Streetwise reporter Niall McGeePeter Power/The Globe and Mail
DEAL OF THE DAY
Catalyst Capital raises $1.5-billion (U.S.) for new distressed debt fund
Catalyst Capital Group Inc. has raised $1.5-billion (U.S.) from investors for a new fund that will invest in distressed debt.
The specialized Canadian private equity firm was started in 2002 and this will be its fifth such fund. Distressed debt investors such as Catalyst typically invest in companies that are in bad financial shape – sometimes even those that have filed the Companies' Creditors Arrangement Act. In June, Catalyst sold its debt holdings in teetering telecom company Mobilicity at a substantial profit to Rogers Communications Inc.
Globally, however, the distressed debt market has been struggling in 2015. (See next article).
Seperately, Catalyst's chief executive officer, Newton Glassman, is currently engaged in a spat with Greg Boland, a Toronto hedge fund manager. Mr. Glassman claims that Mr. Boland is partly responsible for the poor performance of alternative lender Callidus Capital Corp., an investment in which Catalyst holds a big stake. Callidus went public in 2014 and the shares have traded down since the initial public offering. Mr. Glassman claims Mr. Boland has been sullying Callidus's name behind his back. Mr. Boland recently countered that he "has no interest" in the affairs of Callidus. Press release
Bond predators humbled by distressed bets
The cleverest predators of the bond market have suffered a humbling this year, after a heap of high-profile bets have gone awry. "It's been humbling for most folks," says Edwin Tai, a distressed debt portfolio manager at Newfleet Asset Management. "Seven years of easy money has made even the most disciplined investors stretch a little." Story (paywall)
MERGERS AND ACQUISITIONS
Polish energy company PKN buying Kicking Horse Energy for $293-million
Poland's top refiner, state-controlled PKN Orlen, said on Tuesday that it has launched takeover bids for Canada's Kicking Horse Energy and Nasdaq-listed FX Energy, worth a total of over $300-million. PKN has offered Kicking Horse's shareholders $4.75 a share in an all-cash deal, valuing the firm's equity at $29-million. Story
Denison Mines, Fission Uranium call off merger
Canadian uranium miners Denison Mines Corp. and Fission Uranium Corp. said they have terminated their $483-million merger agreement due to opposition from Fission's shareholders. Story
AB InBev, SABMiller brew up $100-billion (U.S.) deal
The world's two biggest brewers agreed on Tuesday to create a company that makes almost a third of the world's beer after SABMiller accepted an offer worth more than $100-billion (U.S.) from larger rival Anheuser-Busch InBev.
The SABMiller board said it would give its blessing to a fifth proposal from its sole larger rival. If it goes through, the deal would rank in the top five mergers in corporate history and be the largest takeover of a U.K. company. Story
Wells Fargo to buy $32-billion (U.S.) in GE assets
Wells Fargo & Co. agreed to buy about $32-billion (U.S.) in assets from General Electric Co. and take on about 3,000 employees as the industrial giant retreats from financial services.
The sale includes commercial distribution, vendor and corporate finance units from GE Capital, San Francisco-based Wells Fargo said Tuesday in a statement that didn't include additional terms. The transaction is expected to be completed in the first quarter of 2016 and would allow GE's finance unit to return about $4.2-billion of capital to its parent, GE said in a separate statement. Story
SCA agrees to buy U.S. tissue firm Wausau Paper for $513-million (U.S.)
Swedish paper and hygiene products maker SCA said on Tuesday that it had agreed to buy U.S. tissue maker Wausau Paper Corp for $513-million (U.S.) in cash, in another step to focus on products ranging from tissues to incontinence protection. Story
NICE LITTLE EARNER
RBC lands piece of Dell's investment banking business
Royal Bank of Canada's investment arm is one of eight investment banks that landed a piece of Dell's Inc.'s investment banking business in its mega deal to buy EMC. Corp.
On Monday, Dell announced that it was buying the data storage company for a mammoth $67-billion (U.S.). RBC is providing a portion of the debt financing to Dell and acted as one of its financial advisers.
Bankers typically get a commission of about 1 per cent for advising on a deal size of $100-million to $1-billion. But because this deal is many multiples higher, the commission will likely be substantially lower – perhaps as low as 0.60 per cent.
In a multibank syndicate, investment banking advisory fees are rarely divvied up equally, and the various portions are almost never made public. According to an investment banking source, there are even occasions where an investment bank could listed on the press release as an adviser, but may earn nothing on a deal. Then why bother at all, I hear you ask? Prestige and league table points.
The big money on this deal will be made not on the advisory business, but on the debt underwriting. Dell is borrowing $50-billion to get this deal done. Commissions on a debt financing of this size are typically around 2 per cent. You do the math. Story
INSIGHT
The costs that come with rising to the top on Bay Street
Get a few drinks in some veteran bankers, lawyers or consultants and many will say the same thing: The higher you rise, the more administrative your job becomes. Going in, you may dream of advising on top deals, but once you're in the hot seat, you spend much of your time trying to stifle internal squabbles and putting clients' needs before yours – and before your children's. Story
Got any Bay Street buzz? If you have any story suggestions for the Daily Deal Roundup, e-mail us at deals@globeandmail.com or nmcgee@globeandmail.com.
Niall McGee