suppl
Filed
pursuant to General Instruction II.K of Form F-9
File No. 333-126770
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$150,000,000
METHANEX CORPORATION
6.00% Senior Notes due 2015 |
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We will pay interest on the Notes on February 15 and
August 15 of each year, commencing on February 15,
2006. The Notes will mature on August 15, 2015. We may
redeem the Notes at any time, in whole or in part, at 100% of
their principal amount plus a make-whole premium described in
this prospectus. We also have the right to redeem all of the
Notes at 100% of their principal amount plus accrued and unpaid
interest to the date of redemption in the event of certain
changes affecting Canadian withholding taxes.
We are permitted to prepare this prospectus in accordance
with Canadian disclosure requirements, which are different from
those of the United States. We prepare our financial statements
in accordance with Canadian generally accepted accounting
principles, and they are subject to Canadian auditing and
auditor independence standards. As a result, they may not be
comparable to financial statements of United States
companies.
Owning the Notes may subject you to tax consequences both in
the United States and Canada. This prospectus may not describe
these tax consequences fully. You should read the tax discussion
under Tax Considerations.
Your ability to enforce civil liabilities under the United
States federal securities laws may be affected adversely because
we are incorporated in Canada, a majority of our officers and
directors and some of the experts named in this prospectus are
Canadian residents, and substantially all of our assets and the
assets of those officers, directors and experts are located
outside of the United States.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities,
or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
There is no market through which the Notes may be sold and
purchasers may not be able to resell Notes purchased under this
prospectus.
Investing in the Notes involves risks. See Risk
Factors beginning on page 10.
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Per Note | |
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Total | |
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Initial public offering price
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99.796% |
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$ |
149,694,000 |
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Underwriting commission
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0.650% |
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$ |
975,000 |
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Proceeds, before expenses, to
Methanex
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99.146% |
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$ |
148,719,000 |
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The initial public offering price set forth above does not
include accrued interest, if any. Interest on the Notes will
accrue from August 3, 2005 and must be paid by the
purchasers if the Notes are delivered after August 3, 2005.
Affiliates of the underwriters are lenders to us under a
revolving credit facility and to certain of our subsidiaries
under certain debt obligations. Consequently, we may be
considered to be a connected issuer of such underwriters under
applicable Canadian securities legislation. See Use of
Proceeds and Underwriting.
We expect that delivery of the Notes will be made to investors
in book-entry form through The Depository Trust Company in
New York, New York on or about August 3, 2005.
Joint Book-Running Managers
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ABN AMRO INCORPORATED |
BNP PARIBAS |
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CIBC WORLD MARKETS |
RBC CAPITAL MARKETS |
Prospectus dated July 28, 2005.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus constitute
forward-looking statements within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
When used in this prospectus, the words may,
would, could, will,
intend, plan, anticipate,
believe, estimate, expect,
and similar expressions, as they relate to us or our management,
are intended to identify forward-looking statements. These
statements reflect our current views with respect to future
events and are subject to certain risks, uncertainties and
assumptions. Many factors could cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements that may be
expressed or implied by such forward-looking statements,
including but not limited to the following, which are discussed
in greater detail under the heading Risk Factors:
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cyclicality of the industry in which we operate and the
volatility of the price of methanol; |
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uncertainty of demand for methanol and its derivatives such as
methyl tertiary butyl ether, or MTBE, and formaldehyde; |
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availability and price of natural gas; |
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methanol production and marketing risks, including operational
disruption; |
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successful identification, development and completion of capital
expenditure projects; |
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risks inherent with investments and operations in foreign
jurisdictions; |
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foreign exchange risks; |
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actions of competitors; and |
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changes in laws or regulations. |
Should one or more of these or other risks or uncertainties
materialize, or should assumptions underlying the
forward-looking statements prove incorrect, actual results,
performance or achievements may vary materially from those
described herein as intended, planned, anticipated, believed,
estimated or expected. We do not intend, and do not assume any
obligation, to update these forward-looking statements.
PRO FORMA INTEREST COVERAGE
The interest coverage set forth below has been prepared and
included in this prospectus in accordance with the disclosure
requirements of applicable Canadian securities laws and has been
calculated on a pro forma basis after giving effect to the
issuance of the Notes and the repayment of our 7.75% Notes due
August 15, 2005 from the proceeds of this offering.
The annual interest requirements on our long term debt (using
applicable interest and exchange rates) for the twelve months
ended December 31, 2004, and for the twelve months ended
June 30, 2005, were $43.4 million and
$43.7 million, respectively. Our earnings before deduction
of interest on long term debt and income taxes for the twelve
months ended December 31, 2004, and for the twelve months
ended June 30, 2005, amounted to $362.3 million and
$421.8 million, respectively. For the twelve months ended
December 31, 2004 and June 30, 2005, these amounts
were 8.34 times and 9.66 times annual interest
requirements, respectively.
Our EBITDA for the twelve months ended December 31, 2004,
and for the twelve months ended June 30, 2005, amounted to
$434 million and $501 million, respectively. For the
twelve months ended December 31, 2004 and June 30,
2005, these amounts were 10.00 and 11.47 times the
annual interest requirements, respectively. EBITDA is a
supplemental non-GAAP measure and differs from the most
comparable GAAP measure. See note 2 under Summary
Historical Consolidated Financial and Operating Data.
CREDIT RATINGS
The Notes have been assigned a rating of BBB- by Standard &
Poors Rating Services, a division of The McGraw-Hill
Companies, Inc., a rating of Ba1 by Moodys Investors
Service, Inc. and a rating of BBB by Fitch, Inc. S&P rates
debt instruments by rating categories from a high of AAA to a
low of D, with a + or indicating
relative strength within each rating category. Moodys
rates debt instruments by rating categories from a high of Aaa
to a low of D, with a 1, 2 or
3 indicating relative strength within each rating
category. Fitch rates debt instruments by rating categories from
a high of AAA to a low of D, with a + or
indicating relative strength within each
rating category. Prospective purchasers of Notes should consult
with the rating agencies with respect to the interpretation of
the foregoing ratings and the implication of those ratings. The
credit ratings accorded to the Notes are not recommendations to
buy, sell or hold the Notes and may be subject to revision or
withdrawal by S&P, Moodys or Fitch at any time.
Any decisions by these or other rating agencies to downgrade the
credit ratings accorded to the Notes in the future could result
in increased interest and other financial expenses relating to
future borrowings by us and could restrict our ability to obtain
additional financing on satisfactory terms.
i
SUMMARY
The following section summarizes more detailed information
presented later in this prospectus or incorporated by reference
herein. You should read the entire prospectus, including, in
particular, the Risk Factors beginning on
page 10, as well as the documents incorporated by reference
into this prospectus, including our consolidated financial
statements and the related notes. In this prospectus, except
where otherwise indicated, all amounts are expressed in United
States dollars, references to $ are to United States
dollars and references to Cdn$ are to Canadian
dollars. EBITDA is a supplemental non-GAAP measure and differs
from the most comparable GAAP measure (see note 2 under
Summary Historical Consolidated Financial and Operating
Data). In this prospectus, except where otherwise
indicated or the context otherwise requires, references to
we, us, our and similar
terms, as well as references to Methanex and the
Company, refer to Methanex Corporation and its
subsidiaries.
Our Company
Overview
We are the worlds largest producer and marketer of
methanol, a liquid chemical produced primarily from natural gas
and used mostly as a chemical feedstock in the manufacture of
other products. In 2004, our sales volume of 7.4 million
tonnes represented 22% of worldwide methanol demand. Our core
methanol production facilities are located in Chile and Trinidad
and are underpinned with low cost, long-term natural gas
contracts. We believe that our access to low cost natural gas
combined with our extensive global marketing and distribution
system provide us with a competitive advantage in our industry.
We believe that this competitive advantage has enabled us to
establish long-term relationships with global customers that
provide us with greater stability and security of demand for our
methanol, as well as marketing and transportation synergies.
For the year ended December 31, 2004, our average realized
methanol price was $237 per tonne and we generated
$236 million of net income and $434 million of EBITDA
on revenues of $1.7 billion. For the six months ended
June 30, 2005, our average realized methanol price was
$259 per tonne and we generated net income of
$139 million and $254 million of EBITDA on revenues of
$849 million.
Facilities
Over the past several years, we have shifted production from
higher cost plants to new, low cost plants. With the completion
of our Atlas plant, a joint venture with BP, in 2004 and our
Chile IV plant in 2005 (which is currently in the start up
phase of production), our low cost hubs in Trinidad and Chile
represent over 85% of our total production capacity. In
addition, we currently operate two methanol production
facilities in New Zealand and Canada. We also source additional
methanol produced by others throughout the world in order to
meet customer needs and support our marketing efforts.
1
The following table sets forth certain operating data and other
information for our methanol operations at each of our existing
facilities:
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Production | |
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Commenced | |
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Operating | |
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H1 | |
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H1 | |
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Production | |
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Capacity | |
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2002 | |
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2003 | |
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2004 | |
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2004 | |
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2005 | |
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(thousands of | |
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tonnes/year) | |
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(thousands of tonnes) | |
Chile
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Chile I
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1988 |
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925 |
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895 |
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775 |
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809 |
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415 |
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415 |
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Chile II
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1996 |
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1,010 |
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997 |
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983 |
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931 |
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460 |
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485 |
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Chile III
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1999 |
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1,065 |
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1,040 |
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946 |
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952 |
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487 |
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513 |
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Chile IV(1)
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June 2005 |
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840 |
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3,840 |
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2,932 |
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2,704 |
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2,692 |
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1,362 |
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1,429 |
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Trinidad
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Titan(2)
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2000 |
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850 |
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577 |
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740 |
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410 |
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337 |
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Atlas (63.1% interest)
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July 2004 |
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1,073 |
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421 |
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487 |
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1,923 |
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577 |
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1,161 |
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410 |
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824 |
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New Zealand
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Motunui(3)
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1985 |
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1,814 |
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819 |
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590 |
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268 |
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Waitara Valley
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1983 |
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530 |
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467 |
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149 |
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498 |
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250 |
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223 |
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530 |
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2,281 |
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968 |
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1,088 |
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518 |
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223 |
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Canada
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Kitimat(4)
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1982 |
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500 |
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478 |
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449 |
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486 |
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243 |
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239 |
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Total
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6,793 |
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5,691 |
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4,698 |
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5,427 |
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2,533 |
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2,715 |
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(1) |
We recently completed construction of our Chile IV plant and it
is currently in the start up phase of production. |
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(2) |
We acquired 100% of the Titan plant effective May 1, 2003
and the table indicates 2003 production from that date.
Titans total annual production in 2003 was 870,186 tonnes. |
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Our Motunui facility was shut down in 2004. Prior to shutdown,
this facility had an annual operating capacity of
1.9 million tonnes. |
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(4) |
We are currently exploring alternatives for our Kitimat facility
which could result in its shutdown. |
Marketing and distribution
We sell methanol through our extensive global marketing and
distribution system with marketing offices in North America
(Dallas and Vancouver), Europe (Brussels and Billingham,
England), Asia Pacific (Auckland, Shanghai, Tokyo and Seoul) and
Latin America (Santiago, Chile). Currently, about 90% of our
sales are covered by long-term or rolling one-year sales
contracts. In order to reduce the impact of cyclical pricing on
our earnings, we have positioned ourselves with certain global
customers under long-term contracts where prices are fixed or
linked to our costs plus a margin. These contracts are a
component of our prudent approach to liquidity. Our customers
include many major global chemical companies.
Methanol is transported from our plants by pipeline to adjacent
deepwater ports for shipping. We manage a fleet of vessels to
ship our methanol and have entered into short-term and long-term
time charters covering vessels with a range of capacities. We
supplement this through contracts of affreightment and spot
arrangements. Our shipping arrangements, together with the
storage and terminal facilities that we own or lease in North
America, Europe and Asia, provide us with flexibility in the
management of our distribution networks and enable us to service
our customers with greater reliability.
2
Natural gas supply
Natural gas is the principal feedstock for methanol and accounts
for a significant portion of its total production costs. Natural
gas for our Chile and Trinidad facilities is supplied under
long-term, low cost contracts. The contracts for Chile I, II,
III and IV are with suppliers in Argentina and Chile and
terminate between 2025 and 2029. In Trinidad, the contract for
Titan expires in 2014 and the Atlas contract expires in 2024.
Pricing of natural gas under these contracts varies with
methanol prices which we believe enables these facilities to be
competitive throughout the methanol price cycle. During the
Southern Hemisphere winter months of May through August in 2004
and 2005, we experienced and continue to experience curtailments
of supply of natural gas to our Chile facilities which have
caused us to reduce our production at these facilities. To
mitigate the impact of current curtailments, we have rescheduled
regular maintenance turnarounds for the Chile II and III
plants, initially planned for later in 2005, to take place
during July and August 2005. In addition, we have had
discussions with Argentine and Chilean governmental authorities
and natural gas suppliers to explore alternatives to address the
current and any future potential curtailments. However, we
cannot assure you that our discussions will lead to successful
actions to address this situation. See Risk
Factors Risks Related to our Business and Our
Industry We are vulnerable to reductions in the
availability of supply and fluctuations in the cost of natural
gas.
We currently source natural gas for our New Zealand and Canadian
facilities on a short-term contract basis.
The Methanol Industry
Methanol is primarily used as a chemical feedstock in the
manufacture of other products. Approximately 80% of all methanol
is used in the production of formaldehyde, acetic acid and a
wide variety of other chemical derivatives. These derivatives
are used in the manufacture of a wide range of products
including building materials, foams, resins and plastics. The
remainder of methanol demand comes from the fuel sector,
principally as a component in the production of methyl tertiary
butyl ether, or MTBE, which is blended with gasoline as a source
of octane and as an oxygenate to reduce the amount of tailpipe
emissions from motor vehicles. Over the last several years,
demand for MTBE has been significantly affected by a ban on the
use of MTBE in several states in the United States as well as
other regulatory developments. Future regulatory actions in the
United States or elsewhere could lead to a further decrease in
the global demand for MTBE.
Methanol is a typical commodity chemical and the methanol
industry is characterized by cycles of oversupply resulting in
lower prices and idling of capacity, followed by periods of
shortage and rising prices as demand exceeds supply until
increased prices lead to new plant investment or the re-start of
idled capacity. Industry restructuring has played a role in
balancing supply and demand in the methanol industry and has
contributed to a prolonged period of above-average methanol
pricing since 2000.
Our Competitive Strengths
Low cost producer
We believe that a low cost structure is critical to maintaining
our strong competitive position. We believe our access to low
cost natural gas and our initiatives in reducing our
distribution costs have allowed us to be a low cost producer of
methanol.
Global presence and scale
We are the largest supplier of methanol to each of the major
international markets of North America, Asia Pacific and Europe,
as well as Latin America. We believe our global presence has
enabled us to secure contracts with global customers. We believe
this presence also enhances our
3
knowledge of the dynamics of the worldwide methanol industry, in
turn enabling us to respond quickly to changing market trends
and to better develop our long-term strategies.
Operational expertise
The high reliability rate of our plants is an essential factor
in keeping our costs low and generating revenue and we believe
it enhances our position as a secure, global provider of
methanol.
Our Strategy
Continue to position ourselves as a low cost producer
We continue to take steps to strengthen our position as a low
cost global producer. Over the last several years, we have
shifted a large portion of our production from higher cost
plants to new, low cost plants. Our 1.7 million tonne Atlas
methanol plant and our 850,000 tonne Titan plant provide us with
a low cost production hub in Trinidad. With our recently
completed Chile IV plant, our low cost production hub in Chile
has an annual production capacity of 3.8 million tonnes
and, together with our hub in Trinidad, represents over 85% of
our total production capacity. In addition, we have taken
significant steps to reduce our methanol distribution costs and
are continuously investigating opportunities to further improve
the efficiency and cost-effectiveness of distributing methanol
to our customers.
Maintain our world leadership in methanol marketing,
logistics and sales
We sell methanol through an extensive global marketing and
distribution system, which has enabled us to become the
worlds largest supplier of methanol to each of the major
international markets of North America, Asia Pacific and Europe,
as well as Latin America. Our leadership has enabled us to
participate in industry restructuring initiatives. We have also
established industry-reported Methanex reference prices in each
major methanol market. We continue to pursue opportunities which
allow us to maintain our leadership.
Focus on operational excellence
We believe that methanol consumers view reliability and quality
of supply as critical to the success of their businesses. By
maintaining and improving our plant operating reliability and
global supply chain, we believe we have differentiated ourselves
from our competitors in the industry.
Maintain financial discipline
We believe it is important to maintain financial flexibility
throughout the methanol price cycle and we have adopted a
prudent approach to financial management. We have established a
disciplined approach to capital spending by setting minimum
target return criteria for methanol capacity additions and other
investments.
4
The Offering
As used in this summary of the offering, references to
we, us, our and similar
terms, as well as references to Methanex, refer only
to Methanex Corporation and its successors and not to any of its
subsidiaries.
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Issuer |
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Methanex Corporation. |
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Notes offered |
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$150,000,000 principal amount of 6.00% Senior Notes. |
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Maturity |
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August 15, 2015. |
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Issue price |
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99.796% plus accrued interest, if any, from August 3, 2005. |
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Interest |
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Annual rate: 6.00%. |
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Interest payment dates |
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Semi-annually on February 15 and August 15 of each
year, commencing on February 15, 2006. |
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Ranking |
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The Notes will be general unsecured obligations of Methanex and
will rank equally in right of payment with all of our other
unsubordinated and unsecured indebtedness, including our 7.75%
Notes due August 15, 2005 and our 8.75% Notes due
August 15, 2012. The Notes, however, will be structurally
subordinated to any indebtedness and other liabilities of our
subsidiaries. As of June 30, 2005, we had no secured debt
outstanding and our subsidiaries had approximately
$331 million of liabilities (which amount includes
approximately $144 million of trade payables). |
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Optional redemption |
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We will have the option to redeem the Notes in whole or in part
at any time, at a redemption price equal to the greater of
(1) 100% of the principal amount of the Notes and
(2) the sum of the present values of the remaining
scheduled payments of principal and interest on the Notes
(exclusive of interest accrued to the date of redemption)
discounted to the redemption date, calculated on a semi-annual
basis (assuming a 360-day year of twelve 30-day months), at the
Treasury Rate (as defined in the indenture under which we will
issue the Notes, which we refer to in this prospectus as the
Indenture) plus 35 basis points, together in each case with
accrued interest to the date of redemption. See
Description of the Notes Optional
Redemption. |
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Additional amounts |
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All payments with respect to the Notes made by us will be made
without withholding or deduction for Canadian taxes unless
required by law or by the interpretation or administration
thereof, in which case, subject to certain exceptions, we will
pay such Additional Amounts (as defined in the Indenture) as may
be necessary, so that the net amount received by the holders
after such withholding or deduction will not be less than the
amount that would have been received in the absence of such
withholding or deduction. See Description of the
Notes Additional Amounts for Canadian Withholding
Taxes. |
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Redemption in the event of changes in Canadian withholding taxes |
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If we become obligated to pay Additional Amounts as a result of
certain changes affecting Canadian withholding taxes, we |
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may redeem all, but not less than all, of the Notes at 100% of
their principal amount plus accrued and unpaid interest to the
date of redemption. See Description of the
Notes Redemption for Changes in Canadian Withholding
Taxes. |
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Mandatory offer to purchase |
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Upon the occurrence of a Change of Control Triggering Event,
which occurs only if a Change of Control and a Rating Decline
(as such terms are defined in the Indenture) both occur, and
provided that the Notes have not had, at any time, an Investment
Grade Rating (as defined in the Indenture), we are required to
offer to purchase all outstanding Notes at 101% of their
principal amount plus accrued and unpaid interest to the date of
purchase. See Description of the Notes Certain
Covenants Change of Control. |
|
Basic covenants of the indenture |
|
The Indenture will, among other things, restrict our ability and
the ability of certain of our subsidiaries to: |
|
|
|
incur liens; |
|
|
|
enter into sale/leaseback transactions; |
|
|
|
in the case of certain of our subsidiaries, incur
indebtedness without guaranteeing the Notes; |
|
|
|
enter into or conduct transactions with unrestricted
subsidiaries; and |
|
|
|
amalgamate or consolidate with, or merge with or
into, or transfer all or substantially all of our assets or
those of certain of our subsidiaries to any person. |
|
|
|
These covenants are subject to important qualifications and
limitations. For more details, see the section Description
of the Notes Certain Covenants. |
|
|
Use of proceeds |
|
The net proceeds from the sale of the Notes offered hereby are
estimated to be approximately $148 million. We intend to
use the estimated net proceeds, together with cash on hand, to
repay in full our 7.75% Notes due August 15, 2005 upon the
maturity of such notes. Pending such application, such net
proceeds will be invested in short-term money market instruments. |
|
Risk Factors
You should carefully consider all of the information in this
prospectus. In particular, you should read the specific risk
factors under Risk Factors for a discussion of
certain risks involved with an investment in the Notes.
Financial Statement Presentation
Our consolidated financial statements are reported in United
States dollars but have been prepared in accordance with
accounting principles generally accepted in Canada, or Canadian
GAAP. To the extent applicable to our consolidated financial
statements, these principles conform in all material respects
with accounting principles generally accepted in the United
States, or U.S. GAAP, except as described in the supplemental
information to our annual consolidated financial statements
incorporated by reference in this prospectus. As a foreign
private issuer under U.S. securities laws, we are not required
to prepare a quarterly reconciliation with U.S. GAAP and
therefore U.S. GAAP figures have not been presented for the six
month periods ended June 30, 2004 and 2005. Financial
information for fiscal years prior to 2004 has been restated to
reflect the retroactive adoption of new accounting standards and
presentation. See note 1 to our annual consolidated
financial statements incorporated by reference in this
prospectus.
6
Summary Historical Consolidated Financial and Operating
Data
You should read the summary historical consolidated financial
data set forth below in conjunction with our consolidated
financial statements and the related notes and managements
discussion and analysis incorporated by reference in this
prospectus. The statement of income data and the balance sheet
data as at and for the three years ended December 31, 2004,
have been derived from our annual consolidated financial
statements, which for the two years ended December 31,
2004, are incorporated by reference in this prospectus. The
statement of income data as at and for the six months ended
June 30, 2004 and 2005 have been derived from our unaudited
interim consolidated financial statements which, except for the
balance sheet as at June 30, 2004, are incorporated by
reference in this prospectus. The financial information as at
and for the six months ended June 30, 2004 and 2005
includes, in the opinion of our management, all adjustments
which are necessary for the fair presentation of this unaudited
financial information. The interim results may not be indicative
of the results for a full year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended | |
|
Six months | |
|
|
December 31, | |
|
ended June 30, | |
|
|
| |
|
| |
|
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except volume and price data) | |
Statement of income
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
1,042 |
|
|
$ |
1,420 |
|
|
$ |
1,719 |
|
|
$ |
805 |
|
|
$ |
849 |
|
|
Cost of sales and operating expenses
|
|
|
776 |
|
|
|
1,034 |
|
|
|
1,284 |
|
|
|
617 |
|
|
|
595 |
|
|
Depreciation and amortization
|
|
|
111 |
|
|
|
96 |
|
|
|
79 |
|
|
|
37 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before undernoted
items
|
|
|
155 |
|
|
|
290 |
|
|
|
356 |
|
|
|
151 |
|
|
|
213 |
|
|
Interest expense(1)
|
|
|
(29 |
) |
|
|
(39 |
) |
|
|
(31 |
) |
|
|
(13 |
) |
|
|
(20 |
) |
|
Interest and other income
|
|
|
10 |
|
|
|
14 |
|
|
|
7 |
|
|
|
4 |
|
|
|
2 |
|
|
Other expense(2)
|
|
|
(88 |
) |
|
|
(179 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
48 |
|
|
|
86 |
|
|
|
332 |
|
|
|
142 |
|
|
|
195 |
|
|
Income tax expense
|
|
|
(25 |
) |
|
|
(85 |
) |
|
|
(96 |
) |
|
|
(43 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
23 |
|
|
$ |
1 |
|
|
$ |
236 |
|
|
$ |
99 |
|
|
$ |
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
21 |
|
|
$ |
(32 |
) |
|
$ |
230 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet data (end of
period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
421 |
|
|
$ |
288 |
|
|
$ |
210 |
|
|
$ |
202 |
|
|
$ |
266 |
|
|
Total assets
|
|
|
1,820 |
|
|
|
2,082 |
|
|
|
2,125 |
|
|
|
2,005 |
|
|
|
2,157 |
|
|
Total long-term debt
|
|
|
547 |
|
|
|
778 |
|
|
|
609 |
|
|
|
609 |
|
|
|
605 |
|
|
Shareholders equity
|
|
|
908 |
|
|
|
786 |
|
|
|
949 |
|
|
|
885 |
|
|
|
1,010 |
|
U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
1,912 |
|
|
$ |
2,159 |
|
|
$ |
2,170 |
|
|
|
N/A |
|
|
|
N/A |
|
|
Shareholders equity
|
|
|
971 |
|
|
|
839 |
|
|
|
975 |
|
|
|
N/A |
|
|
|
N/A |
|
|
Other financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
$ |
190 |
|
|
$ |
361 |
|
|
$ |
336 |
|
|
$ |
158 |
|
|
$ |
209 |
|
|
EBITDA(3)
|
|
|
266 |
|
|
|
386 |
|
|
|
434 |
|
|
|
188 |
|
|
|
254 |
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital maintenance, catalyst,
turnarounds and other
|
|
$ |
18 |
|
|
$ |
36 |
|
|
$ |
23 |
|
|
$ |
7 |
|
|
$ |
31 |
|
|
|
Plant and equipment under
construction or development(4)
|
|
|
142 |
|
|
|
207 |
|
|
|
134 |
|
|
|
87 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$ |
160 |
|
|
$ |
243 |
|
|
$ |
157 |
|
|
$ |
94 |
|
|
$ |
63 |
|
U.S. GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(3)
|
|
$ |
286 |
|
|
$ |
392 |
|
|
$ |
429 |
|
|
|
N/A |
|
|
|
N/A |
|
(footnotes on next page)
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended | |
|
Six months | |
|
|
December 31, | |
|
ended June 30, | |
|
|
| |
|
| |
|
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in millions, except volume and price data) | |
Other selected operating
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Methanol production volume
(thousands of tonnes):
|
|
|
5,691 |
|
|
|
4,698 |
|
|
|
5,427 |
|
|
|
2,533 |
|
|
|
2,715 |
|
Methanol sales volume (thousands of
tonnes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Produced product
|
|
|
5,686 |
|
|
|
4,933 |
|
|
|
5,298 |
|
|
|
2,460 |
|
|
|
2,707 |
|
|
Purchased product
|
|
|
809 |
|
|
|
1,392 |
|
|
|
1,960 |
|
|
|
1,135 |
|
|
|
565 |
|
|
Commission sales
|
|
|
725 |
|
|
|
254 |
|
|
|
169 |
|
|
|
|
|
|
|
303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total methanol sales volume
|
|
|
7,220 |
|
|
|
6,579 |
|
|
|
7,427 |
|
|
|
3,595 |
|
|
|
3,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Methanex average realized methanol
price (dollars per tonne)(5)
|
|
$ |
160 |
|
|
$ |
224 |
|
|
$ |
237 |
|
|
$ |
224 |
|
|
$ |
259 |
|
|
|
(1) |
Interest expense breaks down as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months | |
|
|
Fiscal year ended | |
|
ended | |
|
|
December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in millions) | |
Interest expense before capitalized
interest
|
|
$ |
38 |
|
|
$ |
59 |
|
|
$ |
55 |
|
|
$ |
27 |
|
|
$ |
27 |
|
Less capitalized interest
|
|
|
(9 |
) |
|
|
(20 |
) |
|
|
(24 |
) |
|
|
(14 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
29 |
|
|
$ |
39 |
|
|
$ |
31 |
|
|
$ |
13 |
|
|
$ |
20 |
|
|
|
(2) |
Other expense for 2002 consists of a $115 million asset
restructuring charge related to the write-off of the Fortier,
Louisiana methanol facility and a $27 million reduction in
the accrual for site restoration for the New Zealand facilities.
Other expense for 2003 consists of a $129 million non-cash
impairment charge related to the carrying value of property,
plant and equipment and related assets in New Zealand and
Medicine Hat, Alberta, $10 million in costs primarily for
employee termination benefits to reduce the workforce at the New
Zealand operations and for costs to re-mothball the Medicine Hat
facility, and $40 million for a write-off of plant and
equipment under development related to our decision not to
proceed with the development of a methanol plant located in
Western Australia. |
|
(3) |
EBITDA should be considered in addition to, and not as a
substitute for, operating income, net income, cash flows and
other measures of financial performance and liquidity reported
in accordance with generally accepted accounting principles.
EBITDA differs from the most comparable GAAP measure, cash flows
from operating activities, primarily because it does not include
changes in non-cash working capital and the utilization of
prepaid natural gas, cash flows related to interest expense,
interest and other income, income taxes, asset restructuring
charges and other unusual items. Our method of computing EBITDA
may not be comparable to similarly titled measures reported by
other companies. The following table shows a reconciliation of
EBITDA to cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months | |
|
|
Fiscal year ended | |
|
ended | |
|
|
December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in millions) | |
Cash flows from operating activities
|
|
$ |
190 |
|
|
$ |
361 |
|
|
$ |
336 |
|
|
$ |
158 |
|
|
$ |
209 |
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in non-cash working capital
and the utilization of pre-paid natural gas
|
|
|
55 |
|
|
|
(31 |
) |
|
|
39 |
|
|
|
5 |
|
|
|
6 |
|
|
Other non-cash operating expenses
|
|
|
(14 |
) |
|
|
(19 |
) |
|
|
(13 |
) |
|
|
(4 |
) |
|
|
(9 |
) |
|
Asset restructuring
charges cash settlements
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
29 |
|
|
|
39 |
|
|
|
31 |
|
|
|
13 |
|
|
|
19 |
|
|
Interest and other income
|
|
|
(10 |
) |
|
|
(14 |
) |
|
|
(7 |
) |
|
|
(4 |
) |
|
|
(1 |
) |
|
Income
taxes current
|
|
|
16 |
|
|
|
40 |
|
|
|
48 |
|
|
|
20 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Canadian GAAP
|
|
$ |
266 |
|
|
$ |
386 |
|
|
$ |
434 |
|
|
$ |
188 |
|
|
$ |
254 |
|
|
U.S. GAAP adjustments
|
|
|
20 |
|
|
|
6 |
|
|
|
(5 |
) |
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA U.S. GAAP
|
|
$ |
286 |
|
|
$ |
392 |
|
|
$ |
429 |
|
|
|
N/A |
|
|
|
N/A |
|
8
|
|
(4) |
Plant and equipment under construction or development represents
capital expenditures on the following projects: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months | |
|
|
Fiscal year ended | |
|
ended | |
|
|
December 31, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2002 | |
|
2003 | |
|
2004 | |
|
2004 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(in millions) | |
Atlas (63.1% interest)
(Trinidad) construction
|
|
$ |
99 |
|
|
$ |
74 |
|
|
$ |
54 |
|
|
$ |
40 |
|
|
$ |
|
|
Chile IV
(Chile) construction
|
|
|
23 |
|
|
|
116 |
|
|
|
80 |
|
|
|
47 |
|
|
|
32 |
|
Asia Pacific
(Australia) development (abandoned)
|
|
|
20 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment under
construction or development
|
|
$ |
142 |
|
|
$ |
207 |
|
|
$ |
134 |
|
|
$ |
87 |
|
|
$ |
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) |
The Methanex average realized methanol price is calculated as
revenue, net of commissions earned, divided by total sales
volumes of produced and purchased methanol. Prior to 2005,
in-market distribution costs were deducted from revenue when
calculating average realized methanol price. The presentation of
average realized methanol price for prior periods has been
restated. See Financial Statement
Presentation. |
9
RISK FACTORS
You should carefully consider the risk factors set forth
below as well as the other information contained in this
prospectus before purchasing the Notes offered by this
prospectus. Any of the following risks, as well as risks and
uncertainties currently not known to us, could materially
adversely affect our business, financial condition or results of
operations. As used in the risk factors described under
Risks Related to the Notes and Our
Structure, we, us, our
and similar terms refer only to Methanex Corporation and its
successors and not to any of its subsidiaries.
Risks Related to Our Business and Our Industry
The methanol industry is subject to commodity price
volatility.
The methanol business is a highly competitive commodity
industry, and prices are affected by supply/demand fundamentals.
Methanol prices have historically been, and are expected to
continue to be, characterized by significant volatility. New
methanol plants have recently commenced commercial production
and more are expected to be built in the future. This will
increase overall production capacity. Additional methanol supply
can also become available in the future by restarting or
relocating idle methanol plants, carrying out major expansions
of existing plants or debottlenecking existing plants to
increase their production capacity. Historically, higher cost
plants have shutdown or been idled when methanol prices are low
but there can be no assurance that this trend will occur in the
future. Demand for methanol is in large part dependent upon
levels of industrial production and changes in general economic
conditions. Changes in environmental, health and safety
requirements could also lead to a decrease in methanol demand.
We are not able to predict future methanol supply/demand
balances, market conditions or prices, all of which are affected
by numerous factors beyond our control. As a result, we cannot
provide assurance that demand for methanol will increase
sufficiently to absorb additional production capacity, or
increase at all, or that the price of methanol will not decline.
Since methanol is the only product we produce and market, a
decline in the price of methanol would have an adverse effect on
our results of operations and financial condition.
Future demand for methanol in the production of certain
derivatives is uncertain.
MTBE. Methanol for the production of MTBE represented in
2004 approximately 20% of global methanol demand. In the United
States, methanol for the production of MTBE represented in 2004
6% of global methanol demand. Gasoline containing MTBE has
leaked into groundwater in the United States, principally from
underground gasoline storage tanks, and has been discharged
directly into drinking water reservoirs from recreational
watercraft. The presence of MTBE in some water supplies has led
several states in the United States, including California, New
York and Connecticut, to ban the use of MTBE as a gasoline
component. At the U.S. federal government level, a legislative
proposal which may have the effect of curtailing MTBE use has
been approved by a House-Senate conference committee; however,
the legislation is still subject to final approval of the
U.S. Congress and the President of the United States. We
believe that legislative actions could reduce, or possibly
eliminate, the demand for methanol for MTBE in the United
States, which could have an adverse effect on our results of
operations and financial condition.
In 2002, the European Union issued a final risk assessment
report on MTBE that did not recommend a ban of MTBE. However, it
recommended several risk reduction measures relating to storage
and handling of MTBE-containing fuel. In addition, governmental
efforts in some European Union countries to promote bio-fuels
and alternative fuels through legislation and tax policy is
putting competitive pressures on the use of MTBE in gasoline. In
2004, several European MTBE production facilities commenced
producing ethyl tertiary butyl ether, or ETBE, to take advantage
of these tax incentives.
10
We cannot assure you that legislation banning or restricting the
use of MTBE, or promoting alternatives to MTBE, will not be
passed or that negative public perception of MTBE outside of the
United States may not develop, either of which would lead to a
further decrease in the global demand for MTBE.
Formaldehyde. Approximately 38% of global methanol demand
is used in the production of formaldehyde. In 2004, the
International Agency for Research on Cancer upgraded
formaldehyde to a Group 1 known human carcinogen. It
was previously classified as a Group 2 probable
human carcinogen. In 2004, the U.S. Environmental Protection
Agency, or EPA, also began the process of preparing an internal
study on the reclassification of formaldehyde. The EPA is
awaiting findings from an updated National Cancer Institute, or
NCI, study before finalizing its review of formaldehyde. We are
unable to determine at this time what the outcome of the NCI
study will be or whether the EPA will reclassify formaldehyde.
Any reclassification of formaldehyde could reduce future
methanol demand which could have an adverse effect on our
results of operations and financial condition.
We are vulnerable to reductions in the availability of
supply and fluctuations in the cost of natural gas.
Natural gas is the principal feedstock for methanol production,
and accounts for a significant portion of our cost of sales and
operating expenses. Accordingly, our operations depend in large
part on the availability and security of supply and the price of
natural gas. If we are unable to obtain continued access to
sufficient natural gas for any of our plants on commercially
acceptable terms or if we experience significant interruptions
in the supply of contracted natural gas, we could be forced to
reduce production or close plants which could have an adverse
effect on our results of operations and financial condition.
Our four Chile plants have an annual production capacity of
3.8 million tonnes and account for approximately 60% of our
annual production capacity. Natural gas for our Chile facilities
is supplied under long-term take-or-pay contracts which
terminate between 2025 and 2029. Approximately 62% of the
natural gas for our Chile facilities is currently sourced from
suppliers in Argentina (which is currently expected to increase
to approximately 79% in 2009). Argentina has been experiencing
an energy crisis brought about primarily as a result of price
regulation of domestic natural gas and a devaluation of the
Argentine peso against the U.S. dollar. As a result, domestic
demand for natural gas has increased and, at the same time, low
prices have discouraged new supply and investments in
infrastructure. This has resulted in curtailments of contracted
natural gas supply from Argentina to Chile. In 2004, these
curtailments resulted in the loss of approximately 50,000 tonnes
of methanol production at our Chile facilities, all of which
occurred during the peak season for domestic gas demand in
Argentina during the Southern Hemisphere winter months of May
through August. In May 2005, we lost a small amount of methanol
production over a two-day period due to gas curtailments.
However, in mid-June, curtailments recommenced and were more
significant than those experienced in 2004. These curtailments
have ranged widely in June and July, from days when we received
all of the nominated gas we requested for our Chile plants to
other days when more than half of our nominated gas was
curtailed, including gas to supply the Chile IV plant which is
currently in the start up phase. To date in 2005, we have
experienced a total reduction of approximately
80,000 tonnes of methanol production, compared to what we
would otherwise have produced which takes into account planned
gradual production increases associated with the start up of
Chile IV and excludes foregone production associated with a
regular maintenance turnaround for Chile II. We are not able to
predict what the total production loss will be in 2005 as a
result of gas curtailments, and we cannot assure you that
production losses in 2005 will not persist beyond the Southern
Hemisphere winter months. We believe that recent curtailments
have been influenced by actions of the Argentine government,
including the reallocation of gas entitlements, as well as by
cold weather conditions, greater domestic demand in Argentina,
the timing of increases in gas production and related
infrastructure and other dynamics related to the energy crisis
in Argentina. These and other factors that could affect gas
supply are difficult to
11
predict and are beyond our control. We cannot assure you that
natural gas supply to our Chile facilities will not be
significantly impacted in the future. If natural gas supply to
our Chile facilities is impacted, our methanol production could
be reduced which would have an adverse effect on our results of
operations and financial condition.
In Trinidad, we own the 850,000 tonne per year Titan plant and
63.1% of the 1.7 million tonne per year Atlas plant in a
joint venture with BP. Natural gas for Titan and Atlas is
supplied under two long-term take-or-pay contracts with the
Trinidad state-owned energy company which terminate in 2014 and
2024, respectively. Although Titan and Atlas are located close
to other natural gas reserves in Trinidad, which we believe we
could access after the expiration or early termination of these
natural gas supply contracts, we cannot provide assurance that
we would be able to secure access to such natural gas under
long-term contracts on commercially acceptable terms.
Prior to 2003, the natural gas for our New Zealand facilities
was sourced primarily from the Maui field under contract with
the New Zealand government and the owners of the field. As a
result of the redetermination of the gas reserves of the Maui
field in 2003, we lost substantially all of our remaining
natural gas entitlements from the Maui field. In November 2004,
this resulted in the shutdown of our Motunui site. The Motunui
site represents 1.9 million tonnes of our total New Zealand
operating capacity of 2.4 million tonnes. We have
sufficient natural gas contracted for 2005 to produce up to
400,000 tonnes of methanol at our 530,000 tonne per year Waitara
Valley plant. We continue to seek other supplies of natural gas
to supplement this production and to extend the life of the New
Zealand plants; however, there can be no assurance that we will
be able to secure additional gas on commercially acceptable
terms to allow us to operate the plants after 2005.
Natural gas for our 500,000 tonne per year Kitimat, British
Columbia, facility is currently purchased on a short-term basis.
North American natural gas prices are set in a competitive
market and can fluctuate widely. Sustained high natural gas
prices are currently having an adverse affect on the operating
margins and competitive position of our Kitimat facility. We are
currently exploring alternatives for our Kitimat facility which
could result in a shutdown of this plant. However, we are
obligated to supply ammonia under an offtake agreement with the
former owner of the ammonia production assets located adjacent
to this plant, which limits our flexibility to shut down the
plant prior to December 31, 2005. In addition, if we shut
down this plant, we will be required to make a buy-out payment
to the public utility that transports natural gas to the plant,
and we will incur employee severance and other costs. The
buy-out payment is Cdn$25 million starting November 1,
2005 and reduces monthly thereafter.
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Our business is subject to many operational risks for
which we may not be adequately insured. |
A substantial portion of all of our revenues are derived from
the sale of methanol produced at our plants. As a result, our
business is subject to the risks of operating methanol
production facilities and the related storage and transportation
of hazardous materials, such as unforeseen equipment breakdowns,
interruptions in the supply of natural gas and other feedstocks,
power failures, human error, loss of port facilities, pipeline
leaks and ruptures, fires, mechanical failure, labor
difficulties, remediation complications, discharges or releases
of toxic or hazardous substances or gases and other
environmental risks, explosions, storage tank leaks, unscheduled
downtime, transportation interruptions, chemical spills,
inclement weather and natural disasters, or any other event,
including any event beyond our reasonable control, which could
result in a prolonged shutdown of any of our plants or impede
our ability to deliver methanol to our customers. A prolonged
plant shutdown at any of our major facilities could adversely
affect our revenues and operating income. Additionally,
disruptions in our distribution system could adversely affect
our revenues and operating income. In addition, some of these
hazards may cause personal injury and loss of life, severe
damage to or destruction of property and equipment and
environmental damage, and may result in suspension of operations
and the imposition of civil, regulatory or criminal penalties.
Although we maintain insurance, including business interruption
insurance, we cannot provide assurance that we will not incur
losses beyond the limits of, or outside the coverage of, such
12
insurance. From time to time, various types of insurance for
companies in the chemical and petrochemical industries have not
been available on commercially acceptable terms or, in some
cases, have been unavailable. We cannot provide assurance that
in the future we will be able to maintain existing coverage or
that premiums will not increase substantially.
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We may not be able to successfully identify, develop and
complete new capital projects. |
As part of our strategy to strengthen our position as a low cost
global producer of methanol, we completed construction of the
Atlas facility at our production hub in Trinidad in 2004 and
recently completed construction at the Chile IV expansion of our
production hub in Chile. We intend to continue to pursue new
opportunities to enhance our strategic position in the methanol
industry. For example, we are developing a new methanol project
in Egypt but, as noted below, have not yet made a final decision
to proceed with this project.
Our ability to successfully identify, develop and complete new
capital projects is subject to a number of risks, including
finding and selecting favorable locations for new facilities
where sufficient natural gas is available through long-term
contracts with acceptable commercial terms, obtaining project or
other financing on satisfactory terms, developing and not
exceeding acceptable project cost estimates, constructing and
completing the projects within the contemplated schedules and
other risks commonly associated with the design, construction
and start up of large complex industrial projects. We cannot
assure you that we will be able to identify and develop new
methanol projects or, if we decide to proceed with a project,
that the anticipated cost of construction will not be exceeded
or that it will commence commercial production within the
anticipated schedule, if at all.
In particular, we cannot assure you that the Chile IV plant will
not encounter disruptions or other difficulties during its start
up phase or that the expected costs of this project will not be
exceeded. Further, we do not expect to make a final decision to
proceed with our proposed project in Egypt before 2006, and we
could incur significant development costs for this project but
ultimately determine not to proceed, which would result in a
write-off of these costs.
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We are subject to risks inherent in foreign
operations. |
We currently have substantial operations outside of North
America, including in Chile, Trinidad, New Zealand, Europe and
Asia. We are also developing a methanol project in Egypt, but
have not made a final decision with respect to this project. We
are subject to risks inherent in foreign operations such as:
loss of revenue, property and equipment as a result of
expropriation, nationalization, war, insurrection, corruption
and other political risks; increases in duties, taxes and
governmental royalties and renegotiation of contracts with, and
the ability to obtain necessary permits from, governmental
entities (including permits to export natural gas from Argentina
to supply our Chile facilities); as well as changes in laws and
policies governing operations of foreign-based companies.
In addition, because we derive substantially all of our revenues
from production and sales by subsidiaries outside of Canada, the
payment of dividends or the making of other cash payments or
advances by these subsidiaries to us may be subject to
restrictions or exchange controls on the transfer of funds in or
out of the respective countries or result in the imposition of
taxes on such payments or advances. We have organized our
foreign operations in part based on certain assumptions about
various tax laws (including capital gains and withholding
taxes), foreign currency exchange and capital repatriation laws
and other relevant laws of a variety of foreign jurisdictions.
While we believe that such assumptions are reasonable, we cannot
provide assurance that foreign taxing or other authorities will
reach the same conclusion. Further, if such foreign
jurisdictions were to change or modify such laws, we could
suffer adverse tax and financial consequences.
Our trade in methanol is subject to import duties in certain
jurisdictions. We cannot assure you that duties that we are
currently subject to will not increase, that duties will not be
levied in other
13
jurisdictions in the future or that we will be able to mitigate
the impact of current or future duties, if levied.
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We are exposed to fluctuations in foreign
currencies. |
The dominant currency in which we conduct business is the U.S.
dollar, which is also our reporting currency. The most
significant components of our costs are natural gas and ocean
shipping. Most of these costs are incurred in U.S. dollars.
Certain of our underlying feedstock and fuel costs, operating
costs and capital expenditures, however, are incurred in
currencies other than the U.S. dollar, principally the New
Zealand dollar, the Canadian dollar, the Chilean peso, the
Trinidad and Tobago dollar and the Euro. We are exposed to
increases in the value of these currencies that could have the
effect of increasing the U.S. dollar equivalent of cost of sales
and operating expenses and capital expenditures. A portion of
our revenue is earned in Euros and British pounds. We are
exposed to declines in the value of these currencies compared to
the U.S. dollar which could have the effect of decreasing
the U.S. dollar equivalent of our revenue.
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Competition from other methanol producers is intense and
could reduce our market share and harm our financial
performance. |
The methanol industry is highly competitive. Methanol is a
global commodity, and we believe that customers base their
purchasing decisions principally on the delivered price of
methanol, reliability of supply and quality of service. Some of
our competitors are not dependent for revenues on a single
product and some have greater financial resources than we do.
Our competitors also include state-owned enterprises. These
competitors may be better able than we are to withstand price
competition and volatile market conditions.
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Government regulations relating to the protection of the
environment could increase our costs of doing business. |
The countries in which we operate have laws and regulations, to
which we are subject, governing the environment and the
sustainable management of natural resources as well as the
handling, storage, transportation and disposal of hazardous or
waste materials. We are also subject to laws and regulations
governing the import, export, use, discharge, storage, disposal
and transportation of toxic substances. The products we use and
produce are subject to regulation under various health, safety
and environmental laws. Non-compliance with any of these laws
and regulations may give rise to work orders, fines,
injunctions, civil liability and criminal sanctions. In
addition, the plants we operate or may operate in the future
must secure environmental permits, which permits could be
revoked or not renewed should the plants not comply with
applicable laws.
Laws and regulations protecting the environment have become more
stringent in recent years and may, in certain circumstances,
impose absolute liability rendering a person liable for
environmental damage without regard to negligence or fault on
the part of such person. These laws and regulations may also
expose us to liability for the conduct of, or conditions caused
by, others, or for our own acts which complied with applicable
laws at the time such acts were performed. We cannot predict the
ultimate costs and timing of environmental liabilities,
including costs associated with changes to current regulatory
standards. Liability under environmental laws relating to
contaminated sites can be imposed retroactively and on a joint
and several basis. A liable party could be held responsible for
all costs at a site, whether currently or formerly owned or
operated and regardless of fault, knowledge, timing of the
contamination, cause of the contamination, percentage of
contribution to the contamination or the legality of the
original disposal. We could incur significant costs, including
clean-up costs, natural resource damages, civil or criminal
fines and sanctions and third-party claims, as a result of past
or future violations of, or liabilities under, environmental
laws. We cannot provide assurance that we will not incur
material costs or liabilities as a result of such laws or
changes to such laws.
14
Risks Related to the Notes and Our Structure
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Our structure as a holding company could adversely affect
our ability to meet our obligations under the Notes. |
We are structured primarily as a holding company with limited
material business operations, sources of income or assets of our
own other than the shares of our subsidiaries. The Notes will be
our obligations exclusively. Unless certain covenants in the
Indenture become applicable, our subsidiaries will not guarantee
the payment of principal or of interest on the Notes and the
Notes will therefore be structurally subordinated to the
obligations of our subsidiaries as a result of our being
structured as a holding company. In the event of an insolvency,
liquidation or other reorganization of any of our subsidiaries,
our creditors (including the holders of the Notes) will not have
any right to proceed against the assets of that subsidiary or to
cause the liquidation or bankruptcy of such subsidiary under
applicable bankruptcy laws. Creditors of such subsidiary would
be entitled to payment in full from its assets before we would
be entitled to receive any distribution from such assets. Except
to the extent that we may ourselves be a creditor with
recognized claims against a subsidiary, claims of creditors of
that subsidiary will have priority with respect to the assets
and earnings of that subsidiary over the claims of our
creditors, including claims under the Notes. As of June 30,
2005, our subsidiaries had approximately $331 million of
liabilities (which amount includes approximately
$144 million of trade payables).
In addition, as a result of our holding company structure, our
operating cash flow and our ability to service our debt,
including the Notes, are dependent upon the operating cash flow
of our subsidiaries and the payment of funds by our subsidiaries
to us in the form of dividends, loans or otherwise. Our
subsidiaries are distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due under the Notes
or to make any funds available therefor, whether by dividends,
interest, loans, advances or other payments. In addition, the
payment of dividends and the making of loans, advances and other
payments to us by our subsidiaries may be subject to statutory
or contractual restrictions, are contingent upon the earnings of
our subsidiaries and are subject to various business and other
considerations.
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Our debt service requirements may affect our ability to
fund our business. |
As at June 30, 2005, after giving effect to the sale of the
Notes offered by this prospectus and the application of the net
proceeds thereof, together with cash on hand, to repay in full
our existing 7.75% Notes due August 15, 2005 upon maturity
of such notes, we would have had total indebtedness of
approximately $505 million. The Indenture and our credit
facility permit us and our subsidiaries to incur additional
indebtedness, including secured indebtedness, subject to
limitations. Our level of indebtedness could increase our
vulnerability to general adverse economic and industry
conditions, place us at a disadvantage compared to those of our
competitors that have less debt, and limit our flexibility in
planning for, or reacting to, changes in our business and
industry.
Our ability to make payments on and to refinance our
indebtedness, including the Notes, and to fund our operations,
working capital and capital expenditures will depend on our
ability to generate cash in the future. This is subject to
general economic, industry, financial, competitive, legislative,
regulatory and other factors that are beyond our control. In
particular, global or regional economic conditions could cause
the price of methanol to fall and hamper our ability to make
interest payments on or repay our indebtedness, including the
Notes. We may need to refinance all or a portion of our
indebtedness, including the Notes, on or before maturity. We
cannot assure you that we will be able to refinance any of our
indebtedness, including the Notes, on commercially acceptable
terms, if at all.
15
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Restrictions in our debt agreements could limit our growth
and our ability to respond to changing conditions. |
Our new senior credit facility and the Indenture contain a
number of significant covenants, which will limit our ability,
among other things, to:
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merge or enter into certain other business combination
transactions; |
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create certain liens on our assets to secure debt; |
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enter into sale and leaseback transactions; and |
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incur additional debt. |
In addition, our new senior credit facility will require us to
maintain certain financial ratios and satisfy certain financial
condition tests and may require us to take action to reduce our
debt or take some other action should we not satisfy these
financial ratios or tests.
These restrictions could limit our ability to obtain future
financings, make needed capital expenditures, withstand a future
downturn in our business or the economy in general, or otherwise
conduct necessary corporate activities. We may also be prevented
from taking advantage of business opportunities that arise
because of the limitations that the restrictive covenants under
our new senior credit facility and the Indenture impose on us.
A breach of any of these covenants could result in a default
under the applicable debt agreement. A default, if not waived,
could result in acceleration of the debt outstanding under the
agreement and in a default with respect to, and acceleration of,
the debt outstanding under other debt agreements. The
accelerated debt would become immediately due and payable. If
that should occur, we may not be able to pay all such debt,
including the Notes.
We may not be able to
finance an offer to purchase the Notes and other indebtedness
upon the occurrence of a Change of Control Triggering
Event.
Upon the occurrence of a Change of Control Triggering Event, as
defined in the Indenture, and provided that the Notes have never
had, at any time, an Investment Grade Rating, as defined in the
Indenture, we will be required to offer to purchase all
outstanding Notes at a price in cash equal to 101% of the
aggregate principal amount of the Notes, plus accrued and unpaid
interest thereon. See Description of the Notes
Certain Covenants Change of Control. However, we
may not have or may not be able to obtain on commercially
reasonable terms, or at all, sufficient funds at such time to
make the required purchase of these securities.
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It may be difficult for you to enforce liabilities against
us based solely upon the federal securities laws of the United
States. |
We are organized under the laws of Canada and our principal
executive office is located in Vancouver, British Columbia. The
majority of our directors and officers, and some of the experts
named in this prospectus, are residents of Canada, and a
substantial portion of their assets and our assets are located
outside the United States. As a result, it may be difficult for
you to effect service of process within the United States upon
the directors, officers and experts, or to enforce against them
judgments of United States courts based upon civil liability
under the federal securities laws of the United States. There is
doubt as to the enforceability in Canada of judgments against us
or against any of our directors, officers or experts, in
original actions or in actions for enforcement of judgments of
United States courts, based solely upon the federal securities
laws of the United States.
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There is currently no active trading market for the Notes.
If an active trading market does not develop for the Notes, you
may not be able to resell them. |
No active trading market currently exists for the Notes and none
may develop. We do not intend to apply for the listing of the
Notes on any securities exchange or quotation system. As a
result, an active trading market may not develop for the Notes.
If an active trading market for the Notes does not develop, it
could have an adverse effect on the market price and your
ability to resell the Notes.
16
USE OF PROCEEDS
We estimate the net proceeds from the sale of the Notes offered
by this prospectus, after deducting estimated underwriting
commissions and expenses, will be approximately
$148 million. We intend to use all of the estimated net
proceeds, together with cash on hand, to repay in full our 7.75%
Notes due August 15, 2005 upon the maturity of such notes.
Pending such application, such net proceeds will be invested in
short-term money market instruments.
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
our capitalization as at June 30, 2005 (1) on an
actual basis and (2) as adjusted to reflect the sale of the
Notes offered by this prospectus and the application of the
estimated net proceeds thereof, together with cash on hand, to
repay in full our 7.75% Notes due August 15, 2005 upon the
maturity of such notes. This table should be read in conjunction
with managements discussion and analysis,
Description of Certain Indebtedness and our
unaudited interim consolidated financial statements and related
notes appearing elsewhere or incorporated by reference in this
prospectus.
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As at June 30, 2005 | |
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Actual | |
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As Adjusted | |
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(in millions) | |
Cash and cash equivalents
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$ |
266 |
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$ |
164 |
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Short term debt:
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Current maturities on long term
debt (7.75% Notes due August 15, 2005)
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$ |
250 |
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$ |
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Atlas limited recourse debt
facilities(1)
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11 |
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11 |
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Total short term debt
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261 |
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11 |
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Long term debt:
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Senior unsecured credit facility(2)
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8.75% Notes due August 15, 2012
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200 |
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200 |
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Atlas limited recourse debt
facilities(1)
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144 |
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144 |
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Notes offered by this prospectus
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150 |
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Total long term debt
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344 |
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494 |
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Total debt
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605 |
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505 |
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Shareholders equity:
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Capital stock and contributed
surplus
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522 |
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522 |
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Retained earnings
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488 |
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488 |
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Total shareholders equity
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1,010 |
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1,010 |
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Total capitalization
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$ |
1,615 |
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$ |
1,515 |
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(1) |
Represents our proportionate share. The limited recourse debt
facilities of Atlas are described as limited recourse as they
are secured only by the assets of our joint venture with BP. See
Description of Certain Indebtedness Atlas
Limited Recourse Debt Facilities. |
|
(2) |
Total availability of $250 million, expiring 2010. |
17
DESCRIPTION OF CERTAIN INDEBTEDNESS
Existing Notes
In 1995, we issued $250 million of 7.75% Notes due
August 15, 2005, or the 7.75% Notes, under the Indenture.
In 2002, we issued $200 million of 8.75% Notes due
August 15, 2012, or the 8.75% Notes, under the
Indenture. These existing notes pay interest semi-annually on
February 15 and August 15 of each year and rank
equally in right of payment with all other senior indebtedness,
including the Notes offered by this prospectus. We intend to
repay in full our 7.75% Notes upon maturity of such notes with
the net proceeds from the sale of the Notes offered by this
prospectus and from cash on hand.
The covenants applicable to the 8.75% Notes are substantially
the same as those that will be applicable to the Notes offered
by this prospectus, except that: (1) the 8.75% Notes are
only redeemable if we are obligated to pay Additional Amounts
(as defined herein) as a result of changes affecting Canadian
withholding taxes, (2) the 8.75% Notes are subject to a
Change of Control covenant regardless of whether such notes have
an Investment Grade Rating (as defined in the Indenture), and
(3) the definition of Unrestricted Subsidiaries, as it
applies to the 8.75% Notes, only permits us to designate
subsidiaries as unrestricted at the time of acquisition or
formation of such subsidiaries.
Bank Indebtedness
On June 3, 2005, we finalized a new credit facility with a
syndicate of banks. The credit facility, which is unsecured and
currently undrawn, provides for up to $250 million in
revolving loans and letters of credit, ranks equally in right of
payment with all of Methanex Corporations unsubordinated
and unsecured indebtedness, including the Notes offered by this
prospectus, and expires in 2010. Prior to expiration, funds
available under the credit facility may be borrowed, repaid and
reborrowed without premium or penalty. Borrowings under the
facility bear interest at a floating rate, which can be either a
base rate or, at our option, a LIBOR rate, plus an applicable
margin in either case. Under the credit facility, we are
required to pay a commitment fee on the difference between the
amounts actually borrowed and the committed amounts. The credit
facility requires us to comply with a debt to capitalization
ratio and an interest coverage ratio. We are currently in
compliance with both ratios. The credit agreement contains
customary affirmative and negative covenants, representations,
warranties and events of default, including but not limited to
payment defaults, breaches of representations and warranties,
covenant defaults, cross defaults and certain events of
bankruptcy and insolvency.
Atlas Limited Recourse Debt Facilities
Atlas Methanol Company Unlimited, in which we own a 63.1%
interest, has senior debt obligations in the aggregate amount of
$231 million and subordinated debt obligations in the
aggregate amount of $15 million, incurred for the purposes
of financing a portion of the costs of construction of our Atlas
facility. All such obligations are secured by a first fixed and
floating charge over all of the property and assets of Atlas.
Atlas is also required to maintain a number of restricted
accounts, including a debt service reserve account in the amount
of six months debt service. The master agreement, which
governs all of Atlass senior debt obligations, contains
customary affirmative and negative covenants, representations,
warranties and events of default, including but not limited to
payment defaults, breaches of representations and warranties,
covenant defaults, cross defaults and certain events of
bankruptcy and insolvency. Atlas Methanol Company Unlimited and
its direct parent are Unrestricted Subsidiaries under the
Indenture.
18
DESCRIPTION OF THE NOTES
The Notes will be issued under the Indenture, dated as of
July 20, 1995, as supplemented, between us and The Bank of
New York (formerly United States Trust Company of New York), as
Trustee. The statements under this caption relating to the Notes
and the Indenture are summaries and do not purport to be
complete, and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Indenture,
including the definitions of certain terms therein. The
Indenture is by its terms subject to and governed by the U.S.
Trust Indenture Act of 1939, as amended. Where reference is made
to particular provisions of the Indenture or to defined terms
not otherwise defined herein, such provisions or defined terms
are incorporated herein by reference.
In this description, we, us,
our and similar terms, as well as references to
Methanex, refer only to Methanex Corporation and our
successors and not to any of our subsidiaries.
General
The Notes will be our general unsecured obligations and will
mature on August 15, 2015. The Notes will be initially
issued in a total principal amount of $150,000,000. We may issue
additional notes of the same series under the Indenture from
time to time after this offering, without the consent of the
holders of the Notes. The Notes and any additional notes of this
series subsequently issued under the Indenture will be treated
as a single class for all purposes under the Indenture,
including, without limitation, waivers, amendments, redemptions
and offers to purchase.
Interest on the Notes will accrue at the rate of 6.00% per annum
and will be payable semi-annually on February 15 and
August 15 of each year, commencing on February 15,
2006. The Notes will provide for us to pay interest on overdue
principal and, to the extent lawful, on overdue installments of
interest at the above rate per annum, plus 1%. Interest on the
Notes will be computed on the basis of a 360-day year comprised
of twelve 30-day months. The yearly rate of interest that is
equivalent to the rate payable under the Notes is the rate
payable multiplied by the actual number of days in the year and
divided by 360 and is disclosed herein solely for the purpose of
providing the disclosure required by the Interest
Act(Canada).
Principal of, and premium, if any, and interest on, the Notes
will be payable, and the Notes may be presented for registration
of transfer and exchange, at the office or agency maintained by
us for that purpose in the Borough of Manhattan, the City of New
York, provided, however, that at our option, payment of interest
may be made by check mailed to the address of the person
entitled thereto at such address as shall appear in the register
of Notes, and at the option of the registered holder of the
Notes, by wire transfer to an account designated by the
registered holder. The Trustee will initially act as registrar.
There will be no mandatory sinking fund payments for the Notes.
The Notes will rank equally in right of payment with all other
of our unsubordinated and unsecured indebtedness. The Notes,
however, will be structurally subordinated to the liabilities of
our subsidiaries. See Risk Factors Risks
Related to the Notes and Our Structure.
Additional Amounts for Canadian Withholding Taxes
All payments made by us under or with respect to the Notes must
be made free and clear of and without withholding or deduction
for or on account of any present or future tax, duty, levy,
impost, assessment or other governmental charge imposed or
levied by or on behalf of the Government of Canada or of any
province or territory thereof or by any authority or agency
therein or thereof having power to tax (hereinafter
Taxes), unless we are required to withhold or deduct
Taxes by law or by the interpretation or administration thereof.
If we are so required to withhold or deduct any amount for or on
account of Taxes from any payment made under or with respect to
the Notes, we will pay such additional amounts (Additional
Amounts) as may be necessary so that the net
19
amount received by each holder of the Notes (including
Additional Amounts) after such withholding or deduction will not
be less than the amount the holder of the Notes would have
received if such Taxes had not been withheld or deducted;
provided, however, that no Additional Amounts will be
payable with respect to a payment made to a holder of the Notes
(an Excluded Holder) (1) with which we do not
deal at arms length (within the meaning of the Income
Tax Act (Canada)) at the time of making such payment or
(2) which is subject to such Taxes by reason of its being
connected with Canada or any province or territory thereof
otherwise than by the mere holding of Notes or the receipt of
payments thereunder. We will also make such withholding or
deduction and remit the full amount deducted or withheld to the
relevant authority in accordance with applicable law.
We will furnish to holders of the Notes, within 30 days
after the date the payment of any Taxes is due pursuant to
applicable law, certified copies of tax receipts evidencing such
payment by us. We will indemnify and hold harmless each holder
of Notes (other than an Excluded Holder) and upon written
request reimburse such holder of Notes for the amount of
(1) any Taxes so levied or imposed and paid by such holder
as a result of payments made under or with respect to the Notes,
(2) any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, and
(3) any Taxes imposed with respect to any reimbursement
under (1) or (2), but excluding any such Taxes on such
holders net income.
At least 30 days prior to each date on which any payment
under or with respect to the Notes is due and payable, if we are
obligated to pay Additional Amounts with respect to such
payment, we will deliver to the Trustee an Officers
Certificate stating the fact that such Additional Amounts will
be payable and the amount so payable and will set forth other
information necessary to enable the Trustee to pay such
Additional Amounts to holders of the Notes on the payment date.
Whenever in the Indenture or in this Description of Notes there
is mentioned, in any context, the payment of principal, and
premium (if any), redemption price, interest or any other amount
payable under or with respect to any Note, such mention shall be
deemed to include mention of the payment of Additional Amounts
to the extent that, in the context, Additional Amounts are, were
or would be payable in respect thereof.
Redemption
Optional Redemption
The Notes will be redeemable as a whole or in part, at our
option at any time, at a redemption price equal to the greater
of (1) 100% of the principal amount of the Notes being
redeemed and (2) the sum of the present values of the
remaining scheduled payments of principal and interest thereon
(exclusive of interest accrued to the date of redemption)
discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 35 basis points, plus in each case
accrued interest thereon to the date of redemption.
Comparable Treasury Issue means the United States
Treasury security or securities selected by an Independent
Investment Banker as having an actual or interpolated maturity
comparable to the remaining term of the Notes to be redeemed
that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of a comparable maturity to
the remaining term of such Notes.
Comparable Treasury Price means, with respect to any
redemption date, (1) the average of the Reference Treasury
Dealer Quotations for such redemption date, after excluding the
highest and lowest of such Reference Treasury Dealer Quotations,
or (2) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such
quotations.
Independent Investment Banker means one of the
Reference Treasury Dealers appointed by the Trustee after
consultation with us.
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Reference Treasury Dealer means each of ABN AMRO
Incorporated and BNP Paribas Securities Corp. plus three others
or their affiliates which are primary U.S. Government securities
dealers appointed by the Trustee after consultation with us and
their respective successors; provided, however, that if
any of the foregoing or their affiliates shall cease to be a
primary U.S. Government securities dealer in The City of
New York (a Primary Treasury Dealer), the Company
shall substitute therefor another Primary Treasury Dealer, if
one is available.
Reference Treasury Dealer Quotations means, with
respect to each Reference Treasury Dealer and any redemption
date, the average, as determined by the Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in
each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at
3:30 p.m. New York time on the third business day
preceding such redemption date.
Treasury Rate means, with respect to any redemption
date, the rate per annum equal to the semi-annual equivalent
yield to maturity or interpolated (on a day count basis) of the
Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such
redemption date.
Notice of any redemption will be mailed at least 30 days
but not more than 60 days before the redemption date to
each holder of Notes to be redeemed.
Unless the Company defaults in payment of the redemption price,
on and after the redemption date interest will cease to accrue
on the Notes or portions thereof called for redemption.
Redemption for Changes in
Canadian Withholding Taxes
The Notes may be redeemed, at our option, at any time in whole
but not in part, on not less than 30 nor more than
60 days notice, at 100% of the principal amount
thereof, plus accrued and unpaid interest (if any) to the date
of redemption (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant
interest payment date), in the event we have become or would
become obligated to pay, on the next date on which any amount
would be payable with respect to the Notes, any Additional
Amounts as a result of a change in or an amendment to the laws
(including any regulations promulgated thereunder) of Canada (or
any political subdivision or taxing authority thereof or
therein), or any change in or amendment to any official position
regarding the application or interpretation of such laws or
regulations, which change or amendment is announced or becomes
effective on or after the date of this prospectus.
Certain Covenants
Set forth below are certain covenants contained in the Indenture:
Upon the occurrence of a Change of Control Triggering Event, we
will be required to make an offer (a Change of Control
Offer) to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of each Holders Notes;
provided, however, that the foregoing provision shall not
apply to the Notes if the Notes have, or at any time had, an
Investment Grade Rating. A Change of Control Triggering
Event will occur only if a Change of Control and a Rating
Decline both occur. In the Change of Control Offer, we will
offer to purchase Notes for a purchase price in cash equal to
101% of the aggregate principal amount of the Notes repurchased
plus accrued and unpaid interest, if any, on the Notes
repurchased, to the date of purchase; provided, however, that
interest payable on or prior to the date of purchase will be
payable to the Holders of the Notes repurchased registered as
such on the regular record date for such interest.
Within 30 days following a Change of Control Triggering
Event, we will be required to mail a notice to each Holder of
Notes describing the transaction or transactions that constitute
the Change of Control Triggering Event and offering to
repurchase Notes on the Change of Control Payment
21
Date specified in the notice, which date shall be between 30 and
60 days of the mailing of the notice, pursuant to the
procedures required by the Indenture and described in such
notice. We will comply with the requirements of
Section 14(e) of and Rule 14e-1 under the Securities
Exchange Act of 1934, as amended (the Exchange Act)
and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of
Control Triggering Event. To the extent that the provisions of
any securities laws or regulations conflict with the Change of
Control provisions of the Indenture, we will comply with the
applicable securities laws and regulations and will not be
deemed to have breached our obligations under the Change of
Control provisions of the Indenture by virtue of such conflict.
On the Change of Control Payment Date, we will be required to,
to the extent lawful, (1) accept for payment all Notes or
portions thereof properly tendered pursuant to the Change of
Control Offer, (2) deposit with the paying agent an amount
equal to the purchase price in respect of all Notes or portions
thereof so tendered, and (3) deliver or cause to be
delivered to the Trustee the Notes so accepted, together with an
Officers Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by us. The
paying agent will be required to promptly mail to each Holder
who properly tendered Notes, the purchase price for such Notes
and the Trustee will be required to promptly authenticate and
mail (or cause to be transferred by book entry) to each such
Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; provided that
each new Note will be in a principal amount of US$1,000 or an
integral multiple thereof.
The provisions described above that require us to make a Change
of Control Offer following a Change of Control Triggering Event
will be applicable whether or not any other provisions of the
Indenture are applicable. Except as described above with respect
to a Change of Control Triggering Event, the Indenture does not
contain provisions that permit the Holders of the Notes to
require that we repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
We will not be required to make a Change of Control Offer upon a
Change of Control Triggering Event if a third party makes the
Change of Control Offer in the manner, at the times and
otherwise in compliance with, the requirements set forth in the
Indenture applicable to a Change of Control Offer made by us,
and purchases all Notes properly tendered and not withdrawn
under the Change of Control Offer.
The definition of Change of Control includes a phrase relating
to the direct or indirect sale, lease, transfer, conveyance or
other disposition of all or substantially all of the
properties or assets of us and our Subsidiaries taken as a
whole. Although there is a limited body of case law interpreting
the phrase substantially all, there is no precise
established definition of the phrase under applicable law.
Accordingly, the ability of a holder of Notes to require us to
repurchase the Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets
of us and our Subsidiaries taken as a whole to another Person or
group may be uncertain.
We shall not, and shall not permit any Restricted Subsidiary to,
Incur or to permit to exist any Lien of any nature whatsoever
(other than Permitted Liens) on any of our or its property or
assets now owned or hereafter acquired by us or it (including
any Capital Stock or evidence of Indebtedness and including any
of our Capital Stock or Indebtedness held by us or any
Subsidiary) securing any Indebtedness, without contemporaneously
therewith effectively securing the Notes equally and ratably
with (or prior to) such Indebtedness for so long as such
Indebtedness is so secured, unless, after giving effect to such
Lien, the aggregate amount of all Indebtedness secured by such
Liens (other than Permitted Liens) on our property or assets or
that of our Restricted Subsidiaries, plus all of our
Attributable Indebtedness and that of our Restricted
Subsidiaries with
22
respect to Sale/ Leaseback Transactions permitted as described
below under Limitation on Sale/ Leaseback
Transactions, does not exceed 10% of Consolidated Net
Worth.
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Limitation on Sale/ Leaseback Transactions |
We shall not, and shall not permit any Restricted Subsidiary to,
enter into a Sale/ Leaseback Transaction, unless, after giving
effect thereto, the aggregate amount of all Attributable
Indebtedness with respect to all such Sale/ Leaseback
Transactions, plus all Indebtedness secured by Liens to which
the covenant described above under Limitations
on Liens is applicable, does not exceed 10% of
Consolidated Net Worth. However, the provisions described in
this Limitation on Sale/ Leaseback Transactions
shall not apply to, and there shall be excluded from
Attributable Indebtedness in any computation described in this
covenant and in the covenant described above under
Limitation on Liens, Attributable
Indebtedness with respect to a Sale/ Leaseback Transaction if:
(1) the lease in such Sale/ Leaseback Transaction is for a
period, including renewal rights, of three years or less;
(2) we or a Restricted Subsidiary, within one year (or, in
the event the net proceeds of the sale of the property leased
pursuant to such Sale/ Leaseback Transaction exceeds
$75 million, within two years) after such Sale/ Leaseback
Transaction, apply an amount not less than the greater of the
net proceeds of the sale of the property leased pursuant to such
Sale/ Leaseback Transaction or the fair market value of such
property (as determined in good faith by the Board of Directors)
to either the retirement of our or a Restricted
Subsidiarys Funded Indebtedness or the purchase by us or a
Restricted Subsidiary of other property having a fair market
value (as determined in good faith by the Board of Directors) at
least equal to the fair market value of the property so leased
in such Sale/ Leaseback Transaction; or (3) such Sale/
Leaseback Transaction is entered into between us and a
Restricted Subsidiary or between Restricted Subsidiaries.
We shall not permit any Restricted Subsidiary to Incur any
Indebtedness unless, at the time of such Incurrence such
Restricted Subsidiary has Guaranteed all our obligations with
respect to the Notes pursuant to the terms of the Indenture,
such Guarantee to be in the form provided for in the Indenture.
The foregoing shall not apply to: (1) any Indebtedness
Incurred by a Restricted Subsidiary to finance its working
capital requirements; provided, however, that the
aggregate amount of such Indebtedness Incurred by all Restricted
Subsidiaries and outstanding at any time shall not exceed $25
million; (2) any Indebtedness secured by (a) Permitted
Liens or (b) Liens to which the exception in the covenant
described above under Limitation on
Liens is applicable; provided, however, that the
aggregate amount of all such Indebtedness and all our
Indebtedness secured by such Liens (other than Permitted Liens),
plus all of our and our Restricted Subsidiaries
Attributable Indebtedness with respect to Sale/ Leaseback
Transactions permitted as described above under
Limitation on Sale/ Leaseback
Transactions, does not exceed 10% of Consolidated Net
Worth; (3) any Attributable Indebtedness (a) with
respect to a Sale/ Leaseback Transaction which is permitted
under the covenant described above under
Limitation on Sale/ Leaseback
Transactions or (b) to which the provisions described
above under Limitation on Sale/ Leaseback
Transactions are not applicable; and (4) any
Indebtedness owed to and held by us or another Restricted
Subsidiary; provided, however, that any subsequent
transfer of any such Indebtedness or any subsequent transfer of
any Capital Stock of such Restricted Subsidiary, or any other
event, that results in such Restricted Subsidiary ceasing to be
a Restricted Subsidiary shall be deemed to constitute the
Incurrence of such Indebtedness at such time. Except if we have
exercised either of the defeasance options described under
Defeasance below, no Guarantor shall be
released from its Guarantee provided pursuant to this covenant
or clause (1) in the second paragraph of
Successor Company and Guarantors below
unless (1) such Guarantor ceases to be a Restricted
Subsidiary or (2) such Guarantor has been discharged from
all its obligations with respect to all Indebtedness Incurred by
such Guarantor (other than such Guarantee and Indebtedness
described in clause (4) in the immediately preceding
sentence) and such
23
Guarantor has not had any Indebtedness (other than such
Guarantee and Indebtedness described in clause (4) in the
immediately preceding sentence) outstanding for a period of
91 days.
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Limitations with Respect to Unrestricted
Subsidiaries |
(a) We shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into or conduct any
transaction (including, the purchase, sale, lease or exchange of
any property or the rendering of any service) with any
Unrestricted Subsidiary (an Unrestricted Subsidiary
Transaction) on terms (1) that are less favorable in
sum to us or such Restricted Subsidiary, as the case may be,
than those that could be obtained at the time of such
transaction in arms-length dealings with a person other
than an Unrestricted Subsidiary or (2) that, in the event
such Unrestricted Subsidiary Transaction involves an aggregate
amount in excess of $25 million, are not in writing and
have not been approved by a majority of the members of the Board
of Directors. The foregoing shall not prohibit any Investment by
us or any Restricted Subsidiary in any Unrestricted Subsidiary.
(b) We shall not permit any Unrestricted Subsidiary to
Incur any Indebtedness other than Non-Recourse Indebtedness;
provided, however, that in the event any such
Indebtedness ceases for any reason to constitute Non-Recourse
Indebtedness, such Subsidiary shall be deemed to have Incurred
such Indebtedness at such time.
(c) We shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, transfer to any
Unrestricted Subsidiary any property or assets owned by us or
any Restricted Subsidiary on the date of the Indenture
(1) on terms that are less favorable in sum to us or such
Restricted Subsidiary, as the case may be, than those that could
be obtained at the time of such transfer in arms-length
dealings with a person other than an Unrestricted Subsidiary or
(2) unless the aggregate price for such property or assets
under such transfer, plus the aggregate prices for any other
such property or assets under any other such transfers completed
during the twelve-month period immediately preceding such
transfer, does not exceed $25 million.
Successor Company and Guarantors
We may not amalgamate or consolidate with or merge with or into,
or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all our assets to, any
person, unless: (1) the resulting, surviving or transferee
person (if not us) is organized and existing under the federal
laws of Canada or the laws of any province thereof or the laws
of the United States of America, any State thereof or the
District of Columbia and such person expressly assumes by a
supplemental indenture, executed and delivered to the Trustee,
in form satisfactory to the Trustee, all of our obligations
under the Indenture and the Notes; (2) immediately after
giving effect to such transaction, no Default shall have
occurred and be continuing; and (3) we deliver to the
Trustee an Officers Certificate and an Opinion of Counsel
(who may rely on such Officers Certificate as to matters
of fact), each stating that such amalgamation, consolidation,
merger, conveyance, transfer or lease and such supplemental
indenture (if any) comply with the Indenture. The resulting,
surviving or transferee person will be the successor company
under the Indenture and the Notes.
We will not permit any Restricted Subsidiary that is a Guarantor
to amalgamate or consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any person
unless: (1) the resulting, surviving or transferee person
(if not such Guarantor) is organized and existing under the laws
of the jurisdiction under which such Guarantor or its parent
corporation was organized or under the federal laws of Canada or
the laws of any province thereof or the laws of the United
States of America, or any State thereof or the District of
Columbia and such person expressly assumes by a supplemental
indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of such
Guarantor under its Guarantee unless such resulting, surviving
or transferee person has been released from such Guarantee in
accordance with the terms of the
24
Indenture; (2) immediately after giving effect to such
transaction, no Default shall have occurred and be continuing;
and (3) we deliver to the Trustee an Officers
Certificate and an Opinion of Counsel (who may rely on such
Officers Certificate as to matters of fact), each stating
that such amalgamation, consolidation, merger, conveyance,
transfer or lease and such supplemental indenture (if any)
comply with the Indenture.
Defaults
An Event of Default with respect to the Notes is defined in the
Indenture as (1) a default by us in the payment of interest
on the Notes (including any Additional Amount) when due and
payable, continued for 30 days, (2) a default by us in
the payment of principal with respect to the Notes when due and
payable at Stated Maturity, upon redemption, upon declaration or
otherwise, (3) the failure by us or a Guarantor to comply
with the obligations described under Certain
Covenants Change of Control or
Successor Company and Guarantors above,
(4) the failure by us or any Restricted Subsidiary for
60 days after notice to comply with any of the obligations
described under Certain Covenants above,
(5) the failure by us or any Restricted Subsidiary for
60 days after notice to comply with the agreements
contained in the Indenture or the Notes (other than a failure
described in (1), (2), (3) or (4) above or a failure
to comply with any of our or its obligations under the covenants
or agreements that are specifically for the benefit of one or
more series of debt securities issued pursuant to the Indenture
other than the Notes), (6) Indebtedness of us or any
Restricted Subsidiary is not paid within any applicable grace
period and is accelerated by the holders thereof, or is
accelerated by the holders thereof because of a default, and the
total amount of such Indebtedness unpaid, or due and payable,
and accelerated exceeds $10 million (the cross
acceleration provision), (7) certain specified events
of bankruptcy, insolvency or reorganization of us or a
Significant Subsidiary (the bankruptcy default
provision), or (8) any Guarantee of the Notes by any
Guarantor at any time ceases to be in full force and effect for
any reason (other than as a result of a release of such
Guarantee in accordance with the terms of the Indenture) (the
guarantee default provision). A default under
clause (4) or (5) will not constitute an Event of Default
until the Trustee or the holders of at least 25% in principal
amount of the outstanding Notes notify us of the default and we
do not cure such default within the time specified after receipt
of such notice.
If an Event of Default (other than a bankruptcy default with
respect to us) occurs and is continuing with respect to the
Notes, the Trustee by notice to us, or the holders of at least
25% in principal amount of the Notes then outstanding by notice
to us and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Notes to be due and payable. Upon
such a declaration, such principal and interest shall be due and
payable immediately. If a bankruptcy default with respect to us
occurs and is not cured within the time period permitted, the
principal of and interest on all the debt securities issued
pursuant to the Indenture, including the Notes, will ipso
facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any
holders of debt securities issued pursuant to the Indenture.
Under certain circumstances, the holders of a majority in
principal amount of the Notes may rescind any such acceleration
with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the
duties of the Trustee, in case an Event of Default occurs and is
continuing, the Trustee will be under no obligation to exercise
any of the rights or powers under the Indenture at the request
or direction of any of the holders of the Notes then outstanding
unless such holders have offered to the Trustee reasonable
indemnity or security against any loss, liability or expense.
Except to enforce the right to receive payment of principal,
premium (if any) or interest when due, no holder of Notes may
pursue any remedy with respect to the Indenture or the Notes
unless (1) such holder has previously given the Trustee
notice that an Event of Default is continuing, (2) holders
of at least 25% in principal amount of the outstanding Notes
have requested the Trustee to pursue the remedy, (3) such
holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (4) the
Trustee has
25
not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity, and
(5) the holders of a majority in principal amount of the
Notes have not given the Trustee a direction inconsistent with
such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of
the outstanding Notes will be given the right to direct the
time, method and place of conducting any proceeding for any
remedy available to the Trustee with respect to the Notes or of
exercising any trust or power conferred on the Trustee with
respect to the Notes. The Trustee, however, may refuse to follow
any direction that conflicts with law or the Indenture or that
the Trustee determines is unduly prejudicial to the rights of
any other holder of the Notes or that would involve the Trustee
in personal liability.
Under the Indenture, if a Default occurs with respect to the
Notes and is continuing and is known to the Trustee, the Trustee
must mail to each holder of the Notes notice of the Default
within 90 days after it occurs. Except in the case of a
Default in the payment of principal of, premium (if any) or
interest on the Notes, the Trustee may withhold notice if and so
long as a committee of its trust officers determines in good
faith that withholding notice is in the interest of the holders
of Notes. In addition, we are required to deliver to the
Trustee, within 120 days after the end of each fiscal year,
a certificate indicating whether the signers thereof know of any
Default that occurred during the previous year. We are also
required to deliver to the Trustee, within 30 days after we
learn of the existence thereof, written notice of any event
which would constitute certain Defaults, their status and what
action we are taking or propose to take in respect thereof.
Book-Entry, Delivery and Form
The Notes will be represented by one or more fully registered
global notes without coupons (the Global Notes) and
will be deposited upon issuance with the Trustee as custodian
for The Depository Trust Company (DTC), in New
York, New York, and registered in the name of DTC or its
nominee. Except as set forth below, the Global Notes may be
transferred in whole and not in part only to DTC or another
nominee of DTC.
So long as DTC or its nominee is the registered owner thereof,
DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by the Global
Notes for all purposes under the Indenture. Except as provided
below, owners of beneficial interests in the Global Notes will
not be entitled to have the Notes represented by the Global
Notes registered in their names, will not receive or be entitled
to receive physical delivery of the Notes in definitive form and
will not be considered the owners or holders thereof under the
Indenture.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New
York Banking Law, a banking organization within the
meaning of the New York Banking Law, a member of the Federal
Reserve System, a clearing corporation within the
meaning of the Uniform Commercial Code, and a clearing
agency registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC holds securities that
its participants (Direct Participants) deposit with
DTC. DTC also facilitates the settlement among Direct
Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized
book-entry changed in Direct Participants accounts,
thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and
dealers (including certain of the underwriters), banks, trust
companies, clearing corporations and certain other
organizations. DTC is a wholly-owned subsidiary of The
Depository Trust Company & Clearing Corporation
(DTCC). DTCC, in turn, is owned by a number of its
Direct Participants and members of DTCC clearing corporations,
as well as by the New York Stock Exchange, Inc., the American
Stock Exchange LLC and the National Association of Securities
Dealers, Inc. Access to DTCs system is also available to
others such as securities brokers and dealers, clearing
corporations, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant,
either directly or
26
indirectly (Indirect Participant). The rules
applicable to DTC and its Direct and Indirect Participants are
on file with the United States Securities and Exchange
Commission.
Purchases of the Notes under DTCs system must be made by
or through Direct Participants, which will receive a credit for
such Notes on DTCs records. The ownership interest of each
actual purchaser of each Note represented by a Global Note
(Beneficial Owner) is in turn to be recorded on the
Direct and Indirect Participants records. Beneficial
Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or
Indirect Participants through which such Beneficial Owner
entered into the transaction. Transfers of ownership interests
in the Global Notes representing the Notes are to be
accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners of the Global
Notes representing the Notes will not receive the Notes in
definitive form representing their ownership interests therein,
except in the event that use of the book-entry system for the
Notes is discontinued or upon the occurrence of certain other
events described herein.
To facilitate subsequent transfers, all Global Notes
representing the Notes which are deposited with DTC are
registered in the name of DTCs nominee, Cede & Co. The
deposit of Global Notes with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the
Global Notes representing the Notes; DTCs records reflect
only the identity of the Direct Participants to whose accounts
such Notes are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants or Indirect Participants,
and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect
to the Global Notes representing the book-entry Notes. Under its
usual procedures, DTC mails an omnibus proxy (an Omnibus
Proxy) to us as soon as possible after the applicable
record date. The Omnibus Proxy assigns Cede & Co.s
consenting or voting rights to those Direct Participants to
whose accounts the Notes are credited on the applicable record
date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Global
Notes representing the Notes will be made to DTC. DTCs
practice is to credit Direct Participants accounts upon
DTCs receipt of funds, on the applicable payment date in
accordance with the respective holdings of the Direct
Participants shown on DTCs records. Payments by
Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or
registered in street name, and will be the
responsibility of such Participant and not of DTC, the Trustee
or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of
principal, premium, if any, and interest to Cede & Co. is
our responsibility or that of the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners
shall be the responsibility of Direct and Indirect Participants.
Neither we nor the Trustee will have any responsibility or
liability for the disbursements of payments in respect of
ownership interests in the Notes by DTC or the Direct or
Indirect Participants or for maintaining or reviewing any
records of DTC or the Direct or Indirect Participants relating
to ownership interests in the Notes or the disbursements of
payments in respect thereof.
DTC may discontinue providing its services as securities
depository with respect to the Notes at any time by giving
reasonable notice to us or the Trustee. We may decide to
discontinue use of the system of book-entry transfers through
DTC or a successor securities depository. Under such
27
circumstances, and in the event that a successor securities
depository is not obtained, Notes in definitive form are
required to be printed and delivered.
The information in this section concerning DTC and DTCs
system has been obtained from sources that we believe to be
reliable, but is subject to any changes to the arrangements
between us and DTC and any changes to such procedures that may
be instituted unilaterally by DTC.
Enforceability of Judgments
Since a substantial portion of our assets and those of our
Subsidiaries are outside the United States, any judgment
obtained in the United States against us or any of our
Subsidiaries, including judgments with respect to the payment of
principal, interest, Additional Amounts or redemption price with
respect to the Notes, may not be collectible within the United
States.
We have been informed by our Canadian counsel, McCarthy
Tétrault LLP, that the laws of the Province of British
Columbia and the federal laws of Canada applicable therein
permit an action to be brought in a court of competent
jurisdiction in the Province of British Columbia (a
British Columbia Court) on any final and conclusive
judgment in personam (i.e., against the person) of a Federal or
state court in the State of New York (New York
Court) against us that is subsisting and unsatisfied
respecting the enforcement of the Notes or the Indenture, that
is not impeachable as void or voidable under the laws of the
State of New York and that is for a sum certain if (1) the
New York Court that rendered such judgment had jurisdiction over
the judgment debtor, as recognized by a British Columbia Court
(and submission by us in the Notes or the Indenture to the
jurisdiction of the New York Court will be deemed sufficient for
this purpose); (2) proper service of process in respect of
the proceeding in which such judgment was made in accordance
with New York law; (3) such judgment was not obtained by
fraud or in a manner contrary to natural justice, and the
enforcement thereof would not be either inconsistent with public
policy, as the term is applied by a British Columbia Court, or
contrary to any order made by the Attorney General of Canada
under the Foreign Extraterritorial Measures Act (Canada)
or contrary to any order made by the Competition Tribunal under
the Competition Act (Canada); (4) the enforcement of
such judgment in British Columbia does not constitute, directly
or indirectly, the enforcement of any laws of the State of New
York or of the United States of America which a British Columbia
Court would characterize as revenue, expropriatory, penal or
public laws; (5) in an action to enforce a default
judgment, the judgment does not contain a manifest error on its
face; (6) the action to enforce such judgment is commenced
within the applicable limitation period after the date of such
judgment; and (7) the judgment does not conflict with
another final and conclusive judgment in the same cause of
action; provided that a British Columbia Court may stay an
action to enforce a foreign judgment if an appeal of the
judgment is pending or the time for appeal has not expired; and
provided further that under the Currency Act (Canada), a
British Columbia Court may only give judgment in Canadian
dollars.
Consent to Jurisdiction and Service
The Indenture provides that we irrevocably designate and appoint
CT Corporation System (and any successor entity), as our agent
for service of process in any suit or proceeding arising out of
or relating to the Indenture or the Notes for actions brought in
any federal or state court located in the Borough of Manhattan
in the City of New York and will submit to such jurisdiction.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with
respect to the Notes with the consent of the holders of not less
than a majority in principal amount of the Notes and any past
default or compliance with any provisions may be waived with
such a consent of the holders of a majority in principal amount
of the outstanding Notes. However, without the consent of each
holder of outstanding Notes, no amendment may, among other
things, (1) reduce the amount of the Notes
28
whose holders must consent to an amendment, (2) reduce the
rate of or extend the time for payment of interest on any Notes,
(3) reduce the principal of or extend the Stated Maturity
of any Notes, (4) reduce the premium payable upon the
redemption of any Notes or change the time at which any Notes
may or shall be redeemed, (5) make any Notes payable in
currency other than that stated in the Notes, (6) make any
change to the provisions of the Indenture described under
Additional Amounts for Canadian Withholding
Taxes above that adversely affects the rights of any
holder of the Notes, (7) impair the rights of any holder of
the Notes to receive payment of principal of and interest on
such holders Notes (including any Additional Amount) on or
after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such
holders Notes, (8) make any change in the Guarantee
of the Notes by any Guarantor that would adversely affect any
holder of the Notes or (9) make any change in the amendment
provisions which require each holders consent or in the
provisions which limit suits by holders.
Without the consent of any holder of the Notes, we and the
Trustee may amend the Indenture to cure any ambiguity, defect or
inconsistency, to provide for the assumption by a successor
corporation of our obligations or those of a Guarantor under the
Indenture to add Guarantees with respect to the Notes, to secure
all or any of the Notes, to add to our covenants or to add
Events of Default for the benefit of the holders of the Notes or
to surrender any right or power conferred upon us, to make any
change that does not adversely affect the rights of any holder
of the Notes in any material respect, to establish the form or
terms of the Notes, to supplement any of the provisions of the
Indenture to the extent necessary to permit or facilitate the
defeasance or discharge of the Notes that does not adversely
affect the rights of any holders of the Notes in any material
respect, to change or eliminate any provision of the Indenture
that becomes effective only when there is not outstanding any
debt security of any series issued under the Indenture which is
entitled to the benefit of such provision or to comply with any
requirement of the Commission in connection with the
qualification of the Indenture under the Trust Indenture
Act.
The consent of the holders of the Notes is not necessary under
the Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the
substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are
required to mail to holders of the Notes a notice briefly
describing such amendment. However, the failure to give such
notice to all holders of the Notes, or any defect therein, will
not impair or affect the validity of the amendment.
Defeasance
We at any time may terminate all our and each Guarantors
obligations under the Notes and our obligations and those of
each such Guarantor under the Indenture with respect to the
Notes (legal defeasance), except for certain
obligations, including those respecting the defeasance trust and
obligations to register the transfer or exchange of the Notes,
to replace mutilated, destroyed, lost or stolen Notes and to
maintain a registrar and paying agent in respect of the Notes.
We at any time may terminate our and each Guarantors
obligations with respect to the Notes under the covenants
described above under Certain Covenants, the
operation of the cross acceleration provision, the bankruptcy
default provision with respect to Significant Subsidiaries, the
guarantee default provision and the limitations contained in
clause (2) in the first paragraph and the limitations
contained in the second paragraph of Successor Company and
Guarantors above (covenant defeasance).
We may exercise our legal defeasance option notwithstanding our
prior exercise of our covenant defeasance option. If we exercise
our legal defeasance option with respect to the Notes, payment
of the Notes may not be accelerated because of an Event of
Default with respect thereto and each Guarantor will be released
from its Guarantee with respect to the Notes. If we exercise our
covenant defeasance option with respect to the Notes, payment of
the Notes may not be
29
accelerated because of an Event of Default specified in clause
(3) (with respect to Guarantors only), (4), (5), (6), (7) (with
respect to Significant Subsidiaries only), or (8) of the
first paragraph under Defaults above or because of
our failure to comply with clause (2) in the first
paragraph of Successor Company and Guarantors above
and each Guarantor will be released from its Guarantee with
respect to the Notes.
In order to exercise either defeasance option with respect to
the Notes, we must irrevocably deposit in trust (the
defeasance trust) with the Trustee money or U.S.
Government Obligations for the full payment of principal,
premium (if any) and interest on the Notes to redemption or
maturity, as the case may be, and must comply with certain other
conditions, including delivering to the Trustee: (1) an
Opinion of Counsel in the United States to the effect that
holders of the Notes will not recognize income, gain or loss for
United States Federal income tax purposes as a result of such
deposit and defeasance and will be subject to United States
Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such deposit
and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a
ruling of the United States Internal Revenue Service or other
change in applicable United States Federal income tax law);
(2) an Opinion of Counsel in Canada to the effect that
(A) holders of the Notes will not recognize income, gain or
loss for Canadian federal or provincial income tax or other tax
purposes as a result of such legal defeasance or covenant
defeasance, as applicable, and will be subject to Canadian
federal and provincial income tax and other tax on the same
amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance, as
applicable, had not occurred, and (B) payments out of the
defeasance trust will be free and exempt from any and all
withholding and other income taxes of whatever nature of Canada
or any province thereof or political subdivision thereof or
therein having the power to tax, except in the case of a payment
made to a holder of the Notes (a) with which we do not deal
at arms length (within the meaning of the Income Tax
Act (Canada)) at the time of the making of such payment or
(b) which is subject to such taxes by reason of its being
connected with Canada or any province or territory thereof
otherwise than by the mere holding of the Notes or the receipt
of payments thereunder; (3) a certificate from a nationally
recognized firm of independent accountants opining that the
payments of principal and interest when due and without
investment on the U.S. Government Obligations plus any deposited
money without investment will provide cash at such times and in
such amounts as will be sufficient to pay the principal, premium
(if any) and interest when due on all the Notes to maturity or
redemption, as the case may be; and (4) an opinion of
counsel stating that the defeasance trust does not constitute,
or is qualified as, a regulated investment company under the
Investment Company Act of 1940, as amended. In addition, we can
only exercise either type of defeasance if (1) during the
91 days that follow the establishment of the defeasance
trust, no Default under the bankruptcy default provision occurs
to us and is continuing at the end of the period, (2) no
Default has occurred and is continuing on the date the
defeasance trust is established after giving effect to the
establishment of the defeasance trust, and (3) depositing
funds into the defeasance trust does not constitute a default
under any other of our binding agreements.
The Trustee
The Bank of New York is the Trustee under the Indenture and has
been appointed by us as registrar and paying agent with respect
to the Notes.
Governing Law
The Indenture is, and the Notes will be, governed by the laws of
the State of New York.
Certain Definitions
Set forth below is a summary of certain of the defined terms
used in the Indenture, as they would be applicable to the Notes.
Reference is made to the Indenture for the full definition of
all such
30
terms, as well as any other terms used herein for which no
definition is provided. Except as otherwise indicated, all
accounting terms not otherwise defined in the Indenture will
have the meanings assigned to them in accordance with GAAP (as
defined below) and all accounting determinations and
computations based on GAAP contained in the Indenture shall be
determined and computed in conformity with GAAP.
Attributable Indebtedness in respect of a Sale/
Leaseback Transaction means, as of the date of determination,
the lesser of (1) the fair market value of the property
subject to such Sale/ Leaseback Transaction (as determined in
good faith by our Board of Directors) or (2) the present
value (discounted at a rate per annum equal to the coupon on the
Notes, compounded annually) of the total obligations of the
lessee for rental payments (excluding amounts required to be
paid on account of operating costs, maintenance and repairs,
insurance, taxes, assessments, utility rates and similar
charges) during the remaining term of such lease (including any
period for which such lease has been extended).
Board of Directors means our Board of Directors or
any committee thereof duly authorized to act on behalf of such
Board of Directors, except that for purposes of the definitions
of Change of Control and Continuing
Directors, the term Board of Directors shall
mean our Board of Directors and not any committee thereof.
Business Day means each day which is not a Legal
Holiday.
Capital Lease Obligations of a person means any
obligation which is required to be classified and accounted for
as a capital lease on the face of a balance sheet of such person
prepared in accordance with GAAP; the amount of such obligation
shall be the capitalized amount thereof, determined in
accordance with GAAP; except that the Stated Maturity thereof
shall be deemed to be the date of the last payment of rent or
any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without
payment of a penalty.
Capital Stock of any person means any and all
shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however
designated) equity of such person, including any Preferred
Stock, but excluding any debt securities convertible into or
exchangeable for such equity.
Change of Control means the occurrence of any of the
following:
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(1) the direct or indirect sale, transfer, conveyance or
other disposition (other than by way of amalgamation, merger or
consolidation), in one or a series of related transactions, of
all or substantially all of our properties or assets and those
of our Restricted Subsidiaries, taken as a whole, to any
person (as that term is used in
Section 13(d)(3) of the Exchange Act); |
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(2) the adoption of a plan relating to our liquidation or
dissolution; |
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(3) the consummation of any transaction (including, without
limitation, any amalgamation, merger or consolidation) the
result of which is that any person (as defined in
clause (1) of this definition), becomes the beneficial
owner, directly or indirectly, of more than 50% of our Voting
Stock, measured by voting power rather than number of shares; |
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(4) the first day on which a majority of the members of our
Board of Directors are not Continuing Directors; or |
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(5) we amalgamate or consolidate with, or merge with or
into, any person, or any person amalgamates or consolidates
with, or merges with or into, us, in any such event pursuant to
a transaction in which any of the outstanding Voting Stock of us
or such other person is converted into or exchanged for cash,
securities or other property, other than any such transaction
where our Voting Stock outstanding immediately prior to such
transaction is converted into or exchanged for Voting Stock
(other than Disqualified Stock) of the surviving or transferee
person constituting a majority of the Voting Stock of such
surviving or transferee |
31
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person, measured by voting power rather than number of shares,
immediately after giving effect to such issuance. |
Code means the United States Internal Revenue Code
of 1986, as amended.
Consolidated Net Worth at any date of determination
means the following amount, as shown on our and our
Subsidiaries most recent consolidated balance sheet,
determined on a consolidated basis in accordance with GAAP, as
of the end of our most recent fiscal quarter ending at least
45 days prior to the date of determination: (1) the
consolidated shareholders equity of our common
stockholders plus (2) the respective amounts reported with
respect to any class or series of our Preferred Stock (other
than Exchangeable Stock and Redeemable Stock) but only to the
extent of any cash received by us upon issuance of such
Preferred Stock, less all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of
tangible assets of a going concern business made within
12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any
asset owned by us or any of our Subsidiaries.
Continuing Directors means as of any date of
determination, any member of our Board of Directors who:
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(1) was a member of such Board of Directors on the date of
the issuance of the Notes; or |
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(2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the
time of such nomination or election. |
Default means any event which is, or after notice or
passage of time or both would be, an Event of Default.
Disqualified Stock means any Capital Stock that, by
its terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case at
the option of the holder of the Capital Stock), or upon the
happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder of the Capital Stock, in
whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature.
Exchangeable Stock means any Capital Stock which is
exchangeable or convertible into another security (other than
Capital Stock which is neither Exchangeable Stock nor Redeemable
Stock).
Funded Indebtedness of a person means all
Indebtedness of such person which matures more than one year
after the time of determination thereof or which is extendible
or renewable at the option of such person to a time more than
one year after the time of determination thereof (whether or not
renewed or extended).
GAAP means generally accepted accounting principles
in Canada as in effect as of the date of the Indenture.
Gradation means a gradation within a Rating Category
or a change to another Rating Category, which shall include
+ and , in the case of
S&Ps current Rating Categories (e.g., a decline from
BB+ to BB would constitute a decrease of one gradation);
1, 2 and 3, in the case of
Moodys current Rating Categories (e.g., a decline from B1
to B2 would constitute a decrease of one gradation); or the
equivalent in respect of successor Rating Categories of S&P
or Moodys or Rating Categories used by Rating Agencies
other than S&P or Moodys.
Guarantee means any obligation, contingent or
otherwise, of any person directly or indirectly guaranteeing any
Indebtedness of any other person and any obligation, direct or
indirect, contingent or otherwise, of such person (1) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other
person (whether arising by virtue of partnership arrangements,
or by agreement to keep-well, to purchase assets,
32
goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (2) entered
into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term
Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The
term Guarantee used as a verb has a correlative
meaning.
Guarantor means any person that becomes a guarantor
of the Notes pursuant to the terms of the Indenture, and its
respective successors.
Incur means issue, assume, Guarantee, incur or
otherwise become liable for; provided, however, that any
Indebtedness or Capital Stock of a person existing at the time
such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) or is designated as a
Restricted Subsidiary or an Unrestricted Subsidiary shall be
deemed to be Incurred by such Subsidiary at such time. The term
Incurrence when used as a noun shall have a
correlative meaning.
Indebtedness of any person means, without
duplication, (1) the principal of, premium (if any) in
respect of and interest on (A) indebtedness of such person
for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments related to or for
money borrowed for the payment of which such person is
responsible or liable; (2) all Capital Lease Obligations of
such person and all Attributable Indebtedness in respect of
Sale/Leaseback Transactions entered into by such person;
(3) all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale
obligations of such person and all obligations of such person
under any title retention agreement (but excluding in each case
trade accounts payable or accrued liabilities arising in the
ordinary course of business); (4) all obligations of such
person for the reimbursement of any obligor on any letter of
credit, bankers acceptance or similar credit transaction
(other than obligations with respect to letters of credit
securing obligations (other than obligations described in
(1) through (3) above) entered into in the ordinary
course of business of such person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day
following receipt by such person of a demand for reimbursement
following payment on the letter of credit); (5) all
obligations of such person with respect to the redemption,
repayment or other repurchase of, in the case of a Subsidiary,
any Preferred Stock and, in the case of any other person, any
Redeemable Stock (but excluding any accumulated dividends);
(6) all obligations of the type referred to in clauses
(1) through (5) of other persons for the payment of
which such person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including any
Guarantees of such obligations; and (7) all obligations of
the type referred to in clauses (1)through (6) of other
persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such
person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of
the obligation so secured. The amount of Indebtedness of any
person at any date shall be the outstanding balance at such date
of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such
date.
Investment in any person means any direct or
indirect advance, loan (other than advances to customers,
employees or suppliers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of such
person) or other extension of credit (including by way of
Guarantee or similar arrangement) or capital contribution to (by
means of any transfer of cash or other property to others or any
payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by, such person.
33
Investment Grade Rating means, with respect to the
Notes, a concurrent rating of (i) BBB- or higher by
S&Ps current Rating Categories (or its equivalent
under any successors Rating Categories) and (ii) Baa3 or
higher by Moodys current Rating Categories (or its
equivalent under any successors Rating Categories).
Legal Holiday means each day that is a Saturday, a
Sunday or a day on which banking institutions are not required
to be open in the State of New York or the City of Vancouver,
Canada.
Lien means any mortgage, pledge, security interest,
conditional sale or other title retention agreement or other
similar lien.
Moodys means Moodys Investors Service,
Inc. and its successors.
Non-Recourse Indebtedness means Indebtedness
(1) as to which neither we nor any of our Restricted
Subsidiaries (A) provide credit support (including any
undertaking, agreement or instrument which would constitute
Indebtedness) or (B) is directly or indirectly liable and
(2) no default with respect to which (including any rights
which the holders thereof may have to take enforcement action)
would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of ours or that of any of our Restricted
Subsidiaries to declare a default on such other Indebtedness or
cause a payment thereof to be accelerated or payable prior to
its Stated Maturity.
Permitted Liens means, with respect to any person,
(1) pledges or deposits by such person under workmens
compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness)
or leases to which such person is a party, or deposits to secure
public or statutory obligations of such person or deposits of
cash or government bonds to secure surety or appeal bonds to
which such person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in
each case Incurred in the ordinary course of business; (2) Liens
imposed by law, such as carriers, warehousemens and
mechanics Liens, and maritime liens on cargo for freight
not yet due, in each case for sums not yet due or being
contested in good faith by appropriate proceedings, other Liens
arising out of judgments or awards against such person with
respect to which such person shall then be proceeding with an
appeal or other proceedings for review, and any right of setoff,
refund or charge-back available to any bank or other financial
institution, (3) Liens for property taxes not yet subject
to penalties for non-payment or which are being contested in
good faith and by appropriate proceedings; (4) Liens in
favor of issuers of surety bonds or letters of credit issued
pursuant to the request of and for the account of such person in
the ordinary course of its business; provided, however,
that such letters of credit do not constitute Indebtedness;
(5) minor survey exceptions, minor encumbrances, easements
or reservations of, or rights of others for, licenses, rights of
way, sewers, pipelines, railways, cables and conduits, electric
lines, telegraph and telephone lines and other similar purposes,
or zoning or other restrictions as to the use of real properties
or Liens incidental to the conduct of the business of such
person or to the ownership of its properties which were not
Incurred in connection with Indebtedness and which do not in the
aggregate materially adversely affect the value of such
properties or materially impair their use in the operation of
the business of such person; (6) Liens securing
Indebtedness or other obligations in the ordinary course of
business of a Restricted Subsidiary or us owing to and held by
us or another Restricted Subsidiary; (7) Liens existing on
the date of the Indenture; (8) Liens on property or shares
of stock of a person at the time that such person becomes a
Restricted Subsidiary; provided, however, that such Liens
may not extend to any other property or assets owned by us or a
Restricted Subsidiary; provided further, however, that
such Liens are not created, Incurred or assumed in connection
with, or in contemplation of, or to provide credit support in
connection with, such person becoming a Restricted Subsidiary;
(9) Liens on property or assets at the time we or a
Restricted Subsidiary acquires such property or assets,
including any acquisition by means of an amalgamation, merger or
consolidation with or into us or a Restricted Subsidiary;
provided, however, that such Liens may not extend to any
other property or assets owned by us or a Restricted Subsidiary;
provided further, however, that such Liens are not
34
created, Incurred or assumed in connection with, or in
contemplation of, or to provide credit support in connection
with, such acquisition; (10) Liens on any property or
assets securing any Indebtedness created or assumed as all or
any part of the purchase price or cost of construction or
improvement of real or tangible personal property or assets,
whether or not secured, which Indebtedness was created prior to,
at the time of or within 120 days after the later of the
acquisition, completion of construction or commencement of full
operation of such property or assets; (11) Liens on cash or
marketable securities of us or any Restricted Subsidiary granted
in the ordinary course of business in connection with
(A) any currency swap agreements, forward exchange rate
agreements, foreign currency futures or options, exchange rate
insurance and other similar agreements or arrangements;
(B) any interest rate swap agreements, forward rate
agreements, interest rate cap or collar agreements or other
similar financial agreements or arrangements; or (C) any
agreements or arrangements entered into for the purpose of
hedging product prices; and (12) Liens to secure any
refinancing, extension, renewal or replacement
(refinancing) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing
clauses (7), (8), (9) and (10); provided,
however, that (A) such new Lien shall be limited to all
or part of the same property that secured the original Lien
(plus improvements on such property) and (B) the
Indebtedness secured by such Lien at such time is not increased
to any amount greater than the sum of (a) the outstanding
principal amount of the Indebtedness being refinanced and
(b) an amount necessary to pay any fees and expenses,
including premiums, related to such refinancing.
person means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof or any other entity.
Preferred Stock, as applied to the Capital Stock of
any corporation, means Capital Stock of any class or classes
(however designated) which is preferred as to the payment of
dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of
such corporation.
principal of a Note means the principal of the Note
plus the premium, if any, payable on the Note which is due or
overdue or, to the extent permitted by law, is to become due at
the relevant time.
Rating Agencies means (a) S&P and
Moodys or (b) if S&P and Moodys or both of
them are not making ratings of the Notes publicly available, a
nationally recognized U.S. rating agency or agencies, as the
case may be, selected by us, which will be substituted for
S&P or Moodys or both, as the case may be.
Rating Categories means (1) with respect to
S&P, any of the following categories (any of which may
include a + or ): AAA, AA, A, BBB,
BB, B, CCC, C and D (or equivalent successor categories);
(2) with respect to Moodys, any of the following
categories (any of which may include a 1,
2 or 3): Aaa, Aa, A, Baa, Ba, B, Caa,
Ca, C and D (or equivalent successor categories); and
(3) the equivalent of any such categories of S&P or
Moodys used by another Rating Agency, if applicable.
Rating Decline means the occurrence of a decrease in
the rating of the Notes by any Rating Agency by one or more
Gradations at any time within 90 days (which period shall
be extended so long as the rating of the Notes is under publicly
announced consideration for a possible downgrade by any Rating
Agency) after the date of public notice of a Change of Control,
or the intention of us or any person to effect a Change of
Control.
Redeemable Stock means any Capital Stock that by its
terms or otherwise is required to be redeemed prior to the first
anniversary of the Stated Maturity of the Notes or is redeemable
at the option of the holder thereof at any time prior to such
first anniversary.
Restricted Subsidiary means each of our Subsidiaries
other than our Unrestricted Subsidiaries.
35
S&P means Standard & Poors Ratings
Services, a division of The McGraw-Hill Companies, Inc., and its
successors.
Sale/ Leaseback Transaction means an arrangement
with any person other than us or a Restricted Subsidiary
providing for the leasing by us or any Restricted Subsidiary of
any real or tangible personal property, which property has been
or is to be sold or transferred by us or such Restricted
Subsidiary to such person in contemplation of such leasing;
provided, however, that any subsequent transfer of any
such arrangement between us and a Restricted Subsidiary or
between Restricted Subsidiaries, whereby we or a Restricted
Subsidiary ceases to be the lessor under such arrangement, shall
be deemed to constitute a Sale/Leaseback Transaction at such
time.
Significant Subsidiary means any Restricted
Subsidiary that would be a Significant Subsidiary of
us within the meaning of Rule 1-02 under
Regulation S-X promulgated by the United States Securities
and Exchange Commission.
Stated Maturity means, with respect to any security,
the date specified in such security as the fixed date on which
the principal of such security is due and payable, including
pursuant to any mandatory redemption provision (but excluding
any provision providing for the repurchase of such security at
the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
Subsidiary means, in respect of any person, any
corporation, limited liability company, association, partnership
or other business entity of which more than 50% of the total
voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (1) such person,
(2) such person and one or more Subsidiaries of such person
or (3) one or more Subsidiaries of such person.
Unrestricted Subsidiary means, as it applies to the
Notes, (1) any Subsidiary of ours that shall be designated
an Unrestricted Subsidiary by the Board of Directors in the
manner provided below and (2) each Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of ours (other than a Restricted Subsidiary which
owns, legally or beneficially, all or a material portion of or
interest in any of the facilities located at Puntas Arenas in
Chile (including Chile I, Chile II, Chile III and
Chile IV), Waitara and Motunui in New Zealand (including
D I, D II, D III and D IV) and Point Lisas
in Trinidad (and owned as of the date of the issuance of the
Notes by Methanex Trinidad Unlimited)) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness of, or holds any Lien on
any property of, ours or any other Subsidiary that is not a
Subsidiary of the Subsidiary to be so designated; provided,
however, that, immediately after giving effect to such
designation no Default shall have occurred and be continuing.
The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation no Default
shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the board resolution
giving effect to such designation and an Officers
Certificate certifying that such designation complied with the
foregoing provisions.
U.S. Government Obligations means direct obligations
(or certificates representing an ownership interest in such
obligations) of the United States of America (including any
agency or instrumentality thereof) for the payment of which the
full faith and credit of the United States of America is pledged
and which are not callable at the issuers option.
Voting Stock of any person as of any date means the
Capital Stock of such person that is at the time entitled to
vote in the election of the board of directors of such person.
36
TAX CONSIDERATIONS
Purchasers of the Notes should consult their own tax advisors
with respect to their particular circumstances and with respect
to the effects of state, local or foreign (including Canadian
federal or provincial) tax laws to which they may be subject.
Certain U.S. Federal Income Tax Considerations
The following discussion is a general summary of certain
material U.S. federal income tax consequences of the purchase,
ownership and disposition of Notes and deals only with Notes
held as capital assets, within the meaning of Section 1221
of the Code, by U.S. Holders who purchase Notes in the offering
at a price equal to the issue price of the Notes (i.e., the
first price at which a substantial amount of the Notes is sold,
other than to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement
agents or wholesalers). As used herein, a U.S. Holder means a
beneficial owner of the Notes that is, for U.S. federal income
tax purposes:
|
|
|
|
|
an individual who is a citizen or resident of the United States; |
|
|
|
a corporation (or entity treated as a corporation for such
purposes) created or organized in or under the laws of the
United States or of any political subdivision of the United
States; |
|
|
|
an estate, the income of which is includible in gross income for
U.S. federal income tax purposes regardless of its source; or |
|
|
|
a trust if (x) a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more
U.S. persons, as described in section 7701(a)(30) of the Code,
have authority to control all substantial decisions of the
trust, or (y) the trust has a valid election in effect
under applicable Treasury Regulations to be treated as a U.S.
person. |
This discussion is general and does not consider the U.S.
federal income tax consequences of special classes of U.S.
Holders, including but not limited to dealers in securities or
currencies, banks, tax-exempt organizations, life insurance
companies, financial institutions, broker-dealers, U.S. Holders
holding the Notes as part of a constructive sale, wash sale,
conversion transaction or other integrated transaction or a
straddle, hedge or synthetic security, certain U.S. expatriates,
U.S. Holders whose functional currency is not the U.S. dollar or
pass-through entities (including partnerships and entities and
arrangements classified as partnerships for U.S. federal income
tax purposes) and beneficial owners of pass-through entities.
U.S. Holders who purchase Notes at a price other than the issue
price of the Notes should consult their tax advisors as to the
possible applicability to them of the amortizable bond premium
or market discount rules. If a partnership (or an entity or
arrangement classified as a partnership for U.S. federal income
tax purposes) holds Notes, the U.S. federal income tax treatment
of a partner in the partnership generally will depend on the
status of the partner and the activities of the partnership, and
partnerships holding Notes should consult their own tax advisors
regarding the U.S. federal income tax consequences of
purchasing, owning and disposing of the Notes. This summary does
not address the effect of any U.S. state, local, or federal
estate and gift tax on a U.S. Holder of the Notes. The summary
is based on the Code, its legislative history, existing and
proposed regulations, and published rulings and court decisions,
all as in effect or in existence as of the date of this
prospectus supplement and all subject to change at any time,
possibly with retroactive effect.
Prospective purchasers of the Notes should consult their own tax
advisors concerning the consequences, in their particular
circumstances, under U.S. federal income tax laws and the
laws of any relevant state, local or other foreign tax
jurisdiction of purchase, ownership and disposition of the Notes.
37
Payments of Interest
The gross amount of interest paid on the Notes (including any
Additional Amounts and any Canadian tax withheld therefrom) will
be includible in the gross income of a U.S. Holder as ordinary
interest income at the time it is received or accrued, depending
on whether the holder uses the cash or accrual method of
accounting for U.S. federal income tax purposes. Interest paid
by Methanex on the Notes will constitute foreign source income
and, for taxable years ending on or prior to December 31,
2006, generally will be considered passive income
or, in the case of certain U.S. holders, financial
services income. For taxable years beginning after
December 31, 2006, interest paid on the Notes will be
considered passive category income, or, in the case
of certain U.S. holders, general category income.
Each of these types of income is treated separately from other
types of income in computing the foreign tax credit allowable to
U.S. holders under U.S. federal income tax laws. The rules
relating to foreign tax credits are complex and the availability
of a foreign tax credit depends on numerous factors. Prospective
purchasers of the Notes should consult their own tax advisers
concerning the application of the United States foreign tax
credit rules to their particular situation.
Sale, Exchange or Redemption and Other Disposition of the
Notes
Unless a nonrecognition provision of the U.S. federal income tax
laws applies, upon the sale, exchange, redemption, retirement or
other taxable disposition of a Note, a U.S. Holder will
generally recognize taxable gain or loss equal to the difference
between the amount realized on the disposition (not including
any amounts received that are attributable to accrued and unpaid
interest, which are taxable as ordinary interest income in
accordance with the holders method of accounting) and the
U.S. Holders tax basis in the Note. A U.S. Holders
tax basis in a Note will generally be its cost. Such gain or
loss generally will be capital gain or loss and will be
long-term capital gain or loss if the U.S. Holder held the Note
for more than one year at the time of the disposition. Long-term
capital gains recognized by individuals and certain other
non-corporate U.S. Holders generally are eligible for reduced
rates of taxation. The deductibility of capital losses is
subject to limitations. Capital gain or loss recognized by a
U.S. holder generally will be U.S. source gain or loss.
Information Reporting and Backup Withholding
Payments of principal and interest on the Notes held by certain
non-corporate U.S. Holders and the proceeds of a disposition of
such Notes may be subject to U.S. information reporting
requirements. Such payments also may be subject to United States
backup withholding if the U.S. Holder does not provide a
taxpayer identification number or otherwise establish an
exemption. The U.S. Holder may credit the amounts withheld
against its United States federal income tax liability and claim
a refund for amounts withheld in excess of its tax liability.
U.S. Holders should consult their tax advisors as to their
qualification for exemption from backup withholding and the
procedure for obtaining such an exemption.
Certain Canadian Federal Income Tax Considerations
The following is a summary of the principal Canadian federal
income tax consequences generally applicable to a holder of
Notes acquired at original issuance who at all relevant times,
for the purposes of the Income Tax Act (Canada) (the
Act), is not resident in Canada, deals with us at
arms length, holds the Notes as capital property and does
not use or hold and is not deemed to use or hold the Notes in
carrying on a business in Canada (a Holder). For the
purposes of the Act, related persons (as therein defined) are
deemed not to deal at arms length. It is generally a
question of fact whether persons not related to each other deal
at arms length. This summary does not address the special
tax consequences which may apply to a Holder of Notes who is an
insurer carrying on business in Canada or elsewhere for the
purposes of the Act.
38
This summary is based on the current provisions of the Act and
the regulations thereunder, our understanding of the current
published administrative and assessing practices of Canada
Customs and Revenue Agency, and all specific proposals to amend
the Act and the regulations publicly announced by the Minister
of Finance (Canada) prior to the date hereof. This summary is
not exhaustive of all possible Canadian federal income tax
considerations and does not otherwise take into account or
anticipate changes in the law, whether by judicial, governmental
or legislative decisions or action, nor does it take into
account tax legislation or considerations of any province or
territory of Canada or any jurisdiction other than Canada.
The payment of interest, principal or premium, if any, to a
Holder of the Notes will be exempt from Canadian withholding
tax. No other tax on income or capital gains will be payable
under the Act in respect of the holding, redemption or
disposition of the Notes by a Holder.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND DOES NOT CONSTITUTE
LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER OF NOTES. NO
REPRESENTATION IS MADE WITH RESPECT TO THE TAX CONSEQUENCES TO
ANY PARTICULAR HOLDER. CONSEQUENTLY, HOLDERS OF NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR
CIRCUMSTANCES.
39
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement
between us and the Underwriters, the Underwriters have agreed to
purchase from us severally, and we have agreed to sell to the
Underwriters, all of the Notes in this offering.
The underwriting agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and
that the Underwriters are committed to take and pay for all of
the Notes, if any are taken as indicated in the table below.
Under the underwriting agreement, we have agreed to indemnify
the Underwriters and their controlling persons against certain
liabilities in connection with the offering, including
liabilities under the Securities Act, and to contribute to
payments that the Underwriters may be required to make in
respect thereof.
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|
|
Underwriters |
|
Principal Amount of Notes | |
|
|
| |
ABN AMRO Incorporated
|
|
$ |
56,250,000 |
|
BNP Paribas Securities
Corp.
|
|
|
56,250,000 |
|
CIBC World Markets
Corp.
|
|
|
18,750,000 |
|
RBC Capital Markets Corporation
|
|
|
18,750,000 |
|
|
|
|
|
Total
|
|
$ |
150,000,000 |
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|
|
Notes sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the
cover of this Prospectus. Any Notes sold by the underwriters to
securities dealers may be sold at a discount from the initial
public offering price of up to 0.40% of the principal amount of
Notes. Any such securities dealers may resell any Notes
purchased from the underwriters to certain other brokers or
dealers at a discount from the initial public offering price of
up to 0.25% of the principal amount of Notes. If all the Notes
are not sold at the initial offering price, the underwriters may
change the offering price and the other selling terms.
This offering is being made in the United States pursuant to the
multijurisdictional disclosure system implemented by the
securities regulatory authorities in the United States and
Canada. This prospectus was filed with the British Columbia
Securities Commission, and forms part of a registration
statement on Form F-9 filed with the United States
Securities and Exchange Commission, or the SEC, to register the
Notes under the United States Securities Act of 1933, as
amended, or the Securities Act, and to qualify under the
securities laws of the Province of British Columbia the
distribution of the Notes being offered and sold in the United
States and elsewhere outside of Canada. This prospectus does not
qualify the distribution of any Notes which may be offered and
sold in any province of Canada, including the Province of
British Columbia. The Notes may only be offered or sold,
directly or indirectly, in Canada, or to or for the benefit of
any resident of Canada, pursuant to exemptions from the
prospectus requirements of Canadian securities laws, and only by
securities dealers registered in the applicable province or
pursuant to exemptions from the registered dealer requirements.
Subject to applicable law, the Notes may also be offered outside
of the United States and Canada.
The Notes are a new issue of securities with no established
trading market. We have been advised by the underwriters that
the underwriters intend to make a market in the Notes but are
not obligated to do so and may discontinue market making at any
time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
In connection with the offering of the Notes, the underwriters
may purchase and sell Notes in the open market. These
transactions may include short sales, stabilizing transactions
and purchases to cover positions created by short sales. Short
sales involve the sale by the underwriters of a greater number
of Notes than they are required to purchase in the offering of
the Notes. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or retarding a
decline in the market price of the Notes while the offering is
in progress.
40
The underwriters also may impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting commission received by it because the
representatives have repurchased Notes sold by or for the
account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or
otherwise affect the market price of the Notes. As a result, the
price of the Notes may be higher than the price that otherwise
might exist in the open market. If these activities are
commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected in the over-the-counter
market or otherwise.
Each underwriter has represented, warranted and agreed that:
(1) it has not offered or sold and, prior to the expiry of
a period of six months from the closing of the offering of the
Notes, will not offer or sell any Notes to persons in the United
Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or,
from July 1, 2005, are registered as qualified investors
within the meaning of Article 2(e) of the Prospectus
Directive (2003/71/EC) or otherwise in circumstances which have
not resulted and will not result in an offer of transferable
securities to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995 and,
after July 1, 2005, Section 102B of the FSMA;
(2) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity
(within the meaning of section 21 of the FSMA) received by it in
connection with the issue or sale of any Notes in circumstances
in which section 21(1) of the FSMA does not apply to the Issuer;
and (3) it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United
Kingdom.
From time to time, the underwriters and certain of their
affiliates may have engaged, and may in the future engage, in
transactions, including investment banking and commercial
banking transactions, with and perform services, for us and our
affiliates, in the ordinary course of business.
The underwriters are affiliates of banks which are lenders to us
under our unsecured revolving credit facility and to certain of
our subsidiaries under certain debt obligations. Consequently,
we may be considered to be a connected issuer of the
underwriters under applicable Canadian securities legislation.
We are in compliance with the terms of the agreement governing
the credit facility and our subsidiaries are in compliance with
the terms of the agreements governing their debt obligations.
See Description of Certain Indebtedness. None of the
underwriters nor the banks affiliated with them was involved in
our decision to distribute the Notes offered hereby. The
underwriters negotiated the public offering price of the Notes
with us.
The Company estimates that its share of the total expenses of
the offering of the Notes, excluding the underwriters
commission, will be approximately $700,000.
A prospectus in electronic format may be made available on the
web sites maintained by one or more of the lead managers of this
offering and may also be made available on web sites maintained
by other underwriters.
CORPORATE INFORMATION
We were incorporated under the laws of Alberta on March 11,
1968 and were continued under the Canada Business
Corporations Act on March 5, 1992. Our registered and
head office is located at 1800 Waterfront Centre, 200 Burrard
Street, Vancouver, British Columbia V6C 3M1 (telephone:
604-661-2600). Our significant subsidiaries (and their
jurisdictions of incorporation or formation) are: Cape Horn
Finance Limited (Barbados), Methanex Atlas Holdings Limited
(Barbados), Methanex Chile Limited (Barbados), Methanex Holdings
(Barbados) Limited (Barbados), Methanex Trinidad Holdings
Limited (Barbados), Waterfront Shipping Company Limited (Barba-
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dos), Methanex Europe NV (Belgium), Methanex International
Holdings Limited (Cayman), Methanex Holdings Ltd. (Delaware),
Methanex Netherlands BV (Netherlands), Methanex New Zealand
Limited (New Zealand), Methanex Methanol Company (Texas
partnership), Atlas Methanol Company Unlimited (Trinidad) and
Methanex Trinidad Unlimited (Trinidad). Each of these
subsidiaries is wholly-owned, directly or indirectly, except for
Atlas Methanol Company Unlimited, in which we indirectly hold a
63.1% interest.
CHANGES IN SHARE CAPITAL
On May 5, 2005, we announced an increase in the quarterly
dividend paid to holders of our common shares, from $0.08 per
share to $0.11 per share. The increased dividend commenced with
the dividend paid on June 30, 2005 to holders of common
shares of record on June 16, 2005.
On May 5, 2005, we also announced a normal course issuer
bid to repurchase up to 5,917,629 of our common shares,
representing not more than 5% of the total common shares then
issued and outstanding. The bid commenced May 17, 2005 and
will expire on the earlier of May 16, 2006 or the date we
purchase the maximum number of shares under the bid. Purchases
under the bid will be made from time to time through the
facilities of the Toronto Stock Exchange at the then current
market price of our common shares. All common shares acquired
under the bid will be cancelled.
LEGAL MATTERS
The validity of the Notes will be passed upon for us by McCarthy
Tétrault LLP, with respect to matters of Canadian law,
and by Fried, Frank, Harris, Shriver &
Jacobson LLP, with respect to matters of United States law.
Certain legal matters in connection with the offering of the
Notes will be passed upon for the underwriters by Skadden, Arps,
Slate, Meagher & Flom LLP, with respect to matters
of United States law.
EXPERTS
The consolidated financial statements at December 31, 2003
and 2004 and for the two years then ended have been incorporated
by reference in this prospectus and in the registration
statement of which this prospectus forms a part, in reliance
upon the report of KPMG LLP, independent registered public
accounting firm, as stated in their reports also incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing.
DOCUMENTS INCORPORATED BY REFERENCE
We file annual and quarterly financial information, material
change reports and other information with the securities
commission or similar authority in each of the provinces of
Canada, or the Canadian Commissions. The Canadian Commissions
allow us to incorporate by reference the information
we file with them, which means that we can disclose important
information to you by referring you to those documents.
Information that is incorporated by reference is an important
part of this prospectus. We incorporate by reference the
documents listed below, which were filed with the Canadian
Commissions under the various securities legislation:
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Our Annual Information Form dated March 21, 2005. |
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Our Information Circular dated March 4, 2005 relating to
the Annual General Meeting of shareholders held on May 5,
2005 (excluding the sections entitled Corporate
Governance, Report on Executive Compensation
and Total Shareholder Return Comparison). |
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Our audited annual consolidated financial statements as at and
for the years ended December 31, 2003 and 2004, together
with the notes thereto and the auditors report thereon. |
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Our unaudited interim consolidated financial statements as at
June 30, 2005 and for the six months ended June 30,
2004 and 2005 and the notes thereto. |
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Managements discussion and analysis for the year ended
December 31, 2004. |
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Managements discussion and analysis for the six months
ended June 30, 2005 contained in our interim report to
shareholders. |
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Material change report dated May 19, 2005, with respect to
our normal course issuer bid. |
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Material change report dated June 24, 2005, with respect to
recent gas curtailments to our Chile facilities. |
Any document of the types referred to in the preceding paragraph
(including material change reports other than confidential
material change reports) filed by us with the Canadian
Commissions after the date of this prospectus and prior to the
termination of this distribution shall be deemed to be
incorporated by reference into this prospectus. Any document
filed by us with the SEC under the Exchange Act after the date
of this prospectus will be deemed to be incorporated by
reference into this prospectus if, and to the extent, expressly
provided therein. Any statement contained in this prospectus or
in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded,
for purposes of this prospectus, to the extent that a statement
contained in this prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. The
modifying or superseding statement need not state that it has
modified or superseded a prior statement or include any other
information set forth in the document that it modifies or
supersedes. The making of a modifying or superseding statement
is not to be deemed an admission for any purposes that the
modified or superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an
omission to state a material fact that is required to be stated
or that is necessary to make a statement not misleading in light
of the circumstances in which it was made. Any statement so
modified or superseded shall not, except as so modified or
superseded, be deemed to constitute a part of this prospectus.
Copies of the documents incorporated by reference may be
obtained without charge from the Senior Vice President, General
Counsel and Corporate Secretary of Methanex Corporation at
1800 Waterfront Centre, 200 Burrard Street, Vancouver,
British Columbia, V6C 3M1. Telephone: (604) 661-2600.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form F-9 with the
SEC with respect to the Notes offered hereby. This prospectus,
which constitutes a part of the registration statement, does not
contain all of the information in the registration statement or
the exhibits that are a part of such registration statement. For
further information about us and the Notes we are offering, you
should review the entire registration statement, including the
exhibits that were filed as part of the registration statement.
The registration statement, including the exhibits, may be
inspected, without charge, at the public reference facilities
maintained by the SEC at 100 F Street, N.E., Washington, D.C.
20549. Copies of all or any part of the registration statement
may be obtained from this office after payment at prescribed
rates. You will also be able to obtain a free copy of the
registration statement, including the exhibits, from the
SECs website at www.sec.gov.
We are subject to certain of the informational requirements of
the U.S. Securities Exchange Act of 1934, as amended, or the
Exchange Act, and in accordance therewith, file reports and
other information with the SEC. Under a multijurisdictional
disclosure system, or MJDS, adopted by the United States, some
reports and other information may be prepared in accordance with
the disclosure requirements of Canada, which requirements are
different from those of the United States. As a foreign private
issuer, we are exempt from the rules under the Exchange Act
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prescribing the furnishing and content of proxy statements, and
our officers, directors and principal shareholders are exempt
from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act. In addition,
we are not required to publish financial statements as promptly
as U.S. companies. Our Exchange Act reports and other
information filed with the SEC may be inspected and copied at
the public reference facility maintained by the SEC at its
location referred to above.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been filed with the SEC as part of
the registration statement of which this prospectus forms a
part: the documents listed above under Documents
Incorporated by Reference; a form of the Underwriting
Agreement; earnings coverage calculations as at and for the
twelve months ended December 31, 2004 and June 30,
2005; consent of KPMG LLP; consent of McCarthy
Tétrault LLP; powers of attorney; the Indenture; a
form of the Fourth Supplemental Indenture; a form of our
officers certificate in respect of the Notes; and
Statement of Eligibility on Form T-1 of the Trustee for the
Indenture.
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We have not authorized any dealer,
salesperson or other person to give any information or represent
anything to you other than the information contained in this
prospectus. You must not rely on unauthorized information or
representations.
The information in this prospectus
is currently only as of the date on its cover, and may change
after that date. For any time after the cover date of this
prospectus, we do not represent that our affairs are the same as
described or that the information in this prospectus is
correct nor do we imply those things by delivering
this prospectus or selling securities to you.
TABLE OF CONTENTS
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$150,000,000
METHANEX CORPORATION
6.00% Senior Notes due 2015
PROSPECTUS
Joint Book-Running Managers
ABN AMRO INCORPORATED
BNP PARIBAS
CIBC WORLD MARKETS
RBC CAPITAL MARKETS
July 28, 2005