TC Energy's 6.25% Junior Subordinated Notes: A Strategic Debt Refinancing Play

In the high-stakes game of capital allocation, TC Energy has just made a bold move. announced by TC Energy isn't just a routine refinancing play-it's a calculated chess move to optimize its capital structure while rewarding income-focused investors. Let's break down why this offering could be a win-win, but also why investors need to tread carefully.

The Big Picture: TC Energy's Capital Structure in 2025

TC Energy's balance sheet remains a mixed bag. As of Q3 2025, the company , with leverage staying "stable under 5 times EBITDA." That's a solid number for a capital-intensive business, but it's not without risks. The company's $21 billion secured capital program through 2030 is supported by strong pipeline performance means it will need to manage its debt carefully. Here's where the 6.25% junior subordinated notes come into play.

By issuing these long-term, fixed-rate instruments, TC Energy is locking in cheap financing for decades. The notes mature in , giving the company a 60-year runway to refocus its near-term debt obligations. This is a classic "extend and pretend" strategy, but in this case, it's arguably justified. With TC Energy's CET1-equivalent leverage ratio , the company has room to maneuver without overburdening its credit profile.

The Investor Angle: A 6.25% Yield in a Low-Rate World

For income investors, the 6.25% coupon is a siren song. , this offering delivers a premium yield that's hard to ignore. But here's the catch: these are notes. That means they rank below senior debt in the capital structure, exposing investors to higher risk in a worst-case scenario.

However, TC Energy's financial strength mitigates some of that risk. The company has as reported in Q3 2025, according to Q3 financials. As long as the company maintains its operational momentum-driven by strong natural gas performance and its 2028 growth plan which is powering growth-the likelihood of default on these notes is low. For conservative income investors, this could be a compelling trade-off: a high yield with manageable credit risk.

Strategic Implications: Refinancing and Capital Optimization

The real genius of this offering lies in its purpose. Proceeds will be used to , Series 11, reduce indebtedness, and fund general corporate purposes. Preferred shares often carry higher costs of capital than debt, so swapping them for junior subordinated notes is a textbook example of capital optimization.

This move also aligns with TC Energy's broader strategy to extend its debt maturity profile . , . That's a smart hedge in a world where central banks are still grappling with inflation.

Risks to Watch

No investment is without risk. , . Additionally, . If rates spike in the coming decades, .

Moreover, TC Energy's debt disclosures remain opaque in some areas. The company , . That lack of transparency could frustrate those seeking granular risk assessments.

Final Verdict: A Strategic Win for TC Energy and Savvy Investors

. . For , this is a "buy the rumor, .

But don't get carried away. This isn't a risk-free bond. . For those who do their homework, however, .