CANADA Law and Practice Contributed by: Scott Hyman, Anthony Spadaro and David Wilson, Davies Ward Phillips & Vineberg LLP
sions are included in the lenders’ financing com- mitments. Typical conditions Typical conditions in acquisition financing would be limited to the satisfaction of the conditions to the acquisition itself, without any waiver or amendment of the material terms and condi- tions. Other conditions would include that there is no material misrepresentation and no default prior to or upon completion of the acquisition. Both these conditions are sometimes them- selves materially limited by: • certain funds provisions; • the delivery of historical and pro forma finan- cial information related to the acquisition; • the execution and delivery of all documenta- tion related to the financing and the acquisi- tion; and • the payment of the lenders’ fees and expens- es. Of particular note is the determination that a material adverse change has not occurred. Whether this is a condition of the financing and the scope of such condition often depends on the conditions of completion of the underlying acquisition. If it is a condition of the underly- ing acquisition, it will often be a condition of the financing; however, the condition expressed in relation to the financing should mirror in scope and substance the condition in the acquisition, so that it is not broader – giving the acquisition lenders an out on the financing that does not exist under the acquisition. Debt Securities Canadian acquisitions may also be financed through the sale of debt securities by way of a prospectus offering or a private placement. Debt
securities may also be convertible into equity securities of the issuer. Documentation The primary documentation for an offering of debt securities includes the following: • the certificate representing the debt securities (referred to as the notes or the debentures); • the trust indenture governing those debt securities; and • an underwriting or agency agreement entered into with the dealers (as underwriters or agents) that will assist the issuer in its offering of the debt securities. In the case of a public offering, an offering docu- ment (the prospectus) is also necessary to qual- ify the offering. An offering document (referred to as an “offering memorandum” ) is also commonly provided to potential investors in a Canadian private place- ment. In addition to detailing the terms of the offered securities, the offering document (wheth- er a prospectus or an offering memorandum) will include or incorporate detailed information about the issuer’s business and affairs, including its financial statements and pro forma financial statements that give effect to the acquisition and financing. Information about the business to be acquired, including its financial statements, will The trust indenture is signed by the issuer and a trust company, appointed as trustee. This docu- ment sets out the terms of the debt securities, including the payment obligations set forth in the debt securities. An indenture may be “base” indenture, providing for the issuance of multiple series of debt securities from time to time, or a also be included. Trust indenture
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