2017-0732001R3 XXXXXXXXXX

Principal Issues: Whether the payments on the Notes that are held by an arm’s length person will be subject to Part XIII tax under paragraph 212(1)(b).

Position: No.

Reasons: The payments on the Notes will constitute amounts paid or credited on account or in lieu of payment of, or in satisfaction of interest for the purposes of paragraph 212(1)(b).

Author: XXXXXXXXXX
Section: 212(1)(b)

XXXXXXXXXX                                                                                                                               2017-073200

XXXXXXXXXX, 2018

Dear XXXXXXXXXX:

Re:   XXXXXXXXXX
        Advance Income Tax Ruling Request
        XXXXXXXXXX

This is in reply to the letter of XXXXXXXXXX, in which your firm requested an Advance Income Tax Ruling (the “Ruling”) on behalf of the above-named taxpayer. We also acknowledge the information provided in subsequent correspondence in connection with your request (XXXXXXXXXX).

We understand that, to the best of your knowledge and that of the taxpayer involved, none of the issues involved in the Ruling request is:

(a)   in an earlier return of the taxpayer or a related person;

(b)   being considered by a Tax Services Office or Taxation Center in connection with a previously filed tax return of the taxpayer or a related person;

(c)   under objection by the taxpayer or a related person;

(d)   before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; or

(e)   the subject of a Ruling previously issued by the Directorate.

Unless specified otherwise, all statutory references herein are to provisions or parts of the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.) c. 1, as amended to the date hereof (the “Act”) and all references to monetary amounts are in Canadian dollars.

DEFINITIONS

(a)   “ACo” means XXXXXXXXXX;

(b)   “Additional Amount” has the meaning ascribed in paragraph 23 below;

(c)   “Administrative Action”  means any judicial decision, administrative pronouncement, published or private ruling, regulatory procedure, rule, notice, announcement, assessment or reassessment (including any notice or announcement of intent to adopt or issue such decision, pronouncement, ruling, procedure, rule, notice, announcement, assessment or reassessment);

(d)   XXXXXXXXXX;

(e)   XXXXXXXXXX;

(f)   “Common Shares” means the common shares described in paragraph 3 below;

(g)   “Conversion Ratio” means that number of Common Shares (rounding down, if necessary, to the nearest whole number of Common Shares) of ACo determined by the formula XXXXXXXXXX where XXXXXXXXXX is equal to the aggregate of (i) the Principal Amount of the Notes and (ii) the accrued and unpaid Interest thereon (except to the extent cancelled) to and including the date of the XXXXXXXXXX;

(h)   “Daily VWAP” means the volume-weighted average per share trading price for a particular day on the XXXXXXXXXX Stock Exchange or, if not then listed on that exchange, on another exchange or market chosen by the board of directors of ACo on which Common Shares are then traded, converted (if not denominated in XXXXXXXXXX dollars) into XXXXXXXXXX dollars at the Prevailing Rate on the day immediately prior to the date on which the XXXXXXXXXX occurs.  If no such trading prices are available, “Daily VWAP” shall be the fair value of the Common Shares as reasonably determined by the board of directors of ACo or the Floor Price (as defined below);

(i)   “Floor Price” means the XXXXXXXXXX dollar equivalent of a Canadian dollar amount per Common Share which is expected to be determined prior to the issuance of the applicable series of Notes (XXXXXXXXXX) converted into XXXXXXXXXX dollars at the Prevailing Rate on the day immediately prior to the date on which the XXXXXXXXXX occurs.  XXXXXXXXXX;

(j)   “Ineligible Person” means (i) any person whose address is in, or whom ACo or its transfer agent has reason to believe is a resident of, any jurisdiction outside of Canada to the extent that the issuance by ACo or delivery by the transfer agent to such person of Common Shares upon a XXXXXXXXXX;

(k)   “Interest” means the payments on the Notes contemplated by paragraph 8 below;

(l)   “Interest Payment Date” has the meaning ascribed by paragraph 8 below;

(m)   “Interest Period” means the period of time from an Interest Reset Date to the next occurring Interest Reset Date;

(n)   “Interest Reset Date” means approximately XXXXXXXXXX years following the day the applicable series of Notes are issued and a day that is every XXXXXXXXXX thereafter;

(o)   “Note” or “Notes” means the XXXXXXXXXX indebtedness to be issued by ACo as described in paragraph 4 below;

(p)   “Prevailing Rate” means, in respect of currencies on any day, the spot rate of exchange between the relevant currencies prevailing as at or about XXXXXXXXXX on that date;

(q)   “Principal Amount” has the meaning assigned by subsection 248(1) of the Act and, in respect of each series of Notes, means the fixed dollar denomination of each Note;

(r)   “Redemption Price” in respect of a Note means the aggregate of (i) the Principal Amount of the Note, and (ii) any accrued and unpaid Interest on the Note (except to the extent cancelled) to, but excluding, the date fixed for redemption;

(s)   “XXXXXXXXXX Date” means the date XXXXXXXXXX on which the applicable series of Notes (or any portion thereof) XXXXXXXXXX;

(t)   “XXXXXXXXXX Shareholder” means any person XXXXXXXXXX;

(u)   “XXXXXXXXXX Date” means a date that is a XXXXXXXXXX Date or a XXXXXXXXXX Date;

(v)   XXXXXXXXXX;

(w)   “XXXXXXXXXX Date” means the date on which ACo receives XXXXXXXXXX in Canada experienced in such matters (who may be counsel to ACo) to the effect that,

(i)   as a result of:

(A)   any amendment to, clarification of, or change (including any announced prospective change) in, the laws, or any regulations thereunder, or any application or interpretation thereof, of Canada or any political subdivision or taxing authority thereof or therein, affecting taxation,

(B)   any Administrative Action, or

(C)   any amendment to, clarification of, or change in, the official position with respect to or the interpretation of any Administrative Action or any interpretation or pronouncement that provides for a position with respect to such Administrative Action that differs from the theretofore generally accepted position,

XXXXXXXXXX

(x)   XXXXXXXXXX;

(y)   XXXXXXXXXX;

(z)   “Trust Indenture” means an indenture entered into between ACo and the Trustee, as supplemented from time to time; and

(aa)  “Trustee” means a trust company in XXXXXXXXXX acting as the trustee under the Trust Indenture or such other person or persons appointed from time to time as trustee under the Trust Indenture.

FACTS

1.    ACo is XXXXXXXXXX. It is a taxable Canadian corporation and a public corporation within the meaning of subsection 89(1) of the Act. XXXXXXXXXX.

2.    ACo’s registered address is XXXXXXXXXX and its executive offices are situated at XXXXXXXXXX. Its Taxation Centre is the XXXXXXXXXX Taxation Centre and its Tax Services Office is the XXXXXXXXXX Tax Services Office. ACo’s business number is XXXXXXXXXX.

3.    ACo’s authorized capital includes common shares (the “Common Shares”), which are widely held and traded on the XXXXXXXXXX, and an unlimited number of XXXXXXXXXX preferred shares XXXXXXXXXX, issuable in more than one series. The XXXXXXXXXX preferred shares may be issued in a foreign currency.

PROPOSED TRANSACTIONS

4.    Subject, inter alia, to the receipt of a favourable advance income tax ruling, ACo proposes to issue Fixed Rate XXXXXXXXXX Notes XXXXXXXXXX (the “Notes”) in one or more public offerings in one or more jurisdictions, including jurisdictions outside Canada, and including XXXXXXXXXX.

5.    Each series of Notes will be issued pursuant to the Trust Indenture. The Notes will be issued in denominations of a fixed dollar amount and integral multiples thereof and will be issued for an amount equal to or approximately equal to their Principal Amount. The Notes will not be an indexed debt obligation as defined in subsection 248(1). If issued at a discount, the issue price will not be less than XXXXXXXXXX% of their Principal Amount. ACo anticipates the offering to be for an aggregate amount of up to XXXXXXXXXX $XXXXXXXXXX.

6.    The Notes will constitute direct, unsecured obligations of ACo and rank XXXXXXXXXX to all of ACo’s XXXXXXXXXX liabilities and all of ACo’s other indebtedness (including all of ACo’s other unsecured and XXXXXXXXXX indebtedness) from time to time issued and outstanding, XXXXXXXXXX.

7.    Subject to the provisions of the XXXXXXXXXX, a holder of Notes will have no right to vote at any meeting of shareholders of ACo and will have no right to participate in the profits of ACo. In the event of ACo’s insolvency or winding-up, ACo’s XXXXXXXXXX indebtedness, including the Notes, will be XXXXXXXXXX in right of payment to the prior payment in full of all of ACo’s XXXXXXXXXX liabilities and all of ACo’s other indebtedness (including ACo’s XXXXXXXXXX indebtedness), except indebtedness which by its terms ranks equally in right of payment with, or is XXXXXXXXXX to, the particular XXXXXXXXXX indebtedness. The Notes will not be shares of the capital stock of ACo and will not be added to the stated capital of ACo.

Accrual and Payment of Interest

8.    The Notes will accrue a payment obligation from their date of issue at a rate which will reflect prevailing interest rates at the date of issue. From the date of issue to the first Interest Reset Date, the Notes will accrue a payment obligation at a fixed annual rate. The rate on the Notes will be reset on each Interest Reset Date to a rate equal to a fixed annual rate for the applicable Interest Period plus a spread. The payments on the Notes will be payable XXXXXXXXXX in arrears (the date on which a payment is scheduled to be made being an “Interest Payment Date”). No payment on the Notes will accrue or be payable after the date of a XXXXXXXXXX.

9.    ACo may, in its sole and absolute discretion at all times and for any reason, with prior notice to the holders of Notes, cancel (in whole or in part) any Interest that would otherwise be payable on any Interest Payment Date. Any cancelled Interest payments will not be cumulative.

10.   ACo will agree that, if on any Interest Payment Date, ACo does not pay in full the Interest on the Notes due on such Interest Payment Date (whether as a result of cancellation or otherwise), ACo will not (a) declare dividends on the Common Shares or its preferred shares, or (b) redeem, purchase or otherwise retire any Common Shares or its preferred shares (except pursuant to any purchase obligation, retraction privilege or mandatory redemption provisions attaching to any of its preferred shares), in each case, until the month commencing immediately after ACo resumes interest payments on the Notes.

Redemption

11.   Except as may be otherwise explicitly provided, the Notes will not be redeemable by ACo prior to the first Interest Reset Date.

12.   ACo may, at its option, XXXXXXXXXX and on giving notice to the holders of the Notes, redeem an outstanding series of Notes in whole, or in part, on or after the first Interest Reset Date by payment of an amount for each Note equal to the Redemption Price.

XXXXXXXXXX Redemption

13.   A series of Notes may contain a provision that, upon the occurrence of a XXXXXXXXXX Date, ACo may, at its option and without the consent of any holder of the Notes, XXXXXXXXXX and upon giving notice to the holders of the Notes, redeem all (but not part) of the outstanding series of Notes by the payment of an amount equal to the Redemption Price.

Purchase for Cancellation

14.   XXXXXXXXXX, ACo may, at any time, purchase Notes at any price or prices in the open market or otherwise. Notes so purchased by XXXXXXXXXX will be cancelled and will not be re-issued.

Conversion

15.   The Notes will not be convertible into any other property except as described below.

16.   XXXXXXXXXX, the Notes will be XXXXXXXXXX converted XXXXXXXXXX and as of the start of business on the date on which the XXXXXXXXXX occurs, into a number of fully-paid and freely-tradable Common Shares based on the Conversion Ratio. There is no assurance that the conversion formula would result in the issuance of Common Shares having a fair market value when issued equal to at least the Principal Amount of the Notes. Fractions of Common Shares will not be issued or delivered pursuant to a XXXXXXXXXX and no cash payment will be made in lieu thereof.

17.   In the event of a capital reorganization, consolidation, merger or amalgamation of ACo or comparable transaction affecting the Common Shares, ACo will take necessary action to ensure that Note holders receive, XXXXXXXXXX, the number of Common Shares or other securities that such holders would have received if the XXXXXXXXXX occurred immediately prior to the record date for such event.

18.   XXXXXXXXXX.

19.   XXXXXXXXXX ACo reserves the right not to deliver Common Shares to XXXXXXXXXX. In such circumstances, ACo will hold, as agent for such persons, the Common Shares that would have otherwise been delivered to such persons and will attempt to facilitate the sale of such Common Shares to parties other than ACo and its affiliates on behalf of such persons through a registered dealer to be retained by ACo on behalf of such persons. Those sales (if any) may be made at any time and at any price. The net proceeds received by ACo from the sale of any such Common Shares will be divided among the applicable persons in proportion to the number of Common Shares that would otherwise have been delivered to them upon the XXXXXXXXXX after deducting the costs of sale and any applicable withholding taxes.

20.   XXXXXXXXXX.

Events of Default

21.   An Event of Default in respect of the Notes will occur only if XXXXXXXXXX becomes insolvent or bankrupt or subject to the provisions of the XXXXXXXXXX, or any act that may be substituted therefor, as from time to time amended, or if XXXXXXXXXX goes into liquidation, either voluntary or under an order of a court of competent jurisdiction, passes a resolution for the winding-up, liquidation or dissolution of XXXXXXXXXX or otherwise acknowledges its insolvency. Neither the failure to make a payment on the Notes when due (including any Interest payment, whether as a result of cancellation or otherwise) XXXXXXXXXX will constitute an Event of Default. If an Event of Default has occurred, XXXXXXXXXX, the Principal Amount of, and accrued and unpaid Interest on, all of the Notes (except to the extent such unpaid interest was cancelled) will become immediately due and payable without any declaration or other act on the part of the Trustees or any holders of the Notes.

Maturity

22.   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.

Other Covenants

23.   If any payment under the Notes is subject to withholding under Part XIII of the Act, ACo will pay such Additional Amounts such that, after such withholding and any withholding on such additional amounts, the holder receives an amount equal to the amount it would have received had there been no such withholding.

ADDITIONAL INFORMATION

24.   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.

25.   The governing law of the Notes will be the laws of XXXXXXXXXX, except that the provisions relating to a XXXXXXXXXX and the XXXXXXXXXX provisions will be governed by the laws of XXXXXXXXXX and the laws of Canada applicable therein. The offering of the Notes will be subject to XXXXXXXXXX and XXXXXXXXXX securities laws and will be treated as a debt offering for purposes of such laws (and an offering of any Common Shares issuable pursuant to any XXXXXXXXXX).

PURPOSE OF THE PROPOSED TRANSACTIONS

26.   The purpose of the proposed transactions is to obtain financing to be used for general corporate purposes.

RULING

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions, and purpose of the proposed transactions, and provided further that the proposed transactions are carried out as described above, our Rulings are as follows:

(A)   The amounts described in paragraph 8, which are paid or credited by ACo as, on account or in lieu of payment of, or in satisfaction of interest on the Notes, will not be subject to Part XIII withholding tax under paragraph 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.

The above ruling is given subject to the limitations and qualifications set out in Information Circular 70-6R7 dated April 22, 2016 and are binding on the CRA.  In addition, the above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the rulings provided herein.

COMMENTS

Except as expressly stated, this advance income tax ruling does not imply acceptance, approval or confirmation of any income tax implications of the Facts or Proposed Transactions described herein.  For greater certainty, nothing in this letter should be construed as implying that we are ruling on any tax consequences other than those tax consequences specifically described in the rulings above and, without limiting the generality of the foregoing, the CRA is not ruling on:

(a)   the fair market value or adjusted cost base of any property or the paid-up capital of any shares referred to herein;

(b)   the payment of Additional Amounts as described in paragraph 23; and

(c)   the application of the debt forgiveness rules in the Act to ACo upon the occurrence of a XXXXXXXXXX as contemplated in  paragraph 16 above.

An invoice for our fees in connection with this ruling will be forwarded to you under separate cover.

Yours sincerely,

XXXXXXXXXX
for Director
Partnerships and Corporate Financing Section
Reorganizations Division
Income Tax Rulings Directorate

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