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Streetwise

News and analysis on Bay Street and the world of finance
available exclusively to subscribers of Globe Unlimited

Entry archive:

OSC insider trading case hinges on ‘special relationship’

ADRIAN MYERS

Most people think that insider trading is trading on undisclosed material information. This is not legal advice, but such a view is not correct: you can trade on undisclosed material information. What you cannot do is trade on undisclosed material information while you are in a special relationship with the company that you have undisclosed material information about. So, if you’re in possession of undisclosed material information about a company, a useful question to ask yourself is, Am I in a special relationship with that company?

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Winnipeg tower sale punctuates city’s real estate boom

BOYD ERMAN

The sale of the tallest building in Winnipeg earlier this year is a feel-good story both for the city and the Asper family.

The family sold the building, located at Portage and Main, to a Regina, Sask.-based pension fund manager and the Hill family of Saskatchewan for a price that was never disclosed. Until now, that is, as a source close to the deal says it was just over $160-million, well beyond the $130-million to $135-million that the sellers went into the transaction expecting.

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Real estate gets its own boutique

BOYD ERMAN

Canada has long had energy boutique investment banks, and plenty of small firms specialize in mining. But real estate was another story.

Trimaven Capital Advisors Inc. has stepped into that gap, and in less than two years of operations, is moving up in the rankings of investment banks doing deals in real estate. The Toronto-based firm worked for Huntingdon Capital Corp. on its $210-million sale to Slate Properties Inc., announced earlier this month, as well as advising Royal Host Inc. on its sale to Holloway Lodging Corp. in May. It has also advised New York-based activist Orange Capital LLC on two real estate files.

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Investors reject Aspenleaf takeover of Arcan Resources

JEFFREY JONES

Security holders of Arcan Resources Ltd. have rejected a contentious rescue plan for the company by privately held Aspenleaf Energy Ltd., tossing Arcan into an uncertain future.

Arcan, which is hobbled by heavy debt, had urged its investors to support the transaction that involved Aspenleaf taking over 87.5 per cent of its light oil assets in the Swan Hills area of north-central Alberta. Arcan was to form a new junior oil company with the remaining Swan Hills interests, with Aspenleaf owning 6.7 per cent of it.

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RBC’s asset management group hires head of international business

JACQUELINE NELSON

RBC’s global asset management group has hired a leader to oversee its international operations in a move aimed at growing its business abroad.

Clive Brown will step into the role of chief executive of RBC Global Asset Management International. He will oversee the business in Europe and Asia where RBC has sales teams, as well as the Middle East and Africa. The role has been newly created, and the London-headquartered Mr. Brown won’t formally start until the start of October.

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Hedge fund managers who trade more outperform: Study

DAVE MORRIS

A handful of very active hedge fund managers can outperform the rest, says a new discussion paper that should give much-maligned hedge fund managers a lift.

In a study published Monday by the Board of Governors of the U.S. Federal Reserve, Vassar University economist Ergys Islamaj and Fed research assistant Maziar Kazemi find that more active hedgies’ performance compares favourably to their less active peers. The results could dampen some of the enthusiastic hedge fund bashing that has emerged recently, though the authors caution that the broad variations in the performance of very active managers puts a lot of emphasis on the importance of picking the right one.

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With Painted Pony deal done, AltaGas to issue $400-million of stock

JEFFREY JONES

AltaGas Ltd. is issuing $400-million of shares to finance its strategic alliance with Painted Pony Petroleum Ltd and other expansion initiatives.

AltaGas, the gas distribution and energy services company, is issuing 7.85-million shares at $51 apiece in a bought deal led by TD Securities Inc., BMO Nesbitt Burns and RBC Dominion Securities. An overallotment option would allow the underwriters another $60-million of stock.

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Painted Pony shares gallop ahead 6 per cent on AltaGas deal

JEFFREY JONES

Painted Pony Petroleum Ltd. shares jumped 6 per cent as investors took a shine to a long-term processing deal and alliance with AltaGas Ltd. that provides both an outlet for Painted Pony’s liquids-rich Montney gas as well as funding for development.

Under the deal, AltaGas will build a 198 million cubic feet a day processing plant north of Fort St. John, B.C., of which Painted Pony will have 150 million cubic feet a day of guaranteed capacity. The $350-million plant is expected to be in service by the end of next year.

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Real estate darling Teranet troubled by debt

TIM KILADZE

Monopolies on land registries should make for good business in a real estate boom, yet Teranet was just dealt a debt downgrade.

The company, which controls Ontario and Manitoba’s land registry systems, saw its debt downgraded by rating agency Standard & Poor’s to 'BBB' from 'BBB+.’ The new rating still classifies the debt as investment grade, but it suggests there is more uncertainty about the company’s future.

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Bellatrix becomes U.S. activist investors’ latest target

BOYD ERMAN

New York-based Orange Capital is set to begin a public push for a revamp at Bellatrix Exploration Ltd., the latest in a series of campaigns led by activist shareholders looking to Canada for underperforming companies they can press for change.

Orange, which has been buying Bellatrix shares, is expected to shortly file with the Securities & Exchange Commission to say its stake is bigger than 5 per cent, and that it plans to ask for changes at the Calgary-based natural gas producer, said a person familiar with the situation. The company, with a market capitalization of $1.5-billion (U.S.), trades at a discount to many of its peers. The hedge fund wants Bellatrix to hire a financial adviser to look for strategic alternatives, as well asking the company to look at a sale or initial public offering of some of the so-called midstream assets it owns, such as pipelines and gas plants. Orange is also seeking renewal of the board, better communications with investors and a plan for future outlays of capital.

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Carbon-capture startup not depending on government subsidy

JEFFREY JONES

The Alberta government’s waning love affair with carbon capture does not frighten a Canadian start-up getting set to commercialize its own technology, its chief executive says.

Once seen as a panacea to the oil-producing province’s challenge of meeting greenhouse gas emission reduction targets, carbon-capture ambitions have been tempered. The leading candidate for leader of the ruling Progressive Conservatives, Jim Prentice, has dismissed it as expensive and unproven.

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Cassels adds to its Vancouver outpost

JEFF GRAY

Cassels Brock & Blackwell has hired mining and securities lawyer David Redford, who has left Goodmans LLP to join the new Vancouver office that Cassels set up two years ago.

The move brings the roster to 14 lawyers at the law firm’s West Coast outpost. Vancouver is the only location that Cassels, which focuses on the mining sector, has opened outside of Toronto.

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Sunshine scraps year-long alternatives search

JEFFREY JONES

Sunshine Oilsands Ltd. has ended a year-long search for strategic alternatives after closing a debt offering it said will allow it to restart construction at its long-stalled northern Alberta energy project.

Sunshine, backed by a group of Chinese institutional and retail investors, said it no longer intends to examine potential joint ventures and asset sales, which were contemplated in August 2013 when it ran out of money while constructing its West Ells oil sands development. The company then suspended work, kicking off months of equity placements to raise cash.

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Business Development Bank teams with U of T to fund startups

TIM KILADZE

The Business Development Bank of Canada is teaming up with the University of Toronto to help fund a startup accelerator designed to foster the next batch of great Canadian companies – another substantial move in the cross-country campaign to rebuild a domestic venture capital community.

BDC Capital, the development bank’s investment and financing arm, is partnering with U of T’s Rotman School of Management to support the Creative Destruction Lab, which offers an eight month program to bring entrepreneurs together and offer access to experts in technology oriented faculties. The goal: to commercialize promising technology.

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IIROC head to get ringside seat on U.S. regulation

BOYD ERMAN

The head of Canada’s securities industry self-regulator is going to get a very good inside look at how her peers in the U.S. do business, having been named to the board of the equivalent U.S. body.

Susan Wolburgh Jenah, the chief executive officer of the Investment Industry Regulatory Organization of Canada (IIROC), was named one of two new public governors on the board of the Financial Industry Regulatory Authority (Finra). She is the first Canadian to serve on the board of the U.S. body.

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The duelling pressures of collecting jobs data

Every day ROB Insight delivers exclusive analysis on breaking business news and market-moving events. Streetwise offers news and analysis on Bay Street and the world of finance. Inside the Market delivers up-to-the-minute insights on market news as it develops.

Here are our editors’ picks of some of the best reads available to Globe Unlimited subscribers this week.

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Big jump in banks’ capital markets earnings expected

BOYD ERMAN

A rebound in the investment banking business is providing a big bump to bank bottom lines that will be evident when the country’s biggest financial institutions start reporting their quarterly earnings next week.

National Bank Financial analyst Peter Routledge forecast this week that capital markets income for the six biggest Canadian banks rose 12 per cent in aggregate in the quarter ended July 31 from the same quarter last year. And it’s likely to keep going.

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Silver Wheaton says more miners want help funding acquisitions

RACHELLE YOUNGLAI

Silver Wheaton Corp‘s chief executive said more and more mining companies are asking for his help to finance acquisitions.

Silver Wheaton caters to companies that need capital to build a mine. The Vancouver-based miner buys streams of future gold and silver production from producers in exchange for funding.

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TD’s Mendonca named ‘TopGun’ analyst of the year

BOYD ERMAN

A year ago, TD Securities Inc. went out and grabbed insurance and banking analyst Mario Mendonca from Canaccord Genuity Corp. The results of the annual survey of investors by Brendan Wood International show why TD did it as Mr. Mendonca was named analyst of the year for Canada.

BWI surveys investors about how they allocate commissions to pay for research, which is at the heart of why securities firms are in the business of analyzing stocks. They want to provide clients with good ideas, and get paid for them. And it helps if solid coverage of companies leads those companies to show up with investment banking mandates that pay large fees, like merger advisory and underwriting work.

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Former Encana executive leads big Blackstone gas buy

Boyd Erman

When Doug Suttles came in as head of Encana Corp., Eric Marsh was out soon after. But Mr. Marsh’s new gig as head of the Blackstone Group-backed energy producer that just laid out $1.2-billion (U.S.) to buy the Haynesville shale assets of Royal Dutch Shell PLC raises the question of whether he could once again be running the Encana assets in that area.

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Franco-Nevada shares sag as $500-million deal struggles

TIM KILADZE

Franco-Nevada Corp.’s $500-million (U.S.) share offering is struggling to sell, according to sources familiar with the process, and the weak demand has created uncertainty.

At first, the share offering seemed like a sign of hope for the mining sector. Although the volume of industry financings has been ticking higher, progress has been slow, so the large deal made it look like confidence was coming back in a big way. Now that the sale is struggling, there is less reason to be as optimistic about the industry’s outlook.

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CIBC hires analyst for international E&P companies

JEFFREY JONES

Canadian Imperial Bank of Commerce is bolstering its energy research department, adding an analyst to cover the Canadian-listed international exploration and production companies.

CIBC has hired David Popowich, who had covered that segment of the sector at Macquarie Securities for the past five years. Prior to that, Mr. Popowich was a research associate at Tristone Capital, which Macquarie acquired in 2009.

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Chartwell could be the next takeout target in real estate

TARA PERKINS

Chartwell Retirement Residences could be an acquisition target as deals heat up in the seniors housing and health care space, says Bank of Montreal analyst Heather Kirk.

“We believe Chartwell is an attractive potential takeover target given its dominant platform, significant scale, diversification across Canada and the U.S., and embedded growth potential in the portfolio,” she writes in a research note.

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When shareholders and debt investors are worlds apart

ADRIAN MYERS

Shareholders are a company’s residual claimants – if a company is a cake, shareholders get the last slice after everyone else takes theirs. When a company goes bankrupt, there are no more leftovers, and, therefore, our bankruptcy laws generally wipe out shareholders.

Can companies that are in trouble, but perhaps not quite beyond repair, restructure even when there’s still some value left over for equity? Arcan Resources Ltd. thinks that it can do so through a plan of arrangement. However, the plan requires building a consensus between debt and equity holders, a difficult task. And, if the plan does work, it exposes a procedural flaw in the plan of arrangement process.

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Desire2Learn’s new funding round to fuel rapid growth

BOYD ERMAN

Desire2Learn Inc., one of Canada’s hottest technology growth companies, has raised another $85-million from venture capital investors to supports its quick expansion.

The new money from a Series B round of funding comes from new investors including Columbus Nova Technology Partners Graham Holdings as well as existing investors that include Toronto-based OMERS Ventures. It follows an $80-million Series A round in 2012.

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Franco-Nevada offers $500-million bought deal

RACHELLE YOUNGLAI

Franco-Nevada Corp. is raising $500-million to make acquisitions, the company said on Wednesday, the same week it announced plans to help finance a gold project in West Africa.

Franco-Nevada, which buys royalties and streams of future gold production from miners, is selling 8.375 million shares at $59.75 in a bought deal to a group of banks led by Royal Bank of Canada.

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New investment banking leaders in place at RBC

TIM KILADZE

Royal Bank of Canada has quietly spent the summer lining up new leaders in its investment banking division.

The most significant move is the appointment of Derek Neldner as head of Canadian investment banking. Within the bank, as well as in financial circles generally, Mr. Neldner is widely viewed as a rising star. He has been with the investment bank for nearly twenty years, and started at RBC as an investment banking analyst in 1995.

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Kinross warrants are relics of big, ill-fated mining deal

TIM KILADZE

There’s no way Red Back Mining investors could have expected this.

When Kinross Gold Corp. offered to buy Red Back in a $7.1-billion deal in 2010, the target’s investors jumped at the chance, voting 99 per cent in favour of the acquisition. This was the first big mining deal since the financial crisis, and a 21 per cent premium seemed sexy for a sector still stuck in a lull.

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Could this be the next TMX Group CEO?

BOYD ERMAN

The speculation around the next chief executive officer for exchange operator TMX Group Inc. includes a lot of the expected names, and one quite unexpected one. It’s that last one that’s getting some of the most attention.

TMX on Tuesday said CEO Tom Kloet would extend his term by a couple of months to Oct. 31, giving more time to get a replacement in place. That raised expectations that the contenders must include an outsider, since if it was going to be an internal candidate, why the delay?

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Big Six bank shares are pricey, but investors aren’t crazy

TIM KILADZE

Despite their wild run, shares of Canada’s biggest banks still aren’t astronomically expensive.

That’s the conclusion from CIBC World Markets analyst Rob Sedran, who crunched a slew of numbers to compare current valuations to historical trends, as well as to other sectors.

Right now, the Big Six banks trade at an average of 12.2 times CIBC’s fiscal 2014 earnings expectations. That means that if a bank generates $1 of earnings per share, its stock would trade for $12.20.

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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.

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Tim Kiladze

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial

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Tara Perkins

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Jacqueline Nelson

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Grant Robertson

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Jeff Gray covers legal affairs for The Report on Business. A former reporter and columnist at Toronto’s city hall, he has also worked for the BBC and reported for The Globe from London.

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