Eagle Credit Card -- summary under Credit Card Receivables item
Overview
The Trust is proposing the securitization of credit card receivables generated by President's Choice Bank ("PC Bank" - a Sched. I bank wholly-owned by Loblaw) from PC Mastercard credit cards. The Trust will issue different series of credit card receivables-backed notes (the "Notes"), which will have recourse only to an undivided co-ownership interest in a revolving pool of credit card receivables generated under by PC Bank and certain related assets (a “Series Co-Ownership Interest”) – and the Note proceeds will be used to acquire that co-ownership interest form PC Bank. PC Bank will continue to service the receivables. As contrasted, for example, to the recent short form base prospectus of Glacier Credit Card Trust for Canadian Tire credit card receivables, the “Originator” (i.e., PC Bank) can, at its option, elect that the receivables will be sold to the Trust at a discount (rather than at par) to their principal amount. The tax disclosure contemplates that this discount would in effect be passed through as a discount on the issue price for the Notes, and indicates whether the discounts would be taxable on an accrual or receivable basis could depend on “the facts and circumstances giving rise to the discount.”
Trust
Is governed by the laws of Ontario.
Series Co-Ownership Interest
Consists of an undivided co-ownership interest in and to the Custodial Assets, an interest in any credit enhancement relating to the purchased Series Co-Ownership Interest and an interest in funds on deposit in certain accounts relating to the purchased Series Co-Ownership Interest. Pursuant to the terms of the Pooling and Servicing Agreement, the Custodian agrees to hold the Custodial Assets as agent and bailee for the benefit of the Originator and each of the Co-Owners who owns a Series Co-Ownership Interest. The residual undivided co-ownership interest in the Custodial Assets which is not sold by the Originator is the "Retained Interest."
Obligors
The customers who use the accounts and persons who are liable for amounts due under account. When an Obligor makes a purchase of goods or services or receives a cash advance using a credit card issued by the Originator, the Obligor is obligated to pay the Originator the full cost of the goods or services purchased or the amount advanced, which in turn creates a Receivable. If an Obligor does not pay their entire statement balance in full within the permitted grace period, interest will be payable on all Principal Receivables, including in respect of all previously billed and unpaid purchases appearing on the Obligor's statement. Interest payable in respect of Receivables is included in what is referred to as "Finance Charge Receivables."
Receivables
The "Receivables" included in the Account Assets are the aggregate amounts (being all Finance Charge Receivables and Principal Receivables) charged to related Accounts. The Account Assets will be generated from transactions made by Obligors using PC Mastercard credit cards. “Custodial Assets" refers to the Account Assets together with the Collection Account and all funds on deposit therein and Eligible Investments thereof including all present and future Receivables existing or arising under such Account.
Terms of Co-Ownership Agreement
In connection with each sale to a Co-Owner of a Series Co-Ownership Interest, the Co-Owner will enter into a Series Co-Ownership Agreement, pursuant to which the Co-Owner will purchase, and the Originator or another Co-Owner will sell, transfer, assign and convey to it, a Series Co-Ownership Interest as of the date specified therein. Each Series Co-Ownership Interest will constitute an undivided co-ownership interest in the Custodial Assets purchased pursuant to the Series Co-Ownership Agreement (and related Assignment Agreement, if any) entitling the Co-Owner to those rights and benefits set out in the Pooling and Servicing Agreement and in the related Series Co-Ownership Agreement. Neither the Originator nor any Co-Owner will have a separate interest in any Receivable under any particular Account. The Retained Interest is not a Series Co-Ownership Interest
Calculation of Co-Ownership Interest
Each Co-Owner's proportionate interest in the Account Assets will be calculated by reference to its "Invested Amount". The Invested Amount of each Series will initially be equal to the amount specified as such in the related Series Co-Ownership Agreement (and set out in the applicable pricing supplement) and, for each Settlement Date thereafter, the amount, in dollars, equal to:
(a) the Initial Invested Amount or the Invested Amount of the Series on the immediately preceding Settlement Date, as applicable;
plus,
(b) the aggregate purchase price of any related Supplemental Series Co-Ownership Interests transferred to the related Co-Owner during the related Settlement Period or on such Settlement Date (other than any Supplemental Series Co-Ownership Interest transferred to the related Co-Owner in consideration of the payment to the Originator of a related Series Reserve Draw or, if so provided in the related Series Co-Ownership Agreement, a related Series Enhancement Draw);
plus,
(c) the related Invested Amount Recoveries for the related Settlement Period, if any;
minus,
(d) the amount, if any, by which (i) the related Invested Amount Writedowns (less any amount calculated in (e)(ii)) for the related Settlement Period; exceeds (ii) the aggregate purchase price of any related Supplemental Series Co-Ownership Interests transferred to the related Co-Owner on such Settlement Date pursuant to the Pooling and Servicing Agreement in consideration of the payment to the Originator of a related Series Enhancement Draw or Series Reserve Draw;
minus,
(e) the sum of (i) the aggregate amounts deposited on (or, if so specified in the related Series Co-Ownership Agreement, before) such Settlement Date to the related Distribution Account or, if and to the extent specified in the related Series Co-Ownership Agreement, another related Series Account, in order to fund Principal Payments in respect of such Series; (ii) the aggregate amount of any related Series Reserve Draws or Series Enhancement Draws the proceeds of which have (x) been deposited to the related Distribution Account on such Settlement Date on account of Invested Amount Writedowns; and (y) not paid to the Originator on account of the purchase price of a related Supplemental Series Co- Ownership Interest; and (iii) the aggregate amount of any reimbursements made in accordance with the related Series Co-Ownership Agreement in respect of Series Enhancement Draws on such Settlement Date.
Servicer/PC Bank
PC Bank has been appointed as the initial Servicer. PC Bank is a Schedule I Canadian chartered bank and is a wholly-owned subsidiary of Loblaw. Pursuant to the Pooling and Servicing Agreement, the Servicer will be required to service and administer the Account Assets, and make all required remittances, deposits, withdrawals and transfers with respect to the Collection Account and the Series Accounts.
Revolving Period
During the Revolving Period for each Series, the related Co-Owner will receive only sufficient distributions to satisfy its interest payment obligations and certain of its expenses and other obligations specified in the related Series Co-Ownership Agreement.
Discount Option
The Pooling and Servicing Agreement provides that the Originator may at any time, upon at least 30 days' prior written notice, designate a specified fixed or variable percentage (the "Discount Option Percentage") of the amount of Receivables arising in the Accounts on and after the date such option is exercised that otherwise would have been treated as Principal Receivables to be treated as Finance Charge Receivables (each, a "Discount Option Receivable"). In effect, if such option is exercised by the Originator, the Principal Receivables are treated as having been assigned by the Originator at a discount. The result of such discounting treatment is to increase the yield on the Co-Owners' undivided co-ownership interest in the Accounts beyond the actual income performance of the Accounts.
Canadian tax conseqences
Interest
Interest on the Notes will be recognized by a resident holder under the usual s. 12(1)(c), (3) and (4) rules.
Discounts
If the Notes are purchased by a resident Holder at a discount from their face value, the resident Holder may be required to include an additional amount in computing its income, either in taxation years in which such amount accrues or in a taxation year in which the discount is received or receivable by the resident Holder. Resident Holders should consult their own tax advisors in these circumstances as the treatment of the discount may vary with the facts and circumstances giving rise to the discount.
Non-residents
Interest paid by the Trust to a non-resident Holder will be exempt from Canadian non-resident withholding tax unless all or any portion of such interest (other than interest on a "prescribed obligation") is contingent or dependent on the use of or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class or series of shares of the capital stock of a corporation (a "Participating Debt Interest"). A "prescribed obligation" is a debt obligation the terms or conditions of which provide for an adjustment to an amount payable in respect of the obligation for a period during which the obligation was outstanding which adjustment is determined by reference to a change in the purchasing power of money and no amount payable in respect thereof, other than an amount determined by reference to a change in the purchasing power of money, is contingent or dependent upon, or computed by reference to, any of the criteria described in the preceding sentence.