North American Palladium will be recapitalized through debt being exchanged for common shares

It is proposed that $345M of the debt of North American Palladium (including a fair amount of interest that accrued at a 19% rate) be exchanged under a Plan of Arrangement for treasury common shares, with the existing common shareholders thereby being diluted down to 2%. 10 days later, but also under the same Plan of Arrangement, the common shareholders will be issued rights (which will be listed on the TSX) to acquire further common shares. The two principal former debt holders (Brookfield and Polaris) will "backstop" the rights offering (so as to effectively guarantee that the target equity will be raised), but in a manner so as to comply with the s. 15(1)(c) safe harbor for rights offerings. Ineligible (non-North American) holders will not be permitted to exercise rights, which instead will be sold on their behalf.

No tax risk factors are disclosed (the debt forgiveness rules are too boring for words).

The exchanged debt would include an exchange of debentures (for which there is tax disclosure) and should qualify as a tax-free recapitalization for U.S. federal income tax purposes.

Neal Armstrong. Summary of under North American Palladium Circular under Other – Recapitalizations.