TransCanada Pipelines Limited

Decision

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Filer granted exemption from the prospectus requirement in connection with trades of commercial paper/short term debt instruments that do not meet the rating threshold condition requirement of the short-term debt exemption in section 2.35 of National Instrument 45-106 Prospectus Exemptions -- Relief granted subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.A. 2000, c. S-4, s. 144.

Citation: Re TransCanada Pipelines Limited, 2023 ABASC 128

August 18, 2023

IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions)

AND

IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF TRANSCANADA PIPELINES LIMITED (the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that distributions of certain negotiable promissory notes or commercial paper maturing not more than one year from the date of issue (Notes) issued by the Filer and offered for sale in Canada are exempt from the prospectus requirement under the Legislation (the Exemption Sought).

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

(a) the Alberta Securities Commission 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 (MI 11-102) is intended to be relied upon in respect of the Exemption Sought in each of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut; and

(c) this 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 National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.

Representations

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

1. The Filer is a corporation governed by the Canada Business Corporations Act, with its head and registered office located in Calgary, Alberta.

2. All of the outstanding common shares of the Filer are owned by TC Energy Corporation (TC Energy). Pursuant to a decision dated January 3, 2019 granted by the Alberta Securities Commission (as principal regulator) and the Ontario Securities Commission pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, the Filer is exempted from the requirements under National Instrument 51-102 Continuous Disclosure Obligations to file certain continuous disclosure documents provided that, among other requirements, TC Energy is a reporting issuer in each province and territory of Canada, and has filed all disclosure documents that it is required to file under applicable securities legislation on or before the time those documents would have been required to be filed under such legislation by the Filer.

3. Each of the Filer and TC Energy is a reporting issuer in all of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction of Canada.

4. The Filer has implemented a commercial paper program that involves the sale, from time to time, of Notes issued by the Filer to purchasers located in Canada.

5. The offering and sale of Notes issued by the Filer are subject to the prospectus requirement under the Legislation.

6. Section 2.35(1) of National Instrument 45-106 Prospectus Exemptions (NI 45-106) provides that an exemption from the prospectus requirement of the Legislation for commercial paper (the CP Exemption) is only available where such commercial paper: (a) matures not more than one year from the date of issue; (b) "has a credit rating from a designated rating organization ... that is at or above" certain prescribed short-term ratings set forth in section 2.35(1)(b) of NI 45-106; and (c) "has no credit rating from a designated rating organization ... that is below" certain prescribed short-term ratings set forth in section 2.35(1)(c) of NI 45-106.

7. Prior to July 25, 2023, the ratings assigned to the Filer's commercial paper satisfied the requirements of section 2.35(1)(b) and 2.35(1)(c) of NI 45-106 and accordingly, prior to that date, the Notes were offered and sold in Canada pursuant to, and in accordance with, the CP Exemption.

8. On July 25, 2023, DBRS Limited downgraded the rating of the Filer's commercial paper by one grade to "R-2 (High)" (the Downgrade).

9. As a result of the Downgrade, TCPL no longer satisfies the rating requirements prescribed in sections 2.35(1)(b) and 2.35(1)(c) of NI 45-106 and is therefore no longer able to rely on the CP Exemption for the distribution of Notes.

10. The Filer ceased distributions of Notes following the Downgrade, but seeks to resume distributions under its commercial paper program in the normal course.

11. All Notes will have a maturity not exceeding 365 days from the date of issuance, and will be sold in denominations of not less than $250,000.

12. The Notes will be offered and sold in Canada only:

(a) through investment dealers registered, or exempt from the requirement to register, under applicable securities legislation in Canada (Canadian Dealers); and

(b) to persons (Canadian Qualified Purchasers) that are "accredited investors" (as defined in NI 45-106), other than those that are any of the following:

(i) an individual referred to in any of paragraphs (j), (j.1), (k) and (l) of that definition;

(ii) a person referred to in paragraph (t) of that definition in respect of which any owner of an interest, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, is an individual referred to in any of paragraphs (j), (j.1), (k) and (l) of that definition; and

(iii) a trust referred to in paragraph (w) of that definition.

13. The Filer will require each Canadian Dealer to apply procedures to ensure that sales of Notes by such Canadian Dealer, as well as any subsequent resales of previously issued Notes by such Canadian Dealer, are made only to Canadian Qualified Purchasers in accordance with paragraph 12 of this decision.

Decision

Each of the Decision Makers is satisfied that the decision concerning the Exemption Sought meets the test set out in the Legislation to make the decision.

The decision of the Decision Makers is that the Exemption Sought is granted in respect of the distribution of Notes, provided that:

(a) each Note:

(i) is not convertible or exchangeable into, or accompanied by a right to purchase, another security other than a Note;

(ii) is not a "securitized product" (as defined in NI 45-106);

(iii) has a credit rating at or above one of the categories listed below by: a "designated rating organization" (as defined in NI 45-106) listed below; a "DRO affiliate" (as defined in NI 45-106) of an organization listed below; a designated rating organization that is a successor credit rating organization of an organization listed below; or a DRO affiliate of such successor credit rating organization:

Designated Rating Organization

Rating

 
DBRS

R-2 (High)

 
Fitch Ratings, Inc.

F1

 
Moody's Canada Inc.

P-1

 
S&P Global Ratings Canada

A-1 (Low) (Canada National Scale)

and has no credit rating below:

Designated Rating Organization

Rating

 
DBRS

R-2 (High)

 
Fitch Ratings, Inc.

F2

 
Moody's Canada Inc.

P-2

 
S&P Global Ratings Canada

A-1 (Low) (Canada National Scale) or A-2 (Global Scale)

(b) each distribution of Notes is made:

(i) to a purchaser that is purchasing as a principal and is a Canadian Qualified Purchaser; and

(ii) through a Canadian Dealer;

(c) each Canadian Dealer has agreed to apply the procedures referred to in paragraph 13 of this decision; and

(d) for each jurisdiction of Canada, the Exemption Sought will terminate on July 31, 2028.

For the Commission:

"Tom Cotter"
Vice-Chair
 
"Kari Horn"
Vice-Chair

OSC File #: 2023/0337