Exemption Orders (Discretionary)
CIBC WORLD MARKETS INC.
2001 BCSECCOM 770
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 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 OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, ONTARIO, QUEBEC AND NEWFOUNDLAND
AND
IN THE MATTER THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF CIBC WORLD MARKETS INC. AND SCOTIA CAPITAL INC.
AND
KINGSWAY FINANCIAL SERVICES INC.
MRRS DECISION DOCUMENT
WHEREAS the Canadian 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. (“CIBC WM”) and Scotia Capital Inc. (“Scotia”) (together, the “Filers”) for a decision pursuant to the securities legislation of the Jurisdictions or the respective regulations or rules made thereunder (the “Legislation”) that the requirement (the “Independent Underwriter Requirement”) contained in the Legislation which restricts a registrant from participating in a distribution of securities of an issuer made by means of prospectus, where the issuer is a connected issuer (or the equivalent) of a 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 firmly underwritten offering (the “Offering”) of common shares by Kingsway Financial Services Inc. (the “Issuer”) to be made pursuant to a PREP prospectus (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 Filers and the Issuer have represented to the Decision Makers that:
1. The principal offices of the Filers are in Ontario.
2. The Issuer was incorporated on September 19, 1989 under the laws of Ontario and is a reporting issuer in each of the Jurisdictions. The common shares of the Issuer are listed on The Toronto Stock Exchange.
3. The Issuer received a receipt for a preliminary short form Base PREP prospectus filed on SEDAR on June 7, 2001.
4. In February 1999, the Issuer entered into a US$100.0 million unsecured credit facility (the “Facility”) with a syndicate of two Canadian and two U.S. Banks (the “Lenders”). The Facility is for a fixed term of five years, at a floating rate of LIBOR plus a spread which is commensurate with the Issuer’s credit rating.
5. The Issuer drew down the Facility in full and entered into an interest rate swap transaction whereby it fixed the interest rate at 5.91% plus a spread based on its credit rating or the ratio of funded debt to total capitalization, whichever is higher, for the term of the Facility.
6. The common shares of the Issuer will be offered in a cross-border transaction in the United States and all provinces of Canada (other than New Brunswick and Prince Edward Island) through an underwriting syndicate either directly by the members of the syndicate or through their respective affiliated registrants.
7. CIBC WM and Scotia (the “Connected Underwriters”) are affiliates of the Lenders.
8. The Facility is in good standing and the Issuer is in compliance with all the covenants of the Facility.
9. The Issuer intends to use the net proceeds of the Offering, estimated to be US$81.5 million (US$93.9 million if the underwriters’ over-allotment option is exercised in full), to provide additional capital to its subsidiaries, including to support the expected growth of the business, and for general corporate purposes, which may include the payment of a principal amount of the indebtedness under the Facility and acquisitions of books of business or other companies.
10. The Issuer is not in financial difficulty or 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, dated February 6, 1998 (the “Proposed Instrument”).
11. The Filers may not comply with the Independent Underwriter Requirement in connection with the Offering.
12. The Lenders did not participate in the decision to make the Offering or in the determination of the terms of the Offering.
13. The Connected Underwriters will not benefit in any manner from the Offering other than the payment of their fees in connection with the Offering.
14. The Issuer is not a “related issuer”, within the meaning of section 219(1) of the Regulation or the Proposed Instrument, of any of the Connected Underwriters.
15. 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;
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 Filers 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 29th day of June, 2001
Paul Moore Jack A. Geller