TC Energy's Subordinated Notes Shift: Downside Analysis of Preferred Equity Conversion

, . These junior subordinated notes, issued by Morgan Stanley and others, carry a long maturity date of November 2085. , , alongside debt reduction and general corporate uses. According to the announcement.

However, this transaction's path forward wasn't entirely smooth. Earlier signals indicated the notes offering depended on U.S. . As per the SEC filing, the SEC's approval remains a conditional hurdle, with no guarantee on completion, terms, or timing. This dependency creates a distinct downside risk for liquidity. , . If regulatory approval wavers or delays, , posing an immediate threat to the planned capital shift and shareholder return.

TC Energy's latest financing move shifts its capital structure in ways that fundamentally alter cash flow predictability and regulatory exposure. The utility is replacing perpetual preferred equity with long-term debt, . This $350 million notes offering will extinguish the existing preferred shares, which before redemption. In contrast, . The transaction, finalized through a U.S. SEC prospectus supplement and explicitly not offered in Canada, reduces preferred equity holdings but increases long-term debt exposure, potentially straining leverage ratios over time. Crucially, while the shift provides flexibility for corporate purposes, the rigid interest burden under regulatory scrutiny and the jurisdictional constraint limiting the notes' offering create significant cash flow predictability challenges compared to the original perpetual preferred structure.

TC Energy's subsidiary, TransCanada PipeLines Limited, is considering a U.S. . According to Seeking Alpha, the move aims to optimize capital structure and address debt obligations. However, the offering remains uncertain, with no regulatory approval yet. If executed, it could improve the debt-to-equity ratio by lowering indebtedness but may add long-term subordinated debt to the capital structure. according to , but the issuance may impact debt-to-equity metrics.

Now, let's examine the downside risks of this shift. , providing flexibility during tough times. Debt, however, . If cash flow drops, these payments can strain the company's finances. . . . . The market reaction will depend on deal size, coupon rates, and other terms, which remain uncertain.

TC Energy's recent move to retire preferred shares via a $350 million bond offering introduces several near-term regulatory and operational watchpoints. The core transaction involves subsidiary TCPL issuing fixed-rate junior subordinated notes, , , reduce overall debt, and cover general corporate needs. This structure relies heavily on U.S. regulatory clearance: the offering uses a 2024 shelf registration that requires SEC approval via Form F-10, filed back in December 2024.

Fundamentally, , ensuring the refinancing improves its capital structure without straining liquidity.

However, two key catalysts and their corresponding falsifiers demand close monitoring. First, , potentially increasing near-term dividend burdens and delaying debt reduction. Second, the SEC approval process remains an active regulatory checkpoint; prolonged review or rejection could stall the offering entirely. On the financial side, , signaling reduced capacity to service new debt. The most adverse bear case combines these risks: if the offering fails outright and , , constraining shareholder returns. For now, .