Proposed transactions
ACo will issue unsecured subordinated Notes in one or more public offerings for an amount equalling or approximating their principal amount. The interest thereon (the “Interest”) initially will be at a fixed interest rate that will be reset on each “Interest Reset Date” to a fixed annual rate for the applicable Interest Period plus a spread.
ACo may, in its sole discretion, with prior notice to the Noteholders, cancel any Interest that would otherwise be payable on any Interest Payment Date. However, ACo will agree that, if on any Interest Payment Date, it does not pay in full the Interest then due, ACo will not declare any dividends, or redeem or repurchase any of its shares (except pursuant to any retraction privilege or mandatory redemption provisions attaching to its preferred shares) until the month commencing immediately after ACo resumes Interest payments on the Notes.
The Notes have no scheduled maturity or redemption date. ACo is not required to make any repayment of the Principal Amount except in the event of an event of default.
On the occurrence of a specified event, the Notes will be converted into a number of common shares based on a formula-determined conversion ratio. There is no assurance that the conversion formula would result in the issuance of common shares having a fair market value at least equalling the principal amount of the Notes.
Additional information
The Interest paid or payable by ACo on the Notes will not be deductible under paragraph 20(1)(c) or any other provision of the Act in computing the income of ACo for any taxation year.
Ruling
The Interest amounts will not be subject to Part XIII tax under s. 212(1)(b), provided that i) the recipient of such amounts deals at arm’s length with ACo at the time of the payments, and ii) such Notes are beneficially owned by a person that deals at arm's length with ACo.