Exemption Orders (Discretionary)
DOMTAR INC.
2001 BCSECCOM 350
Headnote
Mutual Reliance Review System for Exemptive Relief Applications – Issuer is a “connected issuer,” but not a “related issuer,” of the registrants that are to act as underwriters in a proposed distribution of medium term notes of the Issuer – Issuer is not a “specified party” as defined in proposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts – Registrant underwriters exempted from independent underwriter requirements provided that, at the time of the distribution, the issuer is not a “specified party” as defined in the proposed Instrument, and, in the case of each registrant, is not a “related issuer.”
Applicable British Columbia Provisions
Securities Act,R.S.B.C. 1996, c. 418, s. 48
Securities Rules, B.C. Reg. 194/97, s. 78(2)(b)
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA, BRITISH COLUMBIA, NEWFOUNDLAND, QUÉBEC AND ONTARIO
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF DOMTAR INC.
AND
IN THE MATTER OF
NATIONAL BANK FINANCIAL INC.
TD SECURITIES INC.
BMO NESBITT BURNS INC.
RBC DOMINION SECURITIES INC.
SCOTIA CAPITAL INC.
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authority or regulator (the ”Decision Maker”) in each of Alberta, British Columbia, Newfoundland, Québec and Ontario (the “Jurisdictions”) has received an application from National Bank Financial Inc. (“NBF”), TD Securities Inc. (“TD”), BMO Nesbitt Burns Inc. ("Nesbitt"), RBC Dominion Securities Inc. ("RBC") and Scotia Capital Inc. ("Scotia") (collectively, the “Filers”) for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that the requirement (the ”Independent Underwriter Requirement") contained in the Legislation which restricts a registrant from acting as an underwriter in connection with a distribution of securities by an issuer made by means of a prospectus where the issuer is a connected issuer of the registrant unless a portion of the distribution at least equal to that portion underwritten by non-independent underwriters is underwritten by independent underwriters shall not apply to the Filers in respect of a proposed distribution (the "Offerings") of Medium Term Notes (the "Notes") by Domtar Inc. (the "Issuer") to be made by means of a short-form shelf prospectus (the "Prospectus"), such Prospectus to be supplemented by a Pricing Supplement for each specific Offering undertaken thereunder;
AND WHEREAS pursuant to the Mutual Reliance System for Exemptive Relief Applications (the “System”), the Commission des valeurs mobilières du Québec is the Principal Regulator for this application;
AND WHEREAS the Filers have represented to the Decision Makers that:
1. The Issuer is a corporation amalgamated under the Canada Business Corporations Act, whose head office is located in Montreal, Quebec.
2. The Issuer is a major North American integrated manufacturer and marketer of speciality and fine papers and a major eastern Canadian producer of forest products and pulp.
3. As of February 1, 2001, Domtar Industries Inc. (incorporated in Delaware) and Ris Paper Company, Inc. (incorporated in New York State) were the only significant wholly owned direct or indirect subsidiaries of the Issuer (the "Subsidiaries"). The Issuer also owns 50% of Norampac Inc., the largest Canadian manufacturer of containerboard and corrugated containers.
4. The Issuer is a reporting issuer under the securities legislation of each of the provinces of Canada. The Issuer's outstanding Common Shares are listed on the Toronto Stock Exchange and the New York Stock Exchange and its outstanding Series A Preferred Shares and Series B Preferred Shares are listed on the Toronto Stock Exchange.
5. The Issuer has a market capitalization in excess of $2.2 billion.
6. The Issuer intends to enter into a selling agency agreement (the "Agency Agreement") with a syndicate of investment dealers including the Filers.
7. Pursuant to the Agency Agreement, the Notes may be offered on a continuing basis by Issuer through the investment dealers, each of which has agreed to use its best efforts to solicit purchases of the Notes, directly or through other Canadian dealers.
8. Notes may also be sold to an investment dealer as principal in which case the obligations of such investment dealer as principal may, if agreed to by the applicable investment dealer and Issuer at the time of such sale, be subject to certain conditions and may be subject to the investment dealer's right to terminate such obligations at its discretion upon the occurrence of certain stated events.
9. Although the Agency Agreement and the Prospectus refer to the investment dealers (including the Filers ) as agents, such parties can be understood to be underwriters any of whom may agree from time to time to underwrite a given issuance of the Notes.
10. The Issuer will file a preliminary short-form shelf prospectus (the "Preliminary Prospectus") and the Prospectus with the securities regulatory authorities in each of the provinces of Canada in order to qualify the Notes for distribution in those provinces. Additionally, a Pricing Supplement will be incorporated by reference therein at the time of each specific Offering.
11. The Issuer currently has credit facilities, including a credit facility held by Norampac Inc. (collectively, the "Credit Facilities"), with Canadian chartered banks of which the Filers are direct or indirect subsidiaries (the "Related Banks"). As at February 19, 2001, the following amounts are outstanding under the Credit Facilities and are owed to the Related Banks:
National Bank of Canada $34.0 million
The Toronto-Dominion Bank $24.6 million
The Bank of Montreal $22.7 million
The Royal Bank of Canada $34.0 million
The Bank of Nova Scotia $22.7 million
$138 million
12. The maximum aggregate gross proceeds of the Offerings, before deducting the underwriters fees and expenses of the Offerings, are currently expected to be approximately $250 million or the equivalent in U.S. dollars.
13. The net proceeds of any Offering of Notes will be applied principally to repay outstanding indebtedness which was incurred for working capital purposes, to fund acquisitions and for the Issuer's ongoing capital expenditure program.
14. Accordingly, the Issuer may be considered a "connected issuer" (or equivalent) (within the meaning of the Legislation and Proposed Multi-Jurisdictional Instrument 33-105 – Underwriting Conflicts ("Proposed Instrument 33-105") of the Filers. The Issuer is not a "related issuer" (or equivalent) (within the meaning of the Legislation or Proposed Instrument 33-105) of the Filers.
15. It is expected that, in any given Offering, the underwriters will not comply with the proportional requirements of the Legislation.
16. The nature and details of the relationship between the Issuer, the Filers and the Related Banks will be described in the Preliminary Prospectus and the Prospectus as prescribed by Proposed Instrument 33-105, including, without limitation, the information specified in Appendix "C" of Proposed Instrument 33-105. The Preliminary Prospectus and the Prospectus will further contain a certificate signed by each underwriter in accordance with item 1.2 of Appendix A to National Instrument 44-102.
17. The Filers will receive no benefit relating to the Offerings other than the payment of their fees in connection therewith.
18. The decision to issue the Notes, including the determination of the terms of a given Offering, was made through negotiations between the Issuer and the underwriters without the involvement of the Related Banks.
19. The Filers have been advised that the Issuer is in good financial condition and that it is not a "specified party" within the meaning of the Proposed Instrument 33-105.
AND WHEREAS pursuant to the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the ”Decision”);
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the Decision has been met;
IT IS THE DECISION of the Decision Makers under the Legislation that the requirement contained in the Legislation which restricts a registrant from participating in a distribution of securities of a connected issuer shall not apply to the Filers in connection with the Offerings by the Issuer to be made by means of the Prospectus and the applicable Pricing Supplement(s) to be incorporated therein, provided that:
1. The Prospectus contains the information required by Appendix C to Proposed Instrument 33 -105; and
2. At the time of the Offerings:
(a) the Issuer is not a specified party (as defined in Proposed Instrument 33-105); and
(b) the Issuer is not a related issuer (as defined in the Legislation and in Proposed Instrument 33-105) of any of the Filers.
DATED at Montreal, this 6th day of March 2001.
Jean Lorrain
Directeur de la conformité et de l’application