Securities Law & Instruments

Headnote

Exchange offer of co-issued notes - exemptions from short form prospectus eligibility requirements, short form prospectus requirements, continuous disclosure requirements, AIF and MD & A requirements and fees, subject to conditions.

Statute Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 75, 77, 78, 79, 81(2), 80(b)(iii) and 88(2).

Rules Cited

National Instrument 44-101 Short Form Prospectus Distributions, s. 15.1.

Ontario Securities Commission Rule 13-502 Fees, ss. 2.2, 6.1.

Ontario Securities Commission Rule 51-501 AIF and MD & A, s. 2.1, 4.1, 5.1.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, as amended (the "Act"),

NATIONAL INSTRUMENT 44-101 ("NI 44-101"),

ONTARIO SECURITIES COMMISSION RULE 51-501 ("RULE 51-501"), AND

ONTARIO SECURITIES COMMISSION RULE 13-502 ("RULE 13-502")

AND

IN THE MATTER OF

GERDAU AMERISTEEL CORPORATION

AND GUSAP PARTNERS

 

EXEMPTION AND ORDER

(Section 15.1 of NI 44-101, Sections 80(b)(iii) and 88(2) of the Act, Section 5.1 of Rule 51-501, and Section 6.1 of Rule 13-502)

UPON the application of Gerdau Ameristeel Corporation (the "Corporation") and GUSAP Partners ("GUSAP") (collectively referred to as the "Applicants") to the Ontario Securities Commission (the "Commission") for an order:

(a) pursuant to section 15.1 of NI 44-101 exempting GUSAP from the qualification criteria for filing a short form prospectus under Part 2 of NI 44-101 with respect to the proposed offering of Exchange Notes (as defined below);

(b) pursuant to section 15.1 of NI 44-101 exempting GUSAP from the short form prospectus disclosure requirements found in NI 44-101 with respect to the proposed offering of Exchange Notes;

(c) pursuant to section 6.1 of Rule 13-502 exempting GUSAP from the requirement in section 2.2 of Rule 13-502 to pay a participation fee for each of its financial years relating to its status as a reporting issuer upon the filing of the prospectus; and

(d) pursuant to sections 80(b)(iii) and 88(2) of the Act and section 5.1 of Rule 51-501 exempting GUSAP from the requirements to report material changes, to prepare, file and deliver to holders of the Exchange Notes audited annual financial statements, to prepare and file annual information forms (and management's discussion and analysis of financial condition and results of operations), to prepare, file and deliver unaudited interim financial statements, to prepare and file interim management's discussion and analysis of financial condition and results of operations and to file a report in place of an information circular as set out in sections 75, 77, 78, 79 and 81(2) of the Act and Rule 51-501;

AND UPON considering the application and the recommendation of staff of the Commission;

AND UPON the Corporation and GUSAP having represented to the Commission that:

1. The Corporation is incorporated in Ontario and is a reporting issuer or the equivalent in each of the provinces and territories of Canada that provides for a reporting issuer regime. The Corporation is also a registrant with the Securities and Exchange Commission (the "SEC") in the United States.

2. The Corporation has been a reporting issuer in Ontario since June 10, 1986. Its common shares and debentures are listed on the Toronto Stock Exchange under the symbols "GNA" and GNA.DB", respectively.

3. As a result of its reporting issuer status, the Corporation is required to comply with all timely and continuous disclosure filing requirements under the Act.

4. To its knowledge, the Corporation is not in default of any requirement under the securities legislation of the Province of Ontario.

5. GUSAP is a partnership formed under Delaware law, between two Canadian corporations (the Corporation and its wholly-owned subsidiary, Gerdau Ameristeel MRM Special Sections Inc.). GUSAP is a financing subsidiary that was created for the purpose of borrowing and providing funds to the Corporation and its subsidiaries. In addition to the Notes, GUSAP is also a co-borrower under the Corporation's senior credit facility entered into on June 27, 2003.

6. GUSAP has no operations, revenues or cash flows other than those related to the financing of the Corporation and its subsidiaries. The assets and liabilities of GUSAP are reported on the consolidated balance sheet of the Corporation. GUSAP is not a reporting issuer in any jurisdiction in Canada and is not a registrant with the SEC.

7. On January 27, 2003, the Applicants completed the private offering of US$405,000,000 aggregate principal amount of 10 3/8% senior notes due 2011 (the "Existing Notes"). The Existing Notes were sold in the United States to qualified institutional buyers and were also sold in Ontario to one accredited investor who purchased directly from the Applicants and to one wholly-owned subsidiary of the Corporation's parent company. The two Ontario purchasers purchased the Existing Notes pursuant to prospectus and registration exemptions. The Existing Notes have not been listed and are not freely tradeable under the securities laws of Canada or the United States. The Ontario purchasers agreed that the Existing Notes could only be sold through a registered dealer or pursuant to an applicable exemption from the registration requirements of applicable securities laws and in accordance with, or pursuant to an exemption from, the prospectus requirements of such laws.

8. As a condition of that private offering, the Applicants entered into a registration rights agreement (the "Registration Rights Agreement") with the initial purchasers of the Existing Notes pursuant to which the Applicants agreed, among other things, to complete an exchange offer for the Existing Notes. The Applicants intend to fulfill their obligation under the Registration Rights Agreement by exchanging the Existing Notes for new notes with the same terms and conditions as the Existing Notes (the "Exchange Notes"). (The Existing Notes and the Exchange Notes are sometimes collectively referred to as the "Notes".)

9. The Existing Notes may be exchanged for Exchange Notes upon the terms and subject to the conditions to be set forth in a prospectus and letter of transmittal (the "Exchange Offer").

10. The Existing Notes were, and the Exchange Notes will be, issued by both of the Applicants, as co-obligors. Each Applicant is unconditionally obligated to pay interest and principal on the Notes in accordance with the indenture entered into with SouthTrust Bank as trustee, dated as of June 27, 2003. This co-obligor structure was used rather than a more conventional guarantor structure as a result of tax considerations.

11. The Notes are unconditionally guaranteed by a number of subsidiaries of the Corporation and GUSAP (the "Guarantors").

12. The Corporation is eligible to use the southbound multi-jurisdictional disclosure system ("MJDS") with respect to the offering of its Exchange Notes. GUSAP is not eligible to use the MJDS with respect to its offering of Exchange Notes.

13. A preliminary prospectus and final prospectus (together, the "Prospectus") qualifying the Exchange Notes will be filed with the Commission and with the SEC. The filing will be made with the SEC under a hybrid combined registration statement on Form F-10 and Form F-4 and will also register the guarantees of the Guarantors.

14. The Corporation is eligible to file a short form prospectus pursuant to section 2.4 of NI 44-101 in connection with its offering of Exchange Notes.

15. GUSAP is not eligible to file a short form prospectus in connection with its offering of Exchange Notes. However, if the Corporation were the guarantor of the Exchange Notes rather than the co-issuer, GUSAP would have been eligible to file a short form prospectus in connection with its offering of Exchange Notes.

16. The Prospectus will contain full, true and plain disclosure of all material facts relating to the Exchange Notes. In addition, the Prospectus will contain detailed disclosure on the business of the Corporation and will include and incorporate by reference comprehensive financial information relating to the Corporation.

17. The Prospectus will also contain the following information:

(a) GUSAP's jurisdiction of organization and ownership;

(b) GUSAP's head and registered office;

(c) a description of the intercorporate relationships among the Corporation and the Corporation's material subsidiaries (including GUSAP);

(d) a summary description of the business of GUSAP;

(e) the identity of each of the Guarantors;

(f) financial information relating to GUSAP and the Guarantors contained in a note to the financial statements of the Corporation as described below;

(g) a statement summarizing the relief obtained by GUSAP in this order; and

(h) a certificate signed by the Chief Executive Officer and Chief Financial Officer of one of GUSAP's general partners and two of GUSAP's managers.

18. Following the effectiveness of the registration statement of which the Prospectus will form a part, financial disclosure of the type required by the U.S. Securities Act of 1933, as amended, in respect of guarantors will be provided with respect to GUSAP and the Guarantors in a note to the financial statements of the Corporation required to be filed pursuant to Sections 77 and 78 of the Act. This financial disclosure will consist of a balance sheet that includes current assets, non-current assets, current liabilities and non-current liabilities, an income statement that includes revenues, gross profits, income from continuing operations and net income, and a cash flow statement, in each case as at the date and for each of the periods for which financial statements for the Corporation are included in the Prospectus. The balance sheets, income statements and cash flow statements will each be presented with separate columns for each of the Corporation, GUSAP, the Guarantors, the non-Guarantor subsidiaries, consolidating adjustments and the total consolidated amounts.

19. The Prospectus will contain a contractual right of rescission for the benefit of the holders of the Notes.

20. GUSAP will become a reporting issuer in the province of Ontario upon the filing of the final prospectus in respect of the offering of the Exchange Notes and will be required to report material changes and to prepare, file and deliver to holders of the Exchange Notes audited annual financial statements, to prepare and file annual information forms (and management's discussion and analysis of financial condition and results of operations), to prepare, file and deliver unaudited interim financial statements, to prepare and file interim management's discussion and analysis of financial condition and results of operations and to file an annual report in place of an information circular as set out in sections 75, 77, 78, 79 and 81 of the Act and Rule 51-501.

21. GUSAP has no operations, revenues or cash flow other than in connection with the financing of the Corporation and its subsidiaries. All of GUSAP's assets and liabilities are reflected on the consolidated balance sheet of the Corporation. Separate financial information with respect to GUSAP in addition to that described in representation 18 would not be meaningful or informative for noteholders.

22. Because the Corporation is co-obligor with GUSAP in respect of the Notes, it is information with respect to the affairs and financial performance of the Corporation and its consolidated subsidiaries (including GUSAP and the Guarantors) that is meaningful to holders of the Exchange Notes. The compliance by the Corporation with its obligations as a reporting issuer and the delivery by the Corporation to holders of the Exchange Notes of the same material delivered to shareholders of the Corporation would provide holders of the Exchange Notes and the general investing public with all information required in order to make an informed decision relating to an investment in the Exchange Notes. In addition, financial information in the prospectus will be presented on a consolidated basis, incorporating GUSAP's financial results. Note disclosure to the financial information will separately identify GUSAP's results from the consolidated results of the Corporation as described in representation 18.

23. It is not intended that GUSAP will access the capital markets in Canada or elsewhere through a further public issue of securities.

24. The Corporation, GUSAP's parent, is a co-issuer of the notes offered under the Prospectus and is already a reporting issuer. As such, the Corporation has paid the participation fee required under Rule 13-502 for itself for the current financial year.

AND WHEREAS the Director and the Commission are satisfied that it would not be prejudicial to the public interest to grant the relief requested;

IT IS HEREBY ORDERED by the Director:

(a) pursuant to section 15.1 of NI 44-101 that GUSAP is exempt from the qualification criteria for a short form prospectus under Part 2 of NI 44-101 in connection with the offering of the Exchange Notes and is eligible to file a short form prospectus relating to the offering of the Exchange Notes under NI 44-101;

(b) pursuant to section 15.1 of NI 44-101 that GUSAP's short form prospectus relating to the Exchange Notes is exempt from the prospectus disclosure requirements set out in NI 44-101, provided that the disclosure set out in representation 17 is included in the prospectus;

(c) pursuant to section 6.1 of Rule 13-502, that GUSAP is exempt from the requirement in section 2.2 of Rule 13-502 to pay a participation fee for each of its financial years, for so long as:

(i) GUSAP continues to be exempt from continuous disclosure requirements;

(ii) GUSAP remains a wholly-owned subsidiary of the Corporation;

(iii) the Corporation is a reporting issuer under Ontario securities legislation;

(iv) the Corporation has paid its participation fee pursuant to section 2.2 of Rule 13-502, and in calculating its fees, has included the market value of each class or series of corporate debt of GUSAP outstanding at the relevant time; and

(v) GUSAP does not issue any further securities to the public,

provided further that upon any further issuance of securities to the public of GUSAP, a participation fee shall be immediately paid by GUSAP in respect of the financial year during which such securities are issued (such fee to be pro-rated to reflect the number of complete months remaining in such financial year) and in respect of subsequent financial years during which such securities remain outstanding;

(d) pursuant to section 5.1 of Rule 51-501 that GUSAP is exempt from the requirement to file an annual information form, provided that the Corporation files with the Commission under GUSAP's SEDAR profile its annual information form on the same day that such annual information form is filed under the Corporation's SEDAR profile in compliance with the requirements of section 2.1 of Rule 51-501;

(e) pursuant to section 5.1 of Rule 51-501 that GUSAP is exempt from the requirement to file annual management's discussion and analysis ("MD&A"), provided that the Corporation files with the Commission under GUSAP's SEDAR profile its annual MD&A on the same day that such annual MD&A is filed under the Corporation's SEDAR profile in compliance with the requirements of section 2.2 of Rule 51-501;

(f) pursuant to section 5.1 of Rule 51-501 that GUSAP is exempt from the requirement to file interim MD&A, provided that the Corporation files with the Commission under GUSAP's SEDAR profile its interim MD&A on the same day that such interim MD&A is filed under the Corporation's SEDAR profile in compliance with the requirements of section 4.1 of Rule 51-501; and

(g) pursuant to section 5.1 of Rule 51-501 that GUSAP is exempt from the requirement in Part 3 and section 4.3 of Rule 51-501 to deliver the annual and interim MD&A, respectively, to its security holders provided that GUSAP delivers the Corporation's annual and interim MD&A to GUSAP's security holders at the same time and in the same manner as if the holders of Notes were holders of the common shares of the Corporation,

provided that for (d) through (g):

(i) the Corporation remains a reporting issuer under Ontario securities legislation;

(ii) GUSAP remains a wholly-owned subsidiary of the Corporation; and

(iii) the Corporation and GUSAP remain co-obligors of the Notes.

December 2, 2003.

"Charlie MacCready"

AND IT IS FURTHER ORDERED by the Commission

(a) pursuant to section 80(b)(iii) of the Act that GUSAP is exempt from the requirement in section 75 of the Act to report material change reports, provided that the Corporation files with the Commission under GUSAP's SEDAR profile its material change reports on the same day that such material change reports are filed under the Corporation's SEDAR profile in compliance with the requirements of section 75 of the Act and that if there is a material change in respect of the business, operations, or capital of GUSAP that is not a material change in respect of the Corporation, GUSAP will comply with section 75 of the Act, notwithstanding that the change may not be a material change in respect of the Corporation;

(b) pursuant to section 80(b)(iii) of the Act that GUSAP is exempt from the requirement in section 77 of the Act to file interim financial statements with the Commission provided that the Corporation files with the Commission under GUSAP's SEDAR profile its interim financial statements on the same day that such interim financial statements are filed under the Corporation's SEDAR profile in compliance with the requirements of section 77 of the Act;

(c) pursuant to section 80(b)(iii) of the Act that GUSAP is exempt from the requirement in section 78 of the Act to file comparative financial statements with the Commission provided that the Corporation files with the Commission under GUSAP's SEDAR profile its comparative financial statements on the same day that such comparative financial statements are filed under the Corporation's SEDAR profile in compliance with the requirements of section 78 of the Act;

(d) pursuant to section 80(b)(iii) of the Act that GUSAP is exempt from the requirement in section 79 of the Act to deliver financial statements to its security holders provided that GUSAP delivers the Corporation's financial statements to GUSAP's security holders at the same time and in the same manner as if the holders of Notes were holders of the common shares of the Corporation;

(e) pursuant to section 88(2) of the Act that GUSAP is exempt from the requirement in section 81(2) of the Act to file with the Commission a report prepared and certified in accordance with the regulations provided that GUSAP files with the Commission under GUSAP's SEDAR profile the Corporation's information circular on the same day that such information circular is filed under the Corporation's profile in compliance with the requirements of section 81 of the Act;

provided that for (a) through (e):

(i) the Corporation remains a reporting issuer under Ontario securities legislation;

(ii) GUSAP remains a wholly-owned subsidiary of the Corporation;

(iii) the Corporation and GUSAP remain co-obligors of the Notes; and

(iv) in the case of all financial information filed by the Corporation, note disclosure sets out results of GUSAP and the Guarantors separately from the consolidated results of the Corporation as described in representation 18.

December 2, 2003.

"Paul M. Moore"
"Mary Theresa McLeod"