Osler Update: ASC Rules on Conflicting Components of Recapitalization Transactions

A common feature of many convertible debenture indentures is the ability of the issuing company to repay the debentures at maturity by issuing shares. The financial challenges faced by many oil and gas companies in today’s markets are likely to result in an increase in repayments of convertible debentures in this fashion. This was the situation with Perpetual Energy Inc. (Perpetual). Perpetual recently announced that it would repay a series of its convertible debentures by issuing shares as part of a series of recapitalization transactions which included a dilutive rights offering that holders of debentures were not permitted to participate in. Several of Perpetual’s debentureholders challenged the rights offering at the Alberta Securities Commission (the ASC) by attempting to have the rights offering cease traded. The ASC declined the challenge and on January 5, 2016, it released the reasons for its decision. Read more.
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