CANADA Law and Practice Contributed by: Scott Hyman, Anthony Spadaro and David Wilson, Davies Ward Phillips & Vineberg LLP
Debt Securities Legal Opinions Opinions delivered by counsel to the issuer of debt securities are similar to those delivered in connection with a loan agreement; however, they would also cover customary securities law mat- ters, including that all necessary securities filings have been made to qualify the public distribution of the debt securities by way of a prospectus (or, in the case of a private placement, that a valid exemption from the prospectus require- ments can be relied upon), and an opinion that the securities have been validly issued. A subset of these opinions will also be delivered by the counsel to the underwriters for the offering. For a Canadian securities offering, it would be atypical for issuers’ and underwriters’ counsel to deliver negative assurance (or “10b-5” ) letters in respect of the disclosure in offering document. However, if the securities are also publicly offered in the United States, or if a sufficient amount of the securities are privately placed in the United States, it is standard practice for those negative assurance letters to be delivered. Acquisition financings in Canada are typically structured as senior secured debt, senior unse- cured debt or, less commonly, senior subordi- nated debt. Senior Secured Debt First-ranking secured term loans or bonds are the most common way to partially finance an acquisition in Canada. The lenders will take security over substantially all of the target’s real and personal property. It is also customary for the same or a similar lending syndicate to simul- taneously provide a new revolving credit facility 3. Structures 3.1 Senior Loans
notices and documents filed with the Quebec personal property security registry and land reg- istry offices must be in French. Although par- ties are still free to negotiate and sign English transaction documents and this is very much still the norm, parties are increasingly choosing to include some French language content with- in security documents and to have real estate transaction documents prepared in French in order to simplify the registration process and minimise translation risks. 2.4 Opinions Credit Agreement Legal Opinions A typical condition to closing under Canadian loan agreements is for the borrower’s counsel to deliver customary legal opinions addressed to the agent(s) and the lender(s). In a secured financing, opinions are typically obtained from counsel in the province in which the borrower is located, in the jurisdiction of the governing law of the transaction documents and in each province or territory in which the collateral is located. The opinions will cover customary corporate matters, including existence, due authorisation, execution and delivery and no breach of constating documents, as well as the enforceability of the relevant loan agreements, no breach of applicable laws and no regulatory consents or authorisations. If security is being taken, the opinions will also cover the validity of the security agreements and perfection by registration. If a share pledge is contemplated, the opinions also typically include issued and authorised share capital and perfection by con- trol. In Canada, opinions are generally provided only by borrowers’ counsel and not by lenders’ counsel (although regional practice may vary to some degree).
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