Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Waiver grantedpursuant to section 4.5 of National Policy Statement No. 47 (and equivalent Quebeclegislation) to enable issuer to participate in the POP System and the Shelf System(as contemplated in National Policy Statement No. 44 (and equivalent Quebeclegislation) to distribute asset-backed securities in accordance with proposedNational Instruments 44-101 and 44-102.

Applicable National Policies

National Policy Statement No. 47 - Prompt Offering Qualification System.

National Policy Statement No. 44 - Rules for Shelf Prospectus Offerings and forPricing Offerings After the Final Prospectus is Receipted.

Proposed National Instruments

Proposed National Instrument 44-101 Prompt Offering Qualification System (1998),21 OSCB 1148.

Proposed National Instrument 44-102 Shelf Distribution (1998), 21 OSCB 6206.

IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO, BRITISH COLUMBIA, ALBERTA,MANITOBA, SASKATCHEWAN, QUEBEC, NOVA SCOTIA, NEW BRUNSWICK, NEWFOUNDLAND AND PRINCE EDWARD ISLAND

AND

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

AND

IN THE MATTER OF
GLOUCESTER CREDIT CARD TRUST

MRRS DECISION DOCUMENT


WHEREAS the Canadian securities regulatory authority or regulator (the"Decision Maker") in each of Ontario, British Columbia, Alberta, Manitoba,Saskatchewan, Quebec, New Brunswick, Nova Scotia and Newfoundland (the"Jurisdictions") has received an application from Gloucester Credit Card Trust (the"Issuer") for a decision pursuant to section 4.5 of Canadian Securities Administrators'National Policy Statement No. 47 ("NP 47") and pursuant to the applicable securitieslegislation of Quebec, including but not limited to, those provisions set forth in Title IIand Title III of the Securities Act and Regulation (Quebec) (the "POP Requirements")(and together with National Policy Statement No. 44 ("NP 44") and the applicablesecurities legislation of Quebec, including but not limited to those provisions set forthin Title II and Title III of the Securities Act and Regulation (Quebec) (the "ShelfRequirements"), collectively, the POP Requirements and the Shelf Requirementsreferred as the "Policies") that the eligibility requirements (the "EligibilityRequirements") contained in the Policies for participation in the Prompt OfferingQualification System (the "POP System"), participation in the shelf system (the "ShelfSystem"), use of the Shelf Procedures as defined in the Shelf Requirements forproposed offerings of Asset-Backed Securities (as defined below) with an ApprovedRating by an Approved Rating Organization (all as defined in the POP Requirements),and for the utilization of annual information forms (each, an "AIF"), a preliminary shortform base shelf prospectus ("preliminary Shelf Prospectus") or a preliminary short formprospectus ("preliminary Short Form Prospectus"), a final short form base shelfprospectus ("final Shelf Prospectus") or a final short form prospectus ("final Short FormProspectus"), shelf prospectus supplements (each, a "Prospectus Supplement") andany necessary supporting documents shall not apply to the Issuer in respect ofproposed offerings of Asset-Backed Securities;

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this application;

AND WHEREAS the Issuer has represented to the Decision Makers that:

1. The Issuer was organized pursuant to a declaration of trust under the laws ofOntario dated December 11, 1998; the Issuer's trustee is CIBC Mellon TrustCompany.

2. The Issuer proposes to offer securities that are primarily serviced by the cashflows of a discrete pool of credit card receivables or other financial assets, eitherfixed or revolving, that by their terms convert into cash within a finite time period,and any rights or other assets designed to assure the servicing or timelydistribution of proceeds to security holders ("Asset-Backed Securities"),including notes issuable in series ("Notes"), with an Approved Rating by anApproved Rating Organization under the POP System or Shelf System using theShelf Procedures, from time to time to the public (the "Offerings"), to finance thepurchase by the Issuer from MBNA Canada Bank or its affiliates (the "Seller")of interests ("Ownership Interests") in credit card receivables or a pool thereof.

3. To date, the Issuer has purchased three Ownership Interests and issued Notesto finance each of these purchases. The dollar value of each OwnershipInterest purchased by the Issuer and the aggregate value of the Notes issuedto finance each such purchase were the same, being $250,000,000. Theclosing dates for the three transactions were December 18, 1998, September23, 1999 and December 3, 1999, respectively. Each issuance of Notes wascompleted pursuant to private placement transactions involving Canadianpurchasers. Pursuant to the applicable agreements, MBNA Canada Bank wasappointed the servicer of the applicable pool of credit card receivables. MBNACanada Bank continues to hold a residual undivided ownership interest in suchpool of receivables being the interest not owned by the Issuer.

4. As a special purpose trust, the Issuer will not carry on any activities other thanpurchasing Ownership Interests, issuing Asset-Backed Securities, includingNotes, and activities related thereto.

5. Each Asset-Backed Security of a particular series and class will represent onlythe right to receive payment of principal and interest and will not represent aninterest in the Ownership Interests except as provided by the terms thereof.

6. The proceeds of each proposed Offering will be used by the Issuer to pay theSeller for the purchase of an Ownership Interest.

7. The Issuer would not be eligible to participate in the POP System without thisdecision of the Decision Makers because it does not satisfy the public floateligibility or reporting issuer history criteria set forth in the POP Requirements.

8. In connection with each proposed Offering by the Issuer:

(a) the Issuer will have a current AIF;

(b) at the time of the filing of its most recent AIF or preliminary Shelf or ShortForm Prospectus or final Shelf or Short Form Prospectus, as the casemay be, the Issuer will not be in default of any requirement of securitieslegislation;

(c) at the time of the filing of its most recent AIF or preliminary Shelf or ShortForm Prospectus or final Shelf or Short Form Prospectus, as the casemay be, the Asset Backed Security to be distributed will:

(i) have received an Approved Rating on a provisional basis;

(ii) have not been the subject of an announcement by an ApprovedRating Organization of which the issuer is or ought reasonably tobe aware that the Approved Rating given by the organization maybe downgraded to a rating category that would not be anApproved Rating; and

(iii) have not received a provisional or final rating lower than anApproved Rating from any Approved Rating Organization; and

 

(d) if the Issuer is filing a preliminary short form prospectus more than 90days after the end of its most recently completed financial year, theIssuer will have filed financial statements for that year.

9. Each AIF of the Issuer will be prepared in accordance with Appendix A of NP 47,with the following amendments:

(a) the disclosure in AIFs filed by the Issuer will be modified to reflect thespecial nature of its business, and

(b) if the Issuer has Asset-Backed Securities outstanding which were issuedby prospectus, the AIF will disclose:

(i) a description of any events, covenants, standards or preconditionsthat are dependant or based on the economic performance of theunderlying pool of financial assets and that may impact on thetiming or amount of payments or distributions to be made underthe Asset-Backed Securities;

(ii) for the past two completed financial years of the Issuer or suchlesser period commencing on the first date on which the Issuerhad Asset-Backed Securities outstanding, information on theunderlying pool of financial assets relating to:

(A) the composition of the pool as of the end of the financialyear or partial period;

(B) income and losses from the pool, on at least a quarterlybasis;

(C) the payment, prepayment and collection experience of thepool on a quarterly basis; and

(D) any significant variances experienced in the mattersreferred to in subclauses (A), (B) and (C);

(iii) if any of the information disclosed under clause (b)(ii) of thisparagraph 9 has been audited, the existence and results of theaudit;

(iv) the investment parameters applicable to investments of any cashflow surpluses;

(v) the amount of payments made in respect of principal and interestor capital and yield, each stated separately, on Asset-BackedSecurities of the Issuer outstanding during the most recentlycompleted financial year or such lesser period commencing on thefirst date on which it had Asset-Backed Securities outstanding;

(vi) the occurrence of any events that have led or with the passage oftime could lead to the accelerated payment of principal or capitalof Asset-Backed Securities; and

(vii) the identity of any principal obligors for the outstanding Asset-Backed Securities of the Issuer at the end of the most recentfinancial year or partial period, the percentage of the underlyingpool of financial assets represented by obligations of eachprincipal obligor and whether the principal obligor, if any, has filedan AIF in any jurisdiction or a Form 10-K or Form 20-F in theUnited States.

10. The preliminary Shelf or Short Form Prospectus, as the case may be, and finalShelf or Short Form Prospectus, as the case may be, of the Issuer will beprepared in accordance with Appendix B of NP 47 and Schedule IV to theregulation made under the Securities Act (Quebec), with such amendments inconnection with the Shelf System as are specified in subsection 2.3(b), Section3 and Appendix B of NP 44 and Section III.1 of Division III of Chapter 1 of TitleII to the regulation under the Securities Act (Quebec), and with the followingadditional amendments:

(a) the disclosure in the preliminary Shelf or Short Form Prospectus, as thecase may be, and final Shelf or Short Form Prospectus, as the case maybe, filed by the Issuer will be modified to reflect the special nature of itsbusiness;

(b) the preliminary Shelf or Short Form Prospectus, as the case may be, andfinal Shelf or Short Form Prospectus, as the case may be, will describeor set out:

(i) the material attributes and characteristics of the Asset-BackedSecurities to be offered, including details on:

(A) the rate of interest or stipulated yield and any premium;

(B) the date for repayment of principal or return of capital andany circumstances in which payments of principal or capitalmay be made before such date, including any redemptionor pre-payment obligations or privileges of the Issuer andany events that may trigger early liquidation or amortizationof the underlying pool of financial assets;

(C) provisions for the accumulation of cash flows to provide forthe repayment of principal or return of capital;

(D) provisions permitting or restricting the issuance ofadditional securities and any other material negativecovenants applicable to the Issuer;

(E) the nature, order and priority of the entitlements of holdersof Asset-Backed Securities and any other entitled personsor companies to receive cash flows generated from theunderlying pool of financial assets; and

(F) any events, covenants, standards or preconditions that aredependant or based on the economic performance of theunderlying pool of financial assets and that may impact onthe timing or amount of payments or distributions to bemade under the Asset-Backed Securities;

(ii) information on the underlying pool of financial assets, for theperiod from the date as at which the following information waspresented in the Issuer's current AIF to a date not more than 90days before the date of the issuance of a receipt for thepreliminary Shelf or Short Form Prospectus, as the case may be,relating to:

(A) the composition of the pool as of the end of the period;

(B) income and losses from the pool for the period, on at leasta quarterly basis; and

(C) the payment, prepayment and collection experience of thepool for the period, on at least a quarterly basis;

(iii) the type or types of the financial assets, the manner in which thefinancial assets originated or will originate and, if applicable, themechanism and terms of the agreement governing the transfer ofthe financial assets comprising the underlying pool to or throughthe Issuer, including the consideration paid for the financialassets;

(iv) any person or company who

(A) originated, sold or deposited a material portion of thefinancial assets comprising the pool, or has agreed to doso;

(B) acts, or has agreed to act, as a trustee, custodian, baileeor agent of the Issuer or any holder of the Asset-BackedSecurities, or in a similar capacity;

(C) administers or services a material portion of the financialassets comprising the pool or provides administrative ormanagerial services to the Issuer, or has agreed to do so,on a conditional basis or otherwise, if (1) finding areplacement provider of the services at a cost comparableto the cost of the current provider is not reasonably likely,(2) a replacement provider of the services is likely toachieve materially worse results than the current provider,(3) the current provider of the services is likely to default inits service obligations because of its current financialcondition, or (4) the disclosure is otherwise material;

(D) provides a guarantee, alternative credit support or othercredit enhancement to support the obligations of the Issuerunder the Asset-Backed Securities or the performance orsome or all of the financial assets in the pool, or hasagreed to do so; or

(E) lends to the Issuer in order to facilitate the timely paymentor repayment of amounts payable under the Asset-BackedSecurities, or has agreed to do so;

(v) the general business activities and material responsibilities underthe Asset-Backed Securities of a person or company referred toin clause (b)(iv) of this paragraph 10;

(vi) the terms of any material relationships between (A) any of thepersons or companies referred to in clause (b)(iv) of thisparagraph 10 or any of their respective affiliates, and (B) theIssuer;

(vii) any provisions relating to termination of services orresponsibilities of any of the persons or companies referred to inclause (b)(iv) of this paragraph 10 and the terms on which areplacement may be appointed; and

(viii) any risk factors associated with the Asset-Backed Securities,including disclosure of material risks associated with changes ininterest rates or prepayment levels, and any circumstances wherepayments on the Asset-Backed Securities could be impaired ordisrupted as a result of any reasonably foreseeable event thatmay delay, divert or disrupt the cash flows dedicated to servicethe Asset-Backed Securities;

provided that if any of the foregoing information will be disclosed in afinal Prospectus Supplement, it may be omitted from the correspondingShelf Prospectus;

(c) the final Shelf Prospectus will contain a statement that the Issuerundertakes that it will not distribute Asset-Based Securities of a type thatat the time of distribution have not previously been distributed byprospectus in Ontario ("Novel Asset-Backed Securities") without pre-clearing with the Decision Makers the disclosure to be contained in anyProspectus Supplement pertaining to the distribution of such NovelAsset-Based Securities; and

(d) the preliminary Shelf or Short Form Prospectus and final Shelf or ShortForm Prospectus, as the case may be, will disclose any factors orconsiderations identified by the Approved Rating Organization as givingrise to unusual risks associated with the securities to be distributed.

11. Final Prospectus Supplements will be prepared in accordance with the ShelfRequirements, and will include all of the shelf information pertaining to thedistribution of Asset-Backed Securities which was omitted from the ShelfProspectus.

AND WHEREAS pursuant to the System this Decision Document evidences thedecision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test containedin the Legislation that provides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers pursuant to the Policies is that theEligibility Requirements set forth in the POP Requirements shall not apply to the Issuerin connection with the Offerings and that the Issuer may participate in the POP Systemand the Shelf System to distribute Asset-Backed Securities with an Approved Ratingfrom time to time, and for the purposes of any such distribution to utilize AIFs, apreliminary Shelf or Short Form Prospectus, as the case may be, a final Shelf or ShortForm Prospectus, as the case may be, Prospectus Supplements and any necessarysupporting documents, with such amendments from the form requirements of thePolicies, as applicable, as are set forth herein, provided that:

(i) the Issuer complies with paragraphs 8, 9, 10, and 11 hereof;

(ii) except as provided herein, the Issuer complies will all of the filing requirementsand procedures set out in the POP Requirements and the Shelf Requirements;

(iii) the Issuer files an undertaking before or concurrently with its preliminary ShelfProspectus, if utilized, which states that:

(a) the Issuer will not distribute under the final Shelf Prospectus NovelAsset-Backed Securities without pre-clearing the disclosure pertainingto the distribution of such Novel Asset-Backed Securities in anyProspectus Supplement with the Decision Makers; and

(b) specifically, the Issuer will not distribute such Novel Asset-BackedSecurities unless:

(i) the draft Prospectus Supplements pertaining to the distribution ofsuch Novel Asset-Backed Securities have been delivered to theDecision Makers in substantially final form; and

(ii) either:

 

(A) the Decision Makers have confirmed their acceptance ofeach draft Prospectus Supplement in substantially finalform or in final form; or

(B) 21 days has elapsed since the date of delivery of eachdraft Prospectus Supplement in substantially final form tothe Decision Makers and the Decision Makers have notprovided written comments on the draft ProspectusSupplement;

(iv) at the time of the filing of its preliminary Shelf or Short Form Prospectus, theIssuer:

(a) has received confirmation from at least one Approved RatingOrganization that the Asset-Backed Securities to be distributedthereunder will receive an Approved Rating, subject to final determinationof the specific attributes of the Asset-Backed Securities; and

(b) has not been informed by any Approved Rating Organization of anintention to provide a rating, whether on a provisional or final basis, ofthe Asset-Backed Securities that is lower than an Approved Rating;

(v) instead of filing an eligibility certificate with its initial AIF, the Issuer files with itspreliminary Shelf or Short Form Prospectus, an eligibility certificate, executedon behalf of the Issuer by an officer of its administrative agent certifying that theIssuer satisfies the eligibility requirements set out in subparagraphs 8(b) and8(c) hereof, and which makes reference to this Decision; and

(vi) this Decision will automatically expire upon the later of proposed NationalInstrument 44-101 and proposed National Instrument 44-102 coming into forceand being adopted as a rule in each of the Jurisdictions.

April 14th, 2000.

"Iva Vranic"