Ithaca Energy Inc.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – issuer deemed to be no longer a reporting issuer under securities legislation.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).

Citation: Re Ithaca Energy Inc., 2018 ABASC 15

January 26, 2018

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

 

AND

 

IN THE MATTER OF

THE PROCESS FOR CEASE TO BE A

REPORTING ISSUER APPLICATIONS

 

AND

 

IN THE MATTER OF

ITHACA ENERGY INC.

(the Filer)

 

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application (the Application) from the Filer for an order under the securities legislation of the Jurisdictions (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (the Order Sought).

Under the Process for Cease to be a Reporting Issuer Applications (for a dual application):

(a)           the Alberta Securities Commission is the principal regulator for this application;

 

(b)           the Filer has provided notice that subsec-tion 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador (the Passport Jurisdictions); and

 

(c)           this order is the order 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 order, unless otherwise defined herein.

Representations

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

General

 

1.             The Filer is incorporated under the Business Corporations Act (Alberta).

 

2.             The Filer’s head office is located in Aberdeen, United Kingdom and the Filer’s registered office is located in Calgary, Alberta.

 

3.             The Filer is a holding company and its subsidiaries have interests in certain United Kingdom continental shelf oil and gas assets. The Filer has no active business interests in Canada and is progressing re-domiciling and/or continuing itself into a jurisdiction outside of Canada.

 

4.             The Filer is a reporting issuer under the laws of each of the Jurisdictions and Passport Juris-dictions and is not in default of its obligations under the securities laws of any of the juris-dictions.

 

5.             Following the acquisition of all the issued common shares (the Common Shares) in the capital of the Filer by DKL Investments Limited (DKL) in the second quarter of 2017 by way of a takeover bid and subsequent compulsory acquisition (the Acquisition), all of the Common Shares are now beneficially owned by DKL, a private company incorporated under the laws of Jersey that is a wholly-owned subsidiary of Delek Group Ltd., a company incorporated in Israel which is listed and traded on the Tel Aviv Stock Exchange under the ticker symbol DLEKG.

 

6.             Since becoming a wholly-owned subsidiary of DKL, the Filer has taken no steps to actively create a market for its securities in Canada. Furthermore, the Filer has no current intention to seek financing by way of a distribution of securities into Canada but may in the future consider a distribution of securities into Canada pursuant to certain prospectus exemptions.

 

7.             The Filer is not eligible to use the simplified procedure under National Policy 11-206 Process for Cease to Be a Reporting Issuer Applications as the Notes (as defined below) are traded on a marketplace as defined National Instrument 21-101 Marketplace Operation (NI 21-101).

 

8.             In news releases dated 31 May 2017 and 2 June 2017 which related to the Acquisition, the Filer disclosed its intention to apply to cease to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer.

 

9.             On 13 November 2017, the Filer released its management discussion and analysis for the three and nine months ended 30 September 2017, in which the Filer disclosed that it applied for an order to cease to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer.

 

Equity Securities

 

10.          Following the Acquisition, the Common Shares were delisted from the Toronto Stock Exchange and the AIM market of the London Stock Exchange on 7 June 2017.

 

11.          Since 7 June 2017, the Filer has had no publicly traded equity securities in Canada or in another country on a marketplace as defined in NI 21-101 or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.

 

12.          In connection with the Acquisition, all of the Filer’s outstanding options to acquire Common Shares were either exercised, surrendered or cancelled as a result of which the Filer now has no options to acquire Common Shares outstanding.

 

13.          The Filer has no securities outstanding which are convertible into Common Shares.

 

Debt Securities

 

14.          On 2 July 2014, the Filer completed an offering (the Notes Offering) of US$300-million aggregate principal amount of senior unsecured notes due 1 July 2019 (the Notes).

 

15.          The Notes were issued pursuant to the terms of a trust indenture dated 3 July 2014 as supple-mented from time to time (the Trust Indenture) and are guaranteed on a senior subordinated basis by certain of the Filer’s subsidiaries.

 

16.          As of 10 January 2018 the Filer continues to have US$300-million aggregate principal amount of Notes outstanding.

 

17.          The Notes do not constitute voting or equity securities in the capital of the Filer and are not convertible into voting or equity securities.

 

18.          In connection with the Notes Offering, the Notes were listed on the Luxembourg Stock Exchange (LUXSE) to enable holders of the Notes to obtain certain tax treatment in respect of their investments.

 

19.          The Notes remain listed on the LUXSE and are the only securities of the Filer which are listed. To the knowledge of the Filer, the LUXSE does not maintain any records relating to the beneficial holders of the Notes and, although the Notes are eligible for trading, there has been no trading activity on the LUXSE since listing. The Filer understands that the Notes are solely traded over the counter between major corporate banks on behalf of institutional investors in accordance with the terms of the Trust Indenture.

 

20.          At the time of closing of the Notes Offering, alloca-tions were made to approximately 65 institutions worldwide. Two Canadian institutions received allocations amounting to approximately 5% of the total Notes Offering. In response to additional inquiries by the Filer, the Joint Bookrunner pro-vided information regarding its trading activity in the Notes into and out of Canada for each calendar year since the Notes were issued. Since the issuance of the Notes, the Joint Bookrunner’s in-house trading data indicates that it executed only two trades in the Notes with Canadian institutions, with both such trades occurring in 2014. The Joint Bookrunner accounted for approximately 63%, 40%, 19% and 60% of the volume traded in the Notes in 2014, 2015, 2016 and the first three quarters of 2017, respectively.

 

21.          Neither the Filer nor any other person or company maintains or is required to maintain a register of beneficial holders of the Notes. Accordingly, it is only possible to make limited enquiries in order to obtain information regarding the beneficial owner-ship of the Notes held by residents in Canada and in total worldwide.

 

22.          In March 2017, the Filer approached the holders of the Notes to solicit consents in connection with DKL’s acquisition of a controlling interest in the Filer (the Consent Solicitation) through Global Bondholder Services Corporation (GBSC), who acted as tabulation and information agent in connection with the Consent Solicitation. GBSC, through information obtained from the Notes trustee, was able to identify the custodians of the bonds but not the underlying beneficial interest holders. GBSC did not identify any Canadian institutional custodians as registered holders, nor did it receive any information to suggest that there were underlying beneficial owners that were Canadian institutional investors.

 

23.          In a further effort to try to establish whether any Canadians beneficially own any Notes,

 

(a)           the Filer contacted the custodians of the Notes (being 22 custodians in total, none of which were Canadian) in August 2017 (the Initial Request) asking that they disclose to the Filer whether they hold Notes on behalf of any Canadian institutions;

 

(b)           the Filer informed such custodians that it was soliciting responses to enable it to provide certain confirmations in connec-tion with a Canadian securities exemp-tion application, and indicated that if it did not receive a response by an indicated deadline, the Filer would assume for all intents and purposes that the relevant custodian was not in custody of any Notes on behalf of any Canadian institutions;

 

(c)           one custodian responded to the Initial Request stating that it did not hold any Notes on behalf of any Canadian institu-tions;

 

(d)           the Filer subsequently contacted the custodians that did not respond to the Initial Request (the Subsequent Re-quest);

 

(e)           two custodians responded to the Subsequent Request, each stating that it did not hold any Notes on behalf of any Canadian institutions.

 

24.          Based on the enquiries described above and the information obtained as a result of such enquiries, to the best of the knowledge and belief of the Filer, the outstanding securities of the Filer, including debt securities, are not owned, directly or indirectly, by any securityholders in Canada.

 

25.          The terms of the Trust Indenture do not require the Filer to maintain its status as a reporting issuer.

 

26.          The terms of the Trust Indenture require the Filer to provide holders of the Notes with certain information about the Filer, including annual and quarterly reports containing specified financial information such as an audited consolidated balance sheet and audited consolidated income statements and statements of cash flow, material developments, complete notes to such financial statements and the report of the independent auditors on the financial statements (the Relevant Reports).

 

27.          The Filer is required to make the Relevant Reports publicly available for so long as the Notes remain listed on the LUXSE, irrespective of its status as a reporting issuer in Canada. The Trust Indenture prescribes that the Relevant Reports must be:

 

(a)           provided by the Filer to the Notes trustee; and

 

(b)           made available either on the Filer’s web-site or made publicly available through substantially comparable means such as Bloomberg or another private electronic information service.

 

Furthermore, the Filer is obliged to hold a conference call or provide live streaming access to a presentation in which holders of the Notes are given an opportunity to discuss the operations of the Filer in respect of the relevant period.

Decision

Each of the Decision Makers is satisfied that the order meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Order Sought is granted.

“Denise Weeres”

Manager, Legal

Corporate Finance

Alberta Securities Commission