F-10/A: South Bow Corporation Files Amendment for Senior Notes Exchange Offer to Enhance Liquidity

South Bow USA Infrastructure Holdings LLC, with guarantees from South Bow Corporation, is conducting an exchange offer for $3.65 billion in senior notes to register them under the U.S. Securities Act, aiming to improve liquidity for holders.

Summary

• Amendment No. 1 to the Registration Statement on Form F-10 and Form S-4 was filed on July 3, 2025, to complete preliminary material for an exchange offer.
• The exchange offer is for U.S.$700,000,000 aggregate principal amount of 4.911% Senior Notes due 2027, U.S.$1,000,000,000 aggregate principal amount of 5.026% Senior Notes due 2029, U.S.$1,250,000,000 aggregate principal amount of 5.584% Senior Notes due 2034, and U.S.$700,000,000 aggregate principal amount of 6.176% Senior Notes due 2054, totaling U.S.$3.65 billion.
• The New Notes will be registered under the U.S. Securities Act, removing transfer restrictions and certain additional interest provisions, and will bear different CUSIP numbers from the Initial Notes.
• The exchange offer is open until 5:00 p.m., New York City time, on August 4, 2025, unless extended, and is not conditioned upon any minimum principal amount of Initial Notes being tendered.
• No proceeds will be raised from the exchange offer; Initial Notes surrendered will be retired and cancelled, evidencing the same continuing indebtedness.
• South Bow Corporation commenced independent operations on October 1, 2024, following the spinoff of TC Energy Corporation's Liquids Pipelines business segment.
• South Bow's business primarily consists of crude oil pipeline and terminal assets across Canada and the U.S., along with non-regulated marketing activities.

Sentiment

Score: 6

Explanation: The document is primarily a technical filing for a debt exchange offer, fulfilling a prior agreement. The registration of notes is a positive for liquidity for noteholders. However, the extensive disclosure of inherent risks related to the company's substantial indebtedness, structural subordination, and external factors (economic, regulatory, tax) prevents a higher score. The slight decrease in earnings coverage ratio and net income in the most recent interim period also contributes to a neutral-to-slightly-positive sentiment rather than a strong positive.

Positives

• The New Notes will be registered under the U.S. Securities Act, which removes transfer restrictions and is expected to improve liquidity for holders.
• The exchange offer fulfills obligations under a Registration Rights Agreement, demonstrating adherence to prior commitments.
• The exchange of Initial Notes for New Notes is not expected to constitute a taxable exchange for U.S. federal income tax purposes or Canadian federal income tax purposes for holders.

Negatives

• Initial Notes not tendered or accepted in the exchange offer will continue to be subject to transfer restrictions and are expected to have substantially limited liquidity.
• No active trading market is established for the New Notes, and there is no intention to list them on any securities exchange or automated quotation system, which could adversely affect market price and liquidity.
• The Company and Guarantors have substantial indebtedness, which could make it more difficult to satisfy obligations and limit flexibility.
• New Notes are structurally subordinated to all existing and future indebtedness and other liabilities of subsidiaries that do not guarantee the New Notes.
• New Notes are effectively subordinated to any secured debt incurred by the Company or Guarantors.
• The Indenture governing the New Notes does not limit the ability of the Company or Guarantors to incur additional unsecured indebtedness that may rank equally.
• The Company has the right to redeem some or all New Notes prior to maturity, potentially at times when prevailing interest rates are low, making reinvestment at comparable rates difficult for holders.
• Any future lowering of credit ratings for the Company or South Bow would likely make it more difficult or expensive to obtain additional debt financing.
• Recent Canadian tax legislation, including the 2% corporate level Equity Repurchase Tax and the EIFEL Provisions limiting interest deductibility, could adversely impact South Bow's business, financial condition, and results of operations.
• The issuance and payments under the New Notes and Guarantees may be subject to review under U.S. federal and state fraudulent transfer and conveyance statutes, potentially voiding obligations.
• Enforcement of civil liabilities under U.S. federal securities laws may be difficult for U.S. holders against Canadian-resident officers, directors, or assets located outside the U.S. due to differences in legal jurisdiction.

Risks

• Substantial indebtedness of the Company and Guarantors could make it more difficult to satisfy their respective obligations, impair their ability to obtain additional financing, reduce funds available for operations, limit flexibility, and increase vulnerability to economic downturns and interest rate increases.
• Structural subordination means the New Notes are effectively subordinated in right of payment to all indebtedness and other obligations and liabilities of subsidiaries that do not guarantee the New Notes.
• The Company and Guarantors are holding companies and depend on dividends and other distributions from their respective subsidiaries, which may be limited by contractual provisions or laws.
• Effective subordination to secured debt means holders of secured debt would have prior claims on assets constituting collateral, potentially leaving less for New Note holders in an insolvency event.
• Lack of restrictions on additional indebtedness means the Company and Guarantors can incur more unsecured debt ranking equally, potentially reducing the amount New Note holders receive in bankruptcy.
• Lack of an active trading market for the New Notes may adversely affect their market price and liquidity, making it difficult for holders to sell at a favorable price.
• The Company's right to redeem New Notes prior to maturity means holders may not be able to reinvest redemption proceeds at an effective interest rate as high as that of the New Notes.
• Any future lowering of credit ratings for the Company or South Bow could make it more difficult or expensive to obtain additional debt financing, and a rating is not a recommendation to buy, sell, or hold securities.
• Proposed and recently enacted tax legislation in Canada, including the Equity Repurchase Tax and the EIFEL Provisions, could have an adverse impact on South Bow's business, financial condition, and results of operations.
• The issuance of, and payments made under, the New Notes and Guarantees may be subject to review under U.S. fraudulent transfer laws, potentially leading to the voiding of obligations or subordination of the New Notes.
• Canadian bankruptcy, insolvency, and restructuring laws could delay or prevent the enforcement of remedies by Trustees under the Indenture, and holders may not be compensated for delays.
• Difficulty for U.S. holders to effect service of process or enforce U.S. judgments against Canadian-resident directors, officers, or experts, or against assets located outside the U.S.
• Initial Notes not exchanged will continue to be subject to transfer restrictions, and their trading market is expected to become substantially limited, potentially affecting their market price and volatility.
• Failure to properly follow exchange offer procedures could result in Initial Notes not being accepted for exchange, leaving holders with illiquid, restricted notes.
• Broker-dealers reselling New Notes may be deemed underwriters and must deliver a prospectus, potentially incurring liability under the U.S. Securities Act.

Future Outlook

Forward-looking statements include expectations regarding the market for the New Notes following the exchange offer, estimated expenses of the exchange offer, and expectations related to the Guarantors. The company also provides a financial outlook for 2025 and beyond, including normalized EBITDA, interest expenses, distributable cash flow, and capital expenditures. Further expectations cover anticipated dividends and shareholder returns, the impact of debt reduction on financial resilience and growth initiatives, future financing options, demand for uncommitted capacity on assets, access to and cost of capital, and costs and schedules for planned projects like the Blackrod Connection project. The company also anticipates regulatory processes and outcomes, legal proceedings outcomes (including arbitration and insurance claims), and the expected impact of future legal and accounting changes, including tariffs. Finally, expectations are provided for industry, market, and economic conditions and their impact on the company, its customers, and suppliers.

Management Comments

• South Bow believes that its tax filings positions are appropriate and supportable.
• The New Notes issued pursuant to the exchange offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is a broker-dealer or an affiliate of the Company or a Guarantor within the meaning of Rule 405 under the U.S. Securities Act) without compliance with the registration and prospectus delivery provisions of the U.S. Securities Act.

Industry Context

South Bow Corporation operates as an energy infrastructure company, specializing in crude oil pipeline and terminal assets across Canada and the U.S. This filing, an amendment to a registration statement for a debt exchange offer, is a standard corporate finance activity for publicly traded companies. It reflects the company's ongoing efforts to manage its capital structure and ensure compliance with securities regulations following its spinoff from TC Energy Corporation, positioning itself as an independent entity in the North American liquids pipelines sector.

Legal Proceedings

• Forward-looking statements include expectations regarding outcomes with respect to legal proceedings, including arbitration and insurance claims.
• Risks include regulatory decisions and outcomes of legal proceedings, including arbitration and insurance claims.
• Permitted liens include those imposed by law or order as a result of any proceeding before any court or regulatory body that is being contested in good faith, and liens which secure a judgment or other court-ordered award or settlement where appellate rights have not been exhausted.

Related Party Transactions

• Upon completion of the Spinoff Transaction, escrowed funds were released to South Bow and used to repay indebtedness owed by South Bow and its subsidiaries to TC Energy and its subsidiaries.

Stakeholder Impact

• **Shareholders**: The spinoff transaction distributed South Bow common shares to TC Energy shareholders. Future dividends and other returns to shareholders are mentioned as forward-looking statements. The exchange offer itself does not directly impact shareholders, but the improved liquidity of the notes could indirectly benefit the company's financial standing.
• **Noteholders (Initial Notes)**: Holders who participate in the exchange offer will benefit from the removal of transfer restrictions and potentially improved liquidity for their New Notes. Holders who do not participate will continue to hold Initial Notes subject to transfer restrictions and are expected to face substantially limited liquidity.
• **Creditors**: The company's substantial indebtedness and the structural and effective subordination of the New Notes to other liabilities are relevant to creditors. The exchange offer is a re-registration of existing debt, not a new capital raise, and does not alter the total indebtedness.

Next Steps

• The exchange offer is expected to close on August 4, 2025, unless extended.
• New Notes will be delivered promptly following the expiration date of the exchange offer.
• The Company will use reasonable efforts to maintain credit ratings from at least two nationally recognized statistical rating organizations.
• South Bow will continue to assess the potential application of the Equity Repurchase Tax and the EIFEL Provisions, recent Canadian tax legislation.

Key Dates

Recommendation

Keywords

South Bow Corporation, South Bow USA Infrastructure Holdings LLC, SEC filing, F-10/A, S-4, exchange offer, senior notes, debt, corporate bonds, U.S. Securities Act, registration rights, liquidity, energy infrastructure, crude oil pipelines, Canada, U.S., financial reporting, risk management, corporate governance, Spinoff Transaction, TC Energy Corporation