407 International Inc. et al.

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Registrantsexempted from prohibition against registrants acting as underwriters of debt offering ofconnected issuer, without certain required participation of independent registrants inoffering - Connected issuer is in good financial condition and is not a "specified party"as defined in draft Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts.

Applicable Ontario Statutes

Securities Act, R.S.O., c. S.5, as am.

Applicable Ontario Regulations

Regulation made under the Securities Act, R.S.O. 1990, Reg. 1015, as am., ss. 219(1),224(1)(b) and 233.

Applicable Ontario Rules

In the Matter of the Limitations on a Registrant Underwriting Securities of a RelatedIssuer or Connected Issuer of the Registrant, (1997) 20 OSCB 1217, as varied by(1999) 22 OSCB 58.

Proposed Multi-Jurisdictional Instrument Cited

Multi-Jurisdictional Instrument 33-105 Underwriters Conflicts, (1998), 21 OSCB 781.

WHEREAS the Canadian securities regulatory authority or regulator (the"Decision Maker") in each of Alberta, British Columbia, Ontario and Newfoundland (the"Jurisdictions") has received an application from Nesbitt Burns Inc., RBC DominionSecurities Inc., Salomon Smith Barney Canada Inc., CIBC World Markets Inc., NationalBank Financial Inc., Scotia Capital Inc. and TD Securities Inc. (collectively, the "Filers")and 407 International Inc. ("407 International"), for a decision, pursuant to thesecurities legislation of the Jurisdictions (the "Legislation"), that the requirement (the"Independent Underwriter Requirement") contained in the Legislation which prohibits aregistrant from acting as underwriter in connection with a distribution of securities of anissuer, made by means of prospectus, where the issuer is a "related issuer" (or theequivalent) of the registrant, or, in connection with the distribution, a "connected issuer"(or the equivalent) of the registrant, without certain required participation in thedistribution by one or more other registrants, in respect of which the issuer is neither arelated issuer (or the equivalent) of the registrant, nor, in connection with thedistribution, a connected issuer (or the equivalent) of the registrant, shall not apply tothe Filers in respect of a proposed distribution (the "Distribution") of Senior Bonds,Series 00-A3 (the "Series 00-A3 Bonds") and Senior Bonds, Series 00-A4 (the "Series00-A4 Bonds") of 407 International, to be made by means of a prospectus (the"Prospectus") expected to be filed with the securities regulatory authority or regulator(the "Securities Regulators") in each of the provinces of Canada;

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this application;

AND WHEREAS the Filers and 407 International have represented to theDecision Makers that:

1. 407 International was incorporated on March 17, 1999 under the provisions ofthe Business Corporations Act (Ontario), has its head office in the City ofToronto in the Province of Ontario and, as of July 20, 1999, is a reporting issuerin each provincial jurisdiction in Canada.

2. 407 International was formed for the purpose of submitting a bid to theGovernment of the Province of Ontario (the "Province") in connection with theprivatization of Highway 407 ETR by the Province. 407 International wasselected as the successful bidder on April 7, 1999 and on April 12, 1999 enteredinto a purchase agreement with the Province to acquire from the Province all ofthe shares of 407 ETR Concession Company Limited (the company establishedby the Province to hold the concession rights in respect of Highway 407 ETR)(the "Concessionaire"). The acquisition by 407 International from the Provinceof the shares of the Concessionaire was completed on May 5, 1999, at apurchase price of approximately $3.1 billion.

3. In preparing its bid for the Concessionaire, 407 International, under theguidance and with the advice of its financial advisors, determined that theoptimal means of financing for 407 International would consist largely of avariety of capital market debt instruments. However, because of the competitivenature of the bidding process for Highway 407 ETR and the requirement of theProvince that the successful bidder have in place prior to April 12, 1999committed financing sufficient to satisfy the $3.1 billion purchase price, it wasdetermined that it would be appropriate to finance the acquisition initially withbridge bank financing (the "Bridge Financing"). It was anticipated from theoutset that the Bridge Financing would be a temporary measure and would besubstantially repaid within 24 months following the acquisition of theConcessionaire out of the proceeds of successive offerings by 407 Internationalof capital market debt instruments.

4. 407 International has established a "Capital Markets Platform" to provide acommon security package and a common set of principal covenants for alllenders, whether capital market investors or members of the banking syndicate(the "Lenders") which provided the Bridge Financing. By virtue of the CapitalMarkets Platform, the capital market debt instruments of 407 International willrank pari passu with the Bridge Financing.

5. 407 International completed , on July 27, 1999, an initial public offering of "A"rated senior bonds in an aggregate principal amount of $1.1 billion. On October15, 1999, 407 International completed a second public offering of "A" ratedsenior bonds in an aggregate principal amount of $400 million. In addition, 407International, on August 20, 1999, completed a private placement of "A" ratedsenior bonds in an aggregate principal amount of $650 million. The netproceeds of these offerings were used to pay down the Bridge Financing.

6. On February 2, 2000, 407 International completed a private placement of "A"rated Series 00-A1 Bonds in an aggregate principal amount of $325 million. Thenet proceeds of this offering were used to pay down the Bridge Financing. TheCompany has filed with the Securities Regulators a preliminary prospectus datedFebruary 3, 2000 for Series 00-A2 Bonds of 407 International Inc. (the "Series00-A2 Bonds"), which will, pursuant to the terms of supplemental indenturegoverning the Series 00-A1 and Series 00-A2 Bonds, be issued, withoutadditional payment, in replacement of the Series 00-A1 Bonds, on the secondbusiness day following the date of the issuance of a receipt by the last of theSecurities Regulators for a (final) prospectus offering the Series 00-A2 Bonds.

6. 407 International has filed with each of the Securities Regulators a preliminaryprospectus dated February 3, 2000 in respect of the Distribution. The netproceeds to 407 International from its issue of Series 00-A3 Bonds and Series00-A4 Bonds comprising the Distribution will be used, primarily, to further paydown the Bridge Financing.

7. The underwriting syndicate for the Distribution will consist of the Filers, MerrillLynch Canada Inc. and Casgrain & Company Limited. Nesbitt Burns Inc. will bethe lead underwriter for the Distribution.

8. With respect to each Filer, 407 International is not a "related issuer", but is, byvirtue of the relationship of the Filer to a Lender, a "connected issuer", as suchterms are defined in draft Multi-Jurisdictional Instrument 33-105 - UnderwritingConflicts ("Draft Instrument 33-105").

9. Each of the Filers, with the exception of Salomon Smith Barney Canada Inc., is

registered under the securities legislation of each of Alberta, Ontario andNewfoundland as an "investment dealer" and "broker" and under the securitieslegislation of British Columbia as an "investment dealer" and "underwriter".Salomon Smith Barney Canada Inc. is registered under the securities legislationof Ontario as an "investment dealer".

10. 407 International is in the process of seeking, and expects to obtain, fromStandard & Poor's an "A" rating and equivalent ratings from each of theCanadian Bond Rating Service Inc. and Dominion Bond Rating Service Limitedin respect of the Series 00-A3 Bonds and Series 00-A4 Bonds comprising theDistribution.

11. The Prospectus will contain the information specified in Appendix "C" of the DraftInstrument, on the basis that 407 International is a "connected issuer" of eachFiler, as such term is defined in Draft Instrument 33-105.

12. 407 International is in good financial condition and is not a "specified party" asdefined in Draft Instrument 33-105.

AND WHEREAS pursuant to the System this MRRS Decision Documentevidences the decision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test containedin the Legislation that provides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that, inconnection with the Distribution, the Independent Underwriter Requirement shall notapply to the Filers.

March 6^th, 2000.

"Howard I. Wetston"    "Theresa McLeod"