GE Capital International Funding Company
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the prospectus requirements with respect to the distribution of non-convertible debt securities issued pursuant to an offer to acquire non-convertible debt securities of an affiliated entity pursuant to an exchange offer forming part of an internal reorganization of the ultimate parent company of both the issuer of the existing securities and the issuer of the securities with which the existing securities will be exchanged -- the exchange offers are not "issuer bids" as the subject securities and the securities with which they will be exchanged are debt securities that are only convertible into other debt securities -- had the exchange offers been "issuer bids" they would have been exempt from the formal bid requirements in reliance on the foreign issuer bid exemption and the distribution of securities as part of the exchange offer would have been exempt from the prospectus requirements -- the exchange offers will be made in compliance with foreign securities law requirements -- holders in Canada will be entitled to participate in the exchange offers on terms at least as favourable as the terms that apply to holders of the same class of securities outside of Canada and will be provided with the same disclosure document in respect of the offers, in the same manner, and at the same time as such document is provided to eligible holders of the class of securities outside of Canada -- relief granted, subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).
August 28, 2015
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 GE CAPITAL INTERNATIONAL FUNDING COMPANY (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the distribution of various classes of non-convertible debt securities to be issued by the Filer (the New Notes) in connection with Exchange Offers (as defined below) made by the Filer to eligible holders of Old Notes (as defined below) in exchange for Old Notes from the prospectus requirements under the Legislation (such requirements, the Prospectus Requirements, and such exemption, the Prospectus Exemption Sought);
Furthermore, the principal regulator in the Jurisdiction has received a request from the Filer for a decision that the Application, supporting materials related to it, and this decision (the Confidential Material) be kept confidential and not be made public until the earlier of: (a) the date on which the Filer advises the principal regulator that there is no longer any need for the Confidential Material to remain confidential; (b) the date on which the Filer publicly announces the Exchange Offers; and (c) the date that is 90 days after the date of this decision (the Confidentiality Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (each, a Local Jurisdiction).
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a public unlimited company incorporated under the Companies Act 1963 to 2013 (Ireland).
2. The Filer's registered office is located at 3220 Aviation House, Westpark, Shannon, County Clare, Ireland.
3. The Filer is not, and will not become, a reporting issuer (or the equivalent thereof) in any of the provinces or territories of Canada, and is not in default of securities legislation in any jurisdiction.
4. The Filer is a direct wholly-owned subsidiary of General Electric Capital Corporation (GECC).
5. GECC is a company governed by the laws of the State of Delaware, United States of America (the U.S.).
6. GECC's principal executive offices are located at 901 Main Avenue, Norwalk, Connecticut, U.S.
7. GECC is not a reporting issuer (or the equivalent thereof) in any of the provinces or territories of Canada and is not in default of securities legislation in any jurisdiction.
8. GECC's common stock is wholly-owned directly by General Electric Company (GE).
9. GECC has non-convertible debt securities issued and outstanding, the categories of which are set out in Schedule A, that may be the subject of the Exchange Offers described below (collectively, the Old Notes).
10. Each class of Old Notes was distributed primarily outside of Canada. Limited distributions of Old Notes were made in Canada pursuant to exemptions from the Prospectus Requirements. There is no published market for any class of Old Notes in Canada.
11. On April 10, 2015, GE announced a plan to reduce the size of its financial services businesses through the sale of most of the assets of GECC and to focus on continued investment and growth in GE's industrial businesses (the GE Reorganization). On the same day, and as part of the GE Reorganization, GE and GECC entered into an amendment to their existing financial support agreement pursuant to which, inter alia, GE has provided a full and unconditional guarantee of the payment and principal on the tradable senior and subordinated outstanding long-term debt securities and commercial paper issued or guaranteed by GECC set out therein, including the Old Notes.
12. To effect, and as part of, the GE Reorganization, the Filer was incorporated and will be making offers to all eligible holders of Old Notes to acquire the Old Notes held by them in exchange for one or more of the applicable classes of New Notes set out in the "Exchange Offers Summary Tables" in the Disclosure Document (as defined below) (such offers, the Exchange Offers).
13. Pursuant to the GE Reorganization, GECC will be merged into GE. The Filer will remain an indirect, wholly-owned subsidiary of GE and will become a subsidiary of GE Capital International Holdings (GE International Holdings), which will have been transferred GECC's international operations.
14. The payment of principal and interest in respect of each class of Old Notes is guaranteed by GE. The payment of principal and interest in respect of each class of New Notes will be guaranteed by both GECC and GE and, upon completion of the GE Reorganization, the obligations of GECC as guarantor will be assumed by GE International Holdings.
15. Each class of New Notes into which a particular class of Old Notes is exchangeable is expected to have the same, or a more favourable, investment grade rating from Moody's Investor Services, Inc. and Standard & Poor's Ratings Services.
16. The Exchange Offers will be made: (a) in the U.S. in reliance on an exemption from the registration requirements of the Securities Act of 1933 (United States), as amended (the 1933 U.S. Securities Act); and (b) outside the U.S., in reliance on Regulation S under the 1933 U.S. Securities Act and the applicable securities laws of the particular jurisdiction.
17. Holders of Old Notes resident in Canada will be eligible to participate in the Exchange Offers provided they are either: (A)(i) not "U.S. persons" as defined in Regulation S under the 1933 U.S. Securities Act, (ii) not acquiring New Notes for the account or benefit of a "U.S. person", and (iii) acquiring New Notes in offshore transactions in compliance with Regulation S under the 1933 U.S. Securities Act; or (B) "qualified institutional buyers" (QIBs) as defined in Rule 144A under the 1933 U.S. Securities Act who are acquiring New Notes for their own account or for the account of one or more other QIBs, in private transactions in reliance upon the exemption from the registration requirements of the 1933 U.S. Securities Act provided by Section 4(a)(2) thereof.
18. The distribution of Old Notes to the Filer as part of the Exchange Offers will be exempt from the Prospectus Requirements.
19. There are three (3) types of Exchange Offers: (i) "2016 Market Value Exchange Offers", pursuant to which certain classes of Old Notes may be exchanged for New Notes with a maturity of six months and bearing interest at a fixed rate; (ii) "2020/2025/2035 Market Value Exchange Offers", pursuant to which certain classes of Old Notes may be exchanged for a tranche of New Notes with a maturity of 5, 10 or 20 years (depending on the class of Old Notes) and, in each case, bearing interest at a fixed rate; and (iii) "Par for Par Exchange Offers" pursuant to which certain classes of Old Notes may be exchanged for a class of New Notes (and, in some instances, additional cash consideration) with the same maturity and interest rate as the applicable class of Old Notes being exchanged.
20. Participation in the Exchange Offers by eligible holders of Old Notes is optional and at the sole discretion of such holders. An eligible holder of Old Notes who determines to participate in the Exchange Offers must elect a single type of Exchange Offer to which such Old Notes will be tendered. Eligible holders of Old Notes may apportion their holdings of Old Notes of a particular class among, and separately tender such apportionments of Old Notes in, any of the Exchange Offers available to such Old Notes, subject to applicable minimum tender amounts that will be set out in the Disclosure Document.
21. The aggregate principal amount of New Notes that may be issued pursuant to the Exchange Offers, generally, and in respect of each type of Exchange Offer, specifically, will be capped at an amount that will be disclosed in the Disclosure Document. Old Notes tendered pursuant to 2016 Market Value Exchange Offers and 2020/2025/2035 Market Value Exchange Offers (together, the Market Value Exchange Offers) will be accepted on a pro-rated basis, subject to the applicable caps. Old Notes tendered to Par for Par Exchange Offers will be accepted in accordance with the acceptance priority level of each class of the applicable Old Notes, as set out in the Disclosure Document, with all tendered Old Notes that are noted as having a higher acceptance priority level being accepted for exchange before those Old Notes tendered that are noted as having a lower acceptance priority level. If the remaining aggregate principal amount of New Notes issuable pursuant to Par for Par Exchange Offers is not sufficient to accept all of the Old Notes within a particular acceptance priority level, then such remaining amount will be allocated pro rata among the Old Notes tendered with that acceptance priority level and any Old Notes with a lower acceptance priority level will not be accepted for exchange pursuant to Par for Par Exchange Offers.
22. Eligible holders of Old Notes who elect to participate in the Exchange Offers may tender their Old Notes at any time prior to the time noted in the Disclosure Document as being the expiry time of the Exchange Offers. However, eligible holders of Old Notes who tender their Old Notes pursuant to Exchange Offers after a specified time in the Disclosure Document (the Early Participation Date) will only be entitled to receive consideration as part of the Exchange Offers that is $50 per $1,000 principal amount less than if such Old Notes had been tendered pursuant to the Exchange Offers prior to the Early Participation Date. The Filer may, subject to applicable law, increase the maximum aggregate principal amount of New Notes that may be issued pursuant to the Exchange Offers, increase the applicable caps in respect of each type of Exchange Offer, or otherwise amend the terms of the Exchange Offers. Any amendments to the terms of an Exchange Offer will apply equally to all eligible holders of the affected classes of Old Notes. The Filer will give all eligible holders of the applicable classes of Old Notes notice of the amendments and will extend the Early Participation Date or the expiration date of the Exchange Offers to the extent required by applicable law.
23. Eligible holders of Old Notes who elect not to participate in the Exchange Offers or whose Old Notes are not accepted for exchange under the Exchange Offers will continue to hold such Old Notes, which will mature on their respective maturity dates and continue to accrue interest in accordance with, and will otherwise be entitled to all rights and privileges under, the respective instruments governing their terms. The Old Notes are not subject to any compulsory acquisition or redemption, or defeasance provisions.
24. Eligible holders of Old Notes who elect to participate in the Exchange Offers and whose Old Notes are accepted for exchange under the Exchange Offers will receive: (a) a cash payment representing accrued and unpaid interest, if any, to, but not including, the applicable settlement date; and (b) consideration consisting of the applicable New Notes and, in the case of Par for Par Exchange Offers and as applicable, cash.
25. The terms of the Exchange Offers will be set out in an offer to exchange disclosure document (the Disclosure Document), the contents of which will include, among other things, a description of the Exchange Offers, a description of the New Notes and risk factors in respect of the Exchange Offers and the New Notes. The Disclosure Document will also incorporate by reference risk factors in respect of both GECC and GE.
26. The Disclosure Document will incorporate by reference the respective Annual Reports on Form 10-K for the year ended December 31, 2014 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K of GECC and GE.
27. The Disclosure Document will be subject to Rule 10b-5 under the Securities Exchange Act of 1934 (U.S.), as amended, which requires that the Disclosure Document not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
28. Section 2.16 of National Instrument 45-106 Prospectus Exemptions provides that the Prospectus Requirements do not apply to a distribution of a security in connection with an issuer bid in a jurisdiction of Canada.
29. But for the fact that the GE Reorganization has been structured such that the Filer, and not GECC, is the entity that will be making the offers to acquire, and that the Old Notes are debt securities that are not convertible into securities other than debt securities, the Exchange Offers would constitute "issuer bids" under Part XX of the Securities Act (Ontario) (the Act) and the corresponding securities legislation in each Local Jurisdiction. The Exchange Offers are, in effect, an internal reorganization of GE pursuant to which debt securities that are fully and unconditionally guaranteed by GE issued by one indirect, wholly-owned subsidiary of GE can be exchanged for debt securities that are fully and unconditionally guaranteed by GE issued by another indirect, wholly-owned subsidiary of GE.
30. If the Exchange Offers constituted an issuer bid, the New Notes to be distributed in connection with the Exchange Offers would be exempt from the Prospectus Requirements.
31. All of the Old Notes were issued in global form and are held by either The Depository Trust Company (DTC) in the U.S., or Euroclear or Clearstream in Europe. To conclude that, as at the commencement of the Exchange Offers, holders of each class of Old Notes whose last address as shown on the books of GECC is in Canada represent less than 10% of such class of outstanding Old Notes, the Filer reviewed:
(a) for those Old Notes issued primarily in the U.S., (i) the DTC participant list for both the CDS Clearing and Depository Services Inc. bridge to DTC and those participants that appeared to have a Canadian connection, and (ii) the non-objecting beneficial owner list; and
(b) for those Old Notes issued primarily in Europe, a geographical breakdown.
32. The Filer reasonably believes that holders of Old Notes who are residents of Canada will beneficially own less than 10% of each outstanding class of Old Notes at the commencement of the Exchange Offers.
33. All eligible holders of each class of Old Notes in Canada will be entitled to participate in the Exchange Offers on terms at least as favourable as the terms that will apply to eligible holders of the same class of Old Notes outside of Canada.
34. If the Exchange Offers were "issuer bids", the Exchange Offers would be exempt from the formal bid requirements under the Legislation on the basis of the foreign issuer bid exemption set out in section 101.4 of the Act and the corresponding securities legislation in each Local Jurisdiction.
35. All eligible holders of each class of Old Notes in Canada will be provided with the Disclosure Document in the same manner and at the same time as the Disclosure Document is provided by, or on behalf of, the Filer to eligible holders of the same class of Old Notes outside of Canada.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Prospectus Exemption Sought is granted provided that:
(a) holders of each class of Old Notes whose last address as shown on the books of GECC is in Canada hold less than 10% of the outstanding Old Notes of such class at the commencement of the Exchange Offers;
(b) the Filer reasonably believes that holders of each class of Old Notes in Canada beneficially own less than 10% of the outstanding Old Notes of such class at the commencement of the Exchange Offers;
(c) the published market on which the greatest dollar volume of trading occurred during the 12 months immediately preceding the commencement of the Exchange Offers was, in the case of each class of Old Notes, not in Canada;
(d) Exchange Offers will be made to all eligible holders of Old Notes in Canada, who will be entitled to participate in the Exchange Offers on terms at least as favourable as the terms that apply to eligible holders of the applicable class of Old Notes outside of Canada;
(e) all eligible holders of Old Notes in Canada will be provided with the Disclosure Document in the same manner and at the same time as the Disclosure Document will be provided by, or on behalf of, the Filer to eligible holders of the applicable class of Old Notes outside of Canada; and
(f) the first trade in any New Notes issued in connection with the Exchange Offers will be deemed to be a distribution unless the conditions in section 2.6 or subsection 2.14(1) of National Instrument 45-102 Resale of Securities are satisfied.
Furthermore, the decision of the principal regulator is that the Confidentiality Sought is granted.
Schedule A
Categories of Old Notes
Each series of the following debt securities subject to the Exchange Offers will be considered a class for purposes of the decision:
1. Debt securities issued by GECC pursuant to a registration statement filed under the 1933 U.S. Securities Act, including senior unsecured, subordinated and senior secured notes issued under the GECC medium term note programs and the floating rate notes issued by GECC.{1}
2. U.S. dollar, Euro and British Pound-denominated fixed to floating rate subordinated debentures issued by GECC (including those underlying Trust Preferred Securities issued by any trust{2} owning such debentures and such Trust Preferred Securities{3}).
3. Debt securities issued by GECC under the GECC European programmes (including the standalone Namensschuldverschreibung issuance) for the issuance of medium-term notes or under other foreign programs.
4. Debt securities issued by GECC that were originally co-issued with LJ VP Holdings LLC{4}.
{1} This includes the GECC subordinated debt securities originally issued by General Electric Capital Services Inc., who is no longer an obligor with respect to these securities.
{2} The trusts include GE Capital Trust I, GE Capital Trust II, GE Capital Trust III, GE Capital Trust IV and GE Capital Trust V.
{3} Certain series of subordinated debentures will be identified as "Hybrids" in the Disclosure Document as they include corresponding series of trust preferred securities (the "Trust Preferred Securities") issued by a GE Capital Trust in which a portion of subordinated debentures are held. These Trust Preferred Securities may be tendered in the Exchange Offers on the same terms and with the same acceptance priority level as those applicable to the underlying subordinated debentures to which they relate, with references to aggregate principal amounts of subordinated debentures corresponding to the same amount of aggregate liquidation preference of the Trust Preferred Securities. The Filer will issue New Notes in exchange for any Trust Preferred Securities accepted for exchange and will not issue any new Trust Preferred Securities in the Exchange Offers.
{4} LJ VP Holdings LLC is no longer an obligor with respect to these securities.