Company Name: Ashanti Goldfields Co. Ltd.
Public Availability Date: June 19, 2002
Securities Act of 1933 4(1) 144
Securities Act of 1933 5(a) 145
Securities Act of 1933 Section 3(a)(10) ---
Securities Act of 1933 Section 4(1) ---
Securities Act of 1933 Section 5(a) ---
[INQUIRY LETTER]
June 4, 2002 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Ashanti Goldfields Company Limited Exemption from Registration under Section 3(a)(10) of the Securities Act of 1933
Ladies and Gentlemen: We are writing this letter on behalf of Ashanti Goldfields Company Limited
("Ashanti"), Ashanti Capital Limited ("Ashanti Capital") and Ashanti Capital
(Second) Limited, a wholly-owned subsidiary of Ashanti ("Newco"). We are seeking
confirmation that the Division of Corporation Finance (the "Division") will not
recommend enforcement action if, in connection with the Proposed Restructuring
(as defined and described herein), (a) Ashanti issues new Ashanti Shares (as
defined herein) and (b) Newco issues 7.95% Exchangeable Guaranteed Notes due
June 30, 2008 to be guaranteed by Ashanti (the "New Exchangeable Notes"), in
exchange for 5 1/2% Exchangeable Guaranteed Notes due March 15, 2003 issued by
Ashanti Capital and guaranteed by Ashanti and not otherwise held by Ashanti (the
"Existing Notes"), pursuant to the scheme of arrangement described herein
without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on the exemption from registration provided by
Section 3(a)(10) of the Securities Act after a hearing before the Grand Court of
the Cayman Islands (the "Cayman Court") to sanction the Scheme of Arrangement
(defined below), and the sanction of the Scheme of Arrangement by the Cayman
Court. This replaces our letter dated March 6, 2002. A. Background Ashanti Capital is a limited liability company incorporated under the laws of
the Cayman Islands and is the issuer of the Existing Notes. Newco is set up as a
limited liability company incorporated under the laws of the Cayman Islands and
will be the issuer of the New Exchangeable Notes. Ashanti, a company
incorporated with limited liability and registered under the laws of the
Republic of Ghana, is an international gold mining and exploration group with
six producing mines in four African countries - Ghana, Guinea, Tanzania and
Zimbabwe. Ashanti is the guarantor of the Existing Notes and will be the
guarantor of the New Exchangeable Notes. The Existing Notes are listed on the
New York Stock Exchange ("NYSE") and the London Stock Exchange ("LSE").
Ashanti's ordinary shares of no par value (the "Ashanti Shares") have a dual
primary listing on the LSE and the Ghana Stock Exchange ("GSE"). On January 25, 2002, Ashanti announced that it had agreed in principle with an
ad hoc committee (the "Ad Hoc Committee") of the holders of the Existing Notes
(as defined herein) to a proposed restructuring of the Existing Notes (the
"Proposed Restructuring"). The principal terms of the Proposed Restructuring are
as follows:
- Exchange of $54,642,750 of the Existing Notes (representing 25% of the
Existing Notes) for Ashanti Shares at $3.70 per Ashanti Share,1
- Exchange of $163,928,250 of the Existing Notes (representing 75% of the
Existing Notes) for $163,928,000 of New Exchangeable Notes,2
- The New Exchangeable Notes will be exchangeable into Ashanti Shares at any
time at an initial exchange price equal to the higher of: (a) $5.03,
representing 130% of the volume-weighted average closing price of Ashanti's
global depositary shares, each representing one Ashanti Share (the "GDSs"), over
a period of 30 trading days on the NYSE immediately prior to the in-principle
conditional announcement of the transaction issued by Ashanti on January 25,
2002 (the "Announcement"); and (b) 125% of the volume-weighted average closing
price of Ashanti's GDSs over a period of 30 trading days on the NYSE immediately
following the Announcement,
- The New Exchangeable Notes will be mandatorily redeemable by Ashanti or Newco
in semi-annual instalments of $12 million commencing on December 31, 2003 to the
extent not already exchanged. The balance of any New Exchangeable Notes not
exercised or redeemed will be repayable in full on June 30, 2008. Ashanti or
Newco also have the option on each semi-annual redemption date to redeem an
additional $12 million of New Exchangeable Notes, and
- Ashanti will, when the New Exchangeable Notes are issued, pay to the then
Holders an exchange fee of 2% of the face value of the then outstanding Existing
Notes. In the aggregate, this payment will amount to approximately $4.37
million.
The Proposed Restructuring is intended to be implemented by way of a scheme of
arrangement (the "Scheme of Arrangement") under Section 86 of the Companies Law
(2001 Second Revision) of the Cayman Islands (the "Cayman Companies Law") to be
sanctioned by the Cayman Court, and is subject to a number of conditions, which
are described herein.3 Pursuant to the requirements of the Cayman Companies Law, Ashanti Capital will
apply to the Cayman Court to issue an order providing for the calling and
holding of the meeting of Holders (defined below) to consider and approve the
Scheme of Arrangement. This meeting must be held before the Court Hearing
referred to below. The sanction of the Scheme of Arrangement by the Holders is a
condition to the effectiveness of the Scheme of Arrangement, as is the sanction
of the Scheme of Arrangement by the Cayman Court.4 Each of the Holders will
receive a scheme document (the "Scheme Document") and an offering memorandum
comprising of the listing particulars to be issued in the Proposed Restructuring
(the "Listing Particulars"). Ashanti Capital will request the Cayman Court to
set the meeting of the Holders and, assuming that the required votes are
obtained, the Scheme of Arrangement will be the subject of a hearing before the
Cayman Court as soon as reasonably practicable thereafter (the "Court Hearing").
This letter requests confirmation that, based on the facts and circumstances
described herein, the Division will not recommend any enforcement action to the
Commission if, in connection with the Proposed Restructuring, (a) Ashanti issues
new Ashanti Shares and (b) Newco issues the New Exchangeable Notes, in each
case, in exchange for the Existing Notes, pursuant to the Scheme of Arrangement,
without registration under the Securities Act in reliance on the exemption from
registration provided by Section 3(a)(10) of the Securities Act, after the
hearing before the Cayman Court to sanction the Scheme of Arrangement, and the
sanction of the Scheme of Arrangement by the Cayman Court. This letter further
requests confirmation that the Division will not recommend any enforcement
action if such new Ashanti Shares and New Exchangeable Notes are resold in
conformity with the limitations set forth herein. B. The Scheme of Arrangement Under the Scheme of Arrangement, the holders as at the record date (which will
not be earlier than the posting of the Scheme Document and the Listing
Particulars) in connection with the Scheme of Arrangement (the "Holders") will
be given the opportunity to elect, subject to countervailing elections, to vary
the proportions in which they receive new Ashanti Shares and New Exchangeable
Notes to which they are entitled in exchange for the Existing Notes (the
"Election"). However, under the Scheme of Arrangement, the maximum amount of
Ashanti Shares to be issued will be 14,768,310 new Ashanti Shares (representing
25% of the Existing Notes) and the maximum amount of New Exchangeable Notes to
be issued will be $163,928,000 (representing 75% of the Existing Notes).
Accordingly, the ability to satisfy the Elections made by the Holders will
depend on the extent to which other Holders make offsetting elections. To the
extent that Elections cannot be satisfied in full, they will be scaled down on a
pro-rata basis. In order for the Scheme of Arrangement to be implemented, it must be approved by
the Holders at a meeting called pursuant to an order of the Cayman Court (the
"Court Meeting"). Approval of the Scheme of Arrangement requires the affirmative
vote of a majority in number representing 75% in value of the Holders present
and voting, either in person or by proxy, at the Court Meeting. Certain Holders,
comprising the Ad Hoc Committee,5 holding in the aggregate approximately 62% of
the Existing Notes, have entered into written undertakings with Ashanti pursuant
to which such Holders have agreed, when solicited, to vote in favor of the
Proposed Restructuring.6 Approximately one month in advance of the Court Meeting, the Scheme Document,
the Listing Particulars and accompanying proxy forms, which contain information
concerning the Scheme of Arrangement and the rights of the Holders, will be sent
to the Holders. The Scheme Document contains information about the rights of
each Holder to appear and be heard at the Court Meeting and at the Court
Hearing. The Scheme Document will also contain the date, time and place of the
Court Hearing. If the requisite Holder approvals are obtained at the meeting, a petition will
be presented to the Cayman Court by Ashanti Capital requesting the Cayman Court
to sanction the Scheme of Arrangement. The Cayman Court will conduct the Court
Hearing in open court on such petition at which all Holders will be entitled to
be present and be heard. As explained further in the attached letter from Cayman
Islands counsel, in order to sanction the Scheme of Arrangement the Cayman Court
will consider, among other things, whether the Scheme of Arrangement is fair to
the Holders. In support of this request, and in accordance with the Staff's requirement set
forth in Revised Staff Legal Bulletin No. 3, October 20, 1999 (the "Staff
Bulletin"), we attach opinions dated 6 March and 28 May, 2002 from Maples and
Calder (together, the "Opinion"), Cayman Islands counsel to Ashanti, confirming
the foregoing information regarding the proceedings before the Cayman Court and
the determinations to be made by it in connection with its sanction of the
Scheme of Arrangement. The Opinion also confirms that, in connection with the
Court Hearing, the Cayman Court will be advised that its sanction of the Scheme
of Arrangement will be the basis for qualifying for the exemption from the
registration requirements of the Securities Act provided by Section 3(a)(10)
with respect to the Ashanti Shares and New Exchangeable Notes to be issued
pursuant to the Scheme of Arrangement. C. Legal Analysis and DiscussionSection 3(a)(10) Section 3(a)(10) of the Securities Act provides, in relevant part, an exemption
from the registration requirements of the Securities Act for "... any security
which is issued in exchange for one or more bona fide outstanding securities ...
where the terms and conditions of such issuance and exchange are approved, after
a hearing upon the fairness of such terms and conditions at which all persons to
whom it is proposed to issue securities in such exchange shall have the right to
appear, by any court ... or other governmental authority expressly authorized by
law to grant such approval." The statutory prerequisites to be met by an issuer
claiming a Section 3(a)(10) exemption are thus: (a) an exchange of securities;
(b) a hearing on the fairness of the exchange at which all persons to whom
securities will be issued under such exchange may appear and be heard; and (c)
approval by a court or other authorized governmental entity. All of these
elements of the Section 3(a)(10) exemption will clearly be satisfied in
connection with the Scheme of Arrangement. Moreover, the Staff has previously
taken "no-action" positions under Section 3(a)(10) of the Securities Act with
respect to securities issued pursuant to schemes of arrangement approved by the
Cayman Court under the Cayman Companies Law. See EXEL Limited; Mid Ocean
Limited; Exel Merger Company Ltd. (July 2, 1998); LAC Minerals Limited (June 27,
1991). The Staff's interpretations of these statutory requirements have been well
established through the "no-action" letter process and are further clarified in
the Staff Bulletin. In the Staff Bulletin, the Staff has set out the specific
preconditions it believes must be met in order for an issuer to be eligible for
the 3(a)(10) exemption: (i) the securities for which exemption is sought must be
issued in exchange for securities, claims, or property interests, and cannot,
with certain exceptions, be issued for cash; (ii) a court must approve the
fairness of the terms and conditions of the exchange; (iii) before approving the
exchange, the court must find that the terms and conditions of the exchange are
fair to those to whom securities would be issued; (iv) the issuer must advise
the court before the court hearing that the court's approval of the exchange
will form the basis of the issuer's reliance on the Section 3(a)(10) exemption;
(v) before approving the exchange, the court must hold a hearing on the fairness
of the terms and conditions of the exchange; (vi) the fairness hearing must be
open to everyone to whom securities would be issued in the proposed exchange;
(vii) adequate notice must be given to all those persons of their right to
attend the hearing, as well as adequate information necessary to assert that
right; and (viii) there can not be any improper impediments to the appearance of
those persons at the hearing. In the case of a foreign court, the Staff also indicated in the Staff Bulletin
that the issuer must provide the Division with an opinion from counsel licensed
to practice in the foreign jurisdiction in question to the effect that before
the foreign court can give its approval, it must consider the fairness to
persons receiving securities in the exchange. In our view, all of these
specifications of the Staff for an issuer to be able to use the Section 3(a)(10)
exemption will be satisfied in connection with the Scheme of Arrangement. (i) Exchange for Securities. Under the Scheme of Arrangement, Existing Notes
will be exchanged for (a) Ashanti Shares and (b) New Exchangeable Notes.7 (ii) Court Fairness Approval. The Scheme of Arrangement can become effective
only after it has been voted on and approved by the Holders and sanctioned by
the Cayman Court. The Division has indicated previously that the term "any
court" in Section 3(a)(10) includes foreign courts and this approach is clearly
reiterated in the Staff Bulletin. In addition, "no-action" letters have
addressed the availability of the exemption in the case of approval by courts in
a variety of jurisdictions. A few of the recent examples that can be cited in
addition to EXEL Limited and LAC Minerals are: ForBio Inc. (September 23, 1998)
(Supreme Court of Queensland, Australia); Staffmark, Inc. (September 3, 1998)
(High Court of Justice, England); China Light & Power Company, Limited; CLP
Holdings (January 2, 1998 (High Court of the Hong Kong Special Administrative
Region); Source Media, Inc.; Cableshare Inc (December 3, 1996) (Ontario Court of
Justice); Evander Gold Mines Limited (November 8, 1996) (Supreme Court of South
Africa); Ashanti Goldfields Company Limited (October 17, 1996) (Supreme Court of
Victoria, Australia); and Microsoft Corporation (April 8, 1994) (Quebec Superior
Court). In LAC Minerals, the Division specifically indicated that the Cayman
Court constitutes a court within the meaning of Section 3(a)(10) and addressed
the nature of the findings required to be made by the Cayman Court in approving
the Scheme of Arrangement to determine that these constituted a review of the
fairness and reasonableness of the exchange of the type to which the exemption
is applicable. Indeed, the LAC Minerals letter was seminal in its recitation of
the standards to be met by the reviewing court, and is cited in many subsequent
"no-action" letters, including the EXEL Limited letter. We have been advised by
Maples and Calder that Section 86 of the Cayman Companies Law is identical to
Section 85 of the earlier version of the Cayman Companies Law pursuant to which
EXEL Limited and LAC Minerals received "no-action" letters. Moreover, the
enclosed Opinion confirms that, under applicable case law, in sanctioning the
Scheme of Arrangement, the Cayman Court has a duty to see that the scheme is
fair to the Holders. (iii) Hearing Requirement. As indicated above, under Section 86 of the Cayman
Companies Law, prior to giving its sanction the Cayman Court will hold the Court
Hearing to determine whether the terms and conditions of the exchange
contemplated by the Scheme of Arrangement are fair to the Holders. (iv) Court Awareness of Section 3(a)(10). As indicated above, the Cayman Court
will be advised that its sanction of the Scheme of Arrangement will be the basis
for qualifying for the exemption from the registration requirements of the
Securities Act provided by Section 3(a)(10) with respect to the Ashanti Shares
and New Exchangeable Notes to be issued pursuant to the Scheme of Arrangement.
(v) Open Hearing. In accordance with the requirement of a hearing in open Court
under Section 86 of the Cayman Companies Law, each Holder will have the right to
appear and be heard at the Court Hearing. (vi) Notice. In order to provide appropriate notice of the Court Hearing in a
timely matter, each Holder will be notified in the Scheme Document of the date,
time and place of the Court Hearing and of its right to appear at such hearing.
The Scheme Document will explain the right of the Holder to attend the Court
Hearing and to be heard, as well as other information relating to the Proposed
Restructuring. (vii) No Improper Impediments. The Court Hearing will be public and open to all
Holders. There are no restrictions or prerequisites to attendance at the Court
Hearing, and any Holder present will be permitted to speak. (viii) Sufficient Knowledge. The Division has indicated in the Staff Bulletin
that the reviewing court "must have sufficient information before it is to
determine the value of both the securities, claims or interests to be
surrendered and the securities to be issued in the proposed transaction." The
Cayman Court will be provided with copies of the Scheme of Arrangement, the
Scheme Document and the Listing Particulars, which include detailed financial
information. Indeed, the Scheme of Arrangement, the Scheme Document and the
Listing Particulars are being provided to the Cayman Court in connection with
Ashanti Capital's preliminary application to the Cayman Court requesting it to
call the Court Meeting. In addition, Ashanti Capital will endeavor to provide to
the Cayman Court with any other information it may request in connection with
its review of the transaction. Based on the foregoing analysis, we are of the opinion that the issuance of the
Ashanti Shares and New Exchangeable Notes to the Holders in exchange for the
Existing Notes is exempt from the registration requirements of the Securities
Act pursuant to Section 3(a)(10) thereof. We respectfully request that the
Division confirm that this opinion is correct or, alternatively, that the
Division confirm that it will not recommend any enforcement action to the
Commission if the Ashanti Shares and New Exchangeable Notes are issued to the
Holders upon implementation of the Scheme of Arrangement without compliance with
the registration provisions of the Securities Act, in reliance upon the
exemption from registration provided by Section 3(a)(10) of the Securities Act.
D. Resale Limitations It is our understanding, based on "no-action" letters and the Staff Bulletin,
that the resale status of the Ashanti Shares and New Exchangeable Notes,
assuming that such Ashanti Shares and New Exchangeable Notes are not registered
upon issuance or thereafter under the Securities Act in reliance upon the
Section 3(a)(10) exemption therefrom, will be as follows: (a) The Ashanti Shares and New Exchangeable Notes received in the Scheme of
Arrangement would not be "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act. (b) Persons who were (i) not affiliates of Ashanti before the effective time of
the Scheme of Arrangement at the time of the meeting of Holders, or (ii)
affiliates of Ashanti after the effective time of the Scheme of Arrangement,
would be permitted to sell any Ashanti Shares and New Exchangeable Notes
received in the Scheme of Arrangement without regard to Rule 144 or Rule 145(c)
and (d) under the Securities Act. (c) Persons who were affiliates of Ashanti before the effective time of the
Scheme of Arrangement at the time of the meeting of the Holders, but who are not
affiliates of Ashanti after the effective time of the Scheme of Arrangement,
would be persons described in Rule 145(c) and would be permitted to resell any
Ashanti Shares and New Exchangeable Notes they receive pursuant to the Scheme of
Arrangement in the manner permitted by Rule 145(d). Such persons would be
permitted to sell Ashanti Shares and New Exchangeable Notes in the manner
permitted by Rule 145(d)(1) (without regard to the holding period required by
Rule 144(d)). In computing the holding period of the Ashanti Shares and New
Exchangeable Notes for the purposes of Rule 145(d)(2) or (3), however, such
persons would not be permitted to "tack" the holding period of their Existing
Notes. (d) Persons who were affiliates of Ashanti before, and who are affiliates of
Ashanti after, the effective time of the Scheme of Arrangement may resell any
Ashanti Shares and New Exchangeable Notes they receive upon implementation of
the Scheme of Arrangement pursuant to Rule 145(d)(1) without regard to the
holding period required by Rule 144(d). We respectfully request that the Division confirm that it will not recommend any
enforcement action to the Commission if resales of the Ashanti Shares and New
Exchangeable Notes issued pursuant to the Scheme of Arrangement are made in
conformity with the restrictions set forth above. E. Timing Considerations We note the applicability to the Scheme of Arrangement of the practical timing
issue described in point 3 of the Staff Bulletin since, under Section 86 of the
Cayman Companies Law, the Court Hearing may be held only after the Holders have
approved the Scheme of Arrangement at the meeting called by the Cayman Court.
This raises the concern that, at the time of the mailing of the Scheme Document
and Listing Particulars (which is scheduled to be made on or around the end of
March or early April in 2002), not all of the technical requirements for the
3(a)(10) exemption will have been met, and the offering of the Ashanti Shares
and New Exchangeable Notes pursuant to the Scheme of Arrangement will not have
been registered under the Securities Act. The Scheme of Arrangement will not, of
course, be effective unless the Cayman Court sanctions such Scheme of
Arrangement at the Court Hearing. This sequence of events is typical in schemes
of arrangement of this type, which have frequently been the subject of
"no-action" letters for exemptions under Section 3(a)(10). The Staff Bulletin
indicates that "[i]n these situations, the Division has not objected to a vote
before a fairness hearing, even though this means an investment decision is made
before the fairness hearing." In accordance with the Staff Bulletin, Ashanti
Capital will submit to the Cayman Court the Scheme Document and Listing
Particulars before it mails the Scheme Document and Listing Particulars to the
Holders. Should you have any questions or require additional information, please feel
free to call (collect) the undersigned at (212) 530-5446. We would request,
however, that you kindly contact the undersigned prior to the issuance of a
written response to the "no-action" positions requested herein. Thank you very
much for your cooperation and consideration in this matter. Very truly yours, /s/ Mark L. Weissler -----FOOTNOTES----- 1 The Ashanti Shares to be issued on the completion of the Proposed
Restructuring will be identical to existing Ashanti Shares currently in issue.
Ashanti Shares to be issued on completion of the Proposed Restructuring will be
listed on the GSE, the NYSE and the LSE. 2 The New Exchangeable Notes will be listed on the NYSE and the LSE. The New
Exchangeable Notes will be exchangeable for Ashanti Shares. 3 In addition to the other conditions described herein, the Proposed
Restructuring will be subject to the following conditions: (1) the passing of
all resolutions required to implement the Proposed Restructuring at an
Extraordinary General Meeting of Ashanti; (2) the admission of the new Ashanti
Shares to be issued pursuant to the Proposed Restructuring and the New
Exchangeable Notes to: (a) the Official List of the UK Listing Authority
becoming effective in accordance with paragraph 7.1 of the Listing Rules issued
by the UK Listing Authority and the admission to trading of such securities on
the main market of the London Stock Exchange for listed securities becoming
effective in accordance with the London Stock Exchange Admission and Disclosure
Standards; and (b) the NYSE; (3) admission of the new Ashanti Shares to be
issued pursuant to the Proposed Restructuring to the First List of the GSE; (4)
the approval to the Proposed Restructuring of Ashanti's majority hedge
counter-parties (as defined in an agreement dated 23 October 2000 between
Ashanti and its hedge counter-parties dealing with the suspension of margin);
(5) the approval of the Proposed Restructuring of Ashanti's lending banks or the
repayment of Ashanti's existing revolving credit facilities; (6) the approval of
the Governor of the Bank of Ghana to the issue of the guarantee by Ashanti in
respect of the New Exchangeable Notes; and (7) a permanent restraining order of
the United States Bankruptcy Court under Section 304 of Title II of the United
States Code being made to give effect to the Proposed Restructuring as a matter
of United States law. 4 Ashanti reserves the right to waive or amend certain conditions (including
with the approval of the Ad Hoc Committee in respect of the condition relating
to the permanent restraining order of the United States Bankruptcy Court).
However, the sanctioning of the Scheme of Arrangement by the Holders and by the
Cayman Court cannot be waived by Ashanti as conditions to the effectiveness of
the Scheme of Arrangement. 5 The Ad Hoc Committee represents Holders comprising of Liberties Strategic
Services Limited/Sodipar SA, Millennium Management LLC and funds of Franklin
Templeton Investments (comprising Franklin Custodian Funds, Inc., Franklin
Income Securities Fund and Franklin SICAV Income Fund). 6 The Ad Hoc Committee Holders also agreed not to sell or otherwise dispose of
any securities of Ashanti or any economic interest therein for 30 trading days
following the date of the announcement of the Proposed Restructuring on 25
January 2002. Thereafter, each such Holder agreed that it may sell or otherwise
dispose of any Existing Notes or any economic interest therein prior to
completion of the Proposed Restructuring only if it procures that the proposed
transferee enters into a similar undertaking with Ashanti. 7 Ashanti will, upon completion of the Proposed Restructuring, also pay to the
then Holders a cash exchange fee of 2% of the face value of the then outstanding
Existing Notes. The language of the Securities Act provides that the exemption
is available for exchanges "partly for cash." The Staff has, in the Staff
Bulletin (see footnote 5 thereof), expressed its view that the level of cash
involved in an exchange must not "change its nature," but have specifically
noted that transactions that are "predominantly exchanges" where the cash
component is "intended merely to permit flexibility" are exempt under Section
3(a)(10). Further, our review of a number of "no-action" letters indicates that
the Staff is not concerned with cash received by the transferee since it is well
established that there is no limitation on the use of cash by the transferor to
sweeten the terms of the exchange. [INQUIRY LETTER]
28\th/ May 2002 By Fax: 1 530 212 5219 & by Courier Mark L. Weissler Esq. Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, NY 10019 United States of America Dear Mark Ashanti Capital Limited (the "Company") We refer to the letter from the London office of Maples and Calder to you dated
6 March, 2002 in respect of which you have asked us to amplify certain matters.
In particular, we understand that the SEC would prefer to see the statutory and
case law authority which supports the opinions expressed in that letter. You
should note that our original letter was erroneously headed "Ashanti Goldfields
(Cayman) Limited (the "Company")"; it should have been headed "Ashanti Capital
Limited (the "Company")". We have acted as Counsel as to Cayman Islands law to the Company in connection
with a proposed scheme of arrangement (the "Scheme") under Section 86 of the
Companies Law (2001 Second Revision) of the Cayman Islands (the "Companies
Law"), whereby the Company seeks to exchange new notes and new shares for its 5
1/2 % Exchangeable Guaranteed Notes Due 2003 (the "Notes"). The proposed
restructuring is more fully described in your letter, dated 6\th/ March, 2002,
to the Division of Corporation Finance (the "Division") of the United States
Securities and Exchange Commission (the "SEC"), seeking confirmation from the
SEC Staff that the Division will not recommend enforcement if new notes and new
shares are exchanged for the Notes without registration under the US Securities
Act of 1933, as amended from time to time (the "Securities Act"), in reliance on
the exemption from registration provided by Section 3(a)(10) of the Securities
Act. You have asked us to describe certain procedures under Section 86 of the
Companies Law with respect to the Scheme and to confirm certain statements made
in your letter to the Division. In rendering this letter, we have reviewed
originals, copies, drafts or conformed copies of the following documents: 1.1 a final proof of the Scheme document (comprising, inter alia, the
explanatory statement and the Scheme) dated 15\th/ May, 2002; and 1.2 a final proof of the offering memorandum comprising of the listing
particulars, dated 15\th/ May, 2002, to be issued in the proposed restructuring.
We are providing this letter to you only as to, and based on, circumstances and
matters of fact existing and known to us on the date of this letter. This letter
only relates to the laws of the Cayman Islands which are in force on the date of
this letter. Section 86 Companies Law Under the heading "Arrangements and Reconstructions" Section 86 states: "(1) Where a compromise or arrangement is proposed between a company and its
creditors or any class of them, or between the company and its members or any
class of them, the Court may, on the application of the company or of any
creditor or member of the company, or where a company is being wound up, of the
liquidator, order a meeting of the creditors or class of creditors, or of the
members of the company or class of members, as the case may be, to be summoned
in such a manner as the Court directs. (2) If a majority in number representing seventy-five per cent in value of the
creditors or class of creditors, or members or class of members, as the case may
be, present and voting either in person or by proxy at the meeting, agree to any
compromise or arrangement, the compromise or arrangement shall, if sanctioned by
the Court, be binding on all the creditors or the class of creditors, or on the
members or class of members, as the case may be, and also on the company or,
where a company is in the course of being wound up, on the liquidator and
contributories of the company. (3) An order made under subsection (2) shall have no effect until a copy of the
order has been delivered to the Registrar for registration, and a copy of every
such order shall be annexed to every copy of the memorandum of association of
the company issued after the order has been made, or, in the case of a company
not having a memorandum, of every copy so issued of the instrument constituting
or defining the constitution of the company. (4) If a company makes default in complying with subsection (3), the company and
every officer of the company who is in default shall be liable to a fine of two
dollars for each copy in respect of which default is made. (5) In this section the expression "company" means any company liable to be
wound up under this Law and the expression "arrangement" includes a
reorganisation of the share capital of the company by the consolidation of
shares of different classes or by the division of shares into shares of
different classes or by both those methods." The established practice of the Grand Court of the Cayman Islands (the "Grand
Court") on applications under Section 86 is substantially the same as the
equivalent English practice and procedure with respect to substantive law
aspects of the proceeding with some minor variations (see Re Universal Tours Ltd
and Re General Oriental Investments Ltd1 and the established practice of the
Grand Court2) including the standards for determining the fairness of the
transaction. Section 86 of the Companies Law is identical to Section 85 of the
earlier version of the Companies Law, as in effect in 1991 and 1998. An application under Section 86 of the Companies Law has been described in
decided English cases which relate to the equivalent provisions under Section
425 of the English Companies Act 1985 (or Section 206 of the English Companies
Act 1948, or earlier English enactments from which it is derived) which section
is in all material respect the same as Section 86 of the Companies Law. These
cases will be highly persuasive in the Grand Court and are likely to be applied
in the same way as they would in the English Courts. Section 86 of the Companies Law applies to a compromise or arrangement. The word
"arrangement" has been interpreted very widely by the English Courts (see
Mercantile Investment and General Trust Co. v International Co. of Mexico3) and
its meaning in the equivalent English section has been held not to be limited to
something analogous to a compromise (see Re Guardian Assurance Co.4). Schemes
ranging from a simple rearrangement of the rights of classes of shareholders to
complex amalgamations involving a variety of companies, with a complete
reorganisation of their share and loan capital, have been held to fall within
the ambit of the section. Courts have held that schemes involving the
modification of the rights of debenture-holders, shareholders and other
creditors may be sanctioned. Further, it has been held that a scheme may involve
the acquisition by one company of the whole share capital of another (see Re
National Bank Ltd.5 and Re Hellenic & General Trust Ltd.6) and the acquisition
by the majority of the minority's shares (see Sun Alliance Insurance v IRC7). In
conclusion therefore we confirm that in our opinion the proposed transaction as
structured involving the Company and the Noteholders is a scheme of arrangement
within the meaning and application of Section 86. As to the function of the Court, Re Anglo-Continental Supply Co. Limited8 held
that in exercising its power of sanction the Court will see: "First, that the provisions of the statute have been complied with. Secondly,
that the class was fairly represented by those who attended the meeting and that
the statutory majority are acting bona fide and are not coercing the minority in
order to promote interests adverse to those of the class whom they purport to
represent, and, Thirdly, that the arrangement is such as a man of business would
reasonably approve." Maugham J. elaborated on this duty formulation, stating that the duty of the
Court is, among other things, to determine whether "the proposal is such that an
intelligent and honest man, a member of the class concerned and acting in
respect of his interest, might reasonably approve". (See Re Dorman, Long and
Company Ltd.9). In a later case, Plowman J. in Re National Bank10 added to this
formulation by concluding as follows: "Under Section 206 an arrangement can only be sanctioned if the question of its
fairness has first of all been submitted to the court." The reference to Section 206, is to Section 206 of the English Companies Act
1948 (which is identical in all material respects to Section 86 of the Companies
Law) which was re-enacted as Section 425 of the English Companies Act 1985. In sanctioning an arrangement under Section 86 of the Companies Law the Grand
Court therefore has a duty to see that the Scheme is fair as discussed above. If
the explanatory statement circulated to Noteholders and Note Investors (being
persons who hold a beneficial or other proprietary interest in the Notes as at
the Scheme record date) provides fair disclosure and the Scheme is approved by
the requisite majority at the meeting convened by the Grand Court, the Grand
Court, in the absence of a challenge to the Scheme, will be slow to differ from
the vote of the Noteholders. However, the fact that the Scheme may not be
challenged at the hearing before the Grand Court or the fact that the Scheme is
approved by the requisite vote of Noteholders, will not relieve the Grand Court
of its duty to see that the Scheme is fair to each class of Noteholders. The
explanatory statement circulated to Noteholders has already been submitted to
and will be considered by the Grand Court in connection with its determination
on whether to sanction the Scheme. It is our opinion that the Grand Court would
not sanction the arrangement if it finds the disclosure in the explanatory
statement unfair or misleading. Once the sanction of the Grand Court has been given to the Scheme and it has
been registered with the Registrar of Companies then the arrangements set out
therein are binding on all the Noteholders who were parties to the Scheme and on
the Company pursuant to section 86(2). In addition, the Company has already advised the Grand Court prior to the
hearing of the Petition that the Grand Court's sanctioning of the Scheme will be
the basis for qualifying for the exemption from the registration requirements of
the Securities Act provided by Section 3(a)(10) thereof with respect to the new
shares and new notes to be issued in exchange for the Notes pursuant to the
Schemes. For the avoidance of doubt, we confirm that we express no view as to the
commercial terms of the Scheme or whether such terms represent the intentions of
the parties and make no comment with regard to the representations which may be
made by the Company. This letter is addressed to you and, save for disclosure to
the Division as referred to above, may not, without our prior written consent,
be disclosed by you to any third party. We trust this clarifies the position but please do not hesitate to contact us if
you would like further information or assistance. Yours faithfully /s/ Maples and Calder -----FOOTNOTES----- 1 [1994-95] C.L.I.R. N8 and [1997] C.L.I.R. N6; Maples and Calder acted for the
applicant companies in both of these cases. 2 Pursuant to section 18(2) of the Grand Court Law. 3 [1893] 1 Ch. 484 n(2), per Fry L.J. 4 [1917] 1 Ch. 431. 5 [1966] 1 W.L.R. 819. 6 [1975] 3 A.E.R. 382. 7 [1972] 1 Ch. 133. 8 [1922] 2 Ch. 723 at 736, per Ashbury I. 9 [1934] 1 Ch. 635 at 657. 10 Loc. cit. at 829. [INQUIRY LETTER]
6 March, 2002 Mark L. Weissler Milbank, Tweed, Hadlcy & McCloy LLP One Chase Manhattan Plaza New York, NY 10019 RE: ASHANTI GOLDFIELDS (CAYMAN) LIMITED (THE "COMPANY") Dear Mark, We have acted as counsel as to Cayman Islands law to the Company in connection
with a proposed scheme of arrangement (the "Scheme") under Section 86 of the
Companies Law (2001 Second Revision) of the Cayman Islands (the "Companies
Law"), whereby the Company seeks to exchange new notes and shares for its 5 1/2%
Exchangeable Guaranteed Notes Due 2003 (the "Notes"). The proposed restructuring
is more fully described in your letter, dated March 6, 2002, to the Division of
Corporation Finance (the "Division") of the United States Securities and
Exchange Commission (the "SEC"), seeking confirmation from the SEC Staff that
the Division will not recommend enforcement if new notes and shares are
exchanged for the Notes without registration under the Securities Act of 1933,
as amended from time to time (the "Act"), in reliance on the exemption from
registration provided by Section 3(a)(10) of the Securities Act. You have asked us to describe certain procedures under Section 86 of the
Companies Law with respect to the Scheme and to confirm certain statements made
in your letter to the Division. In rendering this letter, we have reviewed
originals, copies, drafts or conformed copies of the following documents: 1.1 A draft of the Scheme dated 27 February 2002; 1.2 A draft of the offering memorandum comprising of the listing particulars,
dated 27 February 2002, to be issued in the proposed restructuring; and 1.3 A draft of the Scheme document dated 27 February 2002. We are providing this letter to you only as to, and based on, circumstances and
matters of fact existing and known to us on the date of this letter. This letter
only relates to the laws of the Cayman Islands which are in force on the date of
this letter. Section 86 Companies Law The established practice of the Grand Court on applications under Section 86 is
normally to apply the relevant English practice and procedure with some minor
variations. Section 86 of the Companies Law is identical to Section 85 of the
earlier version of the Companies Law, as in effect in 1991 and 1998. The Scheme Based upon our prior experience in order for the Scheme to be come effective it
will be necessary for the Company to carry out the following steps: (a) The Company shall apply by way of ex parte Originating Summons to convene a
meeting. That application must be supported by an affidavit setting out, inter
alia, the terms of the proposed Scheme and exhibiting a draft of the circular to
the Noteholders. The hearing of the Originating Summons is not in open Court.
(b) The Grand Court will determine, inter alia, whether the draft circular to
the Noteholders is fair and, as far as possible, givcs all information
reasonably necessary to enable the Noteholders to determine how to vote.
Assuming that the Court exercises its discretion to convene a meeting of the
Noteholders, then we consider it is likely that it will direct, inter alia,
that: (i) a person be appointed as chairman of the meeting; (ii) the chairman report the result of the meeting to the Grand Court; (iii) reasonable notice of the meeting be given to the Noteholders enclosing a
copy of the proposed Scheme together with an approved form of proxy; The Noteholders will be entitled to attend, to be heard and to vote at the
meeting. (c) If a majority in number representing 75% in value of the Noteholders present
and voting either in person or by proxy at the meeting agree to the proposed
Scheme then the Company shall present a Petition seeking the sanction of the
Grand Court of the proposed Scheme. (d) The Grand Court has a discretion whether or not to sanction the proposed
Scheme, and if so, whether to impose conditions. Before deciding whether to
exercise its discretion the Grand Court will consider the fairness of the
proposed Scheme, and in particular a number of matters, including, but not
necessarily limited to: (i) that the proposed Scheme is an arrangement or compromise within the meaning
of section 86; (ii) that the Noteholders passed the resolution by the statutory majority in
value and in number in accordance with section 86(1) at the meeting duly
convened and held: (iii) the Noteholders who attended and voted at the meeting are fairly
representative of the class approving the Scheme and that the statutory majority
did not coerce the minority in order to promote interests adverse to those of
the class whom they purport to represent; (iv) the proposed Scheme is such as a man of business would reasonably approve.
The Grand Court will not sanction the proposed Scheme if it were unfair to the
Noteholders. We are of the opinion therefore that if the Grand Court sanctions
the proposed Scheme then it has impliedly determined that the proposed Scheme is
fair to the Noteholders. (e) The hearing of the Petition is in open Court. All Noteholders (whether or
not they attended and/or voted at the meeting, and irrespective of whether they
voted for or against the Scheme, or chose not to vote) will be entitled to
attend, and to appear and to be heard at the hearing. The Company has undertaken
to inform the Grand Court before the hearing that it will rely on the Section
(3)(a)(10) exemption and, having obtained the sanction of the Grand Court, it
will not register the exchange under the Securities Act (f) If the Grand Court sanctions the Scheme then the Company must deliver a copy
of the court Order with the Registrar of Companies for registration. Upon
delivery the Order is effective. Once the sanction of the Grand Court has been given to the Scheme then the
arrangements set out therein are binding on all the Noteholders who were parties
to the Scheme and on the Company. In addition, the Company will advise the Grand Court prior to the hearing that
the Grand Court's sanctioning of the Scheme will be the basis for qualifying for
the exemption from the registration requirements of the Securities Act provided
by Section 3(a)(10) thereof with respect to the new shares and new notes to be
issued in exchange for the Notes pursuant to the Scheme. For the avoidance of doubt, we confirm that we express no view as to the
commercial terms of the Scheme or whether such terms represent the intentions of
the parties and make no comment with regard to the representations which may be
made by the Company. This letter is addressed to you and, save for disclosure to
the Division as referred to above, may not, without our prior written consent,
be disclosed by you to any third party. Yours faithfully, /s/ MAPLES and CALDER Europe
[STAFF REPLY LETTER]
June 19, 2002 RESPONSE OF THE OFFICE OF THE CHIEF COUNSEL DIVISION OF CORPORATION FINANCE Re: Ashanti Goldfields Company Limited. (the "Company") Incoming letter dated
June 4, 2002 Based on the facts presented, the Division will not recommend any enforcement
action to the Commission, in reliance on your opinion of counsel that the
exemption provided by Section 3(a)(10) of the Securities Act is available, Newco
issues New Exchangeable Notes, and the Company issues new Company shares, in
exchange for the Existing Notes, as described in your letter, without
registration under the Securities Act. In reaching this position, we particularly note your representations that: * the Cayman Court will hold a hearing on the petition seeking sanctioning of
the Scheme of Arrangement in accordance with the law of the Cayman Islands; * each Holder will receive notice of the Court Hearing and will have an
opportunity to be heard at the Court Hearing; * the Cayman Court will determine that an intelligent and honest man, a member
of the class concerned and acting in respect of his interest, might reasonably
approve the Scheme of Arrangement, and will determine that the Scheme of
Arrangement is fair to the Holders; and * the Cayman Court has been advised that, if the Scheme of Arrangement is
sanctioned, the New Exchangeable Notes and Company Shares to be issued in the
exchange will not be required to be registered under the Securities Act by
virtue of the Cayman Court's approval. The Division's views on resales of the securities to be issued in the Scheme of
Arrangement are as follows: * persons who are not affiliates of Newco or the Company at the time the Scheme
of Arrangement is submitted for Holder approval or after the Scheme of
Arrangement is completed may resell their New Exchangeable Notes and Company
Shares received in the exchange without regard to Rule 144 or Rule 145(c) and
(d); * persons who are affiliates of Newco or the Company at the time the Scheme of
Arrangement is submitted for approval, but not after the Scheme of Arrangement
is completed, are persons described in Rule 145(c) and may resell their New
Exchangeable Notes and Company Shares received in the Scheme of Arrangement
pursuant to Rule 145(d)(1) without regard to the holding period required by Rule
144(d). In computing the periods used in Rule 145(d)(2) or (3), however, such
persons may not take into account the periods during which they held the
Existing Notes; and * persons who are affiliates of Newco or the Company after the Scheme of
Arrangement is completed may resell their New Exchangeable Notes and Company
Shares received in the Scheme of Arrangement in the manner permitted by Rule
145(d)(1). We note that you have not requested a no-action position regarding, and we
express no view as to, the availability of an exemption from Securities Act
registration for future exchanges of New Exchangeable Notes for Company Shares.
These positions are based on the representations made to the Division in your
letter. Any different facts or conditions might require the Division to reach a
different conclusion. Further, this response expresses the Division's position
on enforcement action only and does not express any legal conclusion on the
questions presented. Sincerely, /s/ Cecilia D. Blye Special Counsel
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