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Debentures | 3 Months Ended
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May 31, 2024
Debt Disclosure [Abstract] |
Debentures | 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 “2020 Debentures” (as defined below), 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 will 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 three months ended May 31, 2024:
|  | Carrying Amount
Balance as at February 29, 2024 |  | 194 |  |
Amortization of debt issuance costs |  | — |  |
Balance as at May 31, 2024 |  | $ | 194 |  |
2020 Debentures On September 1, 2020, Hamblin Watsa Investment Counsel Ltd., in its capacity as investment manager of Fairfax Financial Holdings Limited (“Fairfax”), and another institutional investor invested in the Company through a $365 million private placement of debentures (the “2020 Debentures”). The 2020 Debentures matured on November 13, 2023. Due to the conversion option and other embedded derivatives within the 2020 Debentures, the Company elected to record the 2020 Debentures, including the debt itself and all embedded derivatives, at fair value and presented the 2020 Debentures as a single hybrid financial instrument. No portion of the fair value of the 2020 Debentures was recorded as equity. Each period, the fair value of the 2020 Debentures was recalculated and resulting gains and losses from the change in fair value of the 2020 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 following table shows the impact of the changes in fair value of the Debentures for the three months ended May 31, 2024 and May 31, 2023:
|  | Three Months Ended |  |
|  | May 31, 2024 |  | May 31, 2023 |  |  |  |
Charge associated with the change in fair value from non-credit components recorded in the consolidated statements of operations |  | $ | — |  |  | $ | (22) |  |  |  |  |
Total increase in the fair value of the 2020 Debentures |  | $ | — |  |  | $ | (22) |  |  |  |  |
For the three months ended May 31, 2024, the Company recorded interest expense related to the Debentures of $2 million, which has been included in investment income, net on the Company’s consolidated statements of operations (three months ended May 31, 2023 - $2 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 2020 Debentures, owned $330 million principal amount of the 2020 Debentures. As such, the payment of interest on the 2020 Debentures to Fairfax represented a related party transaction.

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- Definition The entire disclosure for long-term debt. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 470 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/470/tableOfContent + Details
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