12 LEXPERT MAGAZINE
|
SEPTEMBER 2016
LEXPERT: e Columbia acquisition was
announced in March and the bought deal
closed in April, so that's not a lot of time to
pull something like this off. Are the banks
lined up well in advance?
Johnston, Bentley, Archer (Deal Team):
TransCanada had to ensure that it had fi-
nancing arrangements in place such that,
if all conditions to the transaction were
satisfied, it would be able to fully fund the
purchase price of approximately US$10.3
billion. Similarly, Columbia needed to be
comfortable that TransCanada had made
adequate arrangements so as to ensure cer-
tainty of financing before it agreed to enter
into and announce the transaction with
TransCanada. ese separate but similar
requirements necessarily meant that work
on the entirety of the transaction financ-
ing structure commenced well in advance
of the Columbia acquisition being an-
nounced on March 17, 2016. ... And be-
cause of the need to ensure confidentiality
regarding all discussions pertaining to the
acquisition and related financing, it was
important that all required work be un-
dertaken by a tight, focused, experienced
transaction team comprising TransCanada
and its legal and financial advisors and the
financing parties and their legal advisors.
So, having regard to such a significant
financing requirement, as well as Trans-
Canada's existing capital structure, Trans-
Canada sought to develop a financing plan
that was executable in the capital markets,
that fully funded the deal at the most ef-
fective total cost of capital, and that also
ensured TransCanada maintained its high-
quality credit ratings. is led to the devel-
opment of separate but inter-related prin-
cipal financing sources, being a planned
equity offering and bridge term loan credit
facilities, which collectively had to provide
certainty of funding for the full US$10.3-
billion purchase price of the acquisition.
Each of these financing pieces would ulti-
mately prove to be one of the largest ever
undertaken by a Canadian issuer, and to-
gether they represented a market-defining
financing structure in support of an
M&A
transaction by a Canadian issuer.
TransCanada has deep transaction ex-
ecution expertise in both the public capi-
tal markets and in the corporate lending
market. ... As a result, TransCanada had
a highly experienced internal deal team
drawn from its finance and legal groups
who led all internal work, and directed and
worked with their regular external securi-
ties and banking counsel — Blake, Cassels
& Graydon LLP in Canada and Mayer
Brown LLP in the US — to undertake the
Bought Deal Breakdown
necessary preparations for the contemplat-
ed financing transactions. ese outside
counsel were brought into the focused in-
ternal deal team in early February to assist
the TransCanada team in designing, nego-
tiating and documenting arrangements for
both the equity raise and the bridge loan.
Norton Rose, as Canadian securities and
banking counsel to the underwriters and
bank lenders, and Paul Weiss, as US se-
curities counsel to the underwriters, were
brought in shortly thereaer.
LEXPERT: With over a dozen financial in-
stitutions participating in Canada and the
US, is this the kind of a deal that requires a
large multinational firm?
Deal Team: e securities counsel involved
in this transaction were Blakes and Mayer
Brown, acting for TransCanada in Canada
and the US, respectively, and Norton Rose
and Paul, Weiss, acting for the underwrit-
ers in Canada and the US, respectively.
Blakes also acted as Canadian counsel for
TransCanada in respect of the bridge term
loan credit facilities, and Norton Rose act-
ed as Canadian counsel for the bank lend-
ers in connection with such facilities. How-
ever, as the governing law for all financing
transaction documents was Alberta law,
and the equity offering involved the filing
of a prospectus and registration statement
solely in Canada and the US, there were no
counsel involved in advising on financing
matters outside of Canada and the US.
LEXPERT: ere also seems to have been a
lot of participation from in-house counsel
at TransCanada. How has this relationship
evolved over the past few years?
Deal Team: TransCanada is a highly active
issuer in the Canadian capital markets as
it continues to actively finance its ongoing
long-term capital program ... e regularity
with which TransCanada accesses the capi-
TransCanada lined up an enormous amount of funding to purchase Columbia Pipeline
INTERVIEW BY DAVID DIAS
Christine
Johnston
VP Law,
Corporate
Secretary,
TransCanada
Ross
Bentley
Blake,
Cassels &
Graydon (for
TransCanada)
Before TransCanada Corp. could execute on its historic US$10.3-billion acquisition
of Columbia Pipeline Group Inc., it had to achieve another monumental feat — the
completion of what was then the largest bought-deal financing in Canadian history,
involving over a dozen financial institutions. Here, the deal team gives us a rundown
of the preparation involved, challenges overcome and lessons learned.
Marcus
Archer
Norton
Rose
Fulbright
(for the
underwriters)
ON THE DEAL
