VARIABLE INTEREST RATE DEBENTURES AND FOREIGN CURRENCY BORROWING

Definitions 1. In this Regulation, “currency risk” means the financial risk for a municipality associated with issuing debentures in any currency because of fluctuations in rates of exchange between the Canadian dollar and other currencies; (“risque de change”) “foreign currency debenture” means a debenture expressed and payable in a foreign currency; (“débenture en devise étrangère”) “interest rate risk” means the financial risk associated with issuing debentures because of fluctuations in interest rates; (“risque de taux d’intérêt”) “person” includes a firm or partnership within the meaning of the Partnerships Act; (“personne”) “variable interest rate debenture” means a debenture that provides for one or more variations in the rate of interest payable on the principal of the debenture debt, whether or not by reference to a method or standard for determining changes to interest rates, but does not include an extendible or retractable term debenture where a change of interest rate is authorized by by-law, a debenture issued to refund an outstanding other debenture at maturity, or a debenture where a change of interest rate is authorized by by-law and the council is of the opinion the change is necessary because the debentures remain unsold. (“débenture à taux d’intérêt variable”) O. Reg. 247/01, s. 1; O. Reg. 75/16, s. 1. Variable interest rate debentures 2. All municipalities are prescribed for the purposes of subsection 412 (5) of the Act. O. Reg. 275/02, s. 1. Condition 3. (1) A municipality shall not issue a debenture with a variable interest rate if the total amount of principal to be financed under the debenture plus the total outstanding principal of all other variable interest rate bank loans and variable interest rate debentures of the municipality would exceed 15 per cent of the total outstanding principal of all undertaking or work indebtedness of the municipality plus the total amount of principal to be financed under the debenture. O. Reg. 275/02, s. 2 (1). (2) The amounts in subsection (1) may be estimated by the treasurer of the municipality. O. Reg. 247/01, s. 3 (2). (3) The calculation required by subsection (1) may be made only as at a date as close as is practical to any one or more of the following dates: 1. The date the treasurer updates the municipality’s debt and financial obligation limit in respect of a work or class of work to be financed by the variable interest rate debenture. 2. The date the treasurer updates the municipality’s debt and financial obligation limit in respect of an increase or potential increase in expenditure for a work or class of work because of the use of the variable interest rate debenture. 3. The date the variable interest rate debenture is issued. O. Reg. 247/01, s. 3 (3). (4) In this section, “outstanding principal” means, (a) for a debenture with a sinking or retirement fund for the debenture, the difference between the principal amount of the debenture and the amount in the sinking or retirement fund, (b) any principal amount of a bank loan or a debenture, other than a debenture in clause (a), that has not been repaid, (c) any principal amount of temporary borrowing or advances for an undertaking, to be financed by or through long-term debt, that has not been repaid; (“tranche impayée du capital”) “undertaking or work indebtedness” means bank loan or debenture debt and temporary borrowing or advances for an undertaking to be financed by or through long-term debt. (“dettes relatives à des entreprises ou travaux”) O. Reg. 275/02, s. 2 (2); O. Reg. 75/16, s. 2. Agreements 4. (1) Subject to subsections (2) and (3), any municipality that has issued or plans to issue a variable interest rate debenture may enter interest rate exchange agreements for the debenture. O. Reg. 247/01, s. 4 (1). (2) Any municipality that has issued or plans to issue a fixed interest rate debenture may enter interest rate exchange agreements for the debenture only if it is also a foreign currency debenture. O. Reg. 247/01, s. 4 (2). (3) A municipality shall enter one or more replacement interest rate exchange agreements for an executed interest rate exchange agreement if a person other than the municipality who is party to the agreement or an assignee, (a) becomes bankrupt within the meaning of any bankruptcy or insolvency Act in force in Ontario; (b) is no longer in compliance with a rating or requirement under section 6; (c) defaults under the agreement; or (d) assigns the agreement or rights under the agreement to any person without the consent of the municipality. O. Reg. 247/01, s. 4 (3); O. Reg. 606/06, s. 1. (4) Any interest rate exchange agreement or agreements for a debenture shall, when read together, provide for the reduction of interest rate risk with respect to all or a portion of the interest payable under the debenture. O. Reg. 247/01, s. 4 (4). (5) Any interest rate exchange agreement or agreements for a debenture shall, when read together, require any amount of interest addressed by the agreement or agreements and payable by the municipality to any person under the agreement or agreements to be expressed as a specific and fixed Canadian currency amount. O. Reg. 247/01, s. 4 (5). Rating 5. On the date a municipality issues a variable interest rate debenture, either the municipality itself or all of its long-term debt obligations must be rated, (a) by Dominion Bond Rating Service Limited as “AA(Low)” or higher; (a.1) by Fitch Ratings as “AA-” or higher; (b) by Moody’s Investors Service, Inc. as “Aa3” or higher; or (c) by Standard and Poor’s as “AA-” or higher. O. Reg. 275/02, s. 3; O. Reg. 651/05, s. 1. Limitation 6. A municipality may only enter an interest rate exchange agreement with, (a) a person who has one or more debt obligations which on the date the agreement is entered are rated, (i) by Dominion Bond Rating Service Limited as “AA(Low)” or higher, (i.1) by Fitch Ratings as “AA-” or higher, (ii) by Moody’s Investors Service, Inc. as “Aa3” or higher, or (iii) by Standard and Poor’s as “AA-” or higher; or (b) a person whose obligations under the agreement are unconditionally guaranteed by a person described in clause (a). O. Reg. 247/01, s. 6; O. Reg. 275/02, s. 4; O. Reg. 651/05, s. 2. Foreign currency debentures 7. All municipalities are prescribed for the purposes of section 411 of the Act as municipalities that may issue foreign currency debentures. O. Reg. 275/02, s. 5. Prescribed currencies 8. The currencies set out in the Schedule are prescribed as foreign currencies in which foreign currency debentures may be issued under section 411 of the Act. O. Reg. 247/01, s. 8; O. Reg. 275/02, s. 6. Conditions for foreign currency debenture 9. A municipality may only issue a foreign currency debenture if, (a) it enters one or more foreign currency exchange agreements for the debenture on or before the date it issues the debenture; and (b) on the date the debenture is issued, either the municipality itself or all of its long-term debt obligations are rated, (i) by Dominion Bond Rating Service Limited as “AA(Low)” or higher, (i.1) by Fitch Ratings as “AA-” or higher, (ii) by Moody’s Investors Service, Inc. as “Aa3” or higher, or (iii) by Standard and Poor’s as “AA-” or higher. O. Reg. 247/01, s. 9; O. Reg. 275/02, s. 7; O. Reg. 651/05, s. 3. Restriction 10. (1) A municipality may only enter a foreign currency exchange agreement with, (a) a person who has one or more debt obligations which on the date the agreement is entered are rated, (i) by Dominion Bond Rating Service Limited as “AA(Low)” or higher, (i.1) by Fitch Ratings as “AA-” or higher, (ii) by Moody’s Investors Service, Inc. as “Aa3” or higher, or (iii) by Standard and Poor’s as “AA-” or higher; or (b) a person whose obligations under the agreement are unconditionally guaranteed by a person described in clause (a). O. Reg. 247/01, s. 10 (1); O. Reg. 275/02, s. 8; O. Reg. 651/05, s. 4. (2) A municipality may only enter a foreign currency exchange agreement for a foreign currency debenture. O. Reg. 247/01, s. 10 (2). Conditions for foreign currency exchange agreement 11. (1) Any foreign currency exchange agreement or agreements for a debenture shall, when read together, provide for the reduction of currency risk with respect to the entire amount of principal and interest payable under the debenture. O. Reg. 247/01, s. 11 (1). (2) Any foreign currency exchange agreement or agreements for a debenture shall, when read together, require any amount payable by the municipality to any person under the agreement or agreements to be expressed as a Canadian currency amount. O. Reg. 247/01, s. 11 (2). (3) Subject to subsection (4), a municipality may only enter a foreign currency exchange agreement for a debenture on or before the date the debenture is issued. O. Reg. 247/01, s. 11 (3). (4) A municipality shall enter a replacement foreign currency exchange agreement for an executed foreign currency exchange agreement if a person other than the municipality who is party to the agreement or an assignee, (a) becomes bankrupt within the meaning of any bankruptcy or insolvency Act in force in Ontario; (b) is no longer in compliance with a rating or requirement under section 10; (c) defaults under the agreement; or (d) assigns the agreement or rights under the agreement to any person without the consent of the municipality. O. Reg. 247/01, s. 11 (4); O. Reg. 606/06, s. 2. Report to council 12. If a municipality has any outstanding variable interest rate debentures or foreign currency debentures in a fiscal year, or any subsisting interest rate or foreign currency exchange agreements applicable to them, the treasurer of the municipality shall prepare and present to the municipal council once in that fiscal year, or more frequently if the municipal council so desires, a detailed report on all those debentures or agreements. O. Reg. 247/01, s. 12. Schedule Prescribed Currencies 1. Dollars of Australia. 2., 3. Revoked: O. Reg. 290/09, s. 1. 4. Yen of Japan. 5. Revoked: O. Reg. 290/09, s. 1. 6. Francs of Switzerland. 7. Sterling money of the United Kingdom. 8. Dollars of the United States of America. 9. The euro currency adopted by member states of the European Union. O. Reg. 247/01, Sched.; O. Reg. 290/09, s. 1.