1999 1999-9927141 - Loss Utilization - XXXXXXXXXX

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Minor amendments to ruling - primarily to amounts to be borrowed - also, for regulatory reasons, transactions will be unwound on XXXXXXXXXX and reinstituted on XXXXXXXXXX

Position:				OK

Reasons:				Minor amendments

XXXXXXXXXX 						992714

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs:

Re: XXXXXXXXXX

XXXXXXXXXX

We are writing in response to your facsimile correspondence of XXXXXXXXXX in which you had requested certain amendments to the advance income tax ruling issued to your firm on XXXXXXXXXX, 1999 on behalf of the above referenced parties (our file 991460) (the "Ruling").

In this letter, all of the abbreviated terms refer to the terms as used in the Ruling. The Ruling is, accordingly, amended as follows:

1. The preamble to the Proposed Transactions as described in the Ruling is amended to read as follows:

The Proposed Transactions described in paragraphs 14 and 15, below, will occur on or prior to the date (the "Closing Date") of the issuance of the LPSub Note, as described in paragraph 17, below.

2. Paragraph 14 of the Ruling is amended by adding the following paragraph:

CCO will apply to the appropriate Court in XXXXXXXXXX for authorization to reduce its share capital by the amount of its deficit which reduction is expected to be approximately $XXXXXXXXXX. CCO will not distribute any amount to its shareholder in respect of this reduction in capital.

3. The first sentence of paragraph 16 of the Ruling is amended as follows:

LP will advance $XXXXXXXXXX to LPSub in consideration for a promissory note (the "LP Note").

4. Paragraph 17 of the Ruling is replaced as follows:

LPSub will advance $XXXXXXXXXX to BCO in consideration for a promissory note (the "LPSub Note").

The LPSub Note will mature on XXXXXXXXXX and will bear interest at a rate of XXXXXXXXXX% per annum. Principal repayments will be made until maturity as required by the terms of the LPSub Note.

The LPSub Note will have standard covenants, representations, warranties and conditions. The loan agreement will contain the specific term that BCO will apply cash flow received by it from the PARTNERSHIP and from CCO in the period prior to maturity, first to interest on the LPSub Note and then to the principal of the LPSub Note.

ACO will agree (the "Support Agreement") to fund all income and capital taxes which may become owing by BCO or CCO on or after XXXXXXXXXX. The Support Agreement will terminate if ACO ceases to be a shareholder of BCO and LPSub or its affiliate(s) becomes the sole shareholder(s) of BCO. ACO will also agree to ensure that BCO and CCO retain sufficient cash on hand to meet their estimated income and capital tax liabilities for the period prior to XXXXXXXXXX.

The terms of the LPSub Note will provide that the board of directors of BCO and of CCO will be comprised of XXXXXXXXXX members. XXXXXXXXXX members will be appointed by ACO and XXXXXXXXXX members by LPSub including the chairman. The chairman will have a casting vote on all matters except those matters relating to tax issues related to the transactions contemplated by the Proposed Transactions. On such matters a director appointed by ACO will have a casting vote. In order to meet its obligations as general partner of the PARTNERSHIP to manage and operate the Plant, CCO will enter into a management agreement with LP or an affiliate.

The LPSub Note will be secured by debentures of CCO and the PARTNERSHIP in support of their guarantees of the Loan (excluding amounts receivable from Numberco); a pledge of the shares of BCO by ACO: and a general security agreement given by BCO (excluding amounts receivable from Numberco) and BCO's pledge of its shares of CCO.

5. Paragraph 20 of the Ruling is replaced by the following:

BCO will use a portion of the remaining proceeds of the LPSub Note to return paid-up capital of its outstanding common shares to ACO in an amount not exceeding $XXXXXXXXXX.

6. Paragraph 21 of the Ruling is replaced by the following:

ACO will have the right to put all or a portion of the shares of BCO to LPSub or its assignee at a total aggregate price of $XXXXXXXXXX.

We also acknowledge the following information:

1. The Proposed Transactions described in paragraphs 29 through 34 of the Ruling will be undertaken on or about XXXXXXXXXX rather than XXXXXXXXXX as originally contemplated in the Ruling.

Also, XXXXXXXXXX, the preferred share and debt structure described in those paragraphs will be unwound on XXXXXXXXXX in the manner described in paragraphs 58 through 61 of the Proposed Transactions.

On XXXXXXXXXX, the structure will be in identical form by again undertaking the Proposed Transactions described in paragraphs 29 through 34 of the Ruling.

2. With the assistance of LP, the existing long-term debt of the PARTNERSHIP will be refinanced with new arm's length financial institutions. All of the proceeds from this refinancing (net of costs) will be used to repay the existing lenders to the PARTNERSHIP.

We confirm that the amendments and the additional information described herein will not affect the advance income tax rulings previously given provided that the transactions described in paragraphs 14 through 63 of the Ruling are implemented on or prior to XXXXXXXXXX.

We trust that this is the information which you require.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch