Twin Butte Energy Ltd. and BBS Securities Inc. – s. 144
Section 144 – application for partial revocation of cease trade order – issuer cease traded due to failure to file interim financial statements, management's discussion and analysis and certifications of the foregoing filings – applicant has applied for a partial revocation of the cease trade order to permit the transfer of debentures of the issuer to an affiliated company in order to create a tax loss – partial revocation granted subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 144.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
(the Act)
AND
IN THE MATTER OF
TWIN BUTTE ENERGY LTD. AND
BBS SECURITIES INC.
ORDER
(Section 144 of the Act)
WHEREAS Twin Butte Energy Ltd. (the Issuer) is subject to a dual failure-to-file cease trade order (the Cease Trade Order) dated November 18, 2016 issued by the Executive Director of the Alberta Securities Commission and the Director (the Director) of the Ontario Securities Commission (the Commission) ordering that trading and purchasing cease in respect of each security of the Issuer;
AND WHEREAS BBS Securities Inc. (the Filer), the beneficial owner of 600 debentures (the Debentures) issued by the Issuer, has applied to the Commission pursuant to section 144 of the Act for a partial revocation of the Cease Trade Order to allow the transfer (the Transfer) of the Debentures by the Filer to its affiliate, Ziaian Holdings Inc. (the Purchaser), solely for the purpose of establishing a tax loss (the Requested Relief);
AND WHEREAS notwithstanding the Cease Trade Order also having effect in all jurisdiction of Canada that have adopted MI 11-103 Failure-to-File Cease Trade Orders in Multiple Jurisdictions or have a statutory reciprocal order provision, the Filer has applied only to the Commission for a partial revocation of the Cease Trade Order;
AND UPON the Filer having represented to the Commission that:
1. The Cease Trade Order was issued as a result of the Issuer’s failure to file interim unaudited financial reports, interim management’s discussion and analysis, and certification of interim filings for the interim period ended September 30, 2016.
2. The Cease Trade Order prohibits all trading and purchasing in the securities of the Issuer in Ontario, other than a sale made through both an investment dealer registered in a jurisdiction of Canada and a foreign organized regulated market.
3. The Issuer issued $85 million of 6.25% Convertible Unsecured Subordinated Debentures at a purchase price of $1,000 per debenture pursuant to a prospectus dated December 6, 2013. The offering closed on December 13, 2014. The debentures mature on December 31, 2018. Each debenture is convertible into common shares of the Issuer at the option of the holder at any time prior to 5:00 p.m. (Calgary time) on the earliest of (1) the maturity date and (2) the last business day following the redemption date (as defined in the prospectus), at a conversion price of $3.05 per debenture, being an effective conversion rate of 327.8689 common shares per $1,000 principal amount of debentures.
4. On September 1, 2016 FTI Consulting Canada Inc. was appointed as receiver (the Receiver) pursuant to an order of the Court of Queen's Bench of Alberta of all the assets, undertakings and properties of the Issuer.
5. The Filer is the owner of the Debentures purchased in the open market from July 4, 2016 to August 10, 2016 at prices ranging from $13.75 to $14.25 per debenture.
6. The Filer is an investment dealer registered under applicable securities legislation in all provinces and territories of Canada and is a member of the Investment Industry Regulatory Organization of Canada.
7. The Filer is subject to extensive regulatory requirements in its capacity as an investment dealer, including, without limitation, requirements as to regulatory capital.
8. The Debentures are held in the name of the Filer and in the inventory account of the Filer. The value of the Debentures is impaired.
9. The risk of further impairment of the value of the Debentures as the Issuer goes through a liquidation process has broad implications for the Filer in its capacity as a registered dealer.
10. The Filer wishes to transfer the Debentures for value to the Purchaser, an affiliate of the Filer, in order to eliminate the risk and to crystalize a tax loss.
11. Both the Filer and the Purchaser are under the common indirect control and beneficial ownership of Bardya Ziaian (the Controlling Owner).
12. As both the Filer and the Purchaser are indirectly owned and controlled by the Controlling Owner, the Transfer will not result in a change in the indirect beneficial ownership or control of the Debentures. There is no other benefit of the Requested Relief to the Filer, the Purchaser, the Issuer, or any other securityholder of the Issuer.
13. The Purchaser will purchase the Debentures currently held by the Filer for a purchase price of $00.1225 per $100 of principal amount of each debenture, being the last public trading price of the debentures published before the Cease Trade Order was imposed.
14. The Filer and the Purchaser are both residents of Ontario. The Transfer will take place in Ontario.
15. The Filer believes that the partial revocation of the Cease Trade Order is not prejudicial to the public interest.
16. The trustee of the Issuer, Computershare Limited (the Trustee), has been informed of the Requested Relief by the Filer and has not raised any objections to the Requested Relief.
17. The Filer acknowledges that, following the Transfer, any trade in the securities of the Issuer held by the Purchaser is prohibited by the Cease Trade Order.
18. The Purchaser acknowledges that the securities of the Issuer acquired by the Purchaser will remain subject to the Cease Trade Order until a full revocation order is granted, the issuance of which is not certain.
19. The Filer will provide a copy of the Cease Trade Order and the partial revocation order to all participants in the proposed trades.
AND UPON considering the application and the recommendation of staff of the Commission;
AND UPON the Director being satisfied that it is not prejudicial to the public interest to make an order for the partial revocation of the Cease Trade Order under section 144 of the Act;
IT IS HEREBY ORDERED pursuant to section 144 of the Act, that the Cease Trade Order be and is hereby revoked solely to permit the Transfer and acts in furtherance of the Transfer that are necessary for and are in connection with the Transfer and all other acts in furtherance of the Transfer that may be considered to fall within the definition of “trade” within the meaning of the Act, provided that prior to the completion of the Transfer, the Filer will provide to the Commission a signed and dated acknowledgment, on its own behalf and on behalf of the Purchaser, clearly stating that the issuance of a partial revocation order does not guarantee the issuance of a full revocation order in the future.
DATED at Toronto on this 2nd day of August, 2017.
“Michael Balter”
Manager, Corporate Finance
Ontario Securities Commission