BK.PR.A: Term Extension

The company wrote to shareholders in October, 2011:

You are invited to a special meeting (the “meeting”) of shareholders of Canadian Banc Recovery Corp. (the “Company”) to be held at 10:00 am (Eastern standard time) on Thursday, November 3, 2011 at the offices of Blake, Cassels & Graydon LLP, 199 Bay Street, 40th floor, Commerce Court West, Toronto, Ontario.

The primary purpose of the meeting is to consider and vote upon a special resolution that would allow shareholders to maintain their investment beyond the scheduled termination date of December 1, 2012.

If the special resolution is approved, the termination date would initially be extended to December 1, 2018.

The Information Circular was published.

The vote was favourable:

Class A Shareholders voted 98.3% in favour of the resolution and Preferred Shareholders voted 86.9% in favour of the resolution, and therefore the resolution to extend the termination date to December 1, 2018 and to provide holders with the Special Retraction Right and all other resolution items was approved at the meeting held earlier today.

The company decided not to call any preferreds:

In order to maintain the requirement that the same number of each class of shares remain outstanding after completion of the Special Retraction, it is expected that any required equalization adjustments will be done by making an adjustment to the number of Class A shares outstanding. Any such adjustment to the number of Class A shares held by each Class A investor will not affect the value of their investment.

Preferred shareholders lost a big chunk of downside protection:

This special retraction right allowed both classes of shareholders to tender one or both classes of shares and receive a retraction price based on the December 30, 2011 net asset value per Unit ($10 per Preferred Share, $10.68 per Class A Share and $20.68 per Unit, as applicable). In aggregate, there were more Class A shares tendered for retraction than Preferred shares. Since Canadian Banc is required to maintain an equal number of shares outstanding for each Class as per the prospectus, the Company must increase the Class A shares to match the number of Preferred shares.

Immediately after the special retraction payment on January 16, 2012, there will be 6,772,453 Preferred shares and 5,737,131 Class A shares outstanding. In order to restore an equal amount of shares outstanding for each Class, Class A shareholders on record as at January 17, 2012 will receive approximately 1.180459885 Class A shares for each Class A share outstanding. The increase in shares (subdivision) is a non taxable event.

DBRS notes:

Canadian Banc Recovery Corp.: On November 3, 2011, Canadian Banc Recovery Corp. (the Company) announced that 98.3% of Class A shareholders and 86.9% of preferred shareholders had approved the extension of the termination date of the Company by an additional six years from December 1 2012, to December 1, 2018. Holders of the Class A shares and preferred shares were provided with a special retraction right that would allow them to retract their shares on December 1, 2012, as originally intended if they do not wish to continue participating. This resolution also allows the Board of Directors to provide subsequent fi ve-year termination date extensions along with the same retraction rights to shareholders without the need to hold a special shareholder meeting. The Board will also be able to adjust dividend distributions for future extensions to refl ect market conditions at that time.

BK.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

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