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SEC Filings
424B5
APOLLO COMMERCIAL REAL ESTATE FINANCE, INC. filed this Form 424B5 on 11/08/2017
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result of cash received in lieu of a fractional share of common stock). The U.S. Holder’s holding period in the common stock (other than shares attributable to accrued and unpaid interest) would include the holding period in the converted note.

Alternative treatments of the conversion of the notes into cash and common stock are possible. For example, the conversion of a note into cash and common stock may instead be treated for U.S. federal income tax purposes as in part a conversion into stock and in part a payment in redemption of a portion of the note. U.S. Holders should consult their tax advisors regarding the tax treatment of the receipt of cash and stock in exchange for notes upon conversion or repurchase, including any alternative treatments.

If a U.S. Holder receives cash in lieu of a fractional share of common stock, the U.S. Holder will be treated as if a fractional share were issued to the U.S. Holder and then the fractional share were immediately redeemed for cash. Accordingly, the U.S. Holder will recognize gain or loss equal to the difference between the cash received for the fractional share and that portion of the U.S. Holder’s tax basis in the common stock allocable to the fractional share. A U.S. Holder’s tax basis in a fractional share will be determined by allocating the holder’s tax basis in the common stock between the common stock received upon conversion and the fractional share, in accordance with their respective fair market values.

Any cash and the value of any portion of our common stock that is attributable to accrued and unpaid interest on notes not yet included in income by a U.S. Holder will be treated as interest income, as described above under “—Interest on the Notes”. A U.S. Holder’s tax basis in the common stock received with respect to accrued interest will equal the fair market value of such stock, and a U.S. Holder’s holding period with respect to such shares will commence on the day after the receipt of such stock.

Adjustments to Conversion Rate

The conversion rate is subject to adjustment under specified circumstances. In certain circumstances, a U.S. Holder may be deemed to have received a distribution of or with respect to our common stock. In certain circumstances, the failure to make an adjustment to the conversion rate may result in a taxable distribution to U.S. Holders if, as a result of such failure, the proportionate interest of such holder in our assets or earnings and profits is effectively increased. Adjustments to the conversion rate made pursuant to a bona fide reasonable adjustment formula which has the effect of preventing the dilution of the interest of U.S. Holders will generally not be deemed to result in a constructive distribution of our common stock. Certain of the possible adjustments provided in the notes (including, without limitation, adjustments in respect of taxable dividends to our stockholders) do not qualify as being made pursuant to a bona fide reasonable adjustment formula. If such adjustments are made, we intend to take the position that a U.S. Holder will be deemed to have received constructive distributions from us, even though such Holder has not received any cash or property as a result of such adjustments. The tax consequences of the receipt of a distribution from us with respect to our common stock are described in the accompanying prospectus under “U.S. Federal Income Tax Considerations—Taxation of Taxable U.S. Stockholders” and “U.S. Federal Income Tax Considerations—Taxation of Tax-Exempt U.S. Stockholders.”

Possible Effect of a Change in Conversion Consideration

In the event we undergo certain of the events described under “Description of Notes—Conversion Rights— Recapitalizations, Reclassifications and Changes of our Common Stock,” the conversion rate and the related conversion consideration may be adjusted such that you would be entitled to convert your notes into the stock (other than our common stock), other securities or other property or assets described in such section. Depending on the facts and circumstances at the time of such event, such adjustment may result in a deemed exchange of the outstanding notes, which may be a taxable event for U.S. federal income tax purposes. You should consult your tax advisor regarding the U.S. federal income tax consequences of such an adjustment.

 

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