The Toronto-Dominion Bank (TD) is offering Callable Fixed Rate Notes due August 11, 2031, with a fixed interest rate of 5.25% per annum. Interest will be paid on the 11th calendar day of each August, commencing on August 11, 2027, and ending on the Maturity Date or Optional Call Date (if applicable).
Key Features and Risks:
- Callable: TD has the option to redeem the Notes on any Optional Call Date, potentially before the Maturity Date.
- Credit Risk: Investors are subject to TD's credit risk, and a decrease in TD's credit ratings or an increase in credit spreads could adversely affect the Notes' market value.
- Bail-inable: The Notes are bail-inable debt securities under the Canada Deposit Insurance Corporation (CDIC) Act. In the event of a CDIC intervention, the Notes may be converted into common shares of TD or its affiliates, potentially resulting in a loss of investment.
- Early Redemption: The Notes can be redeemed early by TD if the interest rate on the Notes is higher than the interest rate on comparable instruments in the market.
- Liquidity Risk: The Notes may not have an active secondary market, and selling them before maturity could result in significant losses due to high transaction costs and potential discounts from the Issue Price.
- Taxation:
- U.S. Federal Income Tax: The Notes are expected to be treated as indebtedness for U.S. federal income tax purposes, with interest payments taxed as ordinary income. Gain or loss upon disposition may be treated as capital gain or loss.
- Canadian Federal Income Tax: For non-resident holders, interest payments are generally not subject to Canadian non-resident withholding tax unless they meet certain conditions. Dividends paid on common shares acquired upon conversion are subject to a 25% withholding tax.
Underwriting and Distribution:
- TD Securities (USA) LLC, an affiliate of TD, is acting as the agent for the sale of the Notes.
- The Underwriter may initially buy or sell the Notes in the secondary market at a price exceeding the secondary market value for a temporary period due to potential cost reimbursements to investors.
- TD Securities (USA) LLC will receive a commission of up to $33.50 per Note.
- The Notes are not intended for retail investors in the European Economic Area (EEA) or the United Kingdom (UK).
Investment Considerations:
- Investors should carefully consider the risks associated with the Notes, particularly credit risk, bail-in risk, and liquidity risk.
- Consultation with investment, legal, tax, and accounting advisors is recommended to assess the suitability of the Notes based on individual circumstances.
