Bank of Montreal 2008 Annual Report Download - page 136

Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
132 | BMO Financial Group 191st Annual Report 2008
Note 18: Subordinated Debt
The term to maturity and repayments of our subordinated debt required over the next five years and thereafter are as follows:
Redeemable
(Canadian $ in millions, Interest at our option Over 2008 2007
except as noted) Face value Maturity date rate (%) beginning in 1 year 2 years 3 years 4 years 5 years 5 years Total Total
Debentures Series 12 $ 140 December 2008 10.85 December 1998 $ 140 $– $– $– $– $ – $ 140 $ 140
Debentures Series 16 $ 100 February 2017 10.00 February 2012 (1) –––––100100100
Debentures Series 20 $ 150 December 2025 to 2040 8.25 not redeemable –––––150150150
Series A Medium-Term Notes
Tranche 2 $ 150 February 2013 5.75 redeemed ––––– – –150
Series C Medium-Term Notes
Tranche 1 $ 500 January 2015 4.00 January 2010 (2) –––––500500500
Tranche 2 $ 500 April 2020 4.87 April 2015 (3) –––––500500500
Series D Medium-Term Notes
Tranche 1 $ 700 April 2021 5.10 April 2016 (4) –––––700700700
Tranche 2 $1,200 June 2017 5.20 June 2012 (5) –––––1,200 1,200 1,200
Series F Medium-Term Notes
Tranche 1 $ 900 March 2023 6.17 March 2018 (6) –––––900900 –
$ 140 $ – $ – $ – $ – $4,050 $4,190(7) $3,440(7)
BMO Trust Subordinated Notes
Series A $ 800 September 2022 5.75 September 2017 (8) –––––800800800
Total $ 140 $ – $ – $ – $ – $4,850 $4,990 $4,240
(“SN Trust”). SN Trust is a variable interest entity which we are not
required to consolidate (see Note 9); therefore, the BMO TSNs –Series A
issued by SN Trust are not reported in our Consolidated Balance Sheet.
SN Trust used the proceeds of the issuance to purchase a senior deposit
note from us which is reported as a business and government deposit
liability in our Consolidated Balance Sheet. All of the BMO TSNs –Series A
will be exchanged automatically, without the consent of the holders,
into our Series E Subordinated Notes upon the occurrence of specific
events, such as a wind-up of Bank of Montreal, a regulatory requirement
to increase capital, violations of regulatory capital requirements or
changes to tax legislation.
We have guaranteed the payments of principal, interest and
redemption price, if any, and any other amounts on the BMO TSNs –
Series A when they become due and payable. This guarantee is
subordinate to our deposit liabilities and all other liabilities, except for
other guarantees, obligations or liabilities that are designated as ranking
either equally with or subordinate to the subordinated indebtedness.
The senior deposit note bears interest at an annual rate of 5.90%
and will mature on September 26, 2022.
(1) Redeemable at the greater of par and the Canada Yield Price after their redemption
date of February 20, 2012 until their maturity date of February 20, 2017.
(2) Redeemable at the greater of par and the Canada Yield Price prior to January 21, 2010,
and redeemable at par commencing January 21, 2010.
(3) Redeemable at the greater of par and the Canada Yield Price prior to April 22, 2015,
and redeemable at par commencing April 22, 2015.
(4) Redeemable at the greater of par and the Canada Yield Price prior to April 21, 2016,
and redeemable at par commencing April 21, 2016.
(5) Redeemable at the greater of par and the Canada Yield Price prior to June 21, 2012,
and redeemable at par commencing June 21, 2012.
(6) Redeemable at the greater of par and the Canada Yield Price prior to March 28, 2018,
and redeemable at par commencing March 28, 2018.
(7) Certain subordinated debt amounts recorded on our Consolidated Balance Sheet include quasi
fair value adjustments that increase their value by $125 million ($6 million in 2007) as they are
part of fair value hedges (see Note 10).
(8) Redeemable at the greater of par and the Canada Yield Price prior to September 26, 2017,
and redeemable at par commencing September 26, 2017.
Please refer to the offering circular related to each of the above issues for further details
on Canada Yield Price calculations and definitions of Government of Canada Yield.
Subordinated debt represents our direct unsecured obligations, in the
form of notes and debentures, to our debt holders and forms part of our
regulatory capital. The rights of the holders of our notes and debentures
are subordinate to the claims of depositors and certain other creditors.
We require approval from OSFI before we can redeem any part of our
subordinated debt.
During the year ended October 31, 2008, we issued Series F
Medium-Term Notes, Tranche 1, totalling $900 million. We redeemed
all of our 5.75% Debentures, Series A Medium-Term Notes,
Tranche 2,
due 2013, totalling $150 million. The debentures were redeemed
at a redemption price of 100% of the principal amount plus unpaid
accrued interest to the redemption date. During the year ended
October 31, 2007, we issued Series D Medium-Term Notes, Tranche 2,
totalling $1.2 billion. We redeemed our $150 million Series 22
Debentures. Our US$300 million 7.80% Notes matured. There were
no gains or losses on any of our redemptions.
During the year ended October 31, 2007, we issued $800 million
of innovative subordinated debentures, BMO Trust Subordinated
Notes (BMO TSNs –Series A), through BMO Subordinated Notes Trust