Friday, February 17, 2012 11:58 AM EST
Natural gas asset sales hot trend for producers
TIM KILADZE
If you’re a natural gas producer and you expect prices to remain low in the near future, there’s only so much you can reduce capital spending to preserve cash. At some point, you may need to take the plunge to sell-off assets.
The industry appears to be at this point. Earlier this week, Chesapeake Energy Corp. CHK-N announced that it will sell $10-billion to $12-billion (U.S.) of non-core assets to raise cash amid decade-low natural gas prices. And on Friday, Encana ECA-T announced a $2.9-billion (Canadian) joint venture, selling off a 40 per cent stake in its Cutbank Ridge Partnership.
For agreeing to the sale, Encana will receive $1.45-billion in cash up front, and the remainder to be carried over five years.
Link to this post
Friday, February 17, 2012 7:51 AM EST
CPPIB raising its profile in China
TARA PERKINS
The new head of Canada Pension Plan Investment Board’s Asian operations is stepping into the role at a time when many investors are becoming a little less bullish about China. So it might just be the perfect time for him to do some deals, suggests Mark Wiseman, CPPIB’s executive vice president of investments.
“Other peoples’ pessimism may very well create additional opportunity for a long-term investor like us,” says Mr. Wiseman. “The path to Chinese growth, and therefore the whole region’s growth, won’t be a straight line. It will be up and down with an overall trend for growth. And, as a long-term investor, we have the luxury of not having to time the specific point in a cycle.”
Mr. Wiseman was speaking from Hong Kong, where he was announcing the appointment of Mark Machin as the first president of CPPIB’s Asian operations. The pension fund opened an office there four years ago. Mr. Machin comes from Goldman Sachs, where he worked for 20 years in London, Hong Kong, and Beijing, eventually leading Goldman’s investment banking business in Asia. With his hire, the Canadian pension plan’s Asian operations – which account for $13.1-billion, or less than 10 per cent of the fund’s assets – are entering a new phase, one that will see more active investment.
To date, CPPIB’s Asian investments have focused on real estate and private equity, with the fund deploying $4-billion in the region over the last four years. “We’ve just put, in the last few months, our first public markets investment professionals on the ground here, to help analyze the public markets and to help analyze external managers operating in these markets, and we’re starting to consider private debt opportunities in the region,” Mr. Wiseman says. “So over time, obviously we’ll need help in doing this, we’ll expand both the scope and scale of activities that we’re turning out here.”
Thursday, February 16, 2012 4:06 PM EST
Rubicon's banks cut price to move unsold stock
BOYD ERMAN
A group of investment dealers who were stuck with a boatload of Rubicon Minerals stock after a share sale failed have cut the price and sold all the stock.
GMP Securities and TD Securities led a group of banks that agreed on Feb. 6 to buy 49 million Rubicon shares from the company, in hopes of reselling them to investors in the market at $4.10 apiece to raise about $200-million. However, investors weren't biting, as this post detailed, and the stock remained unsold.
The banks sold the Rubicon RMX-T stock at $3.75 Thursday, with the reduced price attractive enough to bring in more than enough investors to take the whole amount, said people familiar with the transaction.
Rubicon will get a cheque for the full amount that the offering was supposed to raise, and the dealers in the syndicate will have to eat the difference.
Thursday, February 16, 2012 2:48 PM EST
BMO hires Bonnyman to fill hole in metals research
BOYD ERMAN
BMO Nesbitt Burns Inc. has hired veteran analyst Stephen Bonnyman to cover base metals.
Mr. Bonnyman, in the do-more-with-less world of Bay St. in a soft market, will be replacing two analysts that BMO lost. Nomura Securities hired away two BMO base metals analysts last year -- David Radclyffe and David Cotterell -- leaving the firm with a big hole to fill.
Thursday, February 16, 2012 1:49 PM EST
Private equity was heavy into mining last year
TIM KILADZE
The headline numbers show that Canadian private equity dealmaking popped last year, but overall figures are still far off peak levels.
So what’s more interesting? That private equity is still interested in Canada’s robust mining sector, with over 50 deals getting struck last year, the most of any sector.
Some of these were of decent sizes, including Energy & Minerals Group investment in Baffinland Iron Mines Corp., in a deal worth $590-million, and Ellington Investments buying into Inmet Mining in a deal worth $500-million. But the majority of these deals are ones the general public doesn’t hear about because private equity is happy to invest in companies with small undeveloped assets in hope of riding the valuation wave as the assets move into production.
Thursday, February 16, 2012 3:24 PM EST
RBC at risk of two-notch downgrade: Moody’s
TIM KILADZE
Just over a year after it was initially downgraded, Royal Bank of Canada is at risk of another slash to its credit quality as Moody’s Investors Service reviews all major global banks with big capital markets divisions.
The rating agency has initiated a review of 17 banks and securities firms with global capital markets operations because it feels that the risks associated with these divisions “are not fully captured in their current ratings.”
“Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions,” the rating agency said. “These difficulties, together with inherent vulnerabilities such as confidence-sensitivity, interconnectedness, and opacity of risk, have diminished the longer term profitability and growth prospects of these firms.”
Thursday, February 16, 2012 8:31 AM EST
Could Scotia move out of Scotia Plaza?
BOYD ERMAN
There's speculation in the real estate business that should Brookfield Office Properties win the bidding for Scotia Plaza, Bank of Nova Scotia could be moving out of the iconic red skyscraper.
According to analyst Michael Smith of Macquarie, some believe that Brookfield would want Scotiabank BNS-T as a lead tenant for a new east tower in the Bay Adelaide Centre.That site is directly across the street from the current Scotia headquarters. With Toronto's office market strong, Mr. Smith said there could be a new cycle of office tower development.
Bay Adelaide's west tower is the newest major skyscraper at the heart of Toronto's business district, and a companion tower is long planned and the site sitting more or less ready.
Wednesday, February 15, 2012 3:27 PM EST
GMP tech banker Lorne Sugarman leaves for industry
BOYD ERMAN
When the technology business was king, GMP Securities was one of the busiest banks in the sector.
But with deal flow quiet in the sector in recent years, especially in areas such as clean energy and solar, GMP tech banker Lorne Sugarman has decided to take his leave from the firm.
Wednesday, February 15, 2012 6:32 PM EST
Optimism for U.S. real estate a ‘tectonic shift’
TIM KILADZE
Multi-residential and commercial real estate is attracting myriad eyeballs south of the border as the U.S. economy continues to find solid footing.
The trend has been building for some time, with big Canadian players such as Canada Pension Plan Investment Board and RioCan REIT REI.UN-T getting in back in 2010 and early last year. But now it seems like everyone wants a piece of the pie, and there’s finally a buzz back in the industry.
“The biggest thing that we’re noticing is the overall level of optimism about U.S. real estate,” said Kyle Dunn of real estate private equity firm Second City Capital Partners, which is based in Vancouver. “It seems like there’s been a tectonic shift.”
Wednesday, February 15, 2012 11:57 AM EST
Viterra's feed business had rough outlook
TIM KILADZE
The North American feed business that Viterra VT-T has now sold off was not only a non-core asset, but its profits had taken a big hit and its valuation had plummeted.
Back in 2010, the feed business brought in $16-million in earnings before interest, taxes, depreciation. Analyst projections for 2013 come in at only a quarter of that. And things had been so rough for the Canadian feed division that its goodwill was written down by $8-million last year.
Feed has been a rough business to operate for the past year and a half because input prices have skyrocketed. Things like corn, soybean meal and canola meal are now much more expensive, and that obviously cuts into margins.
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Streetwise Contributors
Boyd Erman
Boyd Erman is a long-time business journalist who has worked at Dow Jones, Bloomberg, and the National Post before joining the Globe and Mail. Over the years, his areas of coverage have included economics, monetary policy, debt markets and corporate finance.
In addition, he is a regular commentator and guest host on Business News Network.
Tim Kiladze
Tim Kiladze is a business reporter with The Globe and Mail. Before graduating from Columbia University’s Graduate School of Journalism, he worked in equity capital markets at National Bank Financial and fixed-income sales and trading at RBC Dominion Securities. Tim has a Bachelor of Commerce in finance from McGill University.
Tara Perkins
Tara Perkins has been a business reporter since 2004, following a brief stint as overnight editor of globeandmail.com. She has been writing for the Globe's business section since the spring of 2007, covering the banking sector during the course of the financial crisis. Prior to that, she worked for the Toronto Star. Tara has a Bachelor of Journalism from Ryerson University and a Bachelor of Commerce from the University of Guelph.
Grant Robertson
Grant Robertson joined The Globe and Mail as a business reporter in 2005 after five years as a business writer at the Calgary Herald. His areas of coverage have included the oil and gas industry, the transportation sector and media & telecom. He now covers the banking sector for The Report on Business and writes for Report on Business Magazine.
Jeff Gray
Jeff Gray covers legal affairs for The Report on Business. For five years, he covered Toronto’s city hall and wrote a column about urban transportation. In 2002, he worked for the world desk of BBC News Online in London and freelanced for The Globe. In 2000, he helped launch The Globe’s first breaking-news website. He started at The Globe in 1998.
David Parkinson
David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics.
