TransAlta Corporation’s proposed restructuring of its preferred shares would let holders choose between a taxable exchange and s. 51 rollover

TransAlta Corporation currently has five series of Preferred Shares outstanding (Series A, B, C, E and G) which are trading at a substantial discount to the $25.00 price at which they originally were issued. TransAlta is proposing a Plan of Arrangement under which the holders of each series would exchange each of their current shares for a fraction of a new series of preferred shares (also with a redemption amount of $25.00 per share). These Series 1 Preferred Shares are expected to trade closer to $25.00 on the basis of more favourable dividend terms, so that TransAlta anticipates that the preferred shareholders’ holdings will trade higher even though there would be a reduction in the redemption amount of their shareholdings.

The preferred shareholders are given the option of having their exchange occur on a taxable basis (rather than on a non-disposition basis under s. 51) by permitting them to elect to have each share exchanged for a “Redemption Note,” which would then be immediately exchanged under the Plan of Arrangement for the proffered fraction of a Series 1 Preferred Share.

Neal Armstrong. Summary of TransAlta Corporation Circular under Other – Recapitalizations or note/pref exchanges – Prefs for prefs.