Decision taken to transfer assets, loan shares concerning Olds Fibre, O-NET


“Ultimately, if the OFL defaults on the loan, the city (of Olds) is still liable for payments on the debenture,” Olds’ chief financial officer said.

OLD — City Council has formally decided how the transfer of specific assets will be incorporated into Olds Fiber Ltd. (OFL), which operates as O-NET.

The board made this decision at its March 14 meeting. A bylaw formally implementing the decision is expected to be submitted to council shortly.

The move includes not only assets, but also OFL share repurchase/repurchase and a loan between the town of Olds and OFL, valued at a total of approximately $14 million.

On October 1, 2021, the Town of Olds entered into a purchase and sale agreement with the receiver of the Olds Institute for Community and Regional Development (OICRD).

At this time, specific assets of the OICRD were incorporated into Olds Fiber Ltd. (OFL), which operates as O-NET. OFL became the Municipality-Controlled Corporation (MCC) of the Town of Olds on October 1, 2021, with the Town of Olds purchasing all of the shares of OFL from the Receiver.

OFL operates as O-NET, the community-owned internet, television and telephone service provider.

In an email, Acting City of Olds Chief Financial and Administrative Officer Sheena Linderman said the council’s decision “simply formalizes how we would structure the transfer of assets into the MCC (OFL)” .

She said that as a result, OFL will owe the town of Olds approximately $14 million.

Linderman was asked if city ratepayers were still responsible for reimbursing that $14 million after the council’s decision.

“Ultimately, if the OFL defaults on the loan, the town (of Olds) is still liable for payments on the debenture,” Linderman wrote. “The difference now being that the Town of Olds owns 100% of the shares of OFL, which means we own assets, not just debt.

Option 1 was to transfer the assets for a $14 million loan. A benefit of this move would be that the Town of Olds would receive the same semi-annual payment it had previously received.

“It would have implications for OFL,” Linderman wrote, noting that the loan would be for $14 million but the assets are valued at $9.1 million.

She wrote that a downside to this option is that the OFL would be “highly leveraged”, meaning the total debt would likely be greater than the total value of the shares.

Option 2 has been described above. Linderman noted that in this case, too, OFL would be heavily strained.

The benefit, as noted in the town diary, is not only that the town of Olds receives the same semi-annual payment that it received before, but also that the OFL payments to the town of Olds would be pre-tax, meaning the interest would be tax deductible for OFL.

Linderman said option 3 involved a loan of $10.1 million, the transfer of assets and the repurchase of part of the shares.

Under this option, the Town of Olds could create a loan document to cover the debenture payments. However, $3.9 million would still be owed.

“It could potentially be covered by dividends, but there are no guarantees with dividends,” Linderman’s email said.

Once again the concern was that OFL would be heavily indebted.

Option 4 was to donate the assets.

The benefits would be that the town of Olds would receive dividends and the debt ratio would improve OFL’s financial statements.

The downside would be that the dividends are in after-tax dollars. OFL should record the assets as a gift which would then be taxable.


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