several motivating factors likely underlie this transaction:
- Cost of Capital Optimization
The Series 9 preferred shares likely carried a fixed or floating rate dividend obligation. By replacing those shares with subordinated debt at a 5.95 % coupon, Pembina may reduce its overall weighted average cost of capital (WACC), particularly if the preferred dividend rate was higher or if issuing debt is more tax efficient. - Duration Matching & Liability Management
The maturity of June 2055 provides a very long-term liability, aligning well with Pembina’s stable, asset-backed revenues from its pipelines, terminals, and processing operations. This long tenor helps reduce refinancing risk in earlier years. - Capital Structure Flexibility
Subordinated debt, while ranking below senior debt, is still less expensive relative to equity or preferred equity. It can also provide flexibility if the Company wishes to raise new debt or equity in different tranches over time without the burden of paying preferred dividends. - Investor Base Diversification
By issuing the Series 2 Notes, Pembina taps into a fixed-income investor base (e.g., institutional bond funds, pension funds, insurance companies) rather than relying purely on equity or hybrid capital markets. This can deepen its investor base and enhance liquidity. - Clean Redemption Strategy
The Company’s careful alignment—issuing the exact nominal amount needed for redemption—suggests an intent to execute a clean capital structure restructuring without residual mismatch or overhang. This disciplined approach limits exposure to excess new debt or underutilized proceeds. - Regulatory and Tax Efficiency
In many jurisdictions, interest paid on debt is deductible for tax purposes, while dividends are not. Thus, substituting preferred equity with debt can yield tax benefits, improving net returns to shareholders over time (subject to jurisdictional rules and limitations).
Given these strategic motivations, the transaction appears to align with Pembina’s long-term goals of maintaining a sound capital structure, preserving financial flexibility, and acting in the best interests of shareholders.
Implications for Stakeholders & Market Reaction
Preferred Shareholders (Series 9 Class A)
- Holders of the Series 9 Class A Preferred Shares should closely monitor the payment of the final dividend and the effective redemption on December 1, 2025.
- For direct (registered) holders, the notice of redemption has already been furnished. These investors should ensure their contact information and accounts are current.
- Beneficial (non‑registered) shareholders should rely on their intermediaries for cash payment of the redemption proceeds (net of withholding, if applicable) and automatic cancellation of their holdings.
- Any questions or concerns during the process should be addressed to Computershare or the investor’s broker.
Debt Investors & Fixed-Income Markets
- The successful closing of the Series 2 Notes signals market confidence in Pembina’s creditworthiness and the strength of the Canadian midstream sector.
- The fixed 5.95 % coupon likely reflects a balance between yield expectations and Pembina’s credit spread; investors will assess relative value with comparable subordinated or corporate debt.
- As subordinated debt, these Notes carry greater risk than senior bonds but also offer higher yields — investors will evaluate Pembina’s coverage ratios, liquidity, and debt service capacity.
Equity Shareholders & Overall Capital Markets
- Redeeming the preferred shares and issuing subordinated debt may enhance earnings per share (EPS) in the long run, given that interest expense may be lower than preferred dividend costs (depending on tax treatment).
- By removing a fixed dividend burden (preferred shares) and replacing it with long-duration debt, the Company may improve cash flow flexibility for growth projects, capital expenditures, or strategic opportunities.
- The transaction could be perceived favorably by rating agencies and credit analysts, provided it does not overly leverage the balance sheet or reduce liquidity buffers.
- Investors will watch future disclosures to assess how the proceeds, after redemption obligations, are used and whether the balance sheet remains prudent.
As with any financing or capital restructuring, the announcement necessarily includes forward-looking elements and associated risks. Pembina likely includes in its full prospectus and filings disclaimers that actual results may differ due to:
- Market conditions, interest rates, and credit spreads affecting future funding costs.
- Operating risks in the midstream/pipeline sector, including maintenance, regulatory shifts, environmental constraints, and demand fluctuations.
- Execution risk in the redemption and settlement process, including tax withholding, investor coordination, and logistical challenges.
- Potential rating agency reactions to incremental indebtedness or capital structure changes.
- Jurisdictional and currency risks, especially for cross-border investors or holdings in U.S. vs Canadian markets.
Investors should review Pembina’s continuous disclosure filings, including its investor presentations, annual and interim reports, and securities offering documents, to fully understand the risk factors, assumptions, and mitigation measures.
Summary & Outlook
In summary:
- Pembina successfully closed its CAD 225 million 5.95 % fixed‑rate subordinated Notes, Series 2, maturing June 2055.
- The offering was underwritten by a syndicate co‑led by CIBC Capital Markets, BMO Capital Markets, and Scotiabank, operating under Pembina’s shelf prospectus regime.
- The net proceeds will be used to fully redeem the existing Series 9 Class A Preferred Shares on December 1, 2025 at CAD 25.00 per share, eliminating the dividend obligation and converting capital structure exposure to debt.
- A final dividend of CAD 0.268875 per share is to be paid on December 1, 2025, to holders of record as of November 3, 2025 — after which no accrued dividends will remain.
- Formal redemption notices have been delivered to the registered shareholder. Beneficial holders need not take additional action, though they should consult their brokers for procedures.
- The Series 2 Notes have not been registered in the U.S. and cannot be offered or sold to U.S. persons under applicable securities law.
- The move reflects Pembina’s strategic priority to optimize its capital structure, secure long-term financing, and reduce equity-like obligations associated with preferred shares.
Going forward, market participants will watch how Pembina integrates this debt, monitors leverage metrics, maintains liquidity, and pursues growth. From a capital markets perspective, the transaction demonstrates a disciplined approach to balancing financing cost, term extension, and investor demand.