HeadnoteMutualReliance Review System for Exemptive Relief Applications - issuerbids - relief granted from the valuation requirement in connectionwith an offer by the issuer for its out-of-the-money convertibledebentures - issuer representing in order that convertibilityfeature is of no material value and debentures trade only on theissuer's underlying creditworthiness - offer otherwise to be madein compliance with issuer bid requirements - offer document toinclude summary of financial opinion on convertibility feature.
ApplicableOntario Rules CitedRule61-501 - Insider Bids, Issuer Bids, Going Private Transactionsand Related Party Transactions, ss. 3.3, 3.4(1) and 9.1.
INTHE MATTER OF
THESECURITIES LEGISLATION OF
ONTARIO,ALBERTA, BRITISH COLUMBIA
MANITOBA,NEWFOUNDLAND AND LABRADOR, NOVA SCOTIA,
QUEBEC AND SASKATCHEWAN
INTHE MATTER OF
THEMUTUAL RELIANCE REVIEW SYSTEM
FOREXEMPTIVE RELIEF APPLICATIONS
INTHE MATTER OF
REVENUEPROPERTIES COMPANY LIMITEDWHEREASthe local securities regulatory authority or regulator (the "DecisionMaker") in each of Ontario, Alberta, British Columbia,Manitoba, Newfoundland and Labrador, Nova Scotia, Quebec and Saskatchewan(collectively, the "Jurisdictions") has receivedan application (the "Application") from RevenueProperties Canada Limited ("Revenue") for a decisionunder the securities legislation of the Jurisdictions (collectively,the "Legislation") that in connection with itsproposed offer (the "Offer") to acquire all ofits outstanding 6% Convertible Subordinated Debentures due March1, 2004 (the "6% Debentures"):
(1)Revenue shall be exempted from the requirements in the Legislationto obtain a formal valuation of the 6% Debentures (the "FormalValuation Requirement"); and
(2)the Application and this MRRS Decision Document (the "Decision")shall be held in confidence by the Decision Makers, subject tocertain conditions;
ANDWHEREAS pursuant to the Mutual Reliance Review Systemfor Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulator forthe Application;
ANDWHEREAS Revenue has represented to the Decision Makersas follows:
1.Revenue is governed by the Business Corporations Act(Ontario). Its head office is located in Toronto, Ontario.
2.Revenue is a reporting issuer or the equivalent in each Jurisdictionand is not in default of any requirements of the Legislation inthe Jurisdictions.
3.Revenue's authorized capital consists of an unlimited number ofFirst Preference Shares issuable in series, an unlimited numberof Second Preference Shares issuable in series, an unlimited numberof Third Preference Shares issuable in series, and an unlimitednumber of common shares (the "Common Shares").As at January 21, 2002, 63,531,358 Common Shares were issued andoutstanding.
4.The Common Shares are listed for trading on The Toronto StockExchange (the "TSE") and the NASD OTC BulletinBoard and the 6% Debentures are listed for trading on the TSE.
5.Revenue also has two series of convertible debentures outstandingas follows:
(a)approximately $79,715,000 of convertible subordinated debentures,bearing interest at 7% per annum, payable semi-annually and maturingDecember 31, 2006; and
(b)approximately U.S.$34,599,000 of the 6% Debentures.
6.The 6% Debentures were issued under a trust indenture (the "Indenture")dated as of March 14, 1994, as amended by a First SupplementalIndenture dated January 1, 2000.
7.The 6% Debentures are rated BB (high) by Dominion Bond RatingService.
8.The 6% Debentures are unsecured and are convertible at the holder'soption into Common Shares at any time prior to the earlier ofFebruary 27, 2004 and the last business day immediately precedingthe date specified for redemption. Originally, the 6% Debentureswere convertible at a price of U.S.$3.45 per Common Share. OnSeptember 24, 2001 (the "Announcement Date"),Revenue declared a special dividend of Cdn.$1.50 per Common Shareto holders of Common Shares of record as at October 18, 2001 (the"Special Dividend"). Accordingly, October 16,2001 was the date the Common Shares began trading "ex-dividend"for the Special Dividend (the "Ex-Dividend Date").In addition, as a result of the Special Dividend, the conversionprice for the 6% Debentures was adjusted as provided for in theIndenture. Effective October 19, 2001 (the "AdjustmentDate"), the 6% Debentures are convertible at a priceof U.S.$1.82 per Common Share. Based upon foreign exchange ratesas of January 18, 2002, the 6% Debentures are convertible at theequivalent of Cdn.$2.93 per Common Share.
9.On September 21, 2001, the last trading day before the AnnouncementDate, the closing price of the Common Shares on the TSE was Cdn.$2.50,and on January 18, 2002, the closing price of the Common Shareson the TSE was Cdn.$1.60.
10.Over the 12-month period preceding the Announcement Date, theCommon Shares traded on the TSE in a range between Cdn.$1.87 andCdn.$2.70 per Common Share, and over the approximately three-monthperiod since the Ex-Dividend Date, the Common Shares have tradedon the TSE in a range between Cdn.$1.42 and Cdn.$1.74 per CommonShare.
11.On October 16, 2001, the last trading day before the AdjustmentDate on which the 6% Debentures were traded, the closing priceof the 6% Debentures was U.S.$935 per U.S.$1,000 principal amount.
12.On January 18, 2002 the closing price of the 6% Debentures wasU.S.$965 per U.S.$1,000 principal amount.
13.Over the approximately nine-month period from January 1 to October9, 2001, the last trading day before the Ex-Dividend Date on whichthe 6% Debentures were traded, the 6% Debentures traded on theTSE on only 22 out of 198 trading days, with an average dailytrading value of $28,868.36 on the days traded, and a price rangeper U.S.$1,000 principal amount of U.S.$790 to U.S.$935.
14.Over the approximately three-month period from the Ex-DividendDate to January 18, 2002, the 6% Debentures traded on the TSEon only 7 out of the 66 trading days, with an average daily tradingvalue of $21,347.86 on the days traded, and a price range perU.S.$1,000 principal amount of U.S.$880 to U.S.$965.
15.Since March 1, 1998, Revenue has been entitled to redeem the 6%Debentures at any time at par plus accrued and unpaid interest.
16.The Indenture, as amended, provides that, at any time when Revenueis not in default under the Indenture, Revenue may purchase anyor all of the 6% Debentures. Revenue is not in default under theIndenture, as amended. There are no other restrictions upon Revenue'sability to purchase the 6% Debentures.
17.On March 2, 2001, Revenue filed and the TSE accepted a Noticeof Intention to Make a Normal Course Issuer Bid (the "Notice").Pursuant to the Notice, Revenue may acquire through the TSE'sfacilities up to a maximum of U.S.$ 3,400,000 of the outstanding6% Debentures, representing approximately 10% of the public floatof 6% Debentures as at March 1, 2001. Pursuant to the Notice,Revenue acquired through the TSE's facilities:
(a)U.S.$373,000 principal amount of the 6% Debentures at a priceof U.S.$900 per U.S.$1,000 principal amount on May 8, 2001;
(b)U.S.$8,000 principal amount of the 6% Debentures at a price ofU.S.$900 per U.S.$1,000 principal amount on May 11, 2001; and
(c)U.S.$20,000 principal amount of the 6% Debentures at a price ofU.S.$860 per U.S.$1,000 principal amount on September 4, 2001.
18.As of January 18, 2002, U.S.$34,599,000 of the 6% Debentures wereoutstanding.
19.Revenue proposes to make the Offer for all of the outstanding6% Debentures. The Offer will be an "issuer bid" within the meaningof the Legislation in the Jurisdictions because the 6% Debenturesare convertible debt securities. The Offer will not be made toholders of 6% Debentures who are residents of the United States.
20.In a letter (the "Opinion Letter") dated January16, 2002, TD Securities Inc. ("TD Securities")advised Revenue that, in TD Securities' opinion:
(a)the convertibility feature of the 6% Debentures is of no materialvalue; and
(b)the 6% Debentures trade on the TSE like non-convertible, subordinated,unsecured debt based on Revenue's underlying creditworthiness.
21.The Offer will be made in compliance with the requirements inthe Legislation applicable to formal bids made by issuers, exceptto the extent exemptive relief is granted by the Decision Makers.
22.The issuer bid circular provided to holders of the 6% Debenturesin connection with the Offer will include a summary of the OpinionLetter.
23.Revenue intends to make the Offer if, but only if, the exemptiverelief provided for in the Decision is granted.
ANDWHEREAS pursuant to the System this MRRS Decision Documentevidences the decision of each Decision Maker (the "Decision");
ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the legislation that provides the DecisionMaker with the jurisdiction to make the Decision has been met;
THEDECISION of the Decision Makers under the Legislationis that Revenue is exempted from the Formal Valuation Requirement,provided that Revenue complies with the other applicable provisionsof the Legislation relating to formal bids made by issuers.
THEFURTHER DECISION of the Decision Makers pursuant to theLegislation is that the Application and the Decision shall beheld in confidence by the Decision Makers until the earlier ofthe date that the Circular is filed in connection with the Offerand March 15, 2002.