These are stories Report on Business is following Thursday, March 22, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Greece details fees It cost Greece some €40-million in fees - that's more than $50-million (U.S.) - to stick it to its bondholders.
The Greek finance ministry disclosed the amounts it's paying to lawyers and other advisers for their work on the bond swap, the world's biggest ever sovereign debt restructuring, Bloomberg says.
Athens doesn't see it as sticking it to bondholders. It calls it a "voluntary" effort by the group, which took huge losses on the paper, made a huge dent in the country's debt and paved the way for more bailout money, though some observers believe a further rescue will still be needed.
According to Bloomberg, fees to Lazard Ltd. have a ceiling of €25-million. The law firm on the deal, Cleary, Gottlieb Steen & Hamilton, has taken in €6.5-million so far. Those closing the deal, already pegged as Deutsche Bank and HSBC Holdings, get up to €4-million.
Foreigners play with Telus shares Canada's Telus Corp. says foreign investors appear to be fiddling with its shares, a move that could push the company past non-Canadian ownership limits after it announced that it would convert its non-voting stock to common.
The Vancouver-based telecommunications company, one of Canada's major players, said today some 24 per cent of its common stock was believed to be in foreign hands as of yesterday. But when applications for share purchases by non-Canadians are taken into account, and if approved, foreign ownership would rise by more than 35 million shares, taking it above 33 1/3-per-cent limit.
"Accordingly, the company is reminding non-Canadian investors of its reservation procedures," it said in a statement. "Telus is examining the situation and wishes to inform the market that its transfer agent may not be able to approve all the pending or new applications."
The problem, Telus said, appears to be related to a plan, announced a month ago, to convert non-voting shares to common stock. In the wake of the announcement, the company believes arbitrage investors are using "short-term, event-driven trading tactics" to profit, even though they have no concern about the long-term stock price.
Telus thinks the foreign investors - it didn't say who but presumably they're hedge funds - are buying the common stock and shorting the non-voting shares. That could suggest those investors are betting the conversion proposal won't go through at a May 9, or that the company may change the exchange ratio from one-for-one to something less.
"The voting shares traded at a 4.5-per-cent to 5-per-cent premium on average over the non-voters over the last three years," said CanaccordGenuity analyst Dvai Ghose. "This spread narrowed to essentially zero after Telus' Feb. 21 share collapse proposal announcement, but has since widened to approximately 1.3 per cent as some arbitrage traders now assume that Telus may not receive the two-thirds approval required by voting shareholders."
Telus said the "sole purpose" of the foreign investors appears to be aimed at influencing the conversion and boosting that spread for a quick profit.
"Since 2004, the level of non-Canadian ownership of common shares has been generally below 20 per cent and the current level is an exceptional development," the company said.
It looks like foreign investors are buying the common and presumably shorting the non-voting "to either potentially scuttle the company's proposed dual-share collapse or, at the very least, bet on a widening of the spread between the two share classes," said analyst Adam Shine of National Bank Financial.
Given that the plan needs two-thirds support, it wouldn't succeed if all the non-Canadian shareholders opposed it, Mr. Shine said.
According to the analyst, Telus could respond by:
- Refusing to register a transfer of voting shares to a foreigner.
- Forcing a foreigner to sell voting stock.
- Converting voting to non-voting.
- Suspending voting rights for those shares in inverse order of their registration.
"It now remains to seen which, if any, of these rights Telus may need or choose to exercise to maintain its compliance with foreign ownership restrictions," Mr. Shine added. "At the very least, not all of the current demand by non-Canadians for common shares will be fulfilled."
Mr. Ghose believes the conversion will be approved at the May 9 vote, and that Telus won't change the plan.
"In our view it is highly unlikely that Telus will come back with an amended offer - the outcome appears binary," he said. "Either the vote will be accepted and Telus voting and non-voting shares will trade at par from May 9 or it will be rejected and we will go back to a 4.5-per-cent to 5-per-cent premium for the voters."
Obama pumps pipeline President Barack Obama wants to clear a path for the new plan by TransCanada Corp. for the southern leg of its controversial Keystone XL pipeline.
"Today I’m directing my administration to cut through the red tape, break through the bureaucratic hurdles, and make this project a priority,” the president said at a stop at the hub of Cushing, Oklahoma.
The U.S. nixed TransCanada's original plan for the pipeline, forcing the company to re-apply and skirt an environmentally sensitive region in Nebraska. While TransCanada still plans that project, which would run from Canada to the U.S. Gulf coast, it has since said it will first build a southern portion in the U.S. alone.
As The Globe and Mail's Shawn McCarthy reports, the president is on a swing through the midwest to fight back against Republican attacks on his energy policy amid high pump prices.
Markets sink Weak economic readings from China are again driving global markets lower, pushed along by similarly soft data from the euro zone.
Investors have been fretting over China, in particular, and today's manufacturing numbers only added to the angst. A private-sector purchasing managers index, or PMI, dipped to 48.1 this month, down from 49.6 in February and still below the key 50 level that separates contraction from expansion.
Europe's manufacturing numbers were also soft.
"Risk is being taken off the table this Thursday morning, inspired by a bout of bad economic news," said senior economist Jennifer Lee of BMO Nesbitt Burns.
"It started in the Asian session, with fresh worries about China’s economic growth stoked after the private sector’s measure of manufacturing showed another contraction this month," she said in a report. "... This points to further stimulative policy efforts coming from the [People's Bank of China]"
Lululemon profit climbs Lululemon Athletica Inc. posted gains across the board in its fourth quarter, and reached a milestone for the year in revenue.
The yogawear retailer said today it earned $73.5-million (U.S.) or 51 cents a share, diluted, in the quarter, compared to $54.8-million or 38 cents a year earlier. Revenue surged more than 50 per cent to $371.5-million, and same-store sales, a key measure for retailers, climbed 26 per cent.
Lululemon also boasted that its sales hit the $1-billion mark for the year.
As always with this company, it went somewhat beyond the traditional corporate report.
"Reaching a billion dollars in revenue is clearly an important milestone that as a company we can all be very proud of," said chief executive officer Christine Day. "But far more important than the number itself are the beliefs, values, culture and people that achieved it. We really are so much more than our numbers; it is the everyday actions of our dedicated team that translates into an unparalleled guest experience and allows us to achieve our ultimate goal of elevating the world."
As The Globe and Mail's Marina Strauss reports, Lululemon also warned that its profit margins will be pinched this year as it focuses on its strength of developing new fabrics and technical offerings to give its merchandise an edge.
Lululemon projected revenue of between $265-million and $270-million and earnings per share of 28 cents to 29 cents for the first quarter of this year. For all of 2012, it expects revenue of about $1.3-billion and earnings per share of $1.50 to $1.57.
Retail sales disappointing Canadians are putting more money into their cars, but just about holding the line otherwise.
Retail sales in Canada increased 0.5 per cent in January, Statistics Canada said today. But that was driven by a 4.6-per cent jump in sales of new cars, the best gain in three years, along with a 2.8-per-cent jump in used cars and a 1.8-per-cent rise in parts and accessories.
If you remove autos from the measure, retail sales actually slipped by 0.5 per cent. Just five of the 11 industries measured posted increases in January, though they accounted for more than half of total sales.
Clothing and accessories shops were also among the winner, led by shoe stores with a gain of 4.2 per cent. Sales among building material and garden equipment slipped more than 5 per cent, but the weather wasn't as nice in January as it is now. Grocery stores also slipped, as did electronics and appliance outlets.
"In spite of the broad-based weakness, volumes were up 0.3 per cent, although much of that comes from the autos sector where a low markup usually translates into a weak positive impact on GDP," CIBC World Markets economist Emanuella Enenajor said of the overall report.
"Taking together the month’s soft factory, wholesaling and retail print, we expect January to post a decline in activity - suggesting a soft start to the first quarter of the year."
EI benefits rise The number of Canadians collecting regular jobless benefits is climbing again, notably in the province of Quebec.
The number of people receiving regular benefits under Canada's Employment Insurance program rose in January by 2.3 per cent, or 12,400, to 561,100, Statistics Canada said today.
That brings the overall level back to about the levels in mid-2011.
Claims rose in eight provinces, the agency said, with the heftiest rise in Quebec.
Initial and renewal claims climbed by 1.6 per cent, led by a 4.4-per-cent increase in Quebec. That was followed by Ontario, at 3.9 per cent, and New Brunswick, at 2.8 per cent. Again illustrating Canada's regional divisions, claims fell in the western provinces of Alberta, British Columbia and Manitoba, and the eastern province of Nova Scotia.
In the United States, signs continue to point toward a labour market on the mend, though with a long way to go.
Claims for initial jobless benefits fell last week by 5,000, the lowest in four years.
Tax us more, doctors say A group of doctors is taking a page from Warren Buffett's tax-the-rich call, urging the Canadian and Ontario governments to tax higher-income earners more. I hate extra taxes, but I like their argument and applaud their efforts. (For full disclosure, I realized after I first wrote about this that one of the doctors involved is my physician.)
Doctors for Fair Taxation is calling for additional taxes on people earning more than $100,000. You'd be hit with an additional 1 per cent if you earn between $100,000 and $170,000, 2 per cent if you earn up to $640,000, and 3 per cent for up to $1.85-million. Above that it would be 6 per cent.
"We feel that this is a moral argument," Dr. Michael Rachlis, who founded the group that so far boasts more than 50 physicians, told The Canadian Press.
"We cannot talk about throwing people out of work and cutting needed programs for people," said Dr. Rachlis, an associate professor at the University of Toronto.
"If the situation is that dire that governments are really feeling that that should be done, it seems to me that the only way to think of that is to tax higher-income earners who've seen their taxes fall a lot."
The group projects that the Canadian government could take in some $3.5-billion from the plan, and the province of Ontario $1.7-billion.
"Our group considers higher taxes a small price to pay for a more civilized Canada," Dr. Rachlis said.
Their tag line is: "Doctors to governments: Tax us. Canada is worth it!"
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