CIBC World Markets Inc. et al. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Issuer is a connected issuer, but not a relatedissuer, in respect of registrants that are underwriters in proposed distribution of units by the issuer - Underwriters exemptfrom the independent underwriter requirement in the legislation provided that issuer not in financial difficulty.
Applicable Ontario Regulations
Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., ss. 219(1), 224(1)(b) and 233.
Applicable Ontario Rules
Proposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts (published for comment February 6, 1998).
IN THE MATTER OF
THE SECURITIES LEGISLATION OF BRITISH COLUMBIA,
ALBERTA, ONTARIO, QUEBEC AND NEWFOUNDLAND
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
CIBC WORLD MARKETS INC. AND
BANC OF AMERICA SECURITIES CANADA CO.
AND
ODYSSEY RE HOLDINGS CORP.
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia,Alberta, Ontario, Quebec and Newfoundland (the "Jurisdictions") has received an application from CIBC WorldMarkets Inc. and Banc of America Securities Canada Co. (together, the "Applicants") for a decision pursuant to thesecurities legislation of the Jurisdictions (the "Legislation") that the requirement (the "Independent UnderwriterRequirement") contained in the Legislation which restricts a registrant from acting as an underwriter in connection witha distribution of securities of an issuer made by means of prospectus, where the issuer is a connected issuer (or theequivalent) of the registrant unless a portion of the distribution at least equal to that portion underwritten by non-independent underwriters is underwritten by an independent underwriter, shall not apply to the members of anunderwriting syndicate in connection with a proposed distribution (the "Offering") of common shares by Odyssey ReHoldings Corp. (the "Issuer") to be made pursuant to a PREP prospectus and a supplemented PREP prospectus(together, the "Prospectus");
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS the Applicants and the Issuer have represented to the Decision Makers that:
1. The principal offices of the Applicants are in Ontario.
2. The Issuer was incorporated on March 21, 2001 under the laws of Delaware, U.S.A., and is not currently areporting issuer, or the equivalent, in any province of Canada.
3. Under a reorganization to be completed in connection with the Offering (the "Reorganization"), FairfaxFinance Holdings Limited ("Fairfax") will cause the shares of certain of its operating subsidiaries to betransferred to the Issuer in consideration for a combination of shares of the Issuer, a cash payment and theissue of term debt. Following completion of such Reorganization, the Issuer will be a United States basedunderwriter of reinsurance providing property and casualty products on a worldwide basis.
4. Following completion of the Offering, it is anticipated that the common shares of the Issuer will be listed on theToronto Stock Exchange and the New York Stock Exchange and that the Issuer will become a reporting issuer,or equivalent, in each province of Canada.
5. The Issuer will continue to be controlled by Fairfax following completion of the Offering.
6. Fairfax maintain approximately Cdn$1.25 billion of unsecured lines of credit (the "Credit Facilities") extendedby a number of Canadian and foreign banks (collectively, the "Lenders"). Although a portion of the availableamounts under the Credit Facilities has been committed for the issuance of letters of credit, no amounts haveactually been drawn by Fairfax on the Credit Facilities.
7. One of the Lenders owns approximately US$136 million of certain trust preferred securities of a statutorybusiness trust subsidiary of Fairfax (the "Preferred Securities").
8. Various of the Lenders are also counter parties to certain foreign exchange or other swap agreements withFairfax or its subsidiaries (the "Swap Agreements").
9. The common shares of the Issuer will be offered in a cross-border transaction in the United States and in allprovinces of Canada through an underwriting syndicate either directly by the members of such syndicate orthrough their respective affiliated Canadian registrants in such provinces as each is duly registered to do so.
10. It is anticipated that some or all of the underwriting syndicate members will be subsidiaries of certain of theLenders and therefore the Issuer may, in connection with the Offering, be considered a connected issuer (orthe equivalent) of the underwriting syndicate members (such syndicate members herein referred to as the"Connected Underwriters").
11. The Credit Facilities are in good standing. All distributions required to be made to date on the PreferredSecurities have been made. All of the Swap Agreements have been entered into in the normal course ofbusiness and are in good standing.
12. Although a portion of the net proceeds from the Offering will be used by the Issuer to acquire the shares ofcertain operating subsidiaries from Fairfax under the Reorganization, none of such proceeds paid to Fairfaxwill be used by Fairfax to repay any debt owing under the Credit Facilities, to redeem any Preferred Securitiesor close out any of the Swap Agreements.
13. Neither the Issuer nor Fairfax is in financial difficulty. The Issuer is not under any immediate financial pressureto proceed with the Offering. The Issuer is not a "specified party" as defined in Proposed Multi-JurisdictionalInstrument 33-105 (the "Proposed Instrument").
14. The Issuer will not be a "related issuer", within the meaning of the Legislation or the Proposed Instrument, ofany of the Connected Underwriters.
15. The Lenders did not participate in the decision to make the Offering or in the determination of the terms of theOffering.
16. The Connected Underwriters will not benefit in any manner from the Offering other than the payment of theirfees in connection with the Offering.
17. The nature of the relationship among the Issuer, the Lenders and the Connected Underwriters will be describedin the final PREP prospectus as required by Appendix C to the Proposed Instrument.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (the "Decision);
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers, under the Legislation, is that the Independent UnderwriterRequirement shall not apply to the Connected Underwriters in connection with the Offering provided the Issuer is nota related issuer, as defined in the Proposed Instrument, to the Connected Underwriters at the time of the Offering andis not a specified party, as defined in the Proposed Instrument, at the time of the Offering.
May 30, 2001.
"John Geller" "Robert Korthals"