F-10: South Bow Corporation Files $3 Billion Shelf Prospectus for Future Securities Offerings

South Bow Corporation has filed a preliminary short form base shelf prospectus with the SEC and Canadian authorities, enabling it to offer up to U.S.$3 billion in various securities over the next 25 months to fund debt reduction, investments, and general corporate purposes.

Summary

• South Bow Corporation has filed a preliminary short form base shelf prospectus (Form F-10) with the U.S. Securities and Exchange Commission and Canadian securities authorities.
• This filing allows South Bow to offer and sell various securities, including Common Shares, First Preferred Shares, Second Preferred Shares, and Subscription Receipts, with an aggregate initial offering price of up to U.S.$3,000,000,000 (or equivalent in other currencies).
• The offering period for these securities will extend for 25 months from the date the prospectus remains valid.
• The specific terms of any offering will be detailed in applicable shelf prospectus supplements.
• The net proceeds from the sale of these securities are intended to be used for debt reduction, financing long-term investment programs, funding working capital requirements, and other general corporate purposes.
• As of June 17, 2025, South Bow had 208,220,631 Common Shares issued and outstanding, with no Preferred Shares or Subscription Receipts outstanding.
• Common Shares are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE) under the symbol SOBO, with closing prices on June 17, 2025, of C$36.49 on TSX and U.S.$26.73 on NYSE.

Sentiment

Score: 7

Explanation: The filing of a shelf prospectus indicates proactive financial management and provides significant flexibility for future capital raises, which is generally positive for long-term strategic planning and funding growth initiatives. However, it does not contain current performance results, and some risks related to the liquidity of certain securities are noted.

Positives

• The shelf prospectus provides South Bow Corporation with significant financial flexibility to raise capital opportunistically over a 25-month period.
• Potential use of proceeds for debt reduction can enhance the company's financial resilience and reduce debt service charges.
• The ability to finance long-term investment programs and fund working capital supports future growth initiatives and operational stability.
• The offering framework allows for various types of securities, providing flexibility in tailoring future capital raises to market conditions and company needs.

Negatives

• There is currently no established trading market for the Preferred Shares or Subscription Receipts that may be offered, which could affect their liquidity and pricing in the secondary market.
• Purchasers of Preferred Shares or Subscription Receipts may face difficulties reselling these securities.
• Credit ratings assigned to Preferred Shares may not fully reflect all associated risks and are subject to change, potentially impacting their market value.
• Enforceability of civil liabilities under U.S. federal securities laws may be challenging for U.S. investors due to South Bow's Canadian incorporation and the residency of some directors, officers, and assets outside the U.S.

Risks

• Failure to realize expected benefits from acquisitions, divestitures, and the spinoff by TC Energy Corporation.
• Ability to successfully implement strategic priorities and whether they will yield expected benefits.
• Ability to implement a capital allocation strategy aligned with maximizing shareholder value.
• Operating performance of pipelines and storage assets.
• Amount of capacity sold and rates achieved in the business.
• Production levels within supply basins.
• Construction and completion of capital projects.
• Cost and availability of, and inflationary pressures on, labor, equipment, and materials.
• Availability and market prices of commodities.
• Access to capital and insurance markets on competitive terms.
• Interest, tax, and foreign exchange rates.
• Performance and credit risk of counterparties.
• Regulatory decisions and outcomes of legal proceedings, including arbitration and insurance claims.
• Ability to effectively anticipate and assess changes to government policies and regulations, including those related to the environment.
• Potential impact of changes in tariff rates and other international trade policies on the Corporation's business and on the market price or value of the Securities.
• Ability to realize the value of tangible assets and contractual recoveries.
• Competition in the business in which South Bow operates.
• Unexpected or unusual weather.
• Acts of civil disobedience.
• Cyber security and technological developments.
• Sustainability-related risks.
• Impact of energy transition on the business.
• Economic conditions in North America as well as globally.
• Global health crises, such as pandemics and epidemics, and the impacts related thereto.
• Recovery of costs resulting from unexpected pollution or environmental events related to operations.
• No established trading market for Securities other than Common Shares, potentially affecting liquidity and resale ability.
• Credit ratings may not reflect all risks associated with an investment in Preferred Shares and may change.
• Difficulty for U.S. holders of Securities to enforce civil liabilities under U.S. federal securities laws due to South Bow's Canadian incorporation and non-U.S. residency of some officers, directors, and experts.

Future Outlook

South Bow Corporation anticipates future offerings of securities to reduce or repay indebtedness, finance its long-term investment program, fund working capital requirements, and for other general corporate purposes. The company has a financial outlook for 2025 and beyond, including expectations for normalized earnings before interest, taxes, depreciation, and amortization (EBITDA), interest expenses, distributable cash flow, and capital expenditures. They also expect debt reduction to enhance financial resilience and capacity for future growth initiatives and shareholder returns, and anticipate various future financing options.

Management Comments

• Forward-looking information in this prospectus and incorporated documents is intended to provide prospective purchasers with information regarding the Corporation, including management's assessment of its future plans and financial outlook.

Industry Context

South Bow Corporation operates as an energy infrastructure company, owning and operating critical liquids pipelines and facilities across Canada and the U.S. Its primary business involves safely transporting crude oil from the Western Canadian Sedimentary Basin and Cushing market hub to the U.S. Midwest and Gulf Coast, along with offering ancillary services like storage. This F-10 filing, a standard shelf prospectus, is a common financial instrument used by capital-intensive companies in the energy sector to establish a flexible framework for future capital raises, enabling them to fund ongoing operations, strategic projects, and manage debt in response to market conditions and growth opportunities.

Corporate Governance

Legal Proceedings

• The document mentions expected outcomes with respect to legal proceedings, including arbitration and insurance claims, as forward-looking information and a risk factor, but does not detail any specific ongoing litigation.
• It notes that the ability to enforce civil liabilities under U.S. federal securities laws may be adversely affected by South Bow's Canadian incorporation and the residency of some officers, directors, and experts outside the U.S.

Stakeholder Impact

• Shareholders: Potential for future dilution from new share issuances, but also potential for increased shareholder value through strategic investments, debt reduction, and enhanced financial resilience. The shareholder rights plan aims to protect their interests during take-over bids.
• Creditors: Proceeds from the offering may be used for debt reduction, which could improve the company's credit profile and reduce financial risk.
• Customers and Suppliers: Their operations and financial results may be impacted by expected industry, market, and economic conditions, as well as changes in tariff rates and trade policies.
• Employees: While not directly mentioned, the funding of long-term investment programs and general corporate purposes could support job stability and potential growth opportunities within the company.

Next Steps

• Issuance of specific Prospectus Supplements for each future offering of Securities.
• Proposed sale of securities to the public as soon as practicable after the Registration Statement is declared effective.
• Potential future acquisitions, divestitures, and the spinoff by TC Energy Corporation of its liquids pipelines business segment into South Bow.
• Ongoing construction and completion of capital projects.
• Continued engagement with regulatory processes and resolution of legal proceedings, including arbitration and insurance claims.

Key Dates

Keywords

South Bow Corporation, SEC F-10, Shelf Prospectus, Capital Raise, Securities Offering, Common Shares, Preferred Shares, Subscription Receipts, Energy Infrastructure, Pipelines, Crude Oil, Financial Flexibility, Debt Reduction, Corporate Finance, TSX, NYSE