Explosive M&A Growth in Canada’s Capital-intensive Financial Services Industry: Torys LLP Report


Yet more traditional financial service transactions also remain on the rise, especially in areas such as banking, wealth management, insurance, loan portfolios and loyalty agreements. With long-term, stable and “fixed” returns on capital in financial services, the report says it expects this “high activity trend to continue as market participants don’t want to miss out on opportunities. growth ”.

Seville says the “new deals” are also shaping capital markets within financial institutions. New structures used to raise capital, including “capital limited notes” offered by Canadian banks (RBC, BMO and TD among them) and life insurers (Great-West Lifeco) to institutional investors.

The structure of these offers consisted of two instruments: highly subordinated interest-bearing LRCNs issued to investors; and perpetual and non-cumulative preferred shares issued to a trust to satisfy the recourse of the holders of LRCN upon the occurrence of certain prescribed remedies.

The structure of an LRCN offered by Scotiabank in June 2021 added a twist – the instrument issued to the trust is a perpetual note rather than a perpetual preferred share. Perpetual Notes rank higher than Perpetual Preferred Shares, and this is reflected in the Potential Non-Viability Principal Multiplier (NVCC) on Perpetual Notes of 1.25 versus 1.0 on Perpetual Preferred Shares.

Scotiabank also recently became the first Canadian financial institution to offer LRCN denominated in US dollars with its October 2021 offer of US $ 600 million of Series 2 Notes at 3.635 per cent of LRCN. The report states that the underlying perpetual notes are a “tax-advantaged instrument to be issued on a cross-border basis”.


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