Pattern Energy Group Inc. (Re), 2020 CanLII 31680

Ontario Commission des 22^nd 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

Pattern Energy Group Inc. (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 principal regulator (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 passport application):

(1) The Ontario Securities Commission is the principal regulator for this application (the Principal Regulator), and

(2) 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 British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador, and the territories of Yukon, the Northwest Territories and Nunavut (collectively with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and Ml 11-102 have the same meaning if used in this order, unless otherwise defined.

Representations

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

1. The Filer was incorporated under and is governed by the laws of the State of

Delaware.

2. The Filer’s head office is located at 1088 Sansome Street, San Francisco, California,

4. The Filer’s registered office is located at Corporation Service Company, 251 Little

Falls Drive, City of Wilmington, County of New Castle, Delaware, 19808.

4. The Filer is a reporting issuer under the laws of each of the Jurisdictions and is not in

default of its obligations under the securities laws of any of the Jurisdictions.

5. The Filer’s shares of Class A common stock (Common Shares) are registered under

section 12 of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act).

6. The Filer is an “SEC foreign issuer” pursuant to National Instrument 71-102

Continuous Disclosure and Other Exemptions Relating to Foreign Issuers.

7. The Filer is not an “OTC reporting issuer” pursuant to Multilateral Instrument 51-105

Issuers Quoted in the U.S. Over-the-Counter Markets.

8. On March 16, 2020 (the Effective Date), the Filer was taken "private" pursuant to an

Agreement and Plan of Merger (the Merger Agreement), dated as of November 3, 2019, among the Filer, Pacific US Inc., a Delaware corporation (Parent) that is indirectly wholly owned by Canada Pension Plan Investment Board (CPPIB), and Pacific BidCo US Inc., a Delaware corporation and a wholly owned direct subsidiary of Parent (Merger Sub). Pursuant to the terms of the Merger Agreement:

(a) Merger Sub was merged with and into the Filer, and the Filer continued as the surviving corporation and as a subsidiary of Parent (the Transaction), and

(b) all of the issued and outstanding Common Shares of the Filer (other than those held by the Parent and certain shares reflecting incentive awards held by management of the Filer, which were exchanged for equity interests in a new entity formed (Newco) in connection with a corporate restructuring of the Filer which was completed following consummation of the Transaction) were cancelled and converted into the right to receive cash consideration of US$26.75 per share (the Merger Consideration).

9. On March 16, 2020, the Filer issued a news release about the closing of the Transaction and the application to cease to be a reporting issuer.

10. Immediately prior to the Effective Date, the authorized capital of the Filer consisted of (i) 500,000,000 Common Shares, and (ii) 100,000,000 shares of preferred stock.

11. Immediately prior to the Effective Date, the Filer had the following outstanding securities: (i) 97,804,897 Common Shares, (ii) 10,400,000 shares of Series A perpetual preferred stock (the Preferred Shares), (iii) 162,079.052 restricted stock units (the RSUs), (iv) 382,154 options entitling the holder thereof to acquire Common Shares (the Options), (v) US$225 million principal amount of 4.00% Convertible Senior Notes due 2020 (the Convertible Notes), and (vi) US$350 million principal amount of 5.875% Senior Notes due 2024 (the Senior Notes).

12. The Common Shares were listed and posted for trading on the Toronto Stock Exchange (the TSX) and the Nasdaq Global Select Market (Nasdaq) under the symbol “PEGI”. No other securities of the Filer were listed on any exchange.

13. The Common Shares were delisted from the TSX on March 17, 2020, and from the Nasdaq on March 16, 2020.

14. The notice of special meeting of the stockholders of the Filer was delivered to the holders of Common Shares and Preferred Shares in connection with the special meeting of stockholders of the Filer that took place on March 10, 2020 to consider the Transaction (the Meeting). The full details of the Transaction were contained in a proxy statement of the Filer dated February 4, 2020, as amended on March 4, 2020 (the Proxy Statement), filed on SEDAR and with the U.S. Securities and Exchange Commission (the SEC) on EDGAR. The Filer received the requisite stockholder approval of the Transaction at the Meeting. The voting results were as follows: 56,856,064 votes for, 23,850,566 votes against, and 460,104 abstentions. Under applicable Canadian securities laws, the Transaction was also required to be approved by a majority of votes cast at the Meeting by holders of Common Shares, excluding those holders of Common Shares whose votes were required to be excluded from such vote pursuant to such laws, as described in the Proxy Statement. The results of such vote were as follows: 45,246,014 votes for and 23,850,566 votes against.

15. On closing of the Transaction, all of the Common Shares of the Filer (except as noted in Paragraph 8(b) above) were cancelled and converted into the right to receive the Merger Consideration.

16. On closing of the Transaction, each RSU was cancelled and converted into the right to receive the Merger Consideration.

17. On closing of the Transaction, each Option, whether or not exercisable or vested, was cancelled and converted into the right to receive an amount in cash equal to the excess, if any, of the Merger Consideration over the per share exercise price of the applicable Options.

18. After closing of the Transaction, the Preferred Shares remain outstanding with certain adjustments to the terms of the Preferred Shares to reflect the non-public status of the Filer. Pursuant to a certain securities rights and purchase agreement (the Preferred Share Purchase Agreement) dated October 10, 2019 and entered into in connection with the offering of the Preferred Shares, on April 1, 2020, the Filer and holders of Preferred Shares amended certain terms of the Preferred Share Purchase Agreement in connection with the closing of the Transaction.

19. After completion of the Transaction, the Convertible Notes (other than as contemplated in paragraph 26) and Senior Notes remain outstanding in accordance with the Convertible Notes Indenture and the Senior Notes Indenture (each as defined below).

20. The Preferred Shares, Senior Notes and Convertible Notes were issued on a private placement basis pursuant to either Section 4(a)(2) or Rule 144A under the U.S. Securities Act of 1933, as amended, or National Instrument 45-106 Prospectus Exemptions. The Preferred Shares were issued to sophisticated institutional investors, with the investment in Preferred Shares led by CBRE Caledon Capital Management Inc.

21. The Senior Notes and the Convertible Notes are transferable. The disclosure to Canadian purchasers in the offering of Senior Notes and Convertible Notes stated that any resale would need to be in compliance with Canadian securities laws and that investors should seek legal advice prior to any such resale. This is customary disclosure in U.S. bond offerings where there is a private placement into Canada.

22. The Preferred Shares are transferable. Pursuant to the certificate of designations of rights and preferences of the Preferred Shares filed with the SEC and on SEDAR (the Certificate), no holder of Preferred Shares may currently transfer any Preferred Shares prior to the date that is eighteen months after the issue date of the Preferred Shares (which was October 25, 2019) without the Filer’s consent. The transfer restrictions are expected to be eliminated by mutual agreement of the Filer and the holders of Preferred Shares.

23. The Filer is not required under any of the terms of the Preferred Shares in the Certificate or the Preferred Share Purchase Agreement, the Convertible Notes Indenture or the Senior Notes Indenture to remain an SEC registrant required to file reports under the Exchange Act or to remain a reporting issuer in any Canadian jurisdiction. The intention of the Filer is to cease to be an SEC registrant as soon as possible following closing of the Transaction and the granting of the Order Sought. It is permitted to do so under U.S. securities laws.

24. The Convertible Notes were issued under a trust indenture dated July 28, 2015 (the Convertible Notes Indenture) with Deutsche Bank Trust Company Americas, as trustee, and have a maturity date of July 15, 2020. The Convertible Notes contain certain conversion rights as described in Paragraph 25 below. The Convertible Notes are not voting nor equity securities.

25. Pursuant to the terms of the Convertible Notes Indenture, the Transaction constituted a “Make-Whole Fundamental Change”. This gave rise to a right for holders of Convertible Notes, for a specified period of time following the Transaction, to convert each US$1,000 principal amount of Convertible Notes into an amount of cash equal to US$26.75 multiplied by the current conversion rate for the Convertible Notes plus an additional make-whole amount determined in accordance with the Convertible Notes Indenture. In addition, the Transaction constituted a “Fundamental Change” pursuant to the terms of the Convertible Notes Indenture which triggered a “put” right permitting holders to require the Filer to repurchase such Convertible Notes for a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to but excluding the date of repurchase.

26. The Filer has delivered a written notice of the occurrence of the “Make-Whole Fundamental Change” and the “Fundamental Change” and resulting conversion and repurchase rights pursuant to the terms of the Convertible Notes Indenture. As at April 10, 2020, Convertible Notes in aggregate principal amount of approximately US$221.4 million had been tendered for cash consideration (leaving a remaining principal amount at that time of approximately US$3.6 million). Convertible Notes remaining outstanding following such conversion period and repurchase offer will be repaid in full on the maturity date for the Convertible Notes of July 15, 2020.

27. For tax purposes, one of the Filer’s subsidiaries (Subsidiary Finco) has been added as a co-obligor, in accordance with the terms of the Convertible Notes Indenture, in respect of the obligations under the outstanding Convertible Notes and the Convertible Notes Indenture. As such, each of the Filer and Subsidiary Finco is an obligor with respect to the principal of, premium, if any, and interest on the Convertible Notes.

28. Under the Convertible Notes Indenture, if the Filer is not subject to public reporting under Section 13 or 15(d) of the Exchange Act, the Filer is required to provide to holders of Convertible Notes certain customary Rule 144A bond market information to such holders.

29. The Senior Notes were issued under a trust indenture dated January 25, 2017 (the Senior Notes Indenture) with Deutsche Bank Trust Company Americas, as trustee. The Senior Notes are not voting nor equity securities and are not convertible into Common Shares (or any other equity securities).

30. Pursuant to the terms of the Senior Notes Indenture, if a “Rating Event” were to occur (a Change of Control Triggering Event), the Filer would be required to make a "change of control offer" to the holders of the Senior Notes within 30 days following the Change of Control Triggering Event to repurchase all or any part of that holder’s note at a price in cash equal to 101% of the aggregate principal amount, plus accrued and unpaid interest. As of the date hereof, the Transaction has not resulted in a Change of Control Triggering Event and the Senior Notes continue to remain outstanding.

31. For tax purposes, Subsidiary Finco has been added as a co-obligor, in accordance with the terms of the Senior Notes Indenture, in respect of the obligations under the Senior Notes and the Senior Notes Indenture. As such, each of the Filer and Subsidiary Finco is an obligor with respect to the principal of, premium, if any, and interest on the Senior Notes.

32. The Filer recently solicited consents from holders of the Senior Notes to, among other things, amend the Senior Notes Indenture to modify the reporting covenant with respect to the Senior Notes to permit financial statements and other customary Rule 144A bond market information of Subsidiary Finco to be provided to holders of the Senior Notes in lieu of the Filer’s information. On April 10, 2020, the Filer received the affirmative consent of holders of 98.1% of the aggregate principal amount of outstanding Senior Notes and executed a supplemental indenture adopting the change to the reporting covenant described above in this paragraph 32.

33. All of the Convertible Notes and the Senior Notes are held in book-entry form and are registered in the name of The Depository Trust Company or its nominee (DTC), with beneficial interests therein recorded in the records maintained by DTC and its participants as financial intermediaries that hold securities on behalf of their clients.

34. The Preferred Shares are voting securities. They are convertible in certain change of control circumstances, but such rights were not triggered in connection with the Transaction.

35. The holders of Preferred Shares have rights to financial statements if the Filer is not subject to public reporting under the Exchange Act, and certain other information, as the terms of the Preferred Shares in the Certificate do contemplate the possibility of a “going private” transaction and the reporting requirements of the Filer thereafter.

36. Under the Preferred Share Purchase Agreement, each holder of Preferred Shares agreed to vote its Preferred Shares in line with the recommendation of the board of directors of the Filer in connection with any merger with, or change of control to, a “Permitted Holder” (which includes CPPIB) for a period of 18 months from the date of the Preferred Share Purchase Agreement.

37. Following completion of the Transaction, the Filer had no securities issued and outstanding other than: (i) 97,805,000 Common Shares held by the Parent, and an aggregate of 359,467 Common Shares (representing an aggregate of 0.367% of the issued and outstanding common shares of the Filer) that were held by seven (7) members of management of the Filer, reflecting incentive awards held by such persons, which were exchanged for equity interests in Newco in connection with a corporate restructuring which was completed following consummation of the Transaction; (ii) the Preferred Shares; (iii) the Senior Notes; and, (iv) the Convertible Notes.

38. The Filer made diligent enquiry with Broadridge Financial Solutions, Inc. (Broadridge) and obtained information to ascertain the beneficial ownership of the Convertible Notes and Senior Notes.

39. The Filer reviewed reports prepared by Broadridge (the Securityholder Reports) to better understand the number of Canadian holders of the Convertible Notes and Senior Notes. The Securityholder Reports, comprised of a Canadian / foreign holder report and a United States holder report as at February 4, 2020, contain the geographical holdings information gathered by Broadridge from financial intermediaries in Canada and the United States that hold beneficial interests in the Convertible Notes and Senior Notes.

40. The Securityholder Reports show that, as at February 4, 2020, the Convertible Notes in the aggregate principal amount of US$225 million were held as follows:

(a) Approximately US$198.0 million aggregate principal amount of the Convertible Notes (representing 88.0% of the outstanding principal amount of the Convertible Notes) were held by 69 holders worldwide.

(b) The remaining US$27.0 million of the Convertible Notes, representing 12.0% of the outstanding principal amount of the Convertible Notes, were held by an undisclosed number of holders who have elected not to be identified.

(c) Approximately US$15.0 million aggregate principal amount of the Convertible Notes, representing 7.6% of the aggregate principal amount captured in subparagraph 40(a) above, were identified as being held by three (3) holders in Canada, all of whom are resident in Ontario.

(d) Extrapolating with the information contained in preceding subparagraphs, with respect to the aggregate principal amount of US$225 million, it is the Filer’s best estimate that as at February 4, 2020, there were approximately US$17.0 million aggregate principal amount of Convertible Notes held by 4 holders in Canada, representing 7.6% of the outstanding principal amount of the Convertible Notes and 4.3% of the holders of Convertible Notes.

41. The Securityholder Reports show that, as at February 4, 2020, the Senior Notes in the aggregate principal amount of US$350 million were held as follows:

(a) Approximately US$173.9 million aggregate principal amount of the Senior Notes (representing 49.7% of the outstanding principal amount of the Senior Notes) were held by 166 holders worldwide.

(b) The remaining US$176.1 million of the Senior Notes, representing 50.3% of the outstanding principal amount of the Senior Notes, were held by an undisclosed number of holders who have elected not to be identified.

(c) Approximately US$2.3 million aggregate principal amount of the Senior Notes, representing 1.3% of the aggregate principal amount captured in subparagraph 41(a) above, were identified as being held by six (6) holders in Canada, five (5) of whom are resident in Ontario and one (1) from an undisclosed jurisdiction in Canada.

(d) Extrapolating with the information contained in preceding subparagraphs, with respect to the aggregate principal amount of US$350 million, it is the Filer’s best estimate that as at February 4, 2020, there were approximately US$4.6 million aggregate principal amount of Senior Notes held by twelve (12) holders in Canada, representing 1.3% of the outstanding principal amount of the Senior Notes and 3.6% of the holders of Senior Notes.

42. The Securityholder Reports capture collectively 243 known beneficial holders of Convertible Notes and Senior Notes, of which nine (9) are known Canadian, equating to approximately 3.83% of the total known number of securityholders of Convertible Notes and Senior Notes captured in the Securityholder Reports.

43. Since February 4, 2020, approximately US$221.4 million of the Convertible Notes have been converted in exchange for the cash entitlement pursuant to the Convertible Notes Indenture and the notice described under paragraph 26. However, the Filer has not performed a beneficial ownership analysis of the Convertible Notes that is more current than as at February 4, 2020.

44. There are 10,400,000 Preferred Shares outstanding. The original subscribers, to the Filer’s knowledge, continue to hold all of the Preferred Shares. Based on the Preferred Share Purchase Agreement (along with the relevant subscription documents), the Preferred Shares are held by eight (8) holders, each of whom are beneficial holders and of these holders, seven (7) are from Canada, all of whom are from Ontario, representing 10,000,000 Preferred Shares (representing approximately 96.1% of the total Preferred Shares outstanding and 87.5% of the holders of Preferred Shares).

45. The Filer is not eligible to use the simplified procedure under Section 19 of NP 11-206 because the Filer estimates that its outstanding securities, including debt securities, are beneficially owned, directly or indirectly, by 15 or more securityholders in Ontario and by more than 51 securityholders in total worldwide.

46. The Filer is not eligible to use the modified procedure under Section 20 of NP 11-206 as the Filer estimates that residents of Canada, directly or indirectly, comprise more than 2% of the total number of securityholders of the Filer worldwide, and beneficially own more than 2% of a class or series of outstanding securities of the Filer, including debt securities, worldwide.

47. The Filer is applying for an order that it has ceased to be a reporting issuer in all of the jurisdictions of Canada in which it is a reporting issuer.

48. Upon granting of the Order Sought, the Filer will not be a reporting issuer or the equivalent in any jurisdiction of Canada.

49. The Filer has no current intention to seek public financing by way of a public offering of securities.

50. No securities of the Filer, including debt securities, are traded 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.

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 23^rd day of April, 2020.

“Tim Moseley” “Cecilia Williams”

Vice-Chair Commissioner

Ontario Securities Commission Ontario Securities Commission