H&R REIT -- summary under Restapling

Overview

The units of the REIT are stapled to those of Finance Trust. Finance Trust holds notes of the indirect U.S. subsidiary of H&R REIT (“U.S. Holdco”). Finance Trust is intended to qualify as a fixed investment trust for Code purposes, so that its unitholders are treated as if they held such notes directly. This avoids the U.S. earnings stripping limitations on the level of permitted interest deductions by U.S. Holdco as well as to a significant extent accessing the U.S. portfolio interest exemption from U.S. withholding tax. U.S. acquisitions by U.S. Holdco were funded with loans from H&R REIT. In order that much of this additional debt can access the benefits of the stapled structure, the REIT and Finance Trust are proposing an Alberta Plan of Arrangement under which Finance Trust will make a s. 107.4 transfer of its notes of U.S. Holdco to the REIT and, following the replacement of those notes and some of the newer debt with amended notes, and the distribution to the unitholders of units of a new fixed investment trust with nominal assets (the “F17 Trust”), the amended notes will be transferred by the REIT under s. 107.4 to the F17 Trust. Thus, there will be a replacement stapled structure similar to what was there before, except that the new Finance Trust (F17 Trust) will hold more U.S. Holdco debt. The repayment of a “significant amount” of the existing loans owing by U.S. Holdco to H&R REIT through the issuance of the additional notes in amended form is anticipated to generate a significant FX gain, but not so as to produce a result which is out of line with 2016, when significant capital gains also were pushed out to the H&R REIT unitholders. Implementation of this Arrangement is conditional on receiving rulings from CRA.

See full summary under Other – Releveragings.