[6-K] Fortis Inc. Current Report (Foreign Issuer)

Rhea-AI Filing Summary

Bank of Montreal (BMO) is offering US$1.331 million of Senior Medium-Term Notes, Series K ― “Digital Return Barrier Notes due August 10, 2026.” The notes are linked to the least-performing of the S&P 500 Index (SPX) and Russell 2000 Index (RTY). Investors pay 100% of principal at settlement (July 08 2025) and receive a single payment at maturity (Aug 10 2026).

Pay-out structure

• Digital Return: 10.20% ($1,102 per $1,000) if the Final Level of the worst index is ≥ 80% of its July 02 2025 Initial Level.
• Downside: If the Final Level is < 80%, principal is reduced point-for-point with the index decline (e.g., –30% index → $700; –100% → $0). No principal protection.
• No periodic coupons; the notes are unsecured, unsubordinated obligations of BMO and will not be listed on any exchange.

Key terms

• Initial Levels: SPX 6,227.42; RTY 2,226.377
• Barrier/Digital Barrier: 80% of Initial Levels (SPX 4,981.94; RTY 1,781.102)
• Agent commission: 1.93%; net proceeds 98.07%
• Estimated initial value: $972.78 per $1,000 (≈ 97.28%), reflecting structuring & hedging costs
• CUSIP: 06376EKW1; calculation & selling agent: BMO Capital Markets (BMOCM)

Primary risks

• Market risk: Any decline >20% in the worst index triggers dollar-for-dollar loss of principal up to 100%.
• Limited upside: Return capped at 10.20% even if indices rise substantially.
• Credit & liquidity risk: Payment depends on BMO credit; no exchange listing and BMOCM is not obliged to make a market.
• Pricing inefficiency: Purchase price exceeds estimated value by ~2.72%, plus potential bid-ask discounts in any secondary trading.

Positive

• 10.20% fixed digital return achievable even if indices fall up to 19.99%, offering higher potential than many short-term IG bonds.
• Short 13-month tenor limits exposure duration compared with longer structured products.
• Diversified reference assets across large-cap (SPX) and small-cap (RTY) U.S. equities.

Negative

• Unlimited downside after a 20% drop in the worst index, exposing investor to full equity risk.
• Return cap at 10.20% eliminates participation in any upside beyond the digital level.
• Pricing premium: issue price exceeds estimated value by about 2.72% plus 1.93% commission.
• No secondary-market listing; liquidity solely dependent on BMOCM's willingness to bid.
• Credit risk of Bank of Montreal; note holders rank pari-passu with other senior debt.
• High correlation between SPX and RTY reduces diversification benefit and increases barrier-breach probability.

Insights

Structured-Product Analyst

TL;DR: 10.2% capped return, full downside after –20%; pricing includes 2.7% premium and credit risk of BMO.

The notes suit tactical investors who expect SPX and RTY to stay flat to mildly negative over the next 13 months. A fixed 10.20% gain is attractive relative to short-dated investment-grade yields, but the payoff is binary: a 19.9% index drop still earns the full digital payout, whereas a 20.01% decline slashes principal. The embedded option is inexpensive for BMO: the bank retains upside beyond 10.2% and passes 1-to-1 downside to the buyer. The initial value (97.278%) versus issue price (100%) shows typical dealer margin, while the 1.93% selling concession plus hedge cost erode secondary value. Credit-spread widening or equity volatility spikes can pressure note prices well before maturity. Overall, risk-adjusted return is modest; I view impact as neutral for diversified portfolios.

Portfolio Risk Manager

TL;DR: High left-tail risk, no liquidity, limited upside—instrument skews risk/return against holder.

From a portfolio hedging standpoint these notes add significant tail exposure: any protracted bear market >20% wipes out capital linearly. Correlation between SPX and RTY is high, so diversification benefit is minimal; probability of barrier breach in recessionary scenarios is material. With no interim coupons, carry is zero until maturity, leaving owners vulnerable to mark-to-market swings and credit spread fatigue. The lack of listing constrains exit routes; BMOCM’s discretionary bid adds further uncertainty. Given these characteristics, the note is best classified as a speculative alternative to short-horizon equity exposure rather than fixed-income substitute. I assign a negative impact score.

&nbsp;

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549&nbsp;

&nbsp;

&nbsp;

&nbsp;

FORM 6-K

&nbsp;

&nbsp;

&nbsp;

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE&nbsp;13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934

&nbsp;

For the month of July, 2025

&nbsp;

Commission File Number: 001-37915

&nbsp;

&nbsp;

&nbsp;

Fortis Inc.&nbsp;

&nbsp;

&nbsp;

&nbsp;

Fortis Place, Suite&nbsp;1100
5 Springdale Street
St.&nbsp;John's, Newfoundland and Labrador
Canada, A1E&nbsp;0E4

(Address of Principal Executive Office)

&nbsp;

&nbsp;

&nbsp;

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F ☐ Form 40-F ☒

&nbsp;

&nbsp;

&nbsp;

EXHIBITS

Exhibit	Description
 	 
99.1	Fortis Inc. Press Release, dated July 7, 2025.

&nbsp;

&nbsp;

&nbsp;

&nbsp;

&nbsp;

&nbsp;

&nbsp;

SIGNATURES

&nbsp;

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

&nbsp;

 	Fortis Inc. (Registrant)  		 
Date: July 7, 2025	/s/ James R. Reid
 	By:	James R. Reid
 	Title:	Executive Vice President, Sustainability and Chief Legal Officer
 	 	 	 

&nbsp;

FAQ

What digital return do BMO's Digital Return Barrier Notes offer?

The notes pay a 10.20% fixed return ($1,102 per $1,000) if the worst-performing index finishes at or above 80% of its initial level.

When do the notes linked to SPX and RTY mature?

They mature on August 10, 2026, with a valuation date of August 05, 2026.

What happens if the least-performing index falls more than 20%?

Principal is reduced 1-for-1 with the index decline; a 30% drop yields $700, and a 100% drop yields $0.

How does the initial estimated value compare to the purchase price?

BMO’s estimated initial value is $972.78 per $1,000, about 2.72% below the $1,000 issue price.

Are the notes insured or exchange-listed?

No. They are unsecured, uninsured obligations of BMO and will not be listed on any securities exchange.