Student Transportation of America LTD. and Student Transportation of America ULC
Headnote
National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions- Relief from registration and prospectus requirements with respect to common shares issued pursuant to an offer to redeem notes in exchange for the common shares, subject to conditions - relief from registration requirements with respect to first trades of common shares acquired by holders of notes under the exchange offer.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).
June 17, 2008
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the "Jurisdiction")
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
STUDENT TRANSPORTATION OF AMERICA LTD. AND
STUDENT TRANSPORTATION OF AMERICA ULC
(collectively, the "Filer")
DECISION
Background
The principal regulator in the Jurisdiction has received an application (the "Application") from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation"):
(a) exempting the distribution of common shares ("Common Shares") of Student Transportation of America Ltd. ("STA Ltd.") by the Filer from (i) the dealer registration requirements under the Legislation (the "Registration Requirements") and (ii) the prospectus requirements under the Legislation (the "Prospectus Requirements") in connection with the exchange offer (the "Exchange Offer") by the Filer of Common Shares to holders of 14% subordinated notes ("Notes") of Student Transportation of America ULC ("STA ULC") in exchange for Notes (the "Registration and Prospectus Exemption Sought");
(b) exempting the first trade of any Common Shares acquired by holders of Notes pursuant to the Exchange Offer from the Registration Requirements (the "First Trade Relief Sought"); and
(c) that the Application and this decision (the "Confidential Material") be kept confidential and not be made public until the earlier of: (i) the date that the Filer publicly announces the Exchange Offer; (ii) the date that the Filer advises the decision maker that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 60 days after the date of this decision (the "Confidentiality Relief Sought").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission (the "OSC") 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, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon Territory, Northwest Territories and Nunavut (each a "Local Jurisdiction").
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 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. STA Ltd. is a corporation formed under the laws of Ontario. STA Ltd.'s head office is located at Suite 2400, 250 Yonge Street, Toronto, Ontario M5B 2M6. STA Ltd. owns all of the Class A common shares of Student Transportation of America Holdings, Inc. ("STA Holdco"), representing an approximate 98.75% voting interest.
2. STA ULC is an unlimited liability company organized under the laws of Nova Scotia and is a wholly-owned subsidiary of STA Holdco. STA ULC's head office is located at Suite 2400, 250 Yonge Street, Toronto, Ontario M5B 2M6.
3. Each of STA Ltd. and STA ULC is a reporting issuer in the Jurisdiction and each Local Jurisdiction (where that concept exists).
4. The Filer is not in default of the Legislation or the securities legislation of any Local Jurisdiction.
5. The Filer currently has outstanding 11,108,561 income participating securities ("IPS"). Each IPS is comprised of one Common Share and $3.847 principal amount of Notes. There are currently 41,595,242 Common Shares outstanding (of which 11,108,561 are represented by IPSs) and $43,657,067.83 principal amount of Notes outstanding (of which $42,734,634.17 principal amount of Notes are represented by IPSs).
6. To the knowledge of the Filer, substantially all of the holders of Notes own either IPSs or Common Shares.
7. The IPSs and Common Shares are listed and posted for trading through the facilities of the Toronto Stock Exchange (the "TSX") under the symbols "STB.UN" and "STB", respectively.
8. There is currently no public market in the Notes, which were de-listed from the TSX effective May 23, 2008.
9. In order to provide liquidity for holders of Notes, and as part of the Filer's long-term strategy to create liquidity in the Common Shares, the Filer wishes to commence the Exchange Offer for all or a specified portion of the Notes (including Notes represented by IPSs) pursuant to which a holder of Notes would receive, in exchange for $3.847 principal amount of Notes, a fraction of a Common Share to be determined based on a number of factors, including the current trading price, liquidity and yield of the IPSs, the estimated value of the underlying Notes, and the current trading price, liquidity and yield of the Common Shares. As part of the Exchange Offer, and in order to facilitate the ability of holders of Notes to "separate" their IPSs into the separate debt and equity components, holders of IPSs will be given the opportunity to tender their IPSs to the Exchange Offer and, in exchange for their IPSs, receive the Common Shares that are currently represented by such IPSs together with the additional Common Shares that such holder is entitled to receive in exchange for the aggregate principal amount of Notes represented by such IPSs.
10. But for the fact that the Notes are debt securities that are not convertible into securities other than debt securities, the Exchange Offer would constitute an indirect issuer bid under Part XX of the Securities Act (Ontario) (the "Act") and the corresponding securities legislation in each Local Jurisdiction.
11. Notwithstanding that the Exchange Offer is not an issuer bid, the Filer intends to treat the Exchange Offer as if it were an issuer bid. In particular, the Filer intends to comply with the requirements relating to issuer bids under Part XX of the Act, including, but not limited to, notice requirements, the delivery of an issuer bid circular in the prescribed form to holders of Notes and the provision of withdrawal rights.
12. The Filer will treat holders of Notes represented by IPSs and holders of Notes not represented by IPSs as holders of the same class of securities for the purpose of the Exchange Offer.
13. The Filer will not treat the Exchange Offer as an issuer bid exempt from the Legislation or the securities legislation of a Local Jurisdiction, except to the extent that such exemption, if any, is evidenced by a decision document from the principal regulator or securities regulatory authority in a Local Jurisdiction, as applicable.
14. Section 2.16 of NI 45-106 provides that the Registration Requirements and Prospectus Requirements do not apply in respect of a trade in a security in connection with an issuer bid. Accordingly, if the Exchange Offer constituted an issuer bid, the Common Shares that would be distributed in connection with the Exchange Offer would be exempt from the Registration Requirements and the Prospectus Requirements.
Decision
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 Registration and Prospectus Exemption Sought is granted provided that:
(a) the Filer treats the Exchange Offer as if it were an issuer bid and complies with the requirements of the Legislation applicable to issuer bids;
(b) the Filer will treat holders of Notes represented by IPSs and holders of Notes not represented by IPSs as holders of the same class of securities for the purposes of the Exchange Offer; and
(c) the first trade in any Common Shares acquired by holders of Notes pursuant to this decision, in the Jurisdiction or a Local Jurisdiction, is deemed a distribution or a primary distribution to the public under applicable securities legislation unless the following conditions are met:
(i) a circular in the form prescribed for an issuer bid circular under Part XX of the Act relating to the distribution of the Common Shares pursuant to the Exchange Offer was filed by the Filer on SEDAR;
(ii) the trade is not a control distribution; and
(iii) each Filer was a reporting issuer on the date the Notes of the offeree holders of Notes were first taken up under the Exchange Offer.
It is the further decision of the principal regulator under the Legislation that the First Trade Relief Sought is granted provided that the conditions in clause (c) above are satisfied.
It is also the decision of the principal regulator is that the Confidentiality Relief Sought is granted.