Subsection 74(1) -- Application for exemption from prospectus requirement in connection with first trades of convertible bonds or shares of issuer through exchange or market outside of Canada or to person or company outside of Canada -- issuer not a reporting issuer in any jurisdiction in Canada -- conditions of the exemption in section 2.14 of National Instrument 45-102 Resale of Securities not satisfied as residents of Canada own more than 10% of the total number of shares -- relief granted subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).
National Instrument 45-102 Resale of Securities, s. 2.14.
IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED (the "Act") AND IN THE MATTER OF ONTARIO TEACHERS' PENSION PLAN BOARD AND LOUIS XIII HOLDINGS LIMITED
The Ontario Securities Commission (the "Commission") has received an application from the Ontario Teachers' Pension Plan Board (the "Applicant" or "OTPP") for an order pursuant to section 74(1) of the Act for an exemption from the prospectus requirement contained in section 53 of the Act in connection with the first trades of the New Convertible Bonds (as defined below) of Louis XIII Holdings Limited ("Louis XIII") acquired by the Applicant pursuant to the Securities Placement (as defined below), and New Shares (as defined below) of Louis XIII that the Applicant would receive upon exchange of such New Convertible Bonds (the "Requested Relief").
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
This order is based on the following facts represented by the Applicant:
1. The Applicant is an independent corporation established on December 31, 1989 by the Teachers' Pension Act (Ontario) to administer and manage a pension plan established for the benefit of the Province of Ontario's primary and secondary school teachers and to pay members of the pension plan their respective benefits under the plan. The head office of the Applicant is located at 5650 Yonge Street, Toronto, Ontario, Canada.
2. Louis XIII is a limited liability corporation incorporated under the laws of Bermuda, with shares listed on the Stock Exchange of Hong Kong (the "SEHK"). The core businesses of Louis XIII include management contracting, property development management and property investment, primarily serving clients based in Hong Kong, China and Macau. The principal place of business of Louis XIII is located at 2901 AIA Central, 1 Connaught Road Central, Hong Kong.
3. Louis XIII has advised OTPP that Louis XIII is not in default of any requirements of the SEHK or the applicable securities laws of China, Bermuda or any jurisdiction of Canada.
4. On December 2, 2014, the Commission issued an order pursuant to section 74(1) of the Act exempting OTPP from the prospectus requirement contained in section 53 of the Act in connection with the first trades of convertible bonds of Louis XIII acquired by OTPP in January and December of 2013, which represented HK$1,307.44 million principal amount of convertible bonds (the "Existing Convertible Bonds"), which were convertible for 190,261,793 Shares (the "Existing Shares", and together with the Existing Convertible Bonds, the "Exempt Securities").
5. In a Louis XIII press release dated January 16, 2015, Louis XIII announced that it had successfully raised aggregate gross proceeds of HK$2,169.1 million from the placement of newly issued ordinary shares (the "Shares") and convertible bonds (the "Convertible Bonds") (collectively, the "Securities Placement").
6. Pursuant to the Securities Placement, OTPP acquired on January 16, 2015 (the "Distribution Date"), HK$445.1 million principal amount of a new series of Convertible Bonds (such Convertible Bonds, the "New Convertible Bonds") convertible for 148,366,666 Shares (such Shares, the "New Shares") at a conversion price of HK$3.00 per Share. The New Convertible Bonds may be converted to New Shares at the applicable prescribed price at any time commencing on the date of issue and up to no later than seven (7) days prior to their maturity date, subject to certain early redemption rights.
7. The New Convertible Bonds were sold to OTPP on a private placement basis in reliance on the "accredited investor" prospectus exemption contained in Section 2.3 of National Instrument 45-106 Prospectus and Registration Exemptions.
8. To the best of OTPP's knowledge, based on a certificate from Louis XIII (the "Louis XIII Certificate"), as of the Distribution Date:
(a) there were issued and outstanding 920,867,010 Shares;
(b) the number of beneficial holders of Shares was 588;
(c) the Existing Convertible Bonds and New Convertible Bonds held by OTPP were convertible for 338,628,459 Shares, which, on as as-converted basis, represented approximately 22.6% of the total number of outstanding Shares;
(d) OTPP, on an as-converted basis, represented less than 0.01% of the outstanding number of holders of Shares;
(e) residents of Canada, other than OTPP, did not own, directly or indirectly, any Shares;
New Convertible Bonds
(f) there were issued and outstanding HK$755,300,000 principal amount of New Convertible Bonds;
(g) OTPP held HK$445,100,000 principal amount of New Convertible Bonds, representing approximately 58.9% of the total principal amount of outstanding New Convertible Bonds;
(h) the number of beneficial holders of New Convertible Bonds was 4;
(i) OTPP represented 25% of the outstanding number of holders of New Convertible Bonds;
(j) residents of Canada, other than OTPP, did not own, directly or indirectly, any New Convertible Bonds;
(k) other than the Convertible Bonds and Shares, there were no other outstanding securities of Louis XIII other than (A) certain exchange rights ("Exchange Rights") entitling holders thereof to purchase Shares and (B) Share options ("Share Options"); and
(l) residents of Canada, including OTPP, did not own, directly or indirectly, any Exchange Rights or Share Options.
9. At the Distribution Date of the New Convertible Bonds, after giving effect to the issue of such New Convertible Bonds, and Convertible Bonds of the same class or series that were issued at the same time or as part of the same distribution, and including the Shares that would be issued upon conversion of the Convertible Bonds, residents of Canada (excluding the Applicant):
(a) did not own, directly or indirectly, more than 10 percent of the outstanding Convertible Bonds and would not have owned, directly or indirectly, more than 10 percent of the outstanding Shares; and
(b) did not represent in number more than 10 percent of the total number of owners, directly or indirectly, of Convertible Bonds and would not have represented in number more than 10 percent of the total number of owners, directly or indirectly, of Shares.
10. Louis XIII was not, as at the Distribution Date, and is not, a reporting issuer or its equivalent in the Province of Ontario or any other province or territory of Canada, nor are any of its securities listed or posted for trading on any exchange, or market, located in Canada.
11. Louis XIII has advised OTPP that it has no present intention of becoming listed in Canada or of becoming a reporting issuer under the Act or under any other Canadian securities laws, and no market for the New Convertible Bonds or Shares exists in Canada and none is expected to develop.
12. In the absence of the Requested Relief, the first trade of New Convertible Bonds or New Shares held by the Applicant will be deemed to be a distribution and subject to section 53 of the Act.
13. The prospectus exemptions in sections 2.5 and 2.6 of National Instrument 45-102 Resale of Securities ("NI 45-102") will not be applicable in this situation because Louis XIII is not a reporting issuer or its equivalent in the Province of Ontario or any other province or territory of Canada.
14. The prospectus exemption in section 2.14 of NI 45-102 would be applicable in this situation, but will not be available to the Applicant (or any other holder of New Convertible Bonds or Shares in Canada) with respect to its first trade of New Convertible Bonds or New Shares because residents of Canada, including the Applicant, currently own more than 10% of the outstanding New Convertible Bonds or Shares.
The Commission is satisfied that this order meets the test set out in Section 74(1) of the Act.
The order of the Commission under Section 74(1) of the Act is that the Requested Relief is granted provided that:
i) Louis XIII is not a reporting issuer in any jurisdiction of Canada at the date of the trade; and
ii) the trade is executed through the facilities of the SEHK or through any other exchange or market outside Canada or to a person or company outside of Canada.
DATED at Toronto on this 7th day of April, 2015.