Hedging agreements
5. (1) In this section, “hedging agreement” means an agreement to minimize the risks associated with making payments in a foreign currency under a cross border lease or any related service agreement and to minimize any costs associated with the making of such payments, and includes a foreign currency exchange agreement, deposit agreement and pledge, payment undertaking, assumption agreement, forward payment agreement, payment arrangement agreement and any other similar financial instrument; “payment arrangement agreement” means a hedging agreement entered into in connection with a cross border lease or a related service agreement under which either or both of the following are provided for: 1. Payments in amounts equal to all or part of the payments required to be made by the City under the lease or the related service agreement, and in the same currency as is required for those payments under the lease or the related service agreement, shall be made to the lessor under the lease or to the service provider named in the related service agreement by a person named in the payment arrangement agreement on behalf of the City at the times the lease or related service agreement payments are due. 2. Funds or securities are set aside for the sole purpose of allowing the City, or a person on the City’s behalf, to make all or part of the payments that the City is required to make under the lease or related service agreement at the times they are due under the lease or related service agreement, where the funds or securities set aside are to be, i. in the same currency as the currency in which the payments are required to be made under the lease or the related service agreement, and ii. in an amount which, together with interest earnings on such funds or securities, will be sufficient to make the payments. O. Reg. 157/03, s. 5 (1). (2) A hedging agreement made by the City in connection with a cross border agreement or a related service agreement is prescribed, for the purposes of section 401 of the Act, as a financial agreement that a municipality may enter in relation to a debt that arises out of cross border lease agreement or a related service agreement. O. Reg. 157/03, s. 5 (2). (3) A hedging agreement made by the City in connection with a cross border agreement or a related service agreement is deemed to be a debenture for the purposes of section 411 of the Act and may require that payments made under the hedging agreement be expressed and made in a foreign currency set out in the Schedule. O. Reg. 157/03, s. 5 (3). (4) For greater certainty, a regulation made under section 411 of the Act with respect to debentures shall not apply to a hedging agreement that is deemed to be a debenture under subsection (3). O. Reg. 157/03, s. 5 (4). (5) Despite subsection (3), a hedging agreement, other than a hedging agreement referred to in subsection (6), shall require that any payments of fixed unconditional amounts made by the City shall be expressed and payable in Canadian currency. O. Reg. 157/03, s. 5 (5). (6) A hedging agreement may provide for payments of fixed unconditional amounts to be expressed and payable in a foreign currency set out in the Schedule if, (a) the hedging agreement provided for, or was conditional on, the City receiving an amount in the particular foreign currency that is equal to the total amount of such payments the City is required to make under the agreement prior to the beginning of the payment obligations under the agreement; or (b) the hedging agreement is a payment arrangement agreement. O. Reg. 157/03, s. 5 (6). (7) A cross border lease and all the hedging agreements entered into in connection with the cross border lease, when read together, shall provide for the reduction of currency risk with respect to the entire amount of fixed unconditional payments under the lease. O. Reg. 157/03, s. 5 (7). (8) A related service agreement and all the hedging agreements entered into in connection with the related service agreement, when read together, shall provide for the reduction of currency risk with respect to the entire amount of fixed unconditional payments under the agreement. O. Reg. 157/03, s. 5 (8).