Subsection 74(1) -- Application for exemption from prospectus requirement in connection with first trade of 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 BONANZA CREEK ENERGY, INC.
The Ontario Securities Commission has received an application from the Ontario Teachers' Pension Plan Board (the "Applicant" or "OTPP") for an order pursuant to subsection 74(1) of the Act for an exemption from the prospectus requirement contained in section 53 of the Act (the "Requested Relief") in connection with the first trades of the common stock (the "Common Stock") of Bonanza Creek Energy, Inc. ("Bonanza Creek") acquired by the Applicant in the Securities Placement (as defined below) (such Common Shares, the "Subject Shares").
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
This decision 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 OTPP is located at 5650 Yonge Street, Toronto, Ontario, Canada.
2. Bonanza Creek is an independent energy company incorporated under the laws of Delaware, with its Common Stock listed on the New York Stock Exchange (the "NYSE"). The principal business of Bonanza Creek consists of the exploration, production and extraction of oil and associated liquids-rich natural gas in the United States. The principal place of business of Bonanza Creek is located at 410 17th Street, Suite 1400, Denver, Colorado, 80202.
3. According to a certificate from Bonanza Creek (the "Bonanza Creek Certificate"), on February 6, 2015, Bonanza Creek raised aggregate gross proceeds of US$209,300,000 million from the placement of 8,050,000 newly issued Common Stock at a price per share of US$26.00 (the "Securities Placement").
4. Pursuant to the Securities Placement, OTPP purchased 1,346,153 shares of the Common Stock. The shares of Common Stock 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.
5. To the best of OTPP's knowledge, based on the Bonanza Creek Certificate, as of the time immediately following the closing of the Securities Placement:
(a) There were issued and outstanding 49,335,032 shares of Common Stock; US$300,000,000 principal amount of 5.75% senior notes of Bonanza Creek due 2023 (the "5.75% Senior Notes"); and US$500,000,000 principal amount of 6.75% senior notes of Bonanza Creek due 2021 (the "6.75% Senior Notes");
(b) The number of registered holders of shares of Common Stock was 238;
(c) The registered and beneficial ownership figures for the 5.75% Senior Notes and 6.75% Senior Notes were not accurately determinable;
(d) OTPP held 1, 346,153 shares of Common Stock which, on an as-converted basis, represented approximately 2.72% of the total number of outstanding shares of Common Stock.
(e) OTPP represented less than 1% of the outstanding number of holders of Common Stock on an as-converted basis; and
(f) OTPP did not hold any other securities of Bonanza Creek.
6. To the best of OTPP's knowledge, based on the Bonanza Creek Certificate, as of April 17, 2015 (the "Record Date"), being the latest record date for which shareholder ownership figures are available from the Issuer's transfer agent, residents of Canada other than OTPP:
(a) held, directly or indirectly, 7,627,651 shares of Common Stock, which represented approximately 15.46% of the total number of outstanding shares of Common Stock, including Her Majesty the Queen in Right of Alberta as represented by Alberta Investment Management Corporation ("AIMCO"), which held 7,587,859 shares of Common stock, or approximately 99.47% of the shares of Common Stock held by Canadians other than OTPP; and
(b) held an indeterminable amount of 6.75% Senior Notes and 5.75% Senior Notes.
7. Pursuant to the Bonanza Creek Certificate, Bonanza Creek has advised OTPP that:
(a) At the distribution date of the Subject Shares, after giving effect to the issue of the Subject Shares and any other shares of the same class or series that were issued at the same time as or as part of the same distribution as the Subject Shares, residents of Canada (excluding OTPP and AIMCO):
(i) did not own, directly or indirectly, more than 10% of the outstanding shares of Common Stock;
(ii) did not represent in number more than 10% of the total number of owners, directly or indirectly, of the shares of Common Stock; and
(iii) did not own, directly or indirectly, any other securities of Bonanza Creek convertible and/or exercisable into Common Stock.
(b) other than the Common Stock, 6.75% Senior Notes and 5.75% Senior Notes, there were no other outstanding securities of Bonanza Creek as of the Record Date;
(c) that it 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;
(d) 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 Common Stock exists in Canada and none is expected to develop; and
(e) it is not in default of any requirements of the NYSE or the applicable securities laws of the United States, Delaware or any jurisdiction of Canada.
8. In addition, Bonanza Creek has indicated that:
(a) none of Bonanza Creek's assets and operations are located in Canada and none of its revenues are derived from operations in Canada;
(b) other than one director and executive officer, who resides partially in Canada, no other directors or executive officers of Bonanza Creek reside in Canada; and
(c) Bonanza Creek has no Canadian subsidiaries.
9. In the absence of the Requested Relief, the Applicant takes the view that the first trade of any Subject Shares held by the Applicant will be deemed to be a distribution and subject to section 53 of the Act.
10. 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 Bonanza Creek is not a reporting issuer or its equivalent in the Province of Ontario or any other province or territory of Canada.
11. The prospectus exemption in section 2.14 of NI 45-102 would be applicable in this situation, but will not be available to OTPP (or any other holder of Common Stock in Canada) with respect to its first trade of any Subject Shares because residents of Canada, including OTPP and AIMCO, currently own more than 10% of the outstanding shares of Common Stock, at the date of the distribution of the Subject Shares.
The Commission is satisfied that this order meets the test set out in subsection 74(1) of the Act.
The order of the Commission under subsection 74(1) of the Act is that the Requested Relief is granted provided that:
(a) Bonanza Creek is not a reporting issuer in any jurisdiction of Canada at the date of the trade; and
(b) the trade is executed through the facilities of the NYSE or through any other exchange or market outside Canada or to a person or company outside of Canada.
DATED at Toronto on this 31st day of July, 2015.