Exemption Orders (Discretionary)
SCOTIA CAPITAL INC.
2001 BCSECCOM 636
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 trust units 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 B.C. 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 OFTHE SECURITIES LEGISLATION OFALBERTA, BRITISH COLUMBIA, ONTARIO, QUEBEC, AND NEWFOUNDLAND
AND
IN THE MATTER OFTHE MUTUAL RELIANCE REVIEW SYSTEMFOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF SCOTIA CAPITAL INC., TD SECURITIES INC.,
BMO NESBITT BURNS INC. AND RBC DOMINION SECURITIES INC.
AND
IN THE MATTER OF PRIMEWEST ENERGY TRUST
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of Alberta, British Columbia, Ontario, Quebec, and Newfoundland (the "Jurisdictions") has received an application from Scotia Capital Inc., TD Securities Inc., BMO Nesbitt Burns Inc. and RBC Dominion Securities Inc. (collectively the "Filers"), for a decision pursuant to the securities legislation of the jurisdictions (the "Legislation") that the requirement contained in the Legislation for an independent underwriter where an offering of securities of an issuer is otherwise being underwritten by underwriters in respect of which the issuer is a "connected issuer" or the equivalent (the "Independent UnderwriterRequirement") shall not apply to a proposed offering (the "Offering") of trust units by PrimeWest Energy Trust (the "Trust");
AND WHEREAS pursuant to 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 Filers have represented to the Decision Makers that:
1. The Trust is an open-end investment trust established under the laws of Alberta pursuant to a declaration of trust dated August 2, 1996.
2. The Trust's principle assets are royalties in certain petroleum and natural gas properties owned by PrimeWestEnergy Inc. ("PrimeWest") and certain other related entities and debt instruments issued to the Trust by such entities. The royalties and debt instruments entitle the Trust to receive substantially all of the net cash flow generated by those properties, after certain costs and deductions.
3. The Trust is authorized to issue an unlimited number of transferable, redeemable trust units (the "Trust Units"). Each Trust Unit represents an equal fractional undivided beneficial interest in the net assets of the Trust, and entitles its holder to one vote at meetings of unitholders of the Trust and to participate equally with respect to any and all distributions made by the Trust, including distributions of net income and net realized capital gains, if any.
4. The Trust became a reporting issuer under the securities legislation in each of the provinces of Canada which has such a concept when it obtained a receipt pursuant to such legislation for its prospectus dated October 3, 1996. As of the date hereof, the Trust continues to be a reporting issuer under such legislation and does not appear on the list of reporting issuers in default maintained by the securities regulatory authorities in each province.
5. The Trust Units are listed and posted for trading on The Toronto Stock Exchange.
6. The Trust, PrimeWest and certain other related entitles have certain revolving and non-revolving credit facilities to a maximum of $400,000,000 (the "Credit Facilities") under which the lender is a syndicate of Canadian financial institutions, including The Toronto Dominion Bank, The Bank of Nova Scotia, Bank of Montreal and Royal Bank of Canada (the "Banking Group"). The Filers are each subsidiaries of members of the Banking Group. Accordingly, the Trust may be considered a connected issuer of the Applicants under the applicable securities laws of each of the Jurisdictions.
7. The revolving portion of the Credit Facilities is subject to an annual review. At the time of the annual review, the revolving portion may be extended, at the Banking Group's option, for a further 365 days. If the Banks revert the revolving portion to a non-revolving facility, the amounts outstanding under the Credit Facilities become repayable in instalments over a period of up to three years following the maturity date of the revolving facility. The cost of funds borrowed under the Credit Facilities is calculated by reference to CIBC's Prime Rate or United States Base Rate or a specified adjusted interbank deposit rate, stamping fee or discount rate, depending on the form of borrowing. Security for amounts outstanding is provided by a floating charge oil and gas debenture over all of the present and after-acquired assets of the Trust, PrimeWest and certain other related entities.
8. As at May 17, 2001, there was $350,000,000 outstanding under the Credit Facilities.
9. The Trust is doing an offering of trust units which will be effected on a "bought deal" basis pursuant to a short form prospectus to be dated on or about June 6, 2001.
10. The Filers, together with Merrill Lynch Canada Inc. and Yorkton Securities Inc., intend to act as underwriters in connection with the Offering.
11. The head office of the lead underwriter for the Offering is in Toronto, Ontario.
12. Merrill Lynch Canada Inc. and Yorkton Securities Inc. are independent underwriters within the meaning of Proposed Multijurisdictional Instrument 33-105 (the "Proposed Instrument") and will underwrite 12% of the Offering. The independent underwriters will participate in the pricing of the Offering and in the due diligence activities performed by the underwriters for the Offering, and will sign the preliminary prospectus certificate and the prospectus certificate as required by securities legislation in the Jurisdictions.
13. The Trust anticipates that the proceeds of the Offering will be used to reduce the indebtedness of the Trust and PrimeWest under the Credit Facilities.
14. The members of the Banking Group did not and will not participate in the decision to make the Offering or in the determination of its terms.
15. The Filers will not benefit in any manner from the Offering other than the payment of their underwriting fees in connection with the Offering.
16. As a result of the foregoing, the underwriting syndicate for the Offering may not meet the requirements for certain minimum proportions of the distribution to be underwritten by independent registrants, as set forth under the applicable securities laws in each of the Jurisdictions.
17. Each of the preliminary prospectus and the prospectus prepared in connection with the Offering will contain the information specified in Appendix C to the Proposed Instrument.
18. Neither the Trust nor PrimeWest is a related issuer as defined in the Proposed Instrument of any prospective member of the underwriting syndicate. Neither the Trust nor PrimeWest is a specified party as defined in the Proposed Instrument.
AND WHEREAS under the System, this 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 Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that the Independent Underwriter Requirement shall not apply to the Filers in connection with the Offering, provided that:
A. the Trust is not a related issuer, as defined in the Proposed Instrument, to the Filers at the time of the Offering, and
B. the Trust is not a specified party, as defined in the Proposed Instrument, at the time of the Offering.
DATEDthis 12th day of June, 2001.
Paul Moore J.A. Geller