Ontario Commission des 22nd Floor 22e étage
Securities valeurs mobilières 20 Queen Street West 20, rue Queen ouest
Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8
In The Matter Of
The Securities Legislation Of
Ontario
(the Jurisdiction)
and
In The Matter Of
The Process For Cease To Be A
Reporting Issuer Applications
and
In The Matter Of
Trillium Credit Card Trust II
(the Filer)
Order
Background
The principal regulator in the Jurisdiction has received an application from the Filer for an order under the securities legislation of the Jurisdiction (the Legislation) that the Filer has ceased to be a reporting issuer in all the 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 passport application):
(a) the Ontario Securities Commission (OSC) is the principal regulator for this application; and
(b) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador, the Yukon Territory, Northwest Territories and Nunavut (collectively with Ontario, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined herein.
Representations
The Filer was originally established under a declaration of trust on February 26, 2016 (the Declaration of Trust). The Declaration of Trust is governed by the laws of the Province of Ontario. BNY Trust Company of Canada is the trustee (in such capacity, the Issuer Trustee) of the Filer and is a trust company established under the laws of Canada and is licensed to carry on business as a trustee in all provinces and territories of Canada. The head office of the Issuer Trustee is c/o BNY Trust Company of Canada at 1 York Street, 9th Floor, Toronto, Ontario M5J 0B6.
The Filer is a special purpose entity that purchases from The Bank of Nova Scotia (BNS), from time to time, undivided co-ownership interests in a revolving pool of credit card receivables and issues credit card receivables backed notes to fund such purchases.
The Filer is a reporting issuer in each of the Jurisdictions and is a “venture issuer” as defined in National Instrument 51-102 Continuous Disclosure Obligations.
The Filer filed a short form base shelf prospectus dated April 21, 2016 (the Base Shelf Prospectus) pursuant to National Instrument 44-102 Shelf Distributions. No securities of the Filer have been distributed by way of a public offering pursuant to the Base Shelf Prospectus. The Base Shelf Prospectus has now lapsed.
The Filer is not in default of any of the requirements of the securities legislation in any of the Jurisdictions. The Filer filed its annual financial statements and MD&A for the fiscal year ended December 31, 2017 with the Canadian securities administrators in each of the Jurisdictions on April 30, 2018, and its quarterly financial statements and MD&A for the first quarter ended March 31, 2018 on May 30, 2018.
The Filer has no issued and outstanding common shares.
Pursuant to an offering memorandum dated March 7, 2018 (the Offering Memorandum), the Filer issued in the United States U.S.$600,000,000 credit card receivables backed Class A floating rate notes, series 2018-1 (the Class A Notes), and by way of private placement in Canada, the Filer concurrently issued CDN$67,300,000 3.875% credit card receivables backed Class B notes, series 2018-1 (the Class B Notes and, collectively with the Class A Notes, the Notes) solely to BNS, each with an expected principal payment date of February 26, 2020. The Class A Notes were not offered for sale to purchasers located in Canada. The entire amount of the Class A Notes were initially sold to “qualified institutional buyers” in the United States in reliance on the exemption under Rule 144A of the U.S. Securities Act of 1933 (the Securities Act), and therefore none of the Class A Notes were initially sold to non-U.S. persons in reliance on the exemption under Regulation S under the Securities Act.
As of June 8, 2018, no other securities of the Filer other than the Notes are outstanding.
The Notes were issued pursuant to a trust indenture made as of April 8, 2016 (the Indenture) between the Filer and Computershare Trust Company of Canada as indenture trustee (the Indenture Trustee).
The Notes are not convertible or exchangeable into common shares. The Class A Notes were initially issued on a private placement basis in the United States pursuant to exemptions from the registration requirements of the United States Securities Act of 1933, while the Class B Notes were purchased by BNS pursuant to a private placement in Canada. The Notes have not been listed for trading on any stock exchange or marketplace.
On May 31, 2018, the Filer and the Indenture Trustee amended the Indenture with respect to the delivery of financial statements (the Amendment). As required pursuant to the Indenture, the rating agencies rating the Notes (the Rating Agencies) provided confirmation that the Amendment would not result in a reduction or withdrawal of the ratings of the Notes in effect immediately before the implementation of the Amendment, and the Filer confirmed to the Indenture Trustee that it was of the opinion that the Amendment would not be prejudicial to the rights and interests of the Specified Creditors (as defined in the Indenture and which includes the holders of the Notes).
Prior to the implementation of the Amendment, Section 6.1(j) of the Indenture required that, unless such financial statements have been publicly filed on www.sedar.com, the Filer deliver or cause to be delivered to the Indenture Trustee and each of the Rating Agencies within 140 days after the end of each fiscal year audited financial statements of the Trust for the fiscal year, including the balance sheet and statements of income, retained earnings and changes in financial position of the Trust and within 60 days after the end of each fiscal quarter, other than the fiscal quarter of the Trust ending on the fiscal year end of the Trust, unaudited financial statements of the Trust for such fiscal quarter of the Trust, including the balance sheet and statements of income, retained earnings and changes in financial position of the Trust.
The implementation of the Amendment had the effect of eliminating the contractual obligation of the Filer to provide periodic financial or other reports to the Indenture Trustee and the Rating Agencies at any time during which it was not a reporting issuer in any jurisdiction in Canada. As a result, the Indenture does not require ongoing reporting to the Indenture Trustee or to holders of Notes once the Filer is no longer subject to reporting requirements under applicable Canadian securities legislation.
The Notes are issued in book-entry form and are represented by global certificates registered in a nominee name of The Depositary Trust Company (DTC), in the case of Class A Notes (the DTC Notes), and CDS Clearing and Depository Services Inc. (CDS), in the case of the Class B Notes issued in Canada and purchased by BNS (the BNS CDS Notes), with beneficial interests therein recorded in records maintained by DTC or CDS, as the case may be, and their respective participants as financial intermediaries that hold securities on behalf of their clients.
BNS continues to hold all of the Class B Notes and has no present intention of disposing of the Class B Notes.
In accordance with industry practice and custom, the Filer has obtained from Broadridge Financial Solutions Inc. (Broadridge) a geographic survey of beneficial holders of Notes as of May 3, 2018 (the Geographic Report), which provides information as to the number of noteholders and Notes held in each jurisdiction of Canada and in the United States and other foreign jurisdictions. Broadridge advises that its reported information is based on securityholder addresses of record identified in the files provided to it by the financial intermediaries holding Notes. The Geographic Report does not cover the BNS CDS Notes and does not cover any DTC Notes that are held by broker/dealers in inventory.
The Geographic Report covers approximately 62% of the outstanding principal amount of DTC Notes for a total of US$372,510,000 and reports a total of 64 beneficial holders residing in the United States holding US$372,510,000 principal amount of DTC Notes.
Broadridge has confirmed that its searches are unable to report on 100% of the geographic ownership of the DTC Notes. A security position was obtained through Broadridge which indicated the position of each financial intermediary holding DTC Notes as of May 3, 2018 (the DTC Report), being the same currency date as the Geographic Report. Three financial intermediaries located in the United States were identified in the DTC Report. These financial intermediaries do not report to Broadridge with respect to the underlying beneficial holders of the related DTC Notes and, accordingly, the Filer was unable to conclusively determine the location of the underlying beneficial owners of such DTC Notes. The Filer reasonably inquired with the Indenture Trustee as to the holders of the Notes not covered by the Geographic Report, and was informed by the Indenture Trustee that the unreported noteholders are likely objecting beneficial holders who do not want their name, mailing address or amount of DTC Notes held by them disclosed. The Filer believes it is reasonable to conclude that these entities hold such DTC Notes directly and, accordingly, all of the DTC Notes are held by residents of the United States.
The Indenture Trustee has subsequently confirmed to the Filer that all of the DTC Notes continue to be held under the Rule 144A CUSIP in DTC and that no transfers have been made from such CUSIP to the Reg S CUSIP in DTC, and accordingly no transfers of DTC Notes have been made to any non-U.S. Person or person located outside of the United States (such persons being those who would need to hold such DTC Notes under a Reg S CUSIP). The Filer believes this provides further evidence that all of the DTC Notes remain held by “qualified institutional buyers” located in the United States.
The Filer is not eligible to surrender its status as a reporting issuer in British Columbia pursuant to British Columbia Instrument 11-502 Voluntary Surrender of Reporting Issuer Status because the Filer may have more than 50 securityholders, being the holders of the Notes. Similarly, and because the Notes may be beneficially owned, directly or indirectly, by more than 50 securityholders worldwide, the Filer is not eligible to file under the simplified procedure under National Policy 11-206 Process for Cease to be a Reporting Issuer Applications.
The only securities issued by the Filer are the Notes. The Notes entitle the holders only to the payment of principal and interest, and do not entitle the holders to receive or to convert into other common shares (or any other equity securities), or to otherwise participate in the distribution of the assets of the Filer upon a liquidation or winding up.
The Notes are rated by the Rating Agencies based primarily on the credit underlying the credit card receivables in which the Filer purchases co-ownership interests, the level of enhancement provided by the reserve account established for each series of co-ownership interest and, in the case of the Class A Notes, the subordination of the payments on the Class B Notes to the prior payment of amounts payable on the Class A Notes, rather than by any independent assessment of the condition and performance, financial or otherwise, of the Filer. The Filer has confirmed that the Notes will continue to be rated by at least one recognized rating agency upon the cessation by the Filer of its reporting under Canadian securities laws for the foreseeable future.
There is no obligation or covenant in the Indenture, the Notes or the Offering Memorandum for the Filer to maintain its status as a reporting issuer or the equivalent in any jurisdiction of Canada or to file financial statements or any other continuous disclosure documentation on SEDAR. No financial statements or any other continuous disclosure documentation was included or incorporated by reference in the Offering Memorandum. The investors to whom the Notes were placed were sophisticated investors who had the opportunity to negotiate for such disclosure or filing obligations under the Indenture, the Notes or the Offering Memorandum as they saw fit. Such investors have determined that they did not require the Filer to maintain reporting issuer status in Canada for the term of the Notes. No continuous disclosure of financial statements, management discussion and analysis or annual information forms is required under the United States securities laws under which the Class A Notes were issued in the United States and no continuous disclosure of such materials would have been required in Canada in connection with securities issued under the prospectus exemptions under which the Class B Notes were issued to BNS.
The Filer issued a news release on July 27, 2018 announcing that it has applied to the OSC, as principal regulator, for a decision that it has ceased to be a reporting issuer in all jurisdictions of Canada and, if that decision is granted, the Filer will no longer be a reporting issuer in any jurisdiction of Canada.
No securities of the Filer, including debt securities, are listed, traded or quoted in Canada or another country on a marketplace (as defined in National Instrument 21-101 Marketplace Operation) or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported. The Filer has no current intention to distribute any securities by way of a public offering of securities in Canada and does not intend to renew the Base Shelf Prospectus.
The Filer will continue to make investor monthly portfolio report summaries and credit card portfolio data available to investors.
Upon granting of the Order Sought, the Filer will not be a reporting issuer or the equivalent in any jurisdiction of Canada.
Order
The principal regulator is satisfied that the order meets the test set out in the Legislation for the principal regulator to make the order.
The decision of the principal regulator under the Legislation is that the Order Sought is granted.
DATED at Toronto, Ontario on this 17th day of August, 2018.
“Deborah Leckman” “Philip Anisman”
Commissioner Commissioner
Ontario Securities Commission Ontario Securities Commission