Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Exemption from the extension take up requirements in subsection 2.32(4) of National Instrument 62-104 Take-Over Bids and Issuer Bids – an issuer conducting an issuer bid requires relief from the requirement not to extend its issuer bid if all terms and conditions are met unless the issuer first takes up all securities validly deposited and not withdrawn under the issuer bid – the issuer will comply with the U.S. regime in connection with the issuer bid – requested relief granted, subject to conditions.
Applicable Legislative Provisions
National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 2.32(4), 6.1.
July 13, 2016
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
ATLANTIC POWER CORPORATION
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) that, in connection with the proposed purchase by the Filer of a portion of its issued and outstanding 5.75% series C convertible unsecured subordinated debentures (the Debentures) pursuant to a formal issuer bid (the Offer), the Filer be exempt from the requirement of the Legislation that the Offer not be extended if all the terms and conditions of the Offer have been complied with or waived unless the Filer first takes up all Debentures deposited under the Offer and not withdrawn (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(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 British Columbia, Alberta, Saskatchewan, Manitoba, Qué-bec, Nova Scotia, New Brunswick, New-foundland and Labrador, Prince Edward Island, the Northwest Territories, Nuna-vut and the Yukon Territory (together with the Jurisdiction, the Reporting Issuer Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation validly existing under the Business Corporations Act (British Columbia), and has its registered office in Vancouver, British Columbia and its principal executive office in Dedham, Massachusetts.
2. The Filer is a reporting issuer in each of the Reporting Issuer Jurisdictions and is not in default of any requirement of the securities legislation of any of the Reporting Issuer Jurisdictions.
3. The authorized share capital of the Filer consists of an unlimited number of common shares (the Common Shares). As at June 10, 2016, 121,275,377 Common Shares were issued and outstanding.
4. The Common Shares are listed and posted for trading on the Toronto Stock Exchange (the TSX) under the symbol “ATP”, and on the New York Stock Exchange under the symbol “AT”.
5. The Filer also has, issued and outstanding, the Debentures and 6.00% series D extendible convertible unsecured subordinated debentures (the Series D Debentures). The Debentures are traded on the TSX under the trading symbol “ATP.DB.U”, and the Series D Debentures are traded on the TSX under the trading symbol “ATP.DB.D”.
6. Atlantic Power Preferred Equity Ltd., the Filer’s wholly-owned subsidiary, has cumulative redeem-able preferred shares series 1, cumulative rate reset preferred shares series 2, and cumulative floating rate preferred shares series 3 issued and outstanding. These preferred shares are listed for trading on the TSX under the trading symbols “AZP.PR.A”, AZP.PR.B” and “AZP.PR.C”, respectively.
7. To the knowledge of the Filer, after reasonable inquiry, no person or company beneficially owns, or exercises control or direction over, more than 10% of the voting rights attached to all of the Filer’s outstanding voting securities.
8. Management of the Filer believes that purchases of Debentures pursuant to the Offer will create value for the Filer’s shareholders by reducing the Filer’s cash interest payments, de-levering is balance sheet and improving its debt maturity profile. The board of directors of the Filer (the Board) believes that the purchase of Debentures pursuant to the Offer represents an efficient use of the Filer’s financial resources and is in the best interests of the Filer.
9. The Filer formally commenced the Offer on June 16, 2016. The issuer bid circular dated June 16, 2016 prepared and filed by the Filer in connection with the Offer (the June 16 Circular) specifies that the Filer proposes to purchase up to U.S.$65,000,000 aggregate principal amount of Debentures (or such larger principal amount as the Filer, in its sole discretion, may determine that it is willing to take up and pay for, subject to applicable law) (the Maximum Purchase Amount) at a purchase price of U.S.$965 cash per U.S.$1,000 principal amount of Debentures. If the Filer determines to increase or waive the Maximum Purchase Amount from the U.S. $65,000,000 aggregate principal amount of Debentures set out in the Circular (as defined below), the Filer will issue and file a news release and send a notice of variation to holders of Debentures (the Debentureholders) in accordance with applicable Legislation.
10. To the Filer’s knowledge, approximately 14% of the Debentures are beneficially owned by residents of the United States (the U.S.) and the Offer was required to be made in the U.S. The Offer is subject to Rule 13e-4 and Regulation 14E promulgated under the Securities Exchange Act of 1934 (U.S.), as amended (the Exchange Act), and is not exempt therefrom. Pursuant to Rule 13e-4, the Filer filed a Tender Offer Statement on Schedule TO with the U.S. Securities and Exchange Commission (the SEC) on June 17, 2016 (the Schedule TO). The SEC required certain non-material changes to the disclosure set out in the Schedule TO, which changes are reflected in Amendment No. 2 dated July 6, 2016 (the Amendment), which amends and supple-ments the Schedule TO.
11. The Amendment is attached to a Notice in respect of the Offer filed on July 8, 2016 on the System for Electronic Document Analysis and Retrieval (together with the June 16 Circular, the Circular).
12. The Filer engaged Alexander Capital Group Inc. to prepare a valuation report with respect to the Debentures (the Valuation) in accordance with Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101). The Valuation contains Alexander Capital’s opinion that, based on the scope of its review and subject to the assumptions, restrictions and limitations provided therein, as of June 15, 2016, the fair market value of the Debentures falls within the range of U.S.$930 to U.S.$970 per U.S.$1,000 principal amount of Debentures. A copy of the Valuation is attached to the Circular.
13. On June 15, 2016, the last full trading day prior to the announcement of the approval by the Board of the Offer, the closing price per Debenture on the TSX was U.S.$928 per U.S.$1,000 principal amount of Debentures.
14. As of June 15, 2016, the aggregate principal amount of Debentures outstanding was U.S.$105,300,000. Accordingly, the Offer is for up to approximately 62% of the total number of issued and outstanding Debentures.
15. Polar Multi-Strategy Master Fund, Twin Lake Total Return Partners QP L.P., Twin Lake Total Return Partners L.P., Iron Road Multi Strategy Fund, L.P. and Iron Road Diversified Fund, L.P. (each, a Tendering Party) entered into lock-up agreements with the Filer on June 16, 2016, pursuant to which each of them agreed to tender the Debentures held by them to the Offer. In aggregate, the Tendering Parties hold approximately U.S.$29,661,000 principal amount of Debentures.
16. The Offer is scheduled to expire at 5:00 p.m. (Toronto time) on July 22, 2016 (the Expiration Date).
17. If all the terms and conditions of the Offer have been complied with or waived by the Filer by the Expiration Date but the Offer is undersubscribed, the Filer may wish to extend the Offer.
18. Under the Legislation, an issuer may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the issuer first takes up all securities deposited under the issuer bid and not withdrawn (the Extension Take Up Requirement). In issuer tender offers subject to Rule 13e-4 under the Exchange Act, the SEC requires an issuer to take up all securities tendered under an issuer bid concurrently and, as a consequence, prohibits an issuer from taking up securities prior to the expiry of an issuer bid.
19. If the Offer is undersubscribed and the Filer extends the Offer, Debentures deposited pursuant to the Offer may be withdrawn at any time prior to the expiry of any extension period in respect of the Offer.
20. Debentures not deposited and purchased pursuant to the Offer will remain outstanding. The terms and conditions governing the Debentures, including the covenants and other protective provisions contained in the trust indenture governing the Debentures, will remain unchanged. No amendments to the trust indenture governing the Debentures are required for the purposes of the Offer and no amendments are being sought.
21. The Circular:
(a) discloses the mechanics for the take up of, and payment for, deposited Deben-tures;
(b) discloses that the Filer has filed for an exemption from the Extension Take Up Requirement;
(c) sets out the manner in which an exten-sion of the Offer will be communicated to Debentureholders and the public;
(d) discloses that Debentures deposited pur-suant to the Offer may be withdrawn any time prior to the expiry of any extension period in respect of the Offer; and
(e) contains the disclosure prescribed by the Legislation for issuer bids.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
(a) the Filer complies with the requirements of Rules 13e-4 and Regulation 14E promulgated under the Exchange Act in respect of the Offer; and
(b) Debentures validly deposited under the Offer and not withdrawn are taken up and paid for, or dealt with, in the manner set out in the Circular.
Director, Office of Mergers & Acquisitions
Ontario Securities Commission