Pacific Basin Shipping Limited

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from the prospectus requirement in connection a rights offering by an issuer with a minimal connection to Canada -- Application for exemption from the prospectus requirement in connection with the first trade of rights and rights share of issuer through exchange or marketplace outside Canada or to person or company outside Canada -- Filer is incorporated in Bermuda and its ordinary shares are listed on the Stock Exchange of Hong Kong Limited -- Conditions of exemption in s. 2.1.2 of National Instrument 45-106 Prospectus Exemptions and s. 2.14 of National Instrument 45-102 Resale of Securities not satisfied as residents of Canada hold more than 10% of the outstanding shares of the issuer following completion of plan of arrangement -- The Filer has de minimis security holders in Canada, excluding one accredited investor -- Filer has no intention to have any of the shares listed on an exchange or marketplace in Canada.

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.

National Instrument 45-106 Prospectus Exemptions, s. 2.1.2.

TRANSLATION

May 20, 2016

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the "Jurisdictions") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF PACIFIC BASIN SHIPPING LIMITED (the "Filer")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (collectively, the "Decision Makers") has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") that the prospectus requirements contained in the Legislation will not apply to the distribution to shareholders of the Filer resident in the Jurisdictions (the "Canadian Holders") of the Nil-Paid Rights (as hereinafter defined) and the Rights Shares (as hereinafter defined) (the "Issuance Relief") or to the first trade thereof by the Canadian Holders (the "Resale Relief" and, together with the Issuance Relief, the "Requested Relief").

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

(a) the Autorité des marchés financiers (the "AMF") 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 and, in Québec, Regulation 11-102 respecting Passport System (collectively, "MI 11-102") is intended to be relied upon in British Columbia; 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 MI 11-102 and National Instrument 14-101 Definitions and, in Québec, Regulation 14-101 respecting Definitions have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation incorporated in Bermuda with limited liability pursuant to the Companies Act 1981 of Bermuda whose principal place of business is located at Hutchison House, 7th Floor, 10 Harcourt Road, Central, Hong Kong.

2. The ordinary shares of the Filer (the "Ordinary Shares") are listed on the main board of The Stock Exchange of Hong Kong Limited (the "Hong Kong Exchange") under the stock code 2343.

3. The Filer is not a reporting issuer in any jurisdiction of Canada and is not, to the knowledge of the Filer, in default under the securities laws of Hong Kong. The Filer has no present intention of becoming listed in Canada or of becoming a reporting issuer in any jurisdiction of Canada under Canadian securities legislation.

4. The Filer has selected the AMF as the principal regulator given that the Filer's principal Canadian securityholder is located in the province of Québec.

5. On April 18, 2016, the Filer issued an announcement of its proposal to, among other things, raise approximately US$150.6 million by way of the issue of rights (the "Rights Offering") to acquire an aggregate of 1,946,823,119 Ordinary Shares (the "Rights Shares") at the subscription price of HK$0.60 per Rights Share, on the basis of one right (a "Nil-Paid Right") for every one existing Ordinary Share.

6. While the Rights Offering will be fully underwritten by The Hongkong and Shanghai Banking Corporation Limited and by BNP Paribas Securities (Asia) Limited, neither such underwriter will be distributing any of the Nil-Paid Rights or the Rights Shares, or conducting any other activities, in Canada in connection therewith.

7. In accordance with Rule 7.19(6) of the Rules Governing the Listing of Securities on the Hong Kong Exchange (the "Listing Rules"), as the Rights Offering will increase the number of issued Ordinary Shares of the Filer by more than 50%, the Rights Offering is subject to the approval of the holders of the Ordinary Shares (the "Shareholders") at a special general meeting of the Shareholders (the "SGM") scheduled to be held in Hong Kong on Monday, May 23, 2016. At the SGM, Shareholders will also be asked to consider, and if thought fit, approve a capital reorganization of the Filer.

8. The Filer will apply to the Listing Committee of the Hong Kong Exchange for permission to list the Nil-Paid Rights and the Rights Shares and permission to deal in the Rights Shares (nil paid and fully paid) on the Main Board of the Hong Kong Exchange (the "Listing Approval"). The Nil-Paid Rights are expected to be traded in board lots of 1,000 (as the Ordinary Shares are currently traded on the Hong Kong Exchange in board lots of 1,000).

9. Based on information provided by the Filer, there are currently nine Shareholders resident in Canada representing 0.005% of the approximately 1,958 Shareholders worldwide.

10. The Shareholders resident in Canada hold an aggregate of 258,917,500 Ordinary Shares, representing approximately 13.29% of the 1,946,823,119 Ordinary Shares outstanding. Such Shareholders resident in Canada are resident in British Columbia, Ontario and Québec.

11. The principal Canadian Holder is a private issuer incorporated pursuant to the Canada Business Corporations Act whose head office is located in Montreal, Québec (the "Québec Holder").

12. The Québec Holder is the registered holder and beneficial owner of an aggregate of 252,703,500 Ordinary Shares, representing 12.98% of the issued and outstanding Ordinary Shares worldwide and approximately 97.6% of the Ordinary Shares held by all of the Canadian Holders.

13. The Québec Holder has advised the Filer that it is an accredited investor within the meaning of National Instrument 45-106 -- Prospectus Exemptions ("NI 45-106") by virtue of being a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements.

14. The Québec Holder has been advised that the Requested Relief is being submitted and has confirmed its support thereof.

15. Any resale of the Nil-Paid Rights and the Rights Shares by the Canadian Holders will be made outside of Canada through the facilities of the Hong Kong Exchange as there is no market for the Nil-Paid Rights or the Rights Shares in Canada and none is expected to develop.

16. In the absence of an order granting the Issuance Relief, the issuance of the Nil-Paid Rights and the Rights Shares will be a distribution in respect of which a prospectus must be prepared unless otherwise exempted.

17. The prospectus exemption set forth in section 2.1.2 of NI 45-106 will not be available to the Filer with respect to the issuance of the Nil-Paid Rights or the Rights Shares given that, as stated above, it is expected that at the distribution date of the Nil-Paid Rights the number of Ordinary Shares for which the rights are issued that are beneficially held by residents of Canada will constitute 10% or more of the outstanding Ordinary Shares.

18. In the absence of an order granting the Issuance Relief, the Rights Offering in Canada will be limited exclusively to accredited investors pursuant to the prospectus exemption set forth in section 2.3 of NI 45-106 and to employees, executive officers, directors and consultants pursuant to the prospectus exemption set forth in section 2.24 of NI 45-106, and there can be no assurance that all Canadian Holders will be capable of satisfying the criteria of such exemptions. Accordingly, certain Canadian Holders may be precluded from participating in the Rights Offering and be unduly disadvantaged.

19. If Canadian Holders cannot participate in the Rights Offering, they would see their respective interest in the Filer diluted.

20. In the absence of an order granting the Resale Relief, the first trade in the Nil-Paid Rights and the Rights Shares will be a distribution unless either (i) section 2.5 of National Instrument 45-102 -- Resale of Securities ("NI 45-102") is complied with, to the extent the Nil-Paid Rights and the Rights Shares are distributed to Canadian Holders pursuant to section 2.3 of NI 45-106 or (ii) section 2.6 of NI 45-102 is complied with, to the extent the Nil-Paid Rights and Rights Shares are distributed to Canadian Holders pursuant to section 2.24 of NI 45-106 or pursuant to the Issuance Relief.

21. The prospectus exemptions in sections 2.5 and 2.6 of NI 45-102 will not be available in connection with the first trade in the Nil-Paid Rights or the Rights Shares because the Filer is not, and has no intention of becoming, a reporting issuer in a jurisdiction of Canada.

22. Section 2.14 of NI 45-102 will not be available to Canadian Holders with respect to the first trade in the Nil-Paid Rights and the Rights Shares given that, as stated above, it is expected that at the distribution date of the Nil-Paid Rights, residents of Canada will own directly or indirectly more than 10% of the outstanding Ordinary Shares.

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.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

(a) at the date of the distribution and at the date of the first trade of the Nil-Paid Rights and the Rights Shares, the Filer is not a reporting issuer in any jurisdiction of Canada;

(b) at the date of the distribution of the Nil-Paid Rights and the Rights Shares, after giving effect to the Rights Offering, residents of Canada do not represent in number more than 10% of Shareholders;

(c) the first trade of the Nil-Paid Rights and the Rights Shares is made through an exchange, or a market, outside of Canada or to a person or company outside of Canada; and

(d) all materials sent to any other Shareholders for the distribution of the Nil-Paid Rights are concurrently filed and sent to each Canadian Holder.

"Lucie J. Roy"
Senior Director, Corporate Finance