Debentures

9 Months Ended

Nov. 30, 2024

DEBENTURES

3.00% Convertible Senior Notes

On January 29, 2024, the Company issued $200 million aggregate principal amount of 3.00% senior convertible unsecured notes (the “Notes” and, collectively with the Extension Debentures and 2020 Debentures, the “Debentures”) in an offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended.

The Notes are due on February 15, 2029 unless earlier converted, redeemed, or repurchased. Each $1,000 principal amount of the Notes is convertible into 257.5826 common shares of the Company based on the initial conversion rate, for a total of 52 million common shares at a price of $3.88 per share, subject to adjustments. Prior to the close of business on

the business day immediately preceding November 15, 2028, the Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding February 15, 2029. The Company may satisfy any conversions of the Notes by paying or delivering, as the case may be, cash, its common shares or a combination of cash and its common shares, at the Company’s election (or, in the case of any Notes called for redemption that are converted during the related redemption period, solely its common shares). Covenants associated with the Notes include general corporate maintenance, existence and reporting requirements. The Notes bear interest at a rate of 3.00% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2024.

The Company had recorded the Notes, including the debt itself and all embedded derivatives, at cost less debt issuance costs of $6 million and presents the Notes as a single hybrid financial instrument. No portion of the embedded derivatives required bifurcation from the host debt contract.

The following table summarizes the change in the Notes for the nine months ended November 30, 2024:


	Carrying Amount



Balance as at February 29, 2024	$	194
Amortization of debt issuance costs	1
Balance as at November 30, 2024	$	195

Extension Debentures and 2020 Debentures

On November 17, 2023, the Company issued $150 million aggregate principal amount of 1.75% extendible convertible unsecured debentures (the “Extension Debentures”) in a private placement to certain controlled affiliates of Fairfax Financial Holdings Limited (“Fairfax”). The Company used the net proceeds from the issuance of the Extension Debentures, together with cash on hand, to repay its outstanding $365 million aggregate principal amount of 1.75% unsecured convertible debentures (the “2020 Debentures” and, collectively with the Extension Debentures, the “Prior Debentures”) at maturity on November 13, 2023. Aside from the maturity date, the terms of the Extension Debentures were substantially identical to those of the 2020 Debentures, except that the Extension Debentures were not listed on any stock exchange and did not involve an indenture trustee. The Extension Debentures matured on February 15, 2024.

Due to the conversion option and other embedded derivatives within the Prior Debentures, the Company elected to record the Prior Debentures, including the debt itself and all embedded derivatives, at fair value and presented the Prior Debentures as a single hybrid financial instrument. No portion of the fair value of the Prior Debentures were recorded as equity.

Each period, the fair value of the Prior Debentures were recalculated and resulting gains and losses from the change in fair value of the Prior Debentures associated with non-credit components were recognized in income, while the change in fair value associated with credit components was recognized in accumulated other comprehensive loss (“AOCL”). The fair value of the 2020 Debentures was determined using the significant Level 2 inputs interest rate curves, the market price and volatility of the Company’s listed common shares, and the significant Level 3 inputs related to credit spread and the implied discount of the 2020 Debentures at issuance. The fair value of the Extension Debentures was determined using observable interest rate curves, and the market price and volatility of the Company’s common shares.

The following table shows the impact of the changes in fair value of the 2020 Debentures for the three and nine months ended November 30, 2024 and November 30, 2023:


	Three Months Ended				Nine Months Ended
	November 30, 2024		November 30, 2023		November 30, 2024		November 30, 2023







Income associated with the change in fair value from non-credit components recorded in the consolidated statements of operations	$	—	$	18	$	—	$	2

Realized losses associated with the change in fair value from credit components recorded in the consolidated statements of operations on maturity of the 2020 Debentures	—		(6)		—		(6)
Realized losses associated with the change in fair value from credit components released from AOCL on maturity of the 2020 Debentures	—		6		—		6
Total decrease in the fair value of the 2020 Debentures	$	—	$	18	$	—	$	2

For the three and nine months ended November 30, 2024, the Company recorded interest expense related to the Debentures of $1 million and $5 million, respectively, which has been included in investment income, net on the Company’s consolidated statements of operations (three and nine months ended November 30, 2023 - $1 million and $5 million).

Fairfax, a related party under U.S. GAAP due to its beneficial ownership of common shares in the Company after taking into account potential conversion of the Extension Debentures and the 2020 Debentures, respectively, owned the full principal amount of the Extension Debentures and $330 million principal amount of the 2020 Debentures. As such, the payment of interest on the Prior Debentures, and their repayment, to Fairfax represented related party transactions.