Exemption Orders (Discretionary)
MICROCELL TELECOMMUNICATIONS INC.
2001 BCSECCOM 220
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief granted from the underwriting conflict provisions of the Rules on the basis that if the proposed multi-jurisdictional instrument 33-105 were in effect, no such relief would be required. An independent underwriter will underwrite at least 20% of each offering and the disclosure prescribed by part 2 of 33-105 will be made.
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)
IN THE MATTER OF THE CANADIAN SECURITIES LEGISLATION OF THE PROVINCES OF 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 MICROCELL TELECOMMUNICATIONS INC.
AND
IN THE MATTER OF BMO NESBITT BURNS INC.
CIBC WORLD MARKETS INC.
J.P. MORGAN SECURITIES CANADA INC.
NATIONAL BANK FINANCIAL INC.
MRRS DECISION DOCUMENT
WHEREAS an application has been received by the British Columbia Securities Commission, the Securities Commission of Newfoundland, the Québec Securities Commission and the Ontario Securities Commission (the “Commissions”) from BMO Nesbitt Burns Inc. (“Nesbitt”), CIBC World Markets Inc. (“CIBC WM”), J.P. Morgan Securities Canada Inc. (“J.P. Morgan Canada”) and National Bank Financial Inc. (“NBF”), (collectively, the “Underwriters”) for a decision pursuant to the Canadian securities legislation (the “Legislation”) of Alberta, British Columbia, Newfoundland, Québec and Ontario (the “Jurisdictions”) that the restrictions against acting as an underwriter with respect to the conflict of interest rules contained in the Legislation (the “Independent Underwriter Requirement”) shall not apply to the Underwriters in connection with a public offering by Microcell Telecommunications Inc. (“Microcell”) of 3,703,704 Class B Non-Voting shares (the “Shares”) at a price of $27.00 per Share by way of a short form prospectus (the “Prospectus”) filed with all securities commissions in Canada, and a registration statement filed with the United States Securities and Exchange Commission, of which 2,032,659 Shares for aggregate gross proceeds of $54,881,793 million have been underwritten by the underwriters (the “Underwritten Offering”) and the balance of 1,671,045 Shares for gross proceeds of $45,118,215 will be subscribed for by Telesystem Ltd. and VoiceStream Wireless Corporation pursuant to a concurrent purchase covered by the Prospectus (the “Concurrent Purchase”, and collectively with the Underwritten Offering the “Offering”).
AND WHEREAS pursuant to the Mutual Reliance System for Exemptive Relief Applications (the “System”), the Québec Securities Commission is the Principal Regulator for this application.
AND WHEREAS the Underwriters have represented to the Commissions that:
1. Microcell is a corporation that was incorporated under the Canada Business Corporations Act and its head office is located in Montreal, Québec. Microcell is involved in the design and deployment of wireless communications services.
2. Microcell is a reporting issuer in all provinces of Canada and its Shares are listed for trading on The Toronto Stock Exchange and quoted on the Nasdaq National Market.
3. Microcell filed on January 10, 2001 a preliminary short form prospectus (the “Preliminary Prospectus”) in order to issue pursuant to the Offering, a total of 3,703,704 Shares for an aggregate consideration of $100,000,008. The Preliminary Prospectus was filed with the securities commissions and similar regulatory authorities of each province under the Mutual Reliance Review System for Prospectuses with Québec as its designated jurisdiction. Microcell intends to file a final short form Prospectus on or about January 17, 2001.
4. The proportionate share of the Underwritten Offering to be underwritten by each of the members of the underwriting syndicate offering the Shares is as follows:
| Underwriter | Proportionate Share |
| Nesbitt | 27.5% |
| Merrill Lynch Canada Inc. (“Merrill”) | 27.5% |
| CIBC WM | 15% |
| J.P. Morgan Canada | 10% |
| NBF | 10% |
| RBC Dominion Securities (“RBC DS”) | 10% |
5. Nesbitt is a wholly-owned subsidiary of BMO Nesbitt Burns Corporation Limited, an indirect majority-owned subsidiary of Bank of Montreal (“BMO”); CIBC WM is a wholly-owned subsidiary of the Canadian Imperial Bank of Commerce (the “CIBC”); J.P. Morgan Canada is a wholly-owned subsidiary of J.P. Morgan Chase & Co. (“J.P. Morgan”) and NBF is an indirect wholly-owned subsidiary of National Bank of Canada (“National”). BMO, CIBC, J.P. Morgan and National are hereinafter referred to as the “Related Banks”.
6. Nesbitt, CIBC WM, J.P. Morgan Canada and NBF are subsidiaries of banks which are members of a syndicate of financial institutions (the “Microcell Lenders”) that has made credit facilities available to Microcell (the “Microcell Loan Facilities”). The Microcell Loan Facilities provide for an aggregate maximum availability of $750 million, of which, as at December 31, 2000, approximately $54.7 million was owed to the banks that control the Underwriters. Microcell is in good financial condition and is not in default under the Microcell Loan Facilities.
Microcell is also indebted to each of BMO and CIBC in the amount of $56.4 million, respectively, for the issuance of standby letters of credit to support Microcell's participation in Industry Canada's upcoming auction of additional PCS Spectrum in the 2 GHz frequency range.
Microcell is an affiliate of Look Communications Inc. (“Look”) because both corporations are ultimately controlled by Telesystem Ltd. Look currently has a revolving credit facility (the “Look Loan Facility”) with BMO and Bank of Nova Scotia (the “Look Lenders”). The Look Loan Facility provides for an aggregate maximum availability of $208 million and is fully drawn as of the date hereof.
Microcell Capital II Inc., a wholly owned subsidiary of Microcell, has entered into a binding term sheet (the “Term Sheet”) with Look to acquire from Look, 50% of the outstanding shares of Inukshuk Internet Inc. (“Inukshuk”) on or before January 31, 2001 for a price of $150 million (the “Inukshuk Acquisition”). The remaining 50% of the outstanding shares of Inukshuk is already owned directly or indirectly by Microcell. The closing of the Inukshuk Acquisition is conditional upon the closing of the Offering. In connection with the execution of the Term Sheet, the Look Lenders have agreed, among other things, to waive certain defaults of Look. The purchase price to be received by Look pursuant to the Inukshuk Acquisition will be applied in part to reduce or repay indebtedness of Look to the Look Lenders.
Look may be considered a “specified party”, within the meaning ascribed to that term in the Proposed Conflicts Instrument (as defined below), if it were issuing the securities pursuant to the Offering. However, Microcell has not, during the 12 months preceding the Offering, undertaken any of the activities described in clauses (b)(i)(A) and (B) of the definition of “specified party” set out in the Proposed Conflicts Instruments (as defined below) and it could not reasonably be expected that Microcell will undertake any of such activities within the 12 months following the end of the Offering.
Each of Nesbitt, CIBC WM, J.P. Morgan Canada and NBF is controlled by a bank that is a lender to Microcell and Nesbitt is controlled by a bank that is a lender to Look. Neither the Microcell Lenders nor the Look Lenders participated in the decision of Microcell to make the Offering, nor did any of such lenders participate in the determination of the terms of the distribution or in the use of proceeds thereof.
7. Furthermore, each of Merrill and RBC DS is independent of the Microcell Lenders and the Look Lenders and Microcell is not a connected issuer of either Merrill or RBC DS.
8. Microcell may be considered a connected issuer (as that term is defined in the Proposed Multi-Jurisdictional Instrument 33-105 entitled Underwriting Conflicts (the “Proposed Conflicts Instrument”) of the Underwriters, thus the Underwriters do not comply with the proportionate requirement of the Legislation.
9. Microcell is not a “related issuer” of any of the Underwriters as that term is defined in the Proposed Conflicts Instrument nor is Microcell a “specified party” as that term is defined in the Proposed Conflicts Instrument.
10. Microcell is in good financial condition and is not in default under the Microcell Loan Facilities. Microcell has no direct or indirect investment by way of loan, guarantee or equity ownership in Look and has no intention of making any such investment.
11. The decision to issue the Shares, including the determination of the terms of such distribution was made through negotiations between Microcell and the members of the underwriting syndicate without the involvement of the Related Banks The Microcell Lenders and the Look Lenders did not participate in the decision of Microcell to make the Offering or in the determination of the terms of the distribution or the use of proceeds thereof.
12. As of date hereof, Microcell is neither a “connected issuer” nor a “related issuer” in relation to Merrill and RBC DS. Merrill and RBC DS have agreed to underwrite 27.5% and 10%, respectively, of the Underwritten Offering, have and will participate in the due diligence investigation and will review and participate in the preparation of the preliminary and final short form prospectuses in respect of the Offering. Furthermore, all the underwriters have participated in the process relating to setting and negotiating the price for the Shares to be distributed pursuant to the Offering.
13. The certificate in each of the Preliminary Prospectus and the Prospectus will be signed by each member of the underwriting syndicate including each of the Underwriters.
14. The Underwriters will not benefit in any manner from the Offering other than the payment of their fee in connection with the Underwritten Offering.
15. The disclosure required by Schedule C of the Proposed Conflicts Instrument will be contained in the Preliminary Prospectus and in the Prospectus and the certificate in such prospectus will be signed by each of the Underwriters.
AND WHEREAS pursuant to the Policy 12-201, this Decision Document evidences the decision of each Decision Maker;
AND WHEREAS each Decision Maker is satisfied that conditions or circumstances exist which are required by the Legislation to enable the Decision Maker to make the decision.
AND WHEREAS each Decision Maker is being satisfied to do so would not be prejudicial to the public interest;
IT IS THE DECISION by the Decision Maker pursuant to the Legislation that the Independent Underwriter Requirement shall not apply to the Offering provided that:
1. The independent underwriters Merrill and RBC DS participate in the Offering as stated in paragraph 12 above;
2. the Prospectus contains the disclosure stated in paragraph 12 above;
3. the relationship between the Issuer and the member of the underwriting syndicate is disclosed in the Prospectus.
DATED at Montréal, this 17th day of January 2001.
Le directeur de la conformité et de l’application,
Me Jean Lorrain