John Deere Capital Corporation (Re), 2012 CanLII 24426

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – exemption granted from continuous disclosure, certification, and insider reporting requirements to an issuer of guaranteed medium term notes – continuous disclosure of U.S. affiliate credit supporter will be provided – issuer also granted relief from certain prospectus disclosure requirements

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c.S-5, as amended, ss. 107 and 121(2)(a)(ii).

National Instrument 51-102 Continuous Disclosure Obligations

National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings

National Instrument 44-101 Short Form Prospectus Distributions

National Instrument 55-104 Insider Reporting Requirements and Exemptions

May 4, 2012

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 JOHN DEERE CAPITAL CORPORATION (JDCC) AND JOHN DEERE CREDIT INC. (JDCI) (collectively, the Filers)

Background

The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for exemptive relief:

(a) pursuant to section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), exempting JDCI from all the requirements of NI 51-102 (the Continuous Disclosure Relief);

(b) pursuant to section 8.1 of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101), exempting JDCI from the requirements in Item 6 and paragraphs 11.1(1)1, 2, 3, 4, 6, 7 and 8 of Form 44-101F1 Short Form Prospectus (Form 44-101F1) (the Short Form Relief);

(c) pursuant to section 8.6 of National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), exempting JDCI from all the requirements of NI 52-109 (the Certification Relief);

(d) pursuant to section 10.1 of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104), exempting insiders of JDCI from the requirements of NI 55-104 in respect of securities of JDCI (the NI 55-104 Insider Reporting Relief, and with the Continuous Disclosure Relief, the Short Form Relief, and the Certification Relief, the Passport Exemptions Sought); and

(e) pursuant to section 121(2)(a)(ii) of the Legislation, exempting insiders of JDCI from the requirements in section 107 of the Legislation in respect of securities of JDCI (the Legislation Insider Reporting Relief).

Under National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission was selected as the principal regulator for the Application;

(b) the Filers have provided notice pursuant to section 4.7(1)(c) of Multilateral Instrument 11-102 Passport System (MI 11-102) that section 4.7(1) of MI 11-102 is to be relied upon by the Filers with respect to the equivalent provisions of the legislation of each province of Canada in respect of the Passport Exemptions Sought; and

Interpretation

Terms defined in National Instruments 14-101 Definitions, MI 11-102 and National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following representations and submissions by the Filers:

JDCI has outstanding non-convertible medium term notes (the Notes), issued pursuant to a short form base shelf prospectus (the Prospectus) filed from time to time with the securities regulatory authorities in each of the provinces of Canada (the JDCI MTN Program).

John Deere Capital Corporation and Support Agreement with Deere

JDCC was incorporated under the laws of Delaware in 1958. Its principal executive offices are located at 1 East First Street, Suite 600, Reno, Nevada, 89501, USA.
JDCC is an indirect wholly-owned subsidiary of Deere & Company (Deere). JDCC is not a reporting issuer or the equivalent in any of the Jurisdictions and complies with U.S. laws in respect of making public disclosure of material information on a timely basis.
As required by the Securities and Exchange Commission (SEC) Regulation S-X Rule 4-08(e), (Rule 4-08(e)) JDCC discloses in each of its quarterly reports on Form 10-Q and each of its annual reports on Form 10-K filed with the SEC any significant restrictions on the ability of JDCC to obtain funds from its subsidiaries by dividend or loan.
JDCC has non-convertible debt securities outstanding with an “approved rating” (as defined in NI 44-101) and JDCC has not been the subject of an announcement by an “approved rating organization” (as defined in NI 44-101) that the “approved rating” given by the organization may be down-graded to a rating category that would not be an “approved rating”.
Deere has entered into an agreement with JDCC (the Support Agreement) pursuant to which it has agreed to own at least 51 percent of the voting shares of capital stock of JDCC and to maintain JDCC’s consolidated tangible net worth at not less than $50 million. The Support Agreement also obliges Deere to make payments to JDCC such that its consolidated ratio of earnings to fixed charges is not less than 1.05 to 1 for each fiscal quarter.
Deere’s obligations under the Support Agreement are independent of JDCC’s indebtedness, obligations or other liabilities. The Support Agreement does not cause Deere to be responsible for the payment of any obligations of JDCC or of any guaranteed entity, including JDCI, to any creditor thereof. However, any holder of Notes has the right to demand that JDCC enforce its rights under the Support Agreement and if JDCC fails or refuses to take timely action to enforce such rights such holder may proceed against JDCC to enforce JDCC’s rights under the Support Agreement.

JDCI

JDCI is an indirect wholly-owned subsidiary of Deere formed under the laws of Canada. Its principal executive offices are located at Burlington, Ontario. JDCI is an affiliate of JDCC.
JDCI is a reporting issuer, or the equivalent, in all of the provinces of Canada.
JDCI primarily finances sales and leases by John Deere dealers of new and used agricultural and turf and commercial and forestry equipment.
The following exemptive relief decisions have been issued by certain securities regulators in Canada in respect of the JDCI MTN Program (the Existing Relief Orders):

(a) the Mutual Reliance Review System for Exemptive Relief Applications decisions entitled (i) “In the Matter of John Deere Credit Inc. and John Deere Capital Corporation” dated September 29, 2003, (ii) “In the Matter of Deere & Company, John Deere Capital Corporation and John Deere Credit Inc.” dated May 30, 2004,

(b) decisions of the New Brunswick Securities Commission both entitled “In the Matter of John Deere Credit Inc.” and identified as Order 2004-80187 and Order 2006-80118, and

Relief from Continuous Disclosure

Deere, and not JDCC, is the indirect beneficial owner of all of the issued and outstanding equity and voting securities of JDCI. In accordance with the terms of the Support Agreement, Deere is obligated to provide financial support to JDCC as described above.
JDCI is not able to utilize exemptions available to certain issuers of guaranteed securities set out in Item 13 of Form 44-101F1 and exemptions set out in Part 13 of NI 51-102, because (i) the guarantor (JDCC) of the issued securities is not the parent of the issuer (JDCI); and (ii) the Notes are not “designated credit support securities” (as defined in NI 51-102) because the terms of the Notes and any agreement governing the rights of holders of the Notes will only entitle holders of Notes to receive payment from JDCC within 30 days (rather than 15 days) of any failure by JDCI to make a payment.
JDCC satisfies the criteria set forth in section 3.1(a) of NI 71-101 and is eligible to use the multi-jurisdictional disclosure system (MJDS) for the purpose of distributing approved rating non-convertible debt in Canada based on documentation prepared in accordance with U.S. requirements even though JDCC is not a reporting issuer in the Jurisdictions.

Future Offerings

Each Prospectus in respect of a proposed offering of Notes will be prepared pursuant to the requirements of NI 44-101 and NI 44-102, other than the disclosure otherwise required pursuant to the Short Form Relief. Each Prospectus will incorporate by reference all United States Securities Exchange Act of 1934 (the 1934 Act) filings made by JDCC that would be required to be incorporated by reference (excluding Non-Incorporated Exhibits, as defined below) in a Form S-3 registration statement filed under the United Stated Securities Act of 1933 (the 1933 Act) if the securities distributed under the Prospectus were being registered on Form S-3, except as varied by the following:

(A) (I) the annual comparative selected financial information (the Annual Selected Financial Information) derived from the audited annual financial statements of JDCI for its most recently completed financial year and the financial year immediately preceding such financial year, prepared in accordance with generally accepted accounting principles in Canada in effect at such time (Canadian GAAP), accompanied by a specified procedures report of the auditors to JDCI, which shall define and include at least the following line items (or such other line items that provide substantially similar disclosure): (1) total revenues; (2) net income; (3) net investment in financing contracts and equipment on operating leases, together with a descriptive note on the dollar amount of the allowance for impaired financial contracts; (4) total assets; (5) short-term borrowings; (6) long-term borrowings (which shall include the Notes); (7) accounts payable and other liabilities; and (8) total shareholder's equity; and

(B) (II) the interim comparative selected financial information (the Interim Selected Financial Information) derived from the unaudited interim financial statements of JDCI for its most recently completed interim period and the corresponding interim period in the previous financial year, prepared in accordance with Canadian GAAP, which shall define and include at least the line items set out above in paragraph 15(A) (or such other line items that provide substantially similar disclosure);

The Non-Incorporated Exhibits are:

(i) agreements and any amendments thereto or termination thereof;

(ii) indemnification and severance agreements, deferred compensation plans, stock unit and stock option plans and other stock option or award plans, and all amendments, supplements and restatements thereto;

(iii) underwriting agreements or voting trust agreements of JDCC and all amendments, supplements and restatements thereto;

(iv) plans of acquisition, reorganization, arrangement, liquidation or succession;

(v) articles of incorporation (or instruments corresponding thereto) and by-laws of JDCC and any amendments or restatements thereof;

(vi) any instruments defining the rights of security holders, including deposit agreements, rights agreements and any supplements to and amendments or restatements thereof;

(vii) charters of committees of JDCC;

(viii) opinions and consents of: (a) legal counsel; and (b) independent or public certified accountants, or revenue rulings from the Internal Revenue Service;

(ix) (a) indentures and supplemental indentures and (b) term sheets and forms of certificates of securities to be issued by JDCC, all relating to the issuance of securities;

(x) statements of eligibility with respect to any indentures and trust indenture legislation;

(xi) certifications pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act and section 1350 as required by section 906 of the Sarbanes-Oxley Act of 2002;

(xii) powers of attorney;

(xiii) codes of ethics; and

(xiv) other information that JDCC voluntarily files as exhibits on Form 10-K, Form 10-Q, Form 8-K or otherwise;

JDCC will fully and unconditionally guarantee payment of the principal, premium (if any), interest and certain other amounts that could become payable under any provisions of the trust indenture relating to the particular Notes;
Any Notes issued by JDCI pursuant to any offering will have an “approved rating” by an “approved rating agency”;
JDCC will sign each short form shelf prospectus of JDCI as credit supporter;
The Prospectus will include, directly or indirectly, all material disclosure regarding JDCI and JDCC;
JDCC will undertake to file with the Decision Makers, in electronic format through SEDAR (as defined in National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR)) under JDCI’s SEDAR profile, all documents that it files under sections 13 (other than sections 13(d), (f) and (g) which relate, inter alia, to holdings of JDCC of securities of other public companies) and 15(d) of the 1934 Act until such time as the Notes are no longer outstanding; and
The consolidated annual and interim financial statements of JDCC that will be included or incorporated by reference in any Prospectus of JDCI will be prepared in conformity with US GAAP, and, in the case of the audited consolidated annual financial statements, such financial statements will be audited in accordance with auditing standards generally accepted in the United States.

DECISION

The principal regulator is satisfied that the test contained in the Legislation that provides the principal regulator with the jurisdiction to make the decision has been met.

The decision of the principal regulator under the Legislation is that the Continuous Disclosure Relief is granted for so long as:

(a) The Filers shall not rely on the Existing Relief Orders;

(b) Deere is the direct or indirect beneficial owner of 100% of the issued and outstanding voting shares of (i) JDCI and (ii) JDCC;

(c) JDCC is an SEC issuer (as defined in subsection 1.1(1) of NI 51-102) that is incorporated or organized under the laws of the United States of America or any state or territory of the United States of America or the District of Columbia and that has filed all documents it is required to file with the SEC;

(d) JDCI does not issue any securities, and does not have any securities outstanding, other than:

(i) (I) non-convertible debt securities or convertible debt securities that are convertible into non-convertible securities of JDCC; or

(II) non-convertible preferred shares or convertible preferred shares that are convertible into securities of JDCC

in respect of which JDCC has provided

(III) alternative credit support that

(A) entitles the holder of the securities to receive payment from JDCC, or enables the holder to receive payment from JDCI, within 30 days of any failure by the JDCI to make a payment; and

(B) results in the securities receiving the same credit rating as, or a higher credit rating than, the credit rating they would have received if payment had been fully and unconditionally guaranteed by JDCC, or would result in the securities receiving such a rating if they were rated; or

(IV) a full and unconditional guarantee of the payments to be made by JDCI, as stipulated in the terms of the securities or in an agreement governing the rights of holders of the securities, that results in the holder of such securities being entitled to receive payment from JDCC within 30 days of any failure by JDCI to make a payment (collectively, Credit Support Securities);

(ii) securities issued to and held by Deere or an affiliate of Deere;

(iii) debt securities issued to and held by banks, loan corporations, loan and investment corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or

(iv) securities issued under exemptions from the prospectus requirement in section 2.35 of National Instrument 45-106 Prospectus and Registration Exemptions;

(e) JDCI files in electronic format, copies of all documents JDCC is required to file with the SEC under the 1934 Act, at the same time or as soon as practicable after the filing by JDCC of those documents with the SEC;

(f) So long as any Credit Support Securities are outstanding, JDCI files, in electronic format, the Annual Selected Financial Information within:

(i) 120 days of JDCI's most recently completed financial year beginning if JDCI is a venture issuer (as defined in NI 51-102) as at the end of such financial year; or

(ii) 90 days of JDCI's most recently completed financial year beginning if JDCI is not a venture issuer as at the end of such financial year;

(g) The Annual Selected Financial Information shall include at least the following line items (or such other line items that provide substantially similar disclosure):

(i) total revenues;

(ii) net income;

(iii) net investment in financing contracts and equipment on operating leases, together with a descriptive note on the dollar amount of the allowance for impaired financial contracts;

(iv) total assets;

(v) short-term borrowings;

(vi) long-term borrowings;

(vii) accounts payable and other liabilities; and

(viii) total shareholder's equity;

(h) So long as any Credit Support Securities are outstanding, JDCI files, in electronic format, Interim Selected Financial Information for such interim period and for items (i) and (ii) of paragraph (I) below, the corresponding interim period in the previous financial year and for items (iii) through to and including (viii) of paragraph (I) below, as at the end of the previous financial year, with all such information derived from its unaudited interim financial statements, prepared in accordance with Canadian GAAP;

(i) So long as any Credit Support Securities are outstanding, JDCI files the Interim Selected Financial Information within:

(i) 60 days of JDCI's then most recently completed interim period if JDCI is a venture issuer as at the end of such interim period; or

(ii) 45 days of JDCI's then most recently completed interim period if JDCI is not a venture issuer as at the end of such interim period;

(j) The Interim Comparative Selected Financial Information referred to in paragraph (H) above shall include at least the following line items (or such other line items that provide substantially similar disclosure):

(i) total revenues;

(ii) net income;

(iii) net investment in financing contracts and equipment on operating leases, together with a descriptive note on the dollar amount of the allowance for impaired financial contracts;

(iv) total assets;

(v) short-term borrowings;

(vi) long-term borrowings;

(vii) accounts payable and other liabilities; and

(viii) total shareholder's equity;

(k) JDCC and Deere comply with U.S. laws and the requirements of any U.S. marketplace on which securities of JDCC or Deere are listed or quoted in respect of making public disclosure of material information on a timely basis;

(l) JDCC discloses, in accordance with Rule 4-08(e), any significant restrictions on the ability of JDCC to obtain funds from its subsidiaries by dividend or loan;

(m) JDCC immediately issues in Canada and files any news release that discloses a material change in its affairs;

(n) JDCI issues in Canada a news release and files a material change report in accordance with Part 7 of NI 51-102 for all material changes in respect of the affairs of JDCI that are not also material changes in the affairs of JDCC;

(o) JDCI concurrently sends to all holders of its debt securities all disclosure materials that are sent to holders of similar debt of JDCC in the manner and at the time required by U.S. laws and any U.S. marketplace on which securities of JDCC are listed or quoted;

(p) JDCI concurrently sends to all holders of its preferred shares all disclosure materials that are sent to holders of similar preferred shares of JDCC in the manner and at the time required by U.S. laws and any U.S. marketplace on which securities of JDCC are listed or quoted;

(q) No person or company other than JDCC has provided a guarantee or alternative credit support (as defined in subsection 13.4(1) of NI 51-102) for the payments to be made under any issued and outstanding securities of JDCI; and

(r) JDCC continues to satisfy the criteria set forth in paragraph 3.1(a) of NI 71-101 (or any applicable successor provision or instrument).

The further decision of the principal regulator under the Legislation is that the Short Form Relief is granted for so long as:

(A) JDCI qualifies for the Continuous Disclosure Relief and the Filers and Deere are in compliance with the applicable requirements and conditions of the Continuous Disclosure Relief, above;

(B) each Prospectus satisfies any applicable requirement under NI 44-101 and Form 44-101F1, except as varied by this decision or otherwise permitted under NI 44-102; and

The further decision of the principal regulator under the Legislation is that the Certification Relief is granted for so long as:

(a) JDCI qualifies for the Continuous Disclosure Relief and the Filers and Deere are in compliance with the applicable requirements and conditions of the Continuous Disclosure Relief, above; and

(b) JDCI is not required to, and does not, file its own annual or interim filings.

The further decision of the principal regulator under the Legislation is that the NI 55-104 Insider Reporting Relief is granted for so long as:

(A) JDCI qualifies for the Continuous Disclosure Relief and the Filers and Deere are in compliance with the applicable requirements and conditions of the Continuous Disclosure Relief, above;

(B) for an insider that is neither JDCC nor Deere,

(i) the insider does not receive, in the ordinary course, information as to material facts or material changes concerning JDCC before the material facts or material changes are generally disclosed; and

(ii) the insider is not an insider of JDCC in any capacity other than by virtue of being an insider of JDCI; and

(c) JDCC and Deere do not beneficially own any securities listed in subparagraph (D)(i) of the conditions to the Continuous Disclosure Relief, above.

“Jo-Anne Matear”

Manager, Corporate Finance

The further decision of the principal regulator under the Legislation is that the Legislation Insider Reporting Relief is granted for so long as:

(A) JDCI qualifies for the Continuous Disclosure Relief and the Filers and Deere are in compliance with the applicable requirements and conditions of the Continuous Disclosure Relief, above;

(B) for an insider that is neither JDCC nor Deere,

(ii) the insider is not an insider of JDCC in any capacity other than by virtue of being an insider of JDCI; and

(c) JDCC and Deere do not beneficially own any securities listed in subparagraph (D)(i) of the conditions to the Continuous Disclosure Relief, above.

“Edward Kerwin” “Sarah Kavanagh” ___________________________ __________________________

Commissioner Commissioner

Ontario Securities Commission Ontario Securities Commission