By Marisa Wong
Los Angeles, Oct. 6 – Bank of Montreal sold $375 million of additional 0% MicroSectors Gold Miners 3x leveraged exchange-traded notes due June 29, 2040 linked to the S-Network MicroSectors Gold Miners index, according to a 424B2 filing with the Securities and Exchange Commission.
Bank of Montreal plans to issue up to $1,375,000,000 aggregate principal amount, representing 5.5 million notes with a principal amount of $250 each.
The issuer priced the initial $4 million principal amount of notes at par of $25 on Dec. 2, 2020. A 1-for-10 reverse split was effected on Oct. 31, 2022.
Prior to issuance of the latest add-on, there was $1 billion principal amount of the notes outstanding. The newest $375 million of notes were issued on Oct. 3.
The issuer said it may sell a portion of the notes in the future at variable prices.
The underlying index is a total return index that tracks the performance of two exchange-traded funds, the VanEck Vectors Gold Miners ETF and the VanEck Vectors Junior Gold Miners ETF.
The return on the ETNs is linked to a three times leveraged participation in the daily performance of the index.
The payout at maturity will be a cash payment in dollars equal to the average of the closing indicative note values on each of the 10 trading days from and including June 13, 2040, subject to a floor of zero.
The indicative note value on the initial trade date was $25. On any subsequent business day, the closing indicative note value will equal (a) the long index amount on that day minus (b) the financing level on that day. However, if that calculation results in a value less than or equal to zero, the closing indicative note value will be zero. If the closing indicative note value is zero on any business day or the intraday indicative value falls to or below zero at any time on any day, then the indicative note value on all future days will be zero. If the indicative note value is zero, the cash settlement amount will be zero.
On Oct. 31, 2022, the issuer effected a 1-for-10 reverse split of the notes. The closing indicative value of the notes on Oct. 28, 2022 was multiplied by 10 to determine the reverse split-adjusted indicative note value.
On the initial trade date, the long index amount was equal to the daily leverage factor, which is 3, times the principal amount, which equaled $75. On any subsequent day until maturity, the long index amount will equal the product of (a) the closing indicative note value on the immediately preceding day times (b) 3 times (c) the index performance factor on that day.
The index performance factor was 1 on the initial trade date. On any subsequent day, the index performance factor will equal (a) the index closing level on that day (or, if that day is not a business day, the index closing level on the immediately preceding day) divided by (b) the index closing level on the immediately preceding day.
On the initial trade date, the financing level was equal the long index amount minus the principal amount, which equaled $50. On any subsequent day, the financing level will equal (a) the closing indicative note value on the immediately preceding day times the daily financing factor of 2 plus (b) the daily financing charge on that day plus (c) the daily investor fee on that day.
The daily financing charge was initially zero. On any day after the initial trade date, the daily financing charge will equal the product of (a) the closing indicative note value on the immediately preceding day times (b) 2 times (c) the daily financing rate, which is equal to the Federal Reserve Bank prime loan rate plus 225 basis points, divided by (d) 365 times (e) the number of calendar days since the last business day. The financing spread may be adjusted from time to time but will not be more than 500 bps.
The daily investor fee was initially zero. On any day after the initial trade date, the fee will equal the product of (a) the indicative note value at the close of the immediately preceding day times (b) the 0.95% divided by (c) 365 times (d) the number of calendar days since the last business day.
The notes are putable at any time, subject to a minimum redemption amount of 25,000 notes and a 0.125% redemption fee amount. The notes are also callable in whole or in part at any time.
The notes are listed on the NYSE Arca under the ticker symbol “GDXU.”
BMO Capital Markets Corp. is the agent.
| Issuer: | Bank of Montreal
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| Issue: | MicroSectors Gold Miners 3x leveraged ETNs
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| Underlying index: | S-Network MicroSectors Gold Miners index
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| Amount: | $1,375,000,000 (5.5 million notes)
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| Maturity: | June 29, 2040
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| Coupon: | 0%
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| Price: | Par of $250 (originally $25 per note, adjusted after 1-for-10 reverse split effective on Oct. 31, 2022)
|
| Payout at maturity: | Average of the closing indicative note values on each of the 10 trading days from and including June 13, 2040, subject to a floor of zero
|
| Indicative note value: | $25 on the initial trade date; on any subsequent business day, (a) the long index amount on that day minus (b) the financing level on that day
|
| Long index amount: | $75 on initial trade date; on any subsequent day, the product of (a) the closing indicative note value on the immediately preceding day times (b) 3 times (c) the index performance factor on that day
|
| Index performance factor: | 1 on the initial trade date; on any subsequent day, (a) the index closing level on that day (or, if that day is not a business day, the index closing level on the immediately preceding day) divided by (b) the index closing level on the immediately preceding day
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| Financing level: | $50 on the initial trade date; on any subsequent day, (a) the closing indicative note value on the immediately preceding day times the daily financing factor of 2 plus (b) the daily financing charge on that day plus (c) the daily investor fee on that day
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| Daily financing charge: | Initially zero; on any day after the initial trade date, (a) the closing indicative note value on the immediately preceding day times (b) 2 times (c) the Prime rate plus 225 bps divided by (d) 365 times (e) the number of calendar days since the last business day
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| Daily investor fee: | Initially zero; on any day after the initial trade date, (a) the indicative note value at the close of the immediately preceding day times (b) the 0.95% divided by (c) 365 times (d) the number of calendar days since the last business day
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| Put option: | At any time, subject to a minimum redemption amount of 25,000 notes and a 0.125% redemption fee amount
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| Call option: | In whole or in part at any time
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| Initial level: | 1,566.56
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| Initial trade date: | Dec. 2, 2020
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| Settlement date: | Dec. 7, 2020 for initial $4 million; Oct. 3 for latest $375 million
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| Agent: | BMO Capital Markets Corp.
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| Fees: | None
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| Cusip: | 063679542
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| Listing: | NYSE Arca: GDXU
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