National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Relief from prospectus requirements with respect to common shares issued pursuant to an offer to redeem notes in exchange for the common shares, subject to conditions – the exchange offer does not meet the definition of an issuer bid under the legislation and no exemption from the prospectus requirement is available; the issuer will treat the exchange offer as if it were an issuer bid and comply with the requirements under securities legislation applicable to issuer bids.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53 and 74(1).
September 22, 2017
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA AND ONTARIO (the Jurisdictions)
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
TAIGA BUILDING PRODUCTS LTD.
1 The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that:
(a) the prospectus requirements under the Legislation (the Prospectus Requirements) do not apply to distributions by the Filer of common shares (Common Shares) and/or new notes (New Notes) in connection with an exchange offer (the Exchange Offer) by the Filer to the holders of 14% subordinated unsecured notes of the Filer (the Existing Notes) to purchase the Existing Notes in exchange for Common Shares and/or New Notes (the Exemption Sought); and
(b) this decision and accompanying application (the Confidential Material) be kept confidential and not be made public until the earlier of:
(i) the date that the Filer publicly announces the mailing of its management information circular in respect of a special meeting for the purposes of seeking the Minority Approval (as defined below),
(ii) the date that the Filer advises the Decision Maker that there is no longer any need for the Confidential Material to remain confidential, and
(iii) the date that is 90 days after the date of this order
(the Confidentiality Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the British Columbia Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI-11-102) is intended to be relied upon in Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Yukon Territory, Northwest Territories and Nunavut (each a Local Jurisdiction); and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
2 Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.
3 This decision is based on the following facts represented by the Filer:
1. the Filer is a company formed under the laws of British Columbia; the Filer’s head office is located at 4710 Kingsway, Burnaby, British Columbia, V5H 4M2;
2. the Filer is a reporting issuer in the Jurisdictions and each of the provinces of Canada, other than Québec, and is not in default of any requirement of the securities legislation in any of these jurisdictions;
3. the Filer currently has 32,414,278 Common Shares and $128,834,218 aggregate principal amount of Existing Notes outstanding;
4. the Common Shares and Existing Notes are listed and posted for trading through the facilities of the Toronto Stock Exchange (the TSX) under the symbols “TBL” and “TBL.NT”, respectively;
5. the Existing Notes became redeemable at par commencing September 1, 2017;
6. in order to provide the Filer with increased financial flexibility, lower cost of capital and long-term stability to its overall capital structure, the Filer wishes to commence the Exchange Offer for all of the Existing Notes under which a holder of Existing Notes would receive, in exchange for Existing Notes: (a) an equivalent principal amount of New Notes, (b) Common Shares at a share exchange price within the permitted range under TSX policies, or (c) a combination of New Notes and Common Shares;
7. the Exchange Offer will involve the potential issuance of securities to certain related parties of the Filer that own Existing Notes and elect to participate in the Exchange Offer (the Interested Parties); the issuance of Common Shares to the Interested Parties in connection with the Exchange Offer would constitute a related party transaction under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101);
8. but for the fact that the Existing Notes are debt securities that are not convertible into securities other than debt securities, the Exchange Offer would constitute an issuer bid under National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104);
9. notwithstanding that the Exchange Offer is not an issuer bid, the Filer intends to treat the Exchange Offer as if it were an issuer bid; in particular, the Filer intends to comply with the requirements relating to issuer bids under NI 62-104, including, but not limited to, notice requirements, the delivery of a circular in accordance with the prescribed form of issuer bid circular to holders of Existing Notes and the provision of withdrawal rights;
10. participation in the Exchange Offer by holders of Existing Notes is optional and at the sole discretion of such holders; holders of Existing Notes that elect not to participate in the Exchange Offer will continue to hold such Existing Notes, which will mature on the applicable maturity date, unless earlier redeemed, and continue to be entitled to all rights and privileges under the instrument governing their terms; holders of Existing Notes that elect to participate in the Exchange Offer will receive: (a) a cash payment representing accrued and unpaid interest (if any) to, but not including, the date of take up of the Existing Notes, and (b) consideration consisting of either New Notes, Common Shares or a combination thereof, as elected by such holder;
11. the Filer will not treat the Exchange Offer as an issuer bid exempt from the Legislation or the securities legislation of a Local Jurisdiction, except to the extent that such exemption is evidenced by a decision document from the Decision Makers or a securities regulatory authority in a Local Jurisdiction, as applicable;
12. section 2.16 of National Instrument 45-106 Prospectus Exemptions provides that the Prospectus Requirements do not apply in respect of a trade in a security in connection with an issuer bid; accordingly, if the Exchange Offer constituted an issuer bid, the New Notes and/or Common Shares that would be distributed in connection with the Exchange Offer would be exempt from the Prospectus Requirements; and
13. in accordance with MI 61-101, the Filer will seek minority shareholder approval (the Minority Approval) in respect of the potential issuance of Common Shares to the Interested Parties in connection with the Exchange Offer, as such issuance will constitute a related party transaction and no exemption is available; such minority shareholder approval shall exclude votes cast by the Interested Parties to the extent they hold Common Shares at the meeting of shareholders convened for such purpose; the Filer will prepare and mail to its shareholders an information circular in respect of a special meeting for the purposes of seeking the Minority Approval that will comply with the disclosure requirements in MI 61-101 in respect of related party transactions.
4 Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted, provided that:
(a) the Filer treats the Exchange Offer as if it were an issuer bid and complies with the requirements of the Legislation applicable to issuer bids; and
(b) the first trade of any Common Shares or New Notes issuable in connection with the Exchange Offer will be a distribution unless
(i) the Filer has filed on SEDAR a circular in accordance with the prescribed form of issuer bid circular relating to the Exchange Offer;
(ii) the trade is not a “control distribution” as defined in National Instrument 45-102 Resale of Securities; and
(iii) the Filer was a reporting issuer on the date the Existing Notes were first taken up under the Exchange Offer.
It is also the decision of the Decision Makers that the Confidentiality Relief is granted.
Director, Corporate Finance
British Columbia Securities Commission