Exemption Orders (Discretionary)

SCOTIA CAPITAL INC.


2001 BCSECCOM 724



Headnote:

Mutual Reliance Review System for Exemptive Relief Applications – relief granted from the underwriting conflicts requirements to permit registrants to underwrite a secondary offering of securities where each of the issuer and the selling securityholder is a connected issuer of the registrants, subject to certain conditions

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, QUÉBEC AND NEWFOUNDLAND

AND

IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF SCOTIA CAPITAL INC. AND RBC DOMINION SECURITIES INC.

AND

IN THE MATTER OF MACDONALD, DETTWILER AND ASSOCIATES LTD.

AND

IN THE MATTER OF MDA HOLDINGS CORPORATION

MRRS DECISION DOCUMENT

[para 1]
WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of British Columbia, Alberta, Ontario, Québec and Newfoundland (the “Jurisdictions”) has received an application from Scotia Capital Inc. (“Scotia”), RBC Dominion Securities Inc. (“RBC”) (collectively, the “Underwriters”), MacDonald, Dettwiler and Associates Ltd. (“MDA”) and MDA Holdings Corporation (“MDA Holdings”), for a decision under 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,

(a) the issuer is a connected issuer (or equivalent) of the registrant, or

(b) the selling securityholder is a connected issuer (or equivalent) 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, will not apply to the Underwriters in respect of the proposed secondary offering (the “Distribution”) by MDA Holdings of 1,650,000 common shares of MDA (the “Common Shares”), subject to certain conditions;

[para 2]
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the Executive Director of the British Columbia Securities Commission is the principal regulator for this application;

[para 3]
AND WHEREAS the Underwriters, MDA and MDA Holdings have represented to the Decision Makers that:

1. MDA was incorporated under the laws of Canada and continued under the Canada Business Corporations Act;

2. the corporate head office of MDA is located in Richmond, British Columbia;

3. MDA is a reporting issuer (or equivalent) under the Legislation of the Jurisdictions and is not in default of any requirements of the Legislation;

4. on June 29, 2001, MDA filed a preliminary prospectus in connection with the Distribution in each of the Jurisdictions and the other Provinces of Canada, and expects to file the prospectus (the “Prospectus”) shortly;

5. the underwriting syndicate for the Distribution is comprised of the Underwriters, Merrill Lynch Canada Inc. (“Merrill Lynch”), Raymond James Ltd. and Dundee Securities Corporation (collectively, the “Underwriting Syndicate”), and the Common Shares will be allocated as follows:

Scotia 40%
RBC 30%
Merrill Lynch 20%
Raymond James Ltd. 5%
Dundee Securities Corporation 5%

6. as of June 15, 2001, MDA had approximately $25.4 million of debt, excluding letters of credit, with The Bank of Nova Scotia (“Scotia Bank”) and the Royal Bank of Canada (“Royal Bank”) under credit facilities totalling $190 million, allocated as follows:

Scotia Bank $ 35 million
Royal Bank $ 40 million
other banks $115 million

7. Scotia is a subsidiary of Scotia Bank and RBC is a subsidiary of Royal Bank, and accordingly, MDA is a connected issuer (or equivalent), as defined in the Legislation, of the Underwriters;

8. MDA is not a related issuer (or equivalent), as defined in the Legislation, of any member of the Underwriting Syndicate;

9. MDA is not receiving any proceeds from the Distribution and was not involved in determining the Underwriting Syndicate or the details of the Distribution, including pricing and fees;

10. the nature and details of the relationship among MDA, the Underwriters, Scotia Bank and the Royal Bank will be disclosed in the Prospectus;

11. MDA Holdings is a wholly owned subsidiary of Orbital Sciences Corporation (“Orbital”);

12. as of March 31, 2001, Orbital had outstanding debt with Scotia Bank of approximately U.S. $21 million and as of March 31, 2001 had two major credit facilities for approximately U.S. $145 million in aggregate, under which Scotia Bank provides 14.5% of the commitments;

13. it is expected that approximately 70% of the proceeds from the sale of the Common Shares will be used to pay down amounts owing by Orbital under such facilities;

14. MDA Holdings is a connected issuer, as defined in proposed Multilateral Instrument 33-105 – Underwriting Conflicts (the “Proposed Instrument”), of Scotia;

15. MDA Holdings is not a related issuer, as defined in the Proposed Instrument, of any member of the Underwriting Syndicate;

16. the nature and details of the relationship among MDA Holdings, Orbital, Scotia and Scotia Bank will be disclosed in the Prospectus, as will be the information specified in Appendix “C” of the Proposed Instrument;

17. none of Scotia Bank, the Royal Bank or the other banks referred to in paragraph 6 above were involved in the decision to make the Distribution or in the determination of its terms;

18. the Underwriters will receive no benefit relating to the Distribution other than the payment of their fees in connection therewith;

19. the Prospectus will be signed by each member of the Underwriting Syndicate, as required by the Legislation;

20. Merrill Lynch is an independent underwriter, as defined in the Proposed Instrument, and will underwrite at least 20 percent of the dollar value of the Distribution; and

21. the Prospectus will identify Merrill Lynch as an independent underwriter and will disclose its role in the structuring and pricing of the Distribution and in the due diligence activities performed by the Underwriting Syndicate for the Distribution;

[para 4]
AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);

[para 5]
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;

[para 6]
THE DECISION of the Decision Makers under the Legislation is that the Independent Underwriter Requirement will not apply to the Underwriters in connection with the Distribution, provided that at the time of the Distribution:

(a) Merrill Lynch underwrites at least 20 percent of the dollar value of the Distribution; and



(b) the Prospectus contains the disclosure stated in paragraphs 10, 16 and 21 above.

[para 7]
DATED July 9, 2001.

Derek E. Patterson
Acting Director
©2024 British Columbia Securities Commission