Exemption Orders (Discretionary)
CIBC WORLD MARKETS INC.
2001 BCSECCOM 546
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 common shares 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 requirement 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 BRITISH COLUMBIA, ALBERTA, ONTARIO, QUEBEC AND NEWFOUNDLAND
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF CIBC WORLD MARKETS INC. AND
BANC OF AMERICA SECURITIES CANADA CO.
AND
ODYSSEY RE HOLDINGS CORP.
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authority or regulator (the “Decision Maker”) in each of British Columbia, Alberta, Ontario, Quebec and Newfoundland (the “Jurisdictions”) has received an application from CIBC World Markets Inc. and Banc of America Securities Canada Co. (together, the “Applicants”) 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 of an issuer made by means of prospectus, where the issuer is a connected issuer (or the equivalent) of the registrant unless a portion of the distribution at least equal to that portion underwritten by non-independent underwriters is underwritten by an independent underwriter, shall not apply to the members of an underwriting syndicate in connection with a proposed distribution (the “Offering”) of common shares by Odyssey Re Holdings Corp. (the “Issuer”) to be made pursuant to a PREP prospectus and a supplemented PREP prospectus (together, the “Prospectus”);
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS the Applicants and the Issuer have represented to the Decision Makers that:
1. The principal offices of the Applicants are in Ontario.
2. The Issuer was incorporated on March 21, 2001 under the laws of Delaware, U.S.A., and is not currently a reporting issuer, or the equivalent, in any province of Canada.
3. Under a reorganization to be completed in connection with the Offering (the “Reorganization”), Fairfax Finance Holdings Limited (“Fairfax”) will cause the shares of certain of its operating subsidiaries to be transferred to the Issuer in consideration for a combination of shares of the Issuer, a cash payment and the issue of term debt. Following completion of such Reorganization, the Issuer will be a United States based underwriter of reinsurance providing property and casualty products on a worldwide basis.
4. Following completion of the Offering, it is anticipated that the common shares of the Issuer will be listed on the Toronto Stock Exchange and the New York Stock Exchange and that the Issuer will become a reporting issuer, or equivalent, in each province of Canada.
5. The Issuer will continue to be controlled by Fairfax following completion of the Offering.
6. Fairfax maintain approximately Cdn$1.25 billion of unsecured lines of credit (the “CreditFacilities”) extended by a number of Canadian and foreign banks (collectively, the “Lenders”). Although a portion of the available amounts under the Credit Facilities has been committed for the issuance of letters of credit, no amounts have actually been drawn by Fairfax on the Credit Facilities.
7. One of the Lenders owns approximately US$136 million of certain trust preferred securities of a statutory business trust subsidiary of Fairfax (the “Preferred Securities”).
8. Various of the Lenders are alsocounter parties to certain foreign exchange or other swap agreements with Fairfax or its subsidiaries (the “Swap Agreements”).
9. The common shares of the Issuer will be offered in a cross-border transaction in the United States and in all provinces of Canada through an underwriting syndicate either directly by the members of such syndicate or through their respective affiliated Canadian registrants in such provinces as each is duly registered to do so.
10. It is anticipated that some or all of the underwriting syndicate members will be subsidiaries of certain of the Lenders and therefore the Issuer may, in connection with the Offering, be considered a connected issuer (or the equivalent) of the underwriting syndicate members (such syndicate members herein referred to as the “Connected Underwriters”).
11. The Credit Facilities are in good standing. All distributions required to be made to date on the Preferred Securities have been made. All of the Swap Agreements have been entered into in the normal course of business and are in good standing.
12. Although a portion of the net proceeds from the Offering will be used by the Issuer to acquire the shares of certain operating subsidiaries from Fairfax under the Reorganization, none of such proceeds paid to Fairfax will be used by Fairfaxto repay any debt owing under the Credit Facilities, to redeem any Preferred Securities or close out any of the Swap Agreements.
13. Neither the Issuer nor Fairfax is in financial difficulty. The Issuer is not under any immediate financial pressure to proceed with the Offering. The Issuer is not a “specified party” as defined in Proposed Multi-Jurisdictional Instrument 33-105 (the “Proposed Instrument”).
14. The Issuer will not be a “related issuer”, within the meaning of the Legislation or the Proposed Instrument, of any of the Connected Underwriters.
15. The Lenders did not participate in the decision to make the Offering or in the determination of the terms of the Offering.
16. The Connected Underwriters will not benefit in any manner from the Offering other than the payment of their fees in connection with the Offering.
17. The nature of the relationship among the Issuer, the Lenders and the Connected Underwriters will be described in the final PREP prospectus as required by Appendix C to the Proposed Instrument.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker (the “Decision);
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers, under the Legislation, is that the Independent Underwriter Requirement shall not apply to the Connected Underwriters in connection with the Offering provided the Issuer is not a related issuer, as defined in the Proposed Instrument, to the Connected Underwriters at the time of the Offering and is not a specified party, as defined in the Proposed Instrument, at the time of the Offering.
DATED this 30th day of May, 2001.
John Geller Robert Korthals