National Bank of Canada Announces NVCC AT1 Limited Recourse Capital Notes Offering

Not for distribution to U.S. news wire services or for dissemination in the United States.

National Bank of Canada (“National Bank”) today announced that it has entered into an agreement with a group of agents led by National Bank Financial Inc. for the issuance of $500 million of Limited Recourse Capital Notes, Series 1 (Non-viability Contingent Capital (NVCC)) (Subordinated Indebtedness) (the “Notes”). 

The Notes will bear interest at a rate of 4.300% annually, payable semi-annually, for the initial period ending on but excluding November 15, 2025. Thereafter, the interest rate on the Notes will reset every five years at a rate equal to the prevailing 5-year Government of Canada Yield plus 3.943%. The Notes will mature on November 15, 2080.  

Concurrently with the issuance of the Notes, National Bank will issue Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares, Series 44 (non-viability contingent capital (NVCC)) (the “Series 44 Preferred Shares”) to be held by Computershare Trust Company of Canada as trustee for a newly-formed trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the Notes when due, the recourse of each Note holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of Series 44 Preferred Shares except in limited circumstances.

National Bank may redeem the Notes during the period from October 15 to and including November 15, commencing in 2025 and every five years thereafter, only upon the redemption by National Bank of the Series 44 Preferred Shares held in the Limited Recourse Trust, in accordance with the terms of such shares and with the prior written approval of the Superintendent of Financial Institutions (Canada) (the “Superintendent”), in whole on not less than 15 nor more than 60 days’ prior notice.

The purpose of the sale of the Notes is to enlarge National Bank’s Tier 1 capital base with a view to optimizing National Bank’s capital structure within the parameters prescribed by the Superintendent for bank capital requirements. The net proceeds from the sale of the Notes will be added to National Bank’s general funds and will be utilized for general banking purposes. The expected closing date is on or about September 9, 2020. National Bank intends to file in Canada a prospectus supplement to its August 17, 2020 base shelf prospectus in respect of this issue.

The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or under any state securities laws, and may not be offered, sold, directly or indirectly, or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. This press release shall not constitute an offer to sell or a solicitation to buy securities in the United States.