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On a (chicken) wing and a prayer: How Priszm faltered Add to ...

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Priszm in court protection Priszm Income Fund , better known for the fast-food outlets they operate, filed today for bankruptcy protection under the Companies' Creditors Arrangement Act.

And just about everyone at the upper levels quit, including John Bitove, who founded the Toronto Raptors, and the trustees and directors, Globe and Mail writers Jeff Gray, Tim Kiladze and Steve Ladurantaye report. (The Raptors haven't been doing much better, in terms of how they're playing.)

All its operations will continue, it said.

Priszm, franchisee of several hundred KFC, Taco Bell and Pizza Hut outlets in Canada, said in a statement it filed for court protection to "facilitate the sale of its restaurants." It has already struck a deal to sell more than 230 restaurants in Ontario and British Columbia, and said it also has received "a number of expressions of interest" for those that remain.

The sale of the outlets was sparked by an unmanageble debt load. In December the company had $65-million of long-term debt maturing, but mid-month the trust did not pay interest on it to its senior lender. Although the restaurant sales were supposed to help solve this problem,

It was clear when the sale was first announced the company would still be about $20-million in the hole in December alone.

The debt problems couldn't have come at a worse time because Priszm was in the midst of upgrading its locations that did not meet the image standards of Yum! Restaurants Canada, which owns the franchise rights.

In an interview conducted last month, Mr. Bitove acknowledged that KFC had been a tough sell in Canada, with franchise agreements that require that capital be spent upgrading the stores.

Analysts are also looking today at Scott's Real Estate Investment Trust , where Priszm is the biggest tenant.

"We are hopeful that the potential sales will occur and that Scott's will end up with stronger tenants and more secure revenue (Scott's is also looking into replacing the tenant in some locations," said Desjardins analyst Jeffrey Roberts.

"Until the issues with Priszm are resolved, we continue to rate the units of Scott's REIT Hold-Above average risk with a $7.60 target price."

Expect volatility in dollar BMO Nesbitt Burns expects some volatility in the Canadian dollar over the course of the federal election campaign, but it's anyone's guess whether it ends up or down.

Economists Michael Gregory and Benjamin Reitzes looked at the past 12 federal elections, since the loonie began floating in 1970, studying both the change in the currency and the volatility.

They found no real discernible pattern, though there was a slight one when the government changed. They also found that the net change in the currency often masked marked moves during a campaign.

Among their conclusions in a report today:

  • It's basically a "coin flip" whether the loonie will strengthen or weaken. And, remember, there are a lot of global factors at play here.
  • First moves can be deceiving. "Whatever path the loonie initially follows, there is a good chance it might finish the campaign on an opposite path."
  • "The odds are that volatility will increase, if history is any guide, and history has been a perfect guide since the mid-1980s."
  • "The Conservatives have already laid out their deficit-reduction schedule, and the Liberals have indicated they will unveil their schedule in their soon-to-be-released election platform," the BMO economists said.

"What markets are looking for from both is credible deficit-reduction strategy. Given that Canada's position of relative fiscal strength globally is among the factors attracting record foreign capital inflows, increased uncertainty on this front could stoke Canadian dollar weakness and volatility. The polls could easily change though, which is precisely the point. It's the uncertainty of the outcome, not the result per se, that whipsawed the loonie in the past."

For Mr. Gregory's earlier research on the dollar and elections, see our slideshow.

Stronach leaves Magna helm Frank Stronach is stepping down as chairman of Magna International Inc. , ending more than 50 years at the helm of the company he founded in 1957, Globe and Mail auto writer Greg Keenan reports.

Mr. Stronach, 78, will stay on the board as honorary chairman and founder, says the circular for Magna's annual meeting issued Thursday.

The move is the latest in a slow disengagement by Mr. Stronach from the company he founded as a tool and die shop that has since grown to become a global auto parts powerhouse.

Canada's economy kicks off year in fine fashion Canada's economy expanded at a healthy pace of 0.5 per cent in January, driven largely by a manufacturing sector that is withstanding the impact of a strong loonie and benefiting from the U.S. recovery.

January's growth in gross domestic product matched that of December, and marks a strong kick-off to the first quarter of the year.

The healthy showing comes amid an election campaign that Stephen Harper says is all about the economy, though his political opponents have added ethics into that mix. But while the economic rebound now appears on solid ground, the jobless rate remains at a high 7.8 per cent, and is expected to remain high through next year.

Normally, today's reading by Statistics Canada, coupled with other economic indicators, would prompt economists to call for an earlier interest rate hike by the Bank of Canada. But Governor Mark Carney is not expected to even signal a hike in his benchmark rate when the central bank next meets given the optics of doing so during an election campaign.

Still, the overnight rate will inevitably rise later this year from its current level of 1 per cent, possibly in July, Toronto-Dominion Bank forecast.

"We remain of the view that July is the most opportune time for the next hike," said TD senior economist Pascal Gauthier.

"Once engaged, the hiking cycle will likely persist at a gradual pace of a quarter-point at each meeting for the remainder of the year, bringing it to 2 per cent by year-end. Looking out further, unless a sizable downside risk materializes between now and then, the overnight rate will likely reach 3 per cent by year-end 2012."

Inflation spikes in Europe The 17 nations that make up the euro zone are bracing for an interest rate next week after a fresh reading today estimated that inflation in the monetary union spiked this month to 2.6 per cent.

That measure by Eurostat makes it all but certain that the European Central Bank chief Jean-Claude Trichet will hike his policy rate next week despite the fact that many of the member countries are in deep trouble and can ill afford higher interest rates.

"The key now will be how hawkish Trichet will continue to be in the aftermath of the likely decision to increase the benchmark rate next week," said CMC Markets analyst Michael Hewson.

"Will he reinforce his 'strong vigilance' call in his monthly press conference after any decision next Thursday, and signal the likelihood of further rate rises down the track? Given the precarious nature of the peripheral European countries finances, any rate hike will further widen the gulf between northern European countries and the periphery."

The latest numbers from the euro zone show just how wide the chasm has become. Portugal, for example, revised its deficit figures today, saying its budget shortfall last year was 8.6 per cent of gross domestic product, much more than the original projection of 6.9 per cent.

Compare Portugal's troubles, and its slide toward a bailout, to Germany, which said today that its jobless rate, while still high, dipped to 7.1 per cent on a seasonally-adjusted basis, the lowest since German reunification in 1990.

Bombardier profit takes off Bombardier Inc. shares surged today after the aerospace and train giant posted a robust fourth-quarter net profit of $325- million (U.S.) or 18 cents per share. That compared to a profit of $179-million or 10 cents a share in the same period last year, The Globe and Mail's Bertrand Marotte reports from Montreal.

The Montreal-based plane and train maker said its aerospace division took in 88 net orders in the quarter ended Jan. 31, 2011, up considerably from 33 in the previous year.

"This past year has been challenging yet positive", chief executive officer Pierre Beaudoin said in a statement.

"...In Aerospace, we seem to have turned the corner with business jet orders picking up substantially in the fourth quarter. To further strengthen our product leadership position, we continued to make progress on the development of new products within our business and commercial aircraft segments, both of which have healthy long-term growth prospects."

Desjardins analyst Benoit Poirer, whose price target on the stock is $8, said the results were "significantly above expectations."

BlackBerry strong overseas Almost 55 per cent of BlackBerry users are now outside North America, highlighting the international strength of Research In Motion Ltd. RIM-T as it battles the likes of Apple Inc. and Google Inc. .

Referring to the information in an annual filing by RIM, UBS Securities Canada analysts said in a report today that, with "headwinds" on new North American subscribers, though a strong international showing, they remain "cautious" as RIM targets earnings per share of $7.50 (U.S.) in its 2012 fiscal year.

"Strong acceptance of new products coming later this year (Storm 3, Torch 2, Curve Touch, PlayBook), will be critical for [RIM]to get to its FY12 $7.50 EPS target," they said.

As Globe and Mail technology writer Omar El Akkad reported last week, even as RIM competes against Apple's iPhone and iPad, and phones powered by Google's Android, at the high end of the smart phone market, the company has found more success in lower-cost phones and international markets.

Canaccord boost Lundin target Canaccord Genuity analysts today boosted their outlook for shares of Lundin Mining Corp. after its broken marriage proposal with Inmet Mining and its pursuit by Equinox Minerals Ltd.

The analysts hiked their target to $9.50 from $8.75.

"Given the emergence of the hostile bid by Equinox, we were not surprised to see the 'merger-of-equals' transaction with Inmet fall apart," Canaccord said.

"Lundin is now in position to formally explore all possible strategic alternatives, which includes finding a white night and/or breaking up the company ... Given the relatively high quality of Lundin's asset base, specifically with Tenke and Neves-Corvo, we anticipate that significant interest from alternative suitors is likely to emerge."

Air Canada adopts poison pill Air Canada has adopted a so-called poison pill, or shareholder rights plan, though the airline says the move is not in response to any takeover overtures.

"The plan has been designed to give the board and shareholders more time to fully consider any take-over bid and to provide the board with more time to pursue, if appropriate, other alternatives to maximize shareholder value," Air Canada said late yesterday.

In Economy Lab today

Blaming high food prices on corn-based ethanol is appealing because it offers up the vision of an easy fix: stop diverting food to fuel, and food prices will fall. Unfortunately, the problem is much deeper, Warren Mabee writes.

In Personal Finance today

The CRA is asking some high net worth individuals for details if their affairs are more complicated, writes tax pro Tim Cestnick.

Severe rainstorms, old infrastructure and fancy finished basements pushing value of claims higher, a property insurer tells Rob Carrick.

If you're a renter saving up for a home purchase, or just looking to free up some money to put toward other goals, consider these options, says Angela Self.

From today's Report on Business

Follow on Twitter: @michaelbabad

 
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