Two months into a strategic review, it's become clear there's no white knight coming to save the day at debt-laden Postmedia. The fate of the country's largest newspaper chain will be decided in a showdown between its two major creditors, a rough-and-tumble New York-based distressed debt investor and a 15-employee bond fund from the Toronto suburbs.
Here's the spoiler alert on how any faceoff would end: The Canadians will win. However, with creditors owed $668-million and the media company's advertising revenues in freefall, there's an expectation that everyone with a financial stake in Postmedia will take a haircut as the company adapts its balance sheet to its diminished circumstances.
Postmedia's financial woes are easy to spot: The owner of the dominant newspapers in most Canadian cities borrows money at the corporate equivalent of payday loan rates. After a trip through creditor protection in 2010, Postmedia ended up financed with a $363-million U.S.-dollar-denominated note that pays 12.5-per-cent interest from Goldentree Asset Management.
Goldentree bills itself as one of the world's largest credit investors, along with a $313-million (Canadian) loan at 8.25 per cent from Canso Investment Counsel, based in that noted financial hotbed of Richmond Hill, Ont. Story
A Bay Street darling's debt upgrade
Finally, some respite from the energy doldrums.
For months, oil prices have been on the rise and energy stocks have followed suit with the TSX energy index up 37 per cent from its lows in January. Now, it appears debt rating agencies are prepared to jump on the bandwagon.
On Monday, Moody's Investors Service blessed Seven Generations Energy Ltd. with an encouraging upgrade, bumping the natural gas producer's senior debt to B1, up from B2.
It's only one company, but Seven Generations' new debt-rating upgrade serves as a benchmark that signifies progress. Earlier this year, as crude prices plummeted below $30 (U.S.) a barrel, a number of Canada's most respected oil and gas producers – including Suncor Energy and Canadian Natural Resources – suffered debt downgrades. There has been hope since that things are getting better as oil and gas markets recovered, but job losses and poor quarterly earnings haven't helped sustain the enthusiasm.
While the Calgary-based company's debt rating remains three notches below investment grade, the Moody's move is a step in the right direction for the company – and a welcome sign for the broader industry.
Seven Generations, or 7Gen, is one of Bay Street's darlings. That it was upgraded won't surprise those in the know. Since going public in 2014, the company has been praised for its low levels of debt and for its strong execution. Chief executive officer Patrick Carlson has a reputation for getting things done without spending wildly. The stock is up 43 per cent to $25.76 (Canadian) from its $18 IPO price. This year, 7Gen has been the second-best performing energy stock in the country and has seen its market value nearly double to $7.1-billion. Story
'Gold shoots' for mining sector financing
Capital markets are showing renewed interest in the mining sector after several tough years, according to an overview by two partners at the law firm Torys LLP.
Michael Amm and Michael Pickersgill say in a new report that there are "gold shoots" at last for mining-sector financing following the rebound of precious metals prices during the first half of 2016.
The biggest beneficiaries to date have been precious metals royalty and streaming companies. These businesses advance money to gold and silver miners in exchange for rights to "streams" of metal that will be produced in the future.
So far this year, Franco-Nevada Corp., Silver Wheaton Corp. and Osisko Gold Royalties Ltd. have raised more than $1.6-billion (U.S.) of equity capital for their streaming businesses.
"This is the streamers' heyday," Mr. Amm said. "When you've got low commodity prices, when you've got other forms of financing drying up for miners … streamers have great opportunities." Story
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