Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Filer granted exemption from the prospectus requirement in connection with trades of commercial paper/short-term debt instruments that may not meet the "designated rating" requirement for the purpose of the short-term debt exemption in section 2.35 of National Instrument 45-106 Prospectus and Registration Exemptions -- Filer anticipates obtaining credit rating from a designated rating organization in line with long-term credit ratings -- Relief granted subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).

Citation: Agrium Inc., Re, 2013 ABASC 515

November 13, 2013

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
AGRIUM INC.
(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation), in respect of certain negotiable promissory notes or commercial paper maturing not more than one year from the date of issue (Notes), that:

(a) distributions of Notes issued by the Filer and offered for sale in the United States are exempt from the prospectus requirement under Alberta securities legislation (the Alberta Decision); and

(b) distributions of Notes issued by either the Filer or by Agrium U.S. Inc. (Agrium US) and offered for sale in Canada are exempt from the prospectus requirement under the Legislation (the Passport Decision and, together with the Alberta Decision, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission (the ASC) 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 each of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 or National Instrument 81-102 Mutual Funds (NI 81-102) have the same meaning if used in this decision, unless otherwise defined herein.

Representations

This decision is based on the following representations by the Filer:

1. The Filer is a corporation governed by the Canada Business Corporations Act with its head and registered office located in Calgary, Alberta.

2. Agrium US, a corporation organized under the laws of Colorado, is a wholly-owned subsidiary of the Filer.

3. The Filer is a reporting issuer in each of the provinces of Canada and is not in default of its obligations as a reporting issuer under the securities legislation of any of the jurisdictions in which it is a reporting issuer.

4. The Filer has securities registered under securities laws of the United States.

5. The common shares of the Filer are listed on the Toronto Stock Exchange and the New York Stock Exchange and trade under the symbol "AGU".

6. The Filer wishes to implement a commercial paper program that will involve the sale, from time to time, of Notes issued by the Filer or by Agrium US in the United States and Canada.

7. The offering and sale in Canada of Notes issued by the Filer or by Agrium US would be subject to the prospectus requirement under the Legislation.

8. ASC Policy 45-601 Distributions Outside Alberta indicates that the offering and sale in the United States of Notes issued by the Filer would be subject to the prospectus requirement under Alberta securities legislation.

9. Section 2.35(b) of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) provides an exemption from the prospectus requirement under the Legislation (the Commercial Paper Exemption) for the distribution of short-term debt that "has a designated rating from a designated rating organization or its DRO affiliate", incorporating by reference the definitions of "designated rating" and "designated rating organization" from NI 81-102.

10. The definition of "designated rating" in NI 81-102 requires, among other things, that (a) the rating issued for a security must be "at or above" prescribed rating categories, and (b) no designated rating organization or any of its DRO affiliates has rated the security in a rating category that is not a designated rating.

11. A rating will not be assigned to the Notes until the Filer launches the commercial paper program. The Filer expects that the ratings then assigned to the Notes will not satisfy the definition of designated rating as described and, therefore, the Commercial Paper Exemption will be unavailable.

12. The Filer's long-term debt currently has a long-term debt rating of "Baa2" from Moody's Investors Service, Inc. and "BBB" from Standard & Poor's Rating Service.

13. The Filer's current expectation is that the Notes will have a short-term debt rating from one of the following designated rating organizations or their respective DRO affiliates, at or above one of the following:

Rating Organization

Rating

 

DBRS Limited

R-1 (low)

 

Fitch, Inc.

F2

 

Moody's Canada Inc.

P-2

 

Standard & Poor's Ratings Services (Canada)

A-2

14. The Notes will be sold in denominations of not less than US$250,000.

15. To the Filer's understanding, Notes will be offered and sold in the United States pursuant to a private placement exemption from the registration statement requirements under United States securities laws (the US Commercial Paper Exemption), and only:

(a) through investment dealers registered, or exempt from the requirement to register, under applicable US securities laws (US Dealers); and

(b) to persons or companies (Qualified Purchasers) that are either:

(i) institutions that are "accredited investors" within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the 1933 Act; or

(ii) "qualified institutional buyers" within the meaning of Rule 144A under the 1933 Act.

16. To the Filer's understanding, each US Dealer will apply procedures to ensure that sales of Notes in the United States are made only to Qualified Purchasers.

17. To the Filer's understanding, Notes will be offered and sold in Canada only to "accredited investors", as defined in NI 45-106.

Decision

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.

1. The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a) the Notes:

(i) are not convertible or exchangeable into or accompanied by a right to purchase another security other than a Note;

(ii) are not short-term debt backed, secured or serviced by or from a discrete pool of mortgages, receivables or other financial assets or interests designed to ensure the servicing or timely distribution of proceeds to holders of that short-term debt; and

(iii) have a rating issued by a designated rating organization or a DRO affiliate, at or above one of the following rating categories:

Rating Organization

Rating

 

DBRS Limited

R-1 (low)

 

Fitch, Inc.

F2

 

Moody's Canada Inc.

P-2

 

Standard & Poor's Ratings Services (Canada)

A-2

(b) in respect of a distribution of a Note to a purchaser in the United States, it is made:

(i) in accordance with the US Commercial Paper Exemption;

(ii) through a US Dealer; and

(iii) to a Qualified Purchaser;

(c) in respect of a distribution of a Note to a purchaser in Canada, it is made:

(i) to a purchaser, purchasing as principal, that is an accredited investor, as defined in NI 45-106; and

(ii) through one of the following:

A. a dealer registered as an investment dealer or exempt market dealer, in accordance with National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103);

B. a bank listed in Schedule I, II or III to the Bank Act (Canada) relying on an exemption from the registration requirement;

C. a dealer relying on an exemption from the registration requirement.

2. The Exemption Sought terminates in a jurisdiction of Canada on the earlier of the following:

(a) 90 days after the coming into force of any rule, regulation, blanket order or ruling under the securities legislation of that jurisdiction of Canada that replaces or amends the conditions of the Commercial Paper Exemption; and

(b) 30 June 2017.

For the Commission:

"Glenda Campbell, QC"
Vice-Chair
 
"Stephen Murison"
Vice-Chair