Note terms with contingent mandatory conversion event
ACo will issue pursuant to the Trust Indenture subordinated indebtedness (“Notes”) in one or more public offerings in Canada and elsewhere to arm’s length purchasers. The Notes will bear interest at a fixed annual rate until the Interest Reset Date, after which they will bear interest on a specified basis plus a fixed spread. No interest on the Notes will accrue or be payable after the date of a XXXXXXXXXX Event (a “Mandatory Event”). On the occurrence of a Mandatory Event, the Notes will be converted into preferred shares at a conversion ratio of one preferred share for each Note plus a fractional preferred share in respect of accrued but unpaid interest except that for foreign securities’ law purposes, ACo may instead seek to sell the preferred shares on the foreign holder’s behalf. There is acceleration on default, and a specified maturity date.
Rulings
Re s. 20(1)(c)(i) deduction and interest not being “participating debt interest.”
The CRA summary states:
The borrower-lender relationship will continue to exist until such time as a [mandatory conversion event] occurs or until such time as it is or it became apparent the [mandatory conversion event] would occur.