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National Bank of Canada (“National Bank”) (TSX: NA) and Canadian Western Bank (“CWB”) (TSX: CWB) today announced a planned reorganization of CWB’s tier 1 capital in the context of the previously announced proposed acquisition of all of the common shares of CWB by National Bank (the “Transaction”).
The proposed amendments will permit the exchange of CWB’s Preferred Shares into new National Bank Preferred Shares and an early redemption of CWB’s LRCNs (each as defined below).
The tier 1 capital reorganization involves and requires amendments to the following CWB securities:
- $125 million First Preferred Shares Series 5 (Non-Viability Contingent Capital (NVCC)) (the “Series 5 Preferred Shares”);
- $125 million First Preferred Shares Series 9 (NVCC) (the “Series 9 Preferred Shares” and together with the Series 5 Preferred Shares, the “Preferred Shares”);
- $175 million 6.00% Limited Recourse Capital Notes Series 1 (NVCC) (Subordinated Indebtedness) (the “Series 1 LRCNs”); and
- $150 million 5.00% Limited Recourse Capital Notes Series 2 (NVCC) (Subordinated Indebtedness) (the “Series 2 LRCNs” and together with the Series 1 LRCNs, the “LRCNs”).
The amendments are being proposed pursuant to CWB’s covenant in the transaction agreement for the Transaction to take certain corporate actions at the request of National Bank prior to the completion of the Transaction. The implementation of the proposed amendments will be conditional upon the completion of the Transaction, which requires approval by the Superintendent of Financial Institutions (Canada) and the Minister of Finance (Canada). The implementation of the proposed amendments is also subject to regulatory approvals and approval of the Toronto Stock Exchange (the “TSX”) to list the National Bank Preferred Shares (as defined below).
The Preferred Share Amendments
CWB has called a meeting of the (i) holders of the Series 5 Preferred Shares, and (ii) holders of the Series 9 Preferred Shares to approve certain amendments to the terms of the Preferred Shares (the “Preferred Share Amendments”).
The Preferred Share Amendments will make the Preferred Shares exchangeable, following the closing of the Transaction, into new First Preferred Shares of National Bank having substantially the same rights, privileges, restrictions and conditions as the Preferred Shares (the “National Bank Preferred Shares”), including the following:
| CWB Series 5 Preferred Shares to be exchanged for Series 47 National Bank Preferred SHARES | CWB Series 9 Preferred Shares to be exchanged for Series 49 National Bank Preferred SHARES | ||
| CWB Series 5 Preferred Shares | Series 47 National Bank Preferred Shares | CWB Series 9 Preferred Shares | Series 49 National Bank Preferred Shares |
Current Dividend Rate | 6.371% | 6.371% | 7.651% | 7.651% |
Rate Reset Spread | 276 bps | 276 bps | 404 bps | 404 bps |
Next Call Date | April 30, 2029 | April 30, 2029 | April 30, 2029 | April 30, 2029 |
CURRENTLY OUTSTANDING CREDIT RATINGS ON PREFERRED SHARES | ||
| CWB Series 5 and Series 9 Preferred Shares |
National Bank Preferred Shares |
DBRS | Pfd-3 (under review with positive implications) | Pfd-2 (Stable) |
Moody’s | Not Rated | Ba1 (hyb) (Under review for upgrade) |
Standard & Poor’s | Not Rated | P-3 (high) (Stable) |
The Preferred Share Amendments will be further described in the Notice of Meetings and Management Proxy Circular of CWB (the “Circular”) which will be mailed to holders of the Preferred Shares. Holders of the Preferred Shares are urged to read and carefully consider the information contained in the Circular.
The meeting of the holders of the Series 5 Preferred Shares and the meeting of the holders of the Series 9 Preferred Shares will be held on November 28, 2024 at 10:00 a.m. (Mountain Time). The record date for determining the holders of Preferred Shares entitled to vote at the respective meetings is October 24, 2024 at 5:00 p.m. (Mountain time). Holders of Preferred Shares entitled to vote at the respective meetings as of the record date shall have one vote for every Series 5 Preferred Share or Series 9 Preferred Share held by such holder, as applicable.
As will be described in the Circular, holders of the Preferred Shares are expected to benefit from receiving a security with substantially the same rights, privileges, restrictions and conditions issued by a larger organization. To facilitate the exchange process, subject to the Preferred Share Amendments coming into force, a consent fee of $0.50 per Preferred Share will be payable to the holders of Preferred Shares who vote, either in person or by proxy regardless of whether such vote is for or against the applicable Preferred Share Amendment.
The proposed amendments to the Series 5 Preferred Shares and to the Series 9 Preferred Shares require approval by the affirmative vote of at least two-thirds of the votes cast at a meeting of the holders of the Series 5 Preferred Shares and the Series 9 Preferred Shares, respectively, at which holders of not less than one-third of the Series 5 Preferred Shares and the Series 9 Preferred Shares, as applicable, then outstanding are present in person or represented by proxy (subject to lower quorum requirements at an adjourned meeting as will be described in the Circular).
The LRCN Amendments
CWB has commenced a solicitation of written consents from the (i) holders of the Series 1 LRCNs, and (ii) holders of the Series 2 LRCNs to approve certain amendments to the (i) trust indenture dated as of October 30, 2020 between CWB and Computershare Trust Company of Canada (“Computershare”), as trustee (the “Series 1 Indenture”), and (ii) trust indenture dated as of March 25, 2021 between CWB and Computershare, as trustee (the “Series 2 Indenture”, and together with the Series 1 Indenture, the “Indentures”), respectively (the “LRCN Amendments”).
The LRCN Amendments will make the LRCNs redeemable following the closing of the Transaction. The LRCN Amendments will be further described in the Consent Solicitation Statement (the “Solicitation Statement”) which will be mailed to holders of the LRCNs. Holders of the LRCNs are urged to read and carefully consider the information contained in the Solicitation Statement.
The record date for determining holders of LRCNs entitled to consent to the LRCN Amendments is October 16, 2024 at 5:00 p.m. (Mountain time). The proposed amendments to the Series 1 Indenture and to the Series 2 Indenture require the written consent of holders of a majority in principal amount of the outstanding Series 1 LRCNs and of holders of a majority in principal amount of the outstanding Series 2 LRCNs, respectively. The consent solicitation will expire at 5:00 p.m. (Mountain time), on November 28, 2024, unless otherwise extended or terminated by CWB. Please note that, for beneficial holders of LRCNs holding through intermediaries in the CDS depositary and clearing system, CDS participants may set deadlines for the return of consent instructions that are well in advance of this time.
As will be described in the Solicitation Statement, if the LRCN Amendments are approved and come into force by the execution of a supplemental indenture to each of the Indentures, CWB will pay a consent fee to the holders of Series 1 LRCNs as of the record date of the LRCNs equal to $33.00 per $1,000 principal amount of the Series 1 LRCNs held; provided that such consent fee will decrease to: (i) $23.00 per $1,000 principal amount if the LRCN Amendments only come into force after June 30, 2025 but on or before December 31, 2025; and (ii) $10.00 per $1,000 principal amount if the LRCN Amendments only come into force on or after January 1, 2026. Holders of Series 2 LRCNs as of the record date of the LRCNs will also be entitled to the payment of a consent fee equal to $27.00 per $1,000 principal amount of the Series 2 LRCNs held; provided that such consent fee will decrease to: (i) $21.00 per $1,000 principal amount if the LRCN Amendments only come into force after June 30, 2025 but on or before December 31, 2025; and (ii) $10.00 per $1,000 principal amount if the LRCN Amendments only come into force on or after January 1, 2026.
|
Consent Fee | |
Implementation of the LRCN Amendments | Series 1 | Series 2 |
On or before June 30, 2025 | $33.00 | $27.00 |
Between July 1, 2025, and December 31, 2025 | $23.00 | $21.00 |
On or after January 1, 2026 | $10.00 | $10.00 |
For Assistance or Further Information
The Preferred Shares: National Bank Financial Inc. is acting as Proxy Solicitation Agent, and Kingsdale Advisors is acting as the Proxy Solicitation and Information Agent for the Preferred Shares pursuant to meetings to be held on November 28, 2024. If you have any questions or need assistance, please contact Kingsdale Advisors by telephone at 1-866-851-3215 (toll-free in North America) or 1-437-561-5012 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com, or National Bank Financial Inc. at 416-869-6660, or by email at CWB_capital_reorganization@nbc.ca.
The LRCNs: National Bank Financial Inc. is acting as Solicitation Agent for the solicitations of consents, and Kingsdale Advisors is acting as Solicitation and Information Agent. Questions concerning the consent solicitation, requests for assistance in completing the consent or other requests for assistance should be directed to Kingsdale Advisors at 1-866-851-3215 (toll-free in North America) or 1-437-561-5012 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com, or to National Bank Financial Inc. at 416-869-8639, or by email at CWB_capital_reorganization@nbc.ca.