DaimlerChrysler Canada Finance Inc. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- application for an MRRS decision varying an earlier MRRS decision to permit the issuer to obtain relief from the continuous disclosure requirements in connection with trades of commercial paper - issuer granted an exemption from the prospectus and registration requirements in connection with trades made subsequent to the date of the decision document of negotiable promissory notes or commercial paper -- issuer could not meet the "approved credit rating" requirement contained in the commercial paper exemption of National Instrument 45-106 Prospectus Exempt Distributions (NI 45-106) -- the definition of an "approved credit rating" requires, among other things, that every rating received by an issuer be at or above a prescribed standard -- concern expressed that the requisite rating thresholds in NI 45-106 are not equivalent among the rating agencies and that correlation among ratings are imperfect -- there was also concern that the requisite ratings were not appropriate as applied to the commercial paper market --relief granted provided the commercial paper (i) matures not more than one year from the date of issue; (ii) is not convertible or exchangeable into or accompanied by a right to purchase another security other than commercial paper; and (iii) has a rating issued by one of the following rating organizations at or above one of the following rating categories: DBRS "R-1(low), Fitch "F2", Moody's "P-2" or S&P "A-2" - the relief contains a sunset provision that the decision will terminate on the earlier of 90 days upon an amendment of NI 45-106 or three years from the date of the decision.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1), 53(1), 74(1).
April 10, 2006
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,
NOVA SCOTIA, PRINCE EDWARD ISLAND,
NEWFOUNDLAND AND LABRADOR,
NORTHWEST TERRITORIES, NUNAVUT AND YUKON
(the Jurisdictions)
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
DAIMLERCHRYSLER CANADA FINANCE INC.
(the Filer)
MRRS DECISION DOCUMENT
Background
The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation):
(a) exempting the Filer from the following (the Requested Commercial Paper Relief):
(i) the dealer registration requirement in respect of a trade in a negotiable promissory notes or commercial paper maturing not more than one year from the date of issue (the Commercial Paper); and
(ii) the prospectus requirement in respect of a distribution of Commercial Paper; and
(b) varying the decision entitled "In the Matter of DaimlerChrysler Canada Finance Inc. and DaimlerChrysler AG" dated June 30, 2005 (the Previous MRRS Decision) of the Decision Makers, other than the Decision Makers in Prince Edward Island and Northwest Territories, as follows (the Amendment Relief):
(i) by deleting subparagraph (e)(ii) of the decision exempting the Filer from the application of National Instrument 51-102 -- Continuous Disclosure Obligations (the CD Decision) in its entirety; and
(ii) by substituting the following for subparagraph (e)(ii) of the CD Decision:
"(ii) negotiable promissory notes or commercial paper that satisfies either (1) the requirements of the commercial paper exemption from the prospectus requirement of the Legislation of the Jurisdiction in which such notes or commercial paper are traded, including the commercial paper exemption contained in National Instrument 45-106 -- Prospectus and Registration Exemptions (or any successor instrument), or (2) the requirements of any rule, regulation, blanket order, ruling or decision issued by the Decision Maker in the Jurisdiction in which such notes or commercial paper are traded, that provides an exemption from the prospectus requirement of the Legislation of such Jurisdiction for trades specifically in negotiable promissory notes or commercial paper."
Under the Mutual Reliance Review System for Exemptive Relief Applications (MRRS):
(a) the Autorité des marchés financiers was selected as the principal regulator for this application, and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 - Definitions and National Instrument 45-106 -- Prospectus and Registration Exemptions (NI 45-106) have the same meaning in this decision unless they are otherwise defined in this decision.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the laws of Québec by articles of incorporation dated November 8, 1994. The registered and head office of the Filer is located in Montréal, Québec.
2. The Filer is a reporting issuer or its equivalent in each Jurisdiction and is not included in a list of defaulting reporting issuers maintained by any of the Decision Markers.
3. Subsection 2.35(1)(b) of NI 45-106 provides that exemptions from the registration requirement and prospectus requirement of the Legislation for short-term debt (the Commercial Paper Exemption) is available only where such short-term debt "has an approved credit rating from an approved credit rating organization" as defined in National Instrument 81-102 - Mutual Funds (NI 81-102).
4. The definition of an "approved credit rating" in NI 81-102, requires, among other things, that (a) the rating assigned to such debt must be "at or above" certain prescribed short-term ratings, and (b) such debt must not have been assigned a rating by any "approved credit rating organization" that is not an "approved credit rating."
5. At the time of this decision, the rating of the Filer's Commercial Paper attributed by Dominion Bond Rating Service Limited is "R-1(low)", which meets the prescribed threshold stated in the definition of "approved credit rating" of NI 81-102 with respect to that approved credit rating organization.
6. However, at the time of this decision, the Commercial Paper of the Filer does not meet the "approved credit rating" of NI 81-102 since Moody's Investor Service, Fitch Ratings Ltd. and Standard & Poor's have attributed, respectively, a "P-2", "F2" and "A-2" rating of the Commercial Paper of the Filer, which is a lower rating than that required by the Commercial Paper Exemption.
Decision
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.
The decision of the Decision Makers under the Legislation is that the Requested Commercial Paper Relief is granted provided that the Commercial Paper:
(a) matures not more than one year from the date of issue;
(b) is not convertible or exchangeable into or accompanied by a right to purchase another security other than Commercial Paper;
(c) has a rating issued by one of the following rating organizations, or any of their respective successors, at or above one of the following rating categories or a rating category that replaces one of the following rating categories:
(d) for each Jurisdiction, this decision will terminate on the earlier of:
i) 90 days after the coming into force of any rule, regulation or blanket order or ruling under the Legislation of the Jurisdiction that amends section 2.35 of NI 45-106 or provides an alternate exemption; and
ii) three years from the date of this decision.
The further decision of the Decision Makers under the Legislation, other than the Decision Makers in Prince Edward Island and Northwest Territories, is that the Amendment Relief is granted, provided that the Filer continues to comply with all terms and conditions contained in the Previous MRRS Decision, except as varied by this decision.