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Streetwise

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

Sirius XM debt demand could fund special dividend

JACQUELINE NELSON

Sirius XM Canada Holdings Inc. has completed an oversubscribed debt offering worth $200-million that could lead to a special dividend for shareholders.

The Toronto-based communications company said favourable market conditions were behind the decision to refinance its senior notes back when it reported earnings on April 14. It planned to redeem $130.7-million of debt that paid a 9.75-per-cent coupon, and take on another $150-million at a lower interest rate.

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HudBay’s challenge tests rules on poison pills

BOYD ERMAN

The debate over the poison pill that protects Augusta Resource Corp. from a hostile takeover bid by HudBay Minerals Inc. – for now – will be the first big test of a new set of proposed rules on such anti-takeover protections.

Last year, facing a number of seemingly contradictory rulings from various provincial securities regulators, the regulators came together and crafted a proposed rule to unify treatment of poison pillls. The upshot of the new rules would allow pills to stand, rather than be thrown out, if they have been recently approved by a shareholder vote. The question is whether the British Columbia Securities Commission will take those rules into consideration even before they have been finalized.

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OSC gender-diversity proposal wins broad support

JANET McFARLAND

An array of business groups and corporate directors have thrown their support behind an Ontario Securities Commission proposal to require companies to disclose their gender diversity policies, and many are now urging the regulator to go even further to make the standards stricter.

Wednesday was the deadline for comments to be submitted to the commission about proposed new rules that would require all public companies that trade on the Toronto Stock Exchange to report annually on their approach to gender diversity for their boards and senior management ranks. The so-called “comply or explain” rules will require companies to disclose if they have diversity policies and internal targets for the proportion of women in senior roles, or else explain why they have opted not to have such policies.

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With crisis behind them, insurers mull new regulations

JACQUELINE NELSON

The world’s insurers are facing a new era of international regulation, a topic that will be front and centre when their leaders descend on Toronto in May.

Chief executive officers from global insurance companies that represent $15-trillion dollars (U.S.) in total assets, will meet to discuss their most pressing concerns at a summit organized by industry think tank the Geneva Association (GA). Among the issues on the table: A proposed increase in capital requirements aimed at protecting the businesses against future risk.

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Canadian crude still hot despite U.S. shale: BoC

TIM KILADZE

Canadian oil sands producers shouldn’t fret about the shale oil revolution unfolding south of the border. The Bank of Canada predicts their product will still be swooned over.

Since the shale oil supply started to skyrocket five years ago, soaring to three million barrels per day, there has been a growing fear that Canada’s heavy oil will be run out of favour because it is much more labour-and-capital-intensive to produce.

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Can Fairfax’s big bet in Greece match Irish payouts?

JACQUELINE NELSON

Fairfax Financial Holdings Ltd. has told investors it likes Greece, and on Tuesday made a big bet on the recovering nation. Now, investors may be hoping for some Irish luck.

Fairfax is part of a consortium that is propping up Greece’s third-largest lender with a €1.3-billion ($2-billion) investment. Eurobank Ergasias SA, which was bailed out by the Greek government’s Hellenic Financial Stability Fund, will issue new shares to these backers. They will collectively become the bank’s largest shareholder.

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Scotiabank’s executive team says goodbye, again

TIM KILADZE

Bank of Nova Scotia is losing another top executive. Chief operating officer and vice chairman Sabi Marwah – a highly respected veteran, and prankster, within the bank – is retiring at the end of May, capping off a 35-year career at the institution.

Mr. Marwah’s departure extends the growing list of executive changes at Scotiabank since Brian Porter replaced the retiring Rick Waugh as chief executive officer. Other changes in the past year include the departures of chief risk officer Rob Pitfield, marketing head Duncan Hannay and Scotia Capital co-head Steve McDonald.

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Orange’s next activist target: Newalta

BOYD ERMAN

Orange Capital LLC, the activist investor that successfully pushed for change at InnVest REIT, is looking to go two-for-two on successful Canadian campaigns in just a few months.

Newalta Corp. last week said that it was nominating two new directors after consulting with “certain major investors, including New York-based Orange Capital LLC, and respected their views” on board renewal.

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Private equity players pursue ‘Chuck E. Cheese for adults’

TIM KILADZE

You aren’t alone if your first reaction to the rumour that private equity players are circling arcade and restaurant chain Dave & Buster’s Inc. is one of confusion.

Dave & Buster’s, a U.S. chain with two Canadian locations, is often described as a grown-up version of Chuck E. Cheese. The chain offers arcade games and food – and most importantly, it serves alcohol.

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CPPIB closes deal, sells Australian commercial property

JANET McFARLAND

The Canada Pension Plan Investment Board has closed a large real estate deal in Australia and says it has already sold four of the properties it acquired, raising funds to reduce its required equity investment in the portfolio.

CPPIB has partnered with Dexus Property Group to buy an Australian property portfolio controlled by the Commonwealth Bank of Australia for about $3.7-billion (Australian) or about $3.8-billion (Canadian). The giant pension fund, which manages the assets of the Canada Pension Plan, said its 50-per-cent equity investment in the deal was $1.9-billion.

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Why Ottawa is raising mortgage insurance premiums

TARA PERKINS

Why are mortgage insurance premiums about to rise in Canada for the first time since the 1990s? The new guidelines that the country’s financial watchdog issued Monday offer some insight.

Banks are required to obtain insurance when they sell a mortgage to a customer who has a down-payment of less than 20 per cent. The mortgage insurance pays the bank back if the customer defaults on the loan. The insurance is there to protect the banks, but the banks almost always pass the cost of the insurance on to the customer.

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At BHP, the stars align for second run at Potash Corp.

BOYD ERMAN

A window is opening for BHP Billiton Ltd. to once again try a takeover of Potash Corp. of Saskatchewan.

Speculation is intense in the fertilizer industry that BHP may mount another campaign to win over Saskatoon-based Potash Corp. after being shot down in 2010. It failed the federal government’s murky “net benefit test” after a strong push from a Saskatchewan government that opposed the transaction.

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Callidus IPO increased amid hot demand

BOYD ERMAN

Another initial public offering has found a very receptive audience, as alternative lender Callidus Capital is now going to sell $250-million of stock after strong demand from investors.

Callidus is expected to announce the final pricing for the IPO later Monday. There was about $1.1-billion of demand for the transaction, allowing Callidus to increase the offering size from the original plan of $175-million to $250-million, said a person familiar with the sale.

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HudBay CEO disputes Augusta’s claims of rival bidders

RACHELLE YOUNGLAI

HudBay Minerals Inc. is asking Canadian regulators to get rid of Augusta Resource Corp.’s defense plan so that it can acquire Augusta’s copper project in Arizona.

HudBay already owns a 16 per cent stake in Augusta. But the Toronto-based company is blocked from acquiring more shares because Augusta adopted a shareholder rights plan, also known as a poison pill, when it found out HudBay had accumulated such a large position.

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Why CIBC must convey a clear-cut capital strategy

TIM KILADZE

Canadian Imperial Bank of Commerce executives must be exasperated.

Despite trouncing rival Canadian lenders on everything from core earnings growth to return on equity since the end of the credit crisis, CIBC’s shares still trade at a lower price-earnings multiple relative to other bank stocks.

This may seem like a petty issue. Who cares about a simple P/E multiple when your stock’s gained 22 per cent in the past year? But in the banking world, a fat multiple is a sign of sheer strength.

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Rajan rolls out red carpet for foreign banks in India

KEVIN CARMICHAEL

Canada’s banks generally have shied away from India. An onerous regulatory system and unfamiliar business culture always made a move into what is now the world’s 10th-largest economy something short of the slam-dunk investment that Bay Street’s famously cautious bankers like.

It may be time for them to take another look – if they aren’t doing so already. Raghuram Rajan, India’s central bank governor, is leading one of the most forceful efforts to overhaul the Indian banking system in the country’s history. He wants it known that outsiders are welcome.

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Energy borrowing booms in U.S., sparks new lending guidelines

TIM KILADZE

A boom in lending to energy companies in the United States has the country’s banking regulator worried that the meteoric rise will lead to loose underwriting standards.

Because the U.S. energy sector has exploded in recent years, driven by shale oil and gas production, banks are piling into the market. Heavyweights such as Bank of America Corp. and JPMorgan Chase & Co. have long lent to energy companies, and now their rivals are bulking up, with Associated Banc-Corp more than doubling its oil and gas portfolio in 2013 and Wells Fargo & Co. buying BNP Paribas SA’s energy lending business in 2012.

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Real Ventures closes half of $100-million fund

ANWAR ALI

Real Ventures thinks the time is right to give more emerging entrepreneurs a shot at success. They now have the cash do it: The Montreal-based early-stage venture capital investors have just closed the first half of what’s expected to be a new $100-million fund.

Teralys Capital, backed by Caisse de dépôt et placement du Québec, is injecting half of the $50-million that’s ready to invest. Fier Partners, the federal government (via its $400-million Venture Capital Action Plan announced in January 2013), Real’s founders and a number of undisclosed angel investors round out the other contributors.

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Increasing market confidence could boost M&A activity: Ernst & Young

JACQUELINE NELSON

Increased confidence in global market stability is encouraging more companies to think about making acquisitions, a survey from Ernst & Young LLP has found.

Six months ago, one third of Canadian executives surveyed by E&Y planned to pursue an acquisition. In their most recent survey, that has increased to 41 per cent.

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Chairman and CEO of Goldman Sachs Canada to retire at end of the year

BOYD ERMAN

One of Goldman Sachs Group Inc.’s most experienced bankers is set to retire after almost four decades at the firm, most recently as head of the Canadian branch of the famed securities firm.

Goldman said in an internal memo that Jack Curtin, the chairman and chief executive officer of Goldman Sachs Canada, will step down at the end of the year. The firm is bringing home an experienced Canadian, Peter Enns, to take his place.

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National Bank Financial names new co-CEO

BOYD ERMAN

National Bank Financial has a new co-chief executive, elevating long-time head of corporate development and governance Brian Davis to the role of running the investment dealer.

He will team with longtime co-CEO Luc Paiement, who has focused on running the wealth management side of NBF. Mr. Davis’s job will be day-to-day oversight of the operations of the wholesale banking business of lending, underwriting, advisory and trading.

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Calgary energy researcher leaves post

JEFFREY JONES

A Calgary energy researcher who’s become an prominent voice in the debate over oil sands development and transportation is leaving her U.S.-based consultancy after seven years.

Jackie Forrest, director of global oil for IHS CERA, is taking a short mid-career break before pursuing her next opportunity, one she hopes allows her to resume her role as a commentator on energy issues.

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Big money managers reveal heavy demand for new deals

TIM KILADZE

A sudden resurgence of institutional demand for equity financings is making it much easier for companies to raise money.

Although the S&P/TSX Composite Index has been on a wild run since June 2013, climbing nearly 20 per cent in that period, it wasn’t until recently that scores of deals started flying off the shelves. For the longest time, big money managers were extra selective about which deals they would participate in.

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Onex CEO awarded $129.3-million in 2013

JACQUELINE NELSON

Onex Corp.’s founder Gerry Schwartz earned $129.3-million (U.S.) as leader of the company in 2013, in a year where compensation for three other executives at the investment firm topped $17-million each.

Mr. Schwartz’s total from 2013 amounts to the biggest compensation package in Canada’s recent history, and far exceeds the largest pay package in Canada in 2012. Hunter Harrison, the turnaround leader at Canadian Pacific Railway, was the highest paid CEO that year, receiving $49.1-million including salary, options and bonuses.

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'Short Canada' strategy gains traction among global investors

KEVIN CARMICHAEL

The “short Canada” trade has reached a fork in the road. One path is the one that it’s already on: A contrarian play deployed by relatively few fund managers willing to bet against Canada’s financial institutions and government debt. The other: Mainstream, which would see a wave of big-money investors join those hoping to profit from a sharp decline in a key sector of the Canadian economy.

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TD names new foreign-exchange head

The Toronto-Dominion Bank is naming bank veteran Michael Twaits as the head of global foreign exchange, after the departure of Michael Gibbens from the post earlier this week.

A TD official confirmed that the news was announced internally on Thursday.

Until today, Mr. Twaits was the London-based head of the TD’s foreign-exchange and fixed-income operations in Europe and Asia. Mr. Gibbens stepped aside on Tuesday for personal reasons.

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Becoming a hub for Chinese money is tougher than it seems

NATHAN VANDERKLIPPE

On June 22, banking leaders in the U.K. and China signed a deal intended to open a torrent of new London trade in the RMB, the Chinese currency whose global importance is rising nearly as fast as China’s. It was, the BBC said, a 200-billion yuan ($35.1-billion) three-year contract “likely to boost trade between the U.K. and China in the yuan.”

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Teachers said to be close to solving Telesat takeover conundrum

BOYD ERMAN

The difficult relationship between the owners of Telesat Holdings Inc. may finally be resolved by a huge takeover bid from one of Canada’s biggest pension funds.

The satellite operator drew interest from two of Canada’s largest pension funds, Ontario Teachers’ Pension Plan and Canada Pension Plan Investment Board (CPPIB), said a person familiar with the situation.

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Fairfax CEO Watsa bearish on tech – except for BlackBerry

JACQUELINE NELSON

Canada’s most renowned value investor believes the market’s infatuation with Twitter and Facebook will “end in tears,” but sounded a new note of optimism about the outlook for battered BlackBerry Ltd.

Prem Watsa, chief executive officer of Fairfax Financial Holdings Ltd., has invested hundreds of millions in the smartphone maker and indicated it is on track to stanch its financial bleeding within a year.

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Teachers to oppose Coke’s proposed employee equity distribution plan

JANET McFARLAND

The Ontario Teachers’ Pension Plan is opposing a new equity plan at Coca-Cola Co., saying it will vote against the company’s request for authorization to issue up to 500 million shares to employees in coming years.

The pension fund, which invests $141-billion of assets on behalf of Ontario’s teachers, said this week that it will not support Coca-Cola’s new equity grant request, which has been the subject of an opposition campaign launched last month by U.S. investment fund Wintergreen Advisers LLC.

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