SEC Division of Corporation Finance no-action letter: EnCana Corporation

Home | Previous Page

December 3, 2004

RESPONSE OF THE OFFICE OF INTERNATIONAL CORPORATE FINANCE DIVISION OF CORPORATION FINANCE

Re:

EnCana Corporation ("EnCana") EnCana Holdings Finance Corp. ("Holdings") Incoming letter dated December 3, 2004

Based on the facts presented, the Division's views are set forth below. Capitalized terms have the meanings defined in your letter.

The Division will not object if Holdings does not comply with the reporting requirements under Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"). In making this determination, the Division notes that:

Holdings is an indirect wholly owned finance subsidiary of EnCana;

EnCana has fully and unconditionally guaranteed the Debt Securities of Holdings;

No other subsidiary of EnCana has guaranteed these Debt Securities;

Canadian securities regulatory authorities have issued decisions ("the Exemptions") conditionally exempting Holdings from specified Canadian provincial continuous disclosure and reporting obligations, as described in your letter;

EnCana is subject to Exchange Act reporting requirements and files Form 40-F annual reports under the Multijurisdictional Disclosure System;

EnCana has represented that, in future Form 40-F annual reports, it will disclose in a footnote to its annual audited financial statements that:

Holdings has received the Exemptions from the specified Canadian securities regulatory authorities;

the Exemptions are subject to certain conditions, including that:

EnCana owns 100% of the voting shares of Holdings;

EnCana has fully and unconditionally guaranteed Holdings' Debt Securities; and

EnCana continues to file in a timely manner all required documents with each Canadian securities regulatory authority under the applicable Canadian provincial securities legislation; and

EnCana has further represented that, in future Form 40-F annual reports, it will comply with the Canadian law requirements relating to management's discussion and analysis, including the liquidity provisions, as described in your letter, which require disclosures similar to or analogous to those required by paragraphs (i)(9) and (i)(10) of Regulation S-X Rule 3-10.

This position is based upon the representations made in your letter to the Division. The Division might reach a different conclusion if presented with different facts or circumstances, such as those involving an operating subsidiary's issuance of securities guaranteed by its parent or a subsidiary's issuance of securities guaranteed by its parent and one or more other subsidiaries of the parent. Moreover, the Division's response regarding whether Holdings must comply with Exchange Act reporting requirements expresses the Division's position on enforcement action only and does not express any legal conclusion on the question presented.

Sincerely,

Elliot B. Staffin Special Counsel

Incoming Letter:

December 3, 2005

By Federal Express

Office of the Chief Counsel Division of Corporation Finance Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549

EnCana Corporation and EnCana Holdings Finance Corp

Ladies and Gentlemen:

We are U.S. counsel to EnCana Corporation ("EnCana"), a corporation organized under the laws of Canada, and EnCana Holdings Finance Corp. ("Holdings"), an unlimited liability company organized under the laws of the province of Nova Scotia, Canada and a wholly-owned subsidiary of EnCana. On March 30, 2004, the Securities and Exchange Commission (the "Commission") declared effective a joint registration statement on Form F-9 (Registration No. 333-113732) filed by EnCana and Holdings (the "Registration Statement") pursuant to the Securities Act of 1933, as amended. The Registration Statement related to the offering of up to U.S.$2,000,000,000 aggregate principal amount of debt securities (the "Debt Securities") of Holdings to be fully and unconditionally guaranteed by EnCana. Guaranteed Debt Securities in the form of Holdings' 5.80% notes due 2014 (the "Notes") were issued and sold under the Registration Statement pursuant to an Indenture (the "Indenture"), dated as of May 3, 2004, among EnCana, Holdings and Deutsche Bank Trust Company Americas, as Trustee. For the convenience of the Staff of the Commission (the "Staff"), copies of the prospectus included in the Registration Statement and as supplemented by a prospectus supplement dated May 10, 2004 have been attached hereto as Exhibits A and B, respectively.

Request. On behalf of Holdings, we hereby apply for an order exempting Holdings from the annual and periodic reporting requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which became applicable as a result of the effectiveness of the Registration Statement, or, in the alternative, we request confirmation from the Staff that it will not recommend any enforcement action to the Commission if Holdings does not comply with such reporting requirements. We note that EnCana is subject to the annual and periodic reporting requirements of the Exchange Act and has and will continue to file reports under the Multijurisdictional Disclosure System ("MJDS") in satisfaction of these requirements.

Rule 12h-5. Although not applicable to the Registration Statement (as discussed below), the Commission has adopted financial reporting rules for related issuers and guarantors of guaranteed securities entitled Financial Statements and Periodic Reports for Related Issuers and Guarantors, Release Nos. 33-7878 and 34-43124 dated August 4, 2000 (the "Release"). In the Release, the Commission adopted Rule 12h 5 under the Exchange Act which exempts subsidiary issuers and subsidiary guarantors, as the case may be, from the requirements of Sections 13(a) or 15(d) of the Exchange Act where such subsidiary issuer or subsidiary guarantor is permitted to omit financial statements by Rule 3-10 of Regulation S-X.

Rule 3-10(b) of Regulation S-X applies where a parent guarantees securities issued by a finance subsidiary. This is the situation presented by the offering of the Notes. Rule 3-10(b) provides that the registration statement and parent company's annual and quarterly reports need not include financial statements of the issuer if:

the issuer is 100% owned by the parent company guarantor;

the guarantee is full and unconditional;

no other subsidiary of the parent company guarantees the securities; and

the parent company's financial statements are filed for the periods specified by Regulation S-X Rules 3-01 and 3-02 and include a footnote stating that the issuer is a 100%-owned finance subsidiary of the parent company and the parent company has fully and unconditionally guaranteed the securities. The footnote also must include the narrative disclosures specified in paragraphs (i)(9) and (i)(10) of this Rule 3-10.

In the case of the Registration Statement, all of the above conditions are satisfied, except that it is the Registration Statement, not a footnote to the parent company financial statements, that includes the disclosures required by Rule 3-10(b)(4). 1

When a subsidiary issuer is eligible to register its securities under MJDS, the financial statements contained in a registration statement and in any annual report on Form 40-F filed by the parent company would not be subject to Rule 3-10 of Regulation S-X. See the Release at Section III.C.7. As a result, Rule 12h-5 is not available to exempt Holdings from the reporting obligations under Sections 13(a) and 15(d). However, because Holdings would satisfy the conditions for an exemption from reporting pursuant to Rule 12h-5, and because, as described below, Holdings has received an analogous exemption under applicable Canadian law, we make on behalf of Holdings the Request specified above.

Canadian Exemptions from Reporting. In response to an application from EnCana and Holdings for exemptive relief from certain continuous disclosure requirements under applicable securities laws, on March 24, 2004 the Canadian securities regulatory authority or regulator in each of Alberta, British Columbia, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador (the "Provinces") issued a decision (attached hereto as Exhibit C) pursuant to the securities legislation of such jurisdictions that Holdings is exempt from the requirements, among others, to file with such regulators and send to its security holders (i) audited annual comparative financial statements; (ii) interim comparative financial statements; and (iii) press releases and material change reports (the "Continuous Disclosure Exemption"). On July 28, 2004, the decision document relating to the Continuous Disclosure Exemption was revoked upon the request of EnCana and Holdings in order to clarify the grounds of the relief and replaced in a decision document that gives effect to the Continuous Disclosure Exemption as initially granted. The July 28, 2004 decision document is attached hereto as Exhibit D.

In addition, on March 24, 2004, the Canadian securities regulatory authority or regulator in each of Ontario, Quebec and Saskatchewan issued a decision (attached hereto as Exhibit E) pursuant to the securities legislation of such jurisdictions that Holdings be exempt from the requirements to file with such securities regulatory authorities or regulators and send to its security holders, as applicable, (i) annual information forms; and (ii) annual and interim Management's Discussion and Analysis. The Continuous Disclosure Exemption in Exhibit D and the exemption in Exhibit E are together referred to herein as the "Exemptions".

The Exemptions are subject to certain conditions, including:

EnCana maintains direct or indirect 100% ownership of the voting shares of Holdings;

the Debt Securities are fully and unconditionally guaranteed by EnCana; and

EnCana continues to file with the securities regulatory authority or regulator in each of the Provinces all documents required to be filed under the applicable securities legislation in each of Provinces within the applicable time limits under both its and Holdings' SEDAR profiles.

Disclosure in Annual and Periodic Reports. As noted above, EnCana files its annual report under MJDS Form 40-F and furnishes current reports on Form 6-K. Also, EnCana prepares its financial statements, including related notes, using Canadian generally accepted accounting principles ("Canadian GAAP"). EnCana has informed us that Canadian GAAP does not require disclosure analogous to that required by Rule 3-10(b) of Regulation S-X. EnCana has also informed us that EnCana has, in the past, voluntarily made disclosures relating to parent guarantees of subsidiary debt obligations similar to those required of U.S. domestic issuers under Rule 3-10(b)(4) and, in addition, that it intends (on a voluntary basis) to disclose in a footnote to its annual audited financial statements (in the footnote relating to its long term debt) that Holdings is an indirect wholly owned subsidiary of EnCana and that the Notes have been fully and unconditionally guaranteed by EnCana. Also, EnCana will in a footnote to its annual audited financial statements make disclosures to the effect that Holdings has obtained certain exemption orders (as previously described in this letter) from Canadian securities regulatory authorities that allow the filing of certain financial and other information of EnCana to satisfy certain continuous disclosure obligations of Holdings. These audited financial statements will be included in EnCana's annual report on Form 40-F. In addition, EnCana will comply with the Canadian law requirements relating to management's discussion and analysis, including the requirements set forth under the caption "Liquidity" in Section 1.6 of Form 51-102 F1 of National Instrument 51-102 which require disclosures similar to or analogous to those contemplated by paragraphs (i)9 and (i)10 of Rule 3-10 of Regulation S-X.

---

Based on the rationale governing the MJDS (including the Commission's willingness to defer to Canadian reporting requirements), we respectfully request that the Staff concur with our view that Holdings need not comply with the reporting requirements of the Exchange Act. In the alternative, we request that the Staff take a no action position if under the circumstances described above, Holdings does not comply with the reporting requirements of the Exchange Act.

Should you have any questions, please do not hesitate to call the undersigned at (212) 373-3078.

Sincerely,

Andrew J. Foley

Attachments

cc:

David F.C. Sheridan, EnCana Corporation Edwin S. Maynard, Paul, Weiss, Rifkind, Wharton & Garrison LLP

Exhibit A

Exhibit B

Exhibit C

Exhibit D

Exhibit E

Endnotes

1 Paragraph (i)(9) of Rule 3-10 requires that issuers disclose any significant restrictions on the ability of the parent company or any guarantor to obtain funds from its subsidiaries by dividend or loan. Paragraph (i)(10) of Rule 3-10 requires that issuers provide the disclosures prescribed by Rule 4-08(e)(3) with respect to subsidiary issuers and subsidiary guarantors. Rule 4-08(e)(3) provides that issuers describe, amongst other things, significant restrictions on the payment of dividends by a registrant where the restricted net assets of consolidated and unconsolidated subsidiaries and the parent's equity in the undistributed earnings of 50-percent-or-less-owned persons accounted for by the equity method together exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of this test, restricted net assets of subsidiaries mean that amount of the registrant's proportionate share of net assets (after intercompany eliminations) reflected in the balance sheets of its consolidated and unconsolidated subsidiaries as of the end of the most recent fiscal year which may not be transferred to the parent company in the form of loans, advances or cash dividends by the subsidiaries without the consent of a third party (i.e., lender, regulatory agency, foreign government, etc.). We note in this context that EnCana has informed us that it has no such significant restrictions on its ability to obtain funds from Holdings by dividend or loan and that Holdings has no "restricted net assets" as such term is defined in Rule 4-08(e)(3) of Regulation S-X.

http://www.sec.gov/divisions/corpfin/cf-noaction/encana120304.htm

Home | Previous Page

Modified: 01/05/2005