Manitoba Telecom Services Inc. has announced it will issue new equity and raise close to $250 million to cover future pension funding obligations.
It has entered into a "bought-deal" agreement with a syndicate of underwriters led by CIBC and ScotiaBank which have agreed to purchase 8,855,000 shares and sell them to the public at $28.01 per share.
It took about two hours on Tuesday afternoon for the company to upsize the offering. When it first announced the offering it was to be for 8,222,000 shares which included an 1,072,000 over-allotment option.
There will be no over-allotment option on the upsized offering.
The company had previously hoped to use $170 million of the proceeds of the negotiated sale of its Allstream division but that transaction was not approved by the federal government.
Earlier this month, the company stated strong asset returns and a 70 basis point interest rate increase have helped reduce its pension solvency deficit by one-half.
The company believes its planned pre-funding will eliminate solvency payments until at least 2016 and any need to incur additional indebtedness to fund such obligations prior to such time.
Trading was halted on MTS shares after the announcement on Tuesday afternoon, when MTS shares were trading at $28.94.