Canexus -- summary under Convertible Debentures
General
Offering by the Corporation of $75 million of 6.5% convertible unsecured subordinated debentures at their principal amount ($1,000 per debenture), with a maturity date of December 31, 2021 and convertible at a conversion price of $6.50 per common share. The interest is payable semi-annually in arrears. The Debentures have been conditionally approved for listing on the TSX.
Cash payment option
Provided it gives notice at least one business day prior to the conversion date, the Corporation has the option, upon a holder electing to convert, to pay in cash (based on the 10-day VWAP of the Corporation's common shares on the TSX commencing on the third day following the conversion date) in lieu of delivering shares.
Redemption/Share payment
The debentures are optionally redeemable by the Corporation during the two-year period following December 31, 2017 if the market price of the common shares (as defined) exceeds 125% of the conversion price - or earlier, on a change of control. Thereafter, they may be redeemed at par. On redemption or maturity, the Corporation may repay the principal amount by delivering common shares whose number is based on a 5% discount to the shares' market price, as computed (being a 20-day VWAP ending on the 5th preceding trading day).
Change of control
In the event of a Change of Control (as defined and including a sale of substantially all the assets), the Corporation is required to offer to purchase debentures for cash at 101% of the principal amount (plus accrued and unpaid interest). Furthermore, if there is a Change of Control occurring on or before December 31, 2019 in which 10% or more of the consideration consists of cash or non-traded securities, then commencing 10 days before the effective date of the Change of Control and up until 30 days after the above Debenture offer is made, holders on conversion will be entitled to receive not only the stipulated number of common shares but also a make-whole premium (generally paid in common shares) interpolated from a table disclosed in the prospectus.
Interest payment option
The Corporation may elect to satisfy its interest obligation in shares, in which event the sole right of the holder will be to receive cash from the Debenture Trustee from the proceeds of the sale of such common shares.
The Corporation
The Corporation is an Alberta corporation which is the successor to the Canexus Income Fund. It produces sodium chlorate and chlor-alkali products largely for the pulp and paper and water treatment industries and also provides trans-loading services.
Canadian tax consequences
Conversion. A resident holder who converts a Debenture into common shares pursuant to the conversion privilege will be deemed not to have disposed of the Debentures. Where the Corporation pays cash pursuant to the cash conversion option, the resident holder will be considered to have disposed of the debentures for such cash consideration (except any interest received in satisfaction of interest).