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Streetwise

News and analysis on Bay Street and the world of finance
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Entry archive:

Alberta court makes insider trading even harder to prove

ADRIAN MYERS

Illegal insider trading is hard to prove in Canada. Despite its apparent ubiquity – a 2010 study finds that 63 per cent of target companies show aberrant trading patterns in their shares prior to the announcement of a takeover – insider trading convictions are hard to come by in Canada. Even adjusting for market size, the U.S. prosecutes 17 times more insider trading cases than Canada.

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Fed stops RBC's spin-off plan

TIM KILADZE AND BOYD ERMAN

Royal Bank of Canada will not spin off its proprietary trading arm after top regulators, the United States Federal Reserve and the Securities and Exchange Commission, balked at the idea.

The lender was looking at turning the division into an independent hedge fund to comply with tough new U.S. laws, and then investing bank money into the fund.

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Mining fire sale: Alberta coal company sold for $2

RACHELLE YOUNGLAI

The Asian owners of an Alberta coal miner are selling the company for two U.S. dollars, after paying $1-billion for the asset at the height of the commodity boom.

The fire sale of Calgary-based Grande Cache Coal to a Chinese mining company comes after a sharp drop in metallurgical coal prices.

Met coal, used to make stainless steel, is worth around $120 per tonne, down from a high of $300 in 2011. The drop comes amid a glut of supply and fears of China’s slowing economy.

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TransCanada moves quickly with asset sale to U.S. partnership

JEFFREY JONES

TransCanada Corp. wasted little time in launching a new campaign to show investors that it is serious about trying to boost its share price, without breaking up the company.

TransCanada said on Wednesday it sold the remaining 30 per cent ownership of Bison Pipeline LLC, a U.S. Rockies natural gas pipeline, to its master limited partnership, TC Pipelines LP, for $215-million (U.S.).

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OSFI unfazed by consolidation of banks and insurers

TIM KILADZE

Canada’s top financial regulator isn’t worried about a growing concentration of power among the country’s largest banks and insurers.

Over the past three years, the Canadian operations of companies such as ING Groep NV, Ally Financial Inc. and Standard Life PLC’s have all been swallowed by large domestic banks and insurers, and barely anyone has said a peep about the consequences.

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Contrans investors said to be seeking higher bid from TransForce

NIALL MCGEE

You just knew this one wasn’t going to go down without a hitch. On Aug. 12 trucking company TransForce Inc. unveiled a friendly tender offer for freight services provider Contrans Group Inc. for $15 a share ($14.60 in cash and a special dividend of 40 cents a share). The premium was … no hold on, there was no premium. The offer was an 11-cent discount to where the stock closed at the day before. Not surprisingly, some argued that Contrans was being sold on the cheap.

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Onex promotes new CFO from within

JACQUELINE NELSON

Private equity firm Onex Corp. has named managing director Christopher Govan as its new chief financial officer.

He will replace current CFO Donald Lewtas starting on March 1 next year.

Mr. Govan has been with the firm for 16 years and currently oversees corporate and fund administration as well as taxation.

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Encana-Athlon could have made private equity firm an extra half-billion

DAVE MORRIS

Encana Corp.’s $5.95-billion (U.S.) purchase of Athlon Energy Inc. has likely made Athlon shareholders jump for joy, but for private equity titan Apollo Global Management LLC, there may be a touch of regret.

Apollo, co-founded by former Drexel Burnham Lambert managing director Leon Black, was an early investor in Athlon. The oil and gas liquids company’s IPO in 2013 was a big win for Mr. Black’s PE firm, with the share price leaping from the original price of $20 to $27 in early trading. Apollo held roughly 56 million Athlon shares, so that post-IPO surge alone added $408.8-million to its stake, for a total of $1.53-billion.

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Grafton doubles down on joint venture with Bellatrix

JEFFREY JONES

Rick Grafton is looking beyond Bellatrix Exploration Ltd.’s current struggles, and has doubled down on a joint venture with the oil and gas producer.

The Calgary-based energy and finance veteran’s Grafton Asset Management Inc. has signed a second JV, committing $250-million to developing Bellatrix lands over several years.

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E-commerce upstart Beyond the Rack raises new funds

NIALL McGEE

Montreal-based online retailer Beyond the Rack Inc. has raised $10-million (U.S.) in a debt financing deal. The lender is Silicon Valley Bank, a subsidiary of SVB Financial Group which specializes in lending to North American technology companies.

Yona Shtern, co-founder and CEO of Beyond the Rack, says the funds will be used for marketing and broadening its product assortment, including beefing up its private label business; Currently the firm’s private label business is miniscule though, consisting of a smattering of household items, like pillows and shoe racks, and only accounts for around 2 percent of revenue.

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Fate of Brookfield bid for Revel casino known soon

BOYD ERMAN

Find struggling casino, acquire for a song, fix up and make profitable.

That’s the Brookfield Asset Management blueprint for gaming resorts, and the Toronto company will likely know by day’s end whether it can add the bankrupt Revel casino in Atlantic City, N.J. to its growing stable of properties.

The company’s Brookfield Property Partners arm is in the midst of bidding for the casino, a process that is expected to wrap up in a few hours. Investor Glen Straub is the stalking horse bid, and there are believed to be three other interested parties.

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Who is the new TMX CEO?

Boyd Erman

For the second straight time, the board of TMX Group Inc. has reached outside Canada for a chief executive.

That’s leaving Canada’s financial community trying to get up to speed on just who it is that TMX has hired. Lou Eccleston, the new boss, comes from S&P Capital IQ. Before that his roles included running sales and global product strategy at Bloomberg LP, the hugely successful seller of financial data systems. So he will get the notion of providing data and customer service, at least based on his résumé. And data is his thing.

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Analyst returns to Canada after several years in U.S.

JEFFREY JONES

Amir Arif is returning to Canada after more than a decade as an energy research analyst in the United States.

Mr. Arif has signed on with Cormark Securities Inc. in Calgary after several years in the Washington D.C. area, most recently with Stifel Nicolaus and before that, FBR & Co.

At Cormark, he’ll cover a wide range of Canadian large, mid- and small-cap exploration and production companies. That’s a bit of a shift from his responsibilities at Stifel, which included mostly large U.S. producers and a handful of Canadian ones.

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Is the Encana-Athlon deal too pricey?

JEFFREY JONES

Encana Corp.’s $5.9-billion (U.S.) takeover of Athlon Energy Inc. looks pricey and, by some measures, it is.

Stacked up against other recent deals in the Permian Basin of Texas, one of the most prolific U.S. shale gas and oil regions, it sets a new high on a standard acquisition metric – price per daily barrel of production. It runs a close second on price per barrel of proved reserves, another often-used yardstick.

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The big risk Canadian bank investors aren’t considering

TIM KILADZE

Big Six bank investors barely blinked when Ottawa asked them to bear more risk during the next financial crisis. A startling new study suggests they shouldn’t be so submissive.

To prevent taxpayers from being asked to bail out the country’s banks, the federal government has proposed new rules that will force bank investors of all stripes – both bondholders and shareholders – to absorb any losses before public funds are put to work. The proposals are part of a global campaign to make private investors pay dearly in a bailout before taxpayers are asked to contribute.

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Cassels adds to its Vancouver and Toronto offices

JACQUELINE NELSON

Cassels Brock & Blackwell LLP is hiring two new lawyers for parts of the firm identified as key growth areas.

Steven Dvorak, a specialist in insolvency and related commercial litigation, joins the law firm as a partner. He will focus on commercial restructuring, receiverships and bankruptcy proceedings. Cassels hired him to work in its relatively new Vanvouver office, which opened about two years ago. He has 20 years of experience and formerly worked at Vancouver-based firm Bull Housser.

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Canadian banks shut out of Encana-Athlon deal

BOYD ERMAN

When Encana Corp. wanted to raise money by selling its royalty business, it turned to Canadian banks. But when it wanted to spend it in a very big way, the Calgary energy producer looked elsewhere for advice.

Toronto-Dominion Bank and Canadian Imperial Bank of Commerce were the lead underwriters when Encana took PrairieSky Royalty Ltd. public, and TD, CIBC and other Canadian banks led the secondary offering that resulted in Encana selling any remaining shares a few weeks ago.

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Encana’s Suttles picks his target, strikes fast

BOYD ERMAN

Encana Corp.’s search for liquids-rich growth took it to one of the most famous regions in North America, the Permian basin. Once it got there, the company found Athlon Energy.

There is no indication that Athlon was for sale. The company was growing, had cash, was raising guidance. This has the hallmarks of Encana chief executive officer Doug Suttles and his advisers identifying the company they wanted and moving fast to get it.

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Canada’s online brokerage price war is on

TIM KILADZE

The banks lead the way, now the independents are following suit. What has ensued is an all-out online trading price war.

Shocking the market, Royal Bank of Canada threw down the gauntlet in January by slashing its discount brokerage commissions to $9.95 flat per trade. Soon after, rivals such as Toronto-Dominion Bank and Bank of Nova Scotia sprung into action and matched the offer.

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Senior Scotia Capital executive departs suddenly

BOYD ERMAN

Pat Burke, one of the top executives at Scotia Capital, left the firm suddenly Thursday.

Mr. Burke was promoted in June to the role of co-head of global equities and advisory at the firm, which is owned by Bank of Nova Scotia.

That was part of a change of Scotia's leadership structure by Mike Durland, who became sole chief executive of the firm a few months prior. That put Mr. Burke one rung below Mr. Durland.

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OSFI hands insurers fresh capital requirements

JACQULINE NELSON

Canada’s banking and insurance regulator has revised its capital requirements for the property and casualty (P&C) insurance sector, and the largest insurer in the sector believes the move is positive.

The Office of the Superintendent of Financial Institutions (OSFI) is changing the Minimum Capital Test (MCT) guidelines for insurers, to better align the amount of capital companies are required to hold with the modern risks they face. A company’s MCT level is expressed as a ratio of total capital available, divided by the total capital required to meet commitments.

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Activist raises stake in Bellatrix Exploration

BOYD ERMAN

Activist investor Orange Capital is taking advantage of a sell-off in Bellatrix Exploration Ltd. to almost double its position in the energy producer.

Orange Capital said in August that it was going to push for change at the Calgary-based company. The stock jumped, but has since sold off. Orange is not backing away.

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Guess who came to the outgoing Barrick CEO’s party?

RACHELLE YOUNGLAI

A farewell party for Barrick Gold Corp.’s ex-chief executive Jamie Sokalsky became a reunion of sorts for the gold company’s former executives.

Barrick’s previous CEOs Aaron Regent and Randall Oliphant – both of whom left abruptly under Barrick’s former chairman Peter Munk – joined dozens of Barrick employees Tuesday night to pay their respects.

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At what was once Stelco, déjà vu for the lawyers

Boyd Erman

It’s déjà vu all over again in the restructuring of what was once Stelco Inc.

Lawyers dealing with the struggling steel maker, now owned by U.S. Steel, are facing the task of doing once again what they already did a few years ago.

Last time the steel maker ended up in creditor protection, in a restructuring that took from 2004 to 2006, the lawyers spent many hours dividing the company into bits. They split the company’s businesses into separate entities, the goal being to make it easier to sell the individual mills if the business went sour. So the Hilton Works in Hamilton, laden with liabilities, went into one bucket. The Nanticoke mill, much more modern and valuable, went into another. It was all still owned by the parent, but easy to parcel out if need be.

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Bay Street lawyer appointed to Competition Bureau

NIALL MCGEE

A prominent Bay Street litigator is moving from private practice into a high profile role with the Competition Bureau Legal Services of the Department of Justice. On October 1, 35-year-old Antonio Di Domenico, a partner with Fasken Martineau LLP, will start a two-year term as counsel to Canada’s Commissioner of Competition. During his period of secondment, he’ll remain a partner of Fasken Martineau.

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Deal for Porter Airlines’ Toronto terminal nearly ready to fly

BOYD ERMAN

The sale of the Porter Airlines terminal at Billy Bishop Toronto City Airport is moving quickly to a close, as buyers in Canada and abroad show intense interest in an asset said to generate $60-million a year from passenger fees and rents.

The airport isn’t popular with all Torontonians, but it is very popular with potential buyers. The auction, first reported in August, could be done in a month, said one person familiar with the process. With infrastructure assets in heavy demand, the cash flow from the terminal is going to be very attractive to an infrastrucure-focused buyer. The terminal produces about $60-million a year, said a second person, who had been briefed on the numbers.

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Legal wrangle sheds light on Ontario’s unique securities regulation regime

ADRIAN MYERS

This is the story of the First Leaside Group, a residential real estate investment firm located in Uxbridge, Ont. It is not a happy story – a lot of people lost a lot of money, and the Ontario Securities Commission alleges (and the Investment Industry Regulatory Organization of Canada has already found) that this happened because First Leaside’s founder David Charles Phillips and one of its salesmen, John Russell Wilson, were unscrupulous in their business practices.

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Insider trading cases proving difficult for provincial regulators

JANET McFARLAND and JEFF GRAY

With the high-profile hearing against former Bay Street lawyer Mitchell Finkelstein set to begin Monday, securities regulators are facing stiff headwinds in proving illegal insider trading cases.

The Ontario Securities Commission suffered a loss in the prominent Baffinland Iron Mines Corp. insider trading case this summer, and OSC staff are also reviewing two losses this year by the Alberta Securities Commission in insider trading cases.

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Boutique investment firms feel the pressure even as markets rebound

BOYD ERMAN

The strong are getting stronger in Canada’s investment industry as the benefits of rebounding markets flow increasingly to the largest firms.

The result is that firms that are left behind will continue to vanish.

Projections from the Investment Industry Association of Canada (IIAC) show that profits are on the rise across the brokerage and securities industry. But it is very much a business of haves and have-nots.

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Pimco probe reflects a deeper problem for ETF industry

TIM KILADZE

The revelation that Pacific Investment Management Co. is being probed by the Securities and Exchange Commission is the stuff of media dreams. A bond giant – already under pressure to prove it can withstand the shocking departure of its chief executive, Mohamed El-Arian – is now targeted by the top U.S. regulator.

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