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Streetwise

News and analysis on Bay Street and the world of finance
available exclusively to subscribers of Globe Unlimited

Entry archive:

Streetwise newsletter: Last week’s best reads: Home Capital, Manulife, RBC

Beware of the booming market for cannabis companies

Remember when the last boom in junior mining stocks got frothy?

Let me refresh your memory: Unproven companies attracted big valuations; insiders loaded up on stock for pennies a share ahead of deals; investment bankers took personal stakes in companies they advised. (Willis) Story

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Streetwise newsletter: Banks beat expectations; Manulife’s new game plan

TD, RBC, CIBC exceed second-quarter profit expectations

Neither a jittery Canadian housing market nor a suddenly wary U.S. business climate could dampen second-quarter performance at three of Canada’s largest banks, but both issues will continue to be key concerns in the coming months. Story (James Bradshaw, Christina Pellegrini and Niall McGee)

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A tale of two results at Royal Bank

CHRISTINA PELLEGRINI and NIALL McGEE

Record-breaking fees from underwriting and advising on deals powered a sharp bump in profit at RBC Dominion Securities Inc. during the second quarter, offsetting lacklustre results in trading that have been widespread in the sector.

This tale splitting the two sides of the house at Royal Bank of Canada was echoed this week at the capital markets arms of Canadian Imperial Bank of Commerce and Toronto-Dominion Bank, which also reported results Thursday, as well as at Bank of Montreal, which disclosed earnings on Wednesday.

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Streetwise newsletter: BMO kicks off bank results, sees boost from capital-markets arm

BMO kicks off bank results with profit boost, dividend hike

Bank of Montreal boosted profit for the fiscal second quarter, hiked its dividend and held its mortgage portfolio stable in a volatile market, but still suffered a letdown as slower-than-expected U.S. business activity dragged on the bank’s growth. Story (James Bradshaw)

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BMO sees boost from capital-markets arm

CHRISTINA PELLEGRINI

The capital-markets arm of Bank of Montreal reported a 12-per-cent jump in earnings in its second quarter, buoyed by record revenue in underwriting and advisory work that helped the bank overcome lacklustre results in trading.

Net income for BMO Nesbitt Burns Inc. increased to $321-million during the three months ended April 30, from $287-million during the same period in 2016, the bank said on Wednesday in a statement. Revenue rose 13 per cent to $1.2-billion.

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Law departments beginning to change the way they do pro bono

LEXPERT

At the Toronto District School Board’s “Oasis Skateboard Factory,” students can earn high-school credits by creating their own brand and running a skateboard business. It’s here where the ability to tap into the wisdom of mentors can work wonders. No surprise, then, that students are eager to tap into the collective expertise of volunteers from the Weston Group Legal, through the pro bono Start-Up Youth program.

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Kinder Morgan prices IPO below previous expectations

Jeffrey Jones and Jeff Lewis

Kinder Morgan Inc. and its bankers have tempered their hopes for pricing a $1.75-billion initial public offering of shares in the pipeline company’s Canadian unit.

Kinder Morgan Canada, best known for its Trans Mountain oil pipeline in Alberta and British Columbia, has priced the shares at $17 apiece, down from a previously expected range of $19 to $22, according to a source familiar with the issue. The expected proceeds remain the same, making it one of the largest Canadian IPOs in recent years.

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Canadian asset managers feel heat of looming European financial reforms

CHRISTINA PELLEGRINI

Canadian asset managers are fretting over if – and how – they should respond when a sweeping set of European financial reforms comes into effect in 2018.

The new regulations, which are referred to by the acronym MiFID II, were born in response to the 2008 financial crisis. They are set to transform the business of trading securities across Europe, with implications for investment banks, brokers and fund managers around the world. Starting Jan. 3, 2018, the new rules will be imposed on everything from high-frequency trading to commodity derivatives trading to bond trading.

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Streetwise newsletter: Shell to offload CNRL stake; Home Capital hikes rates on GICs

Shell to sell $4.1-billion stake in CNRL

Royal Dutch Shell Plc has decided to offload a roughly $4.1-billion stake in Canadian Natural Resources Ltd (CNRL) that it acquired as part of a deal to retreat from Canada’s oil sands earlier this year, people familiar with the situation told Reuters. Story



Home Capital hikes rates to draw funds

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New rules could add Shopify, Brookfield to Canadian index

ANDREW WILLIS

New rules are in the works for Canada’s benchmark stock index that could benefit dozens of companies listed on domestic and U.S. exchanges and open the door to index membership for Shopify Inc. and Brookfield Infrastructure Partners LP.

Right now, a company only gets invited into the flagship S&P/TSX composite index if the volume of trading in its stock exceeds predetermined thresholds on Canadian exchanges. The team that runs that benchmark, S&P Dow Jones Indices LLC, recently published a proposal that would make it easier for dual-listed companies to meet the threshold by counting buying and selling on U.S. exchanges, in addition to trading on domestic markets.

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A new source for corporate cash: At-The-Market offerings

ANDREW WILLIS

Corporate Canada is embracing a new, low-cost approach to selling stock, borrowing from the playbook of U.S. companies that have raised more than $50-billion in the past five years.

The concept is known as an At-The-Market offering, or ATM program, and it sees a public company announce plans to issue stock, then actually tap investors any time it sees fit, during a period of up to 24 months, by selling shares at prevailing market prices. While rare in the domestic market, more than 500 U.S. companies have put ATM programs in place, and Canadian regulators and stock exchanges are starting to push the approach.

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Streetwise newsletter: A second stab at Hydro One; China eyes Bombardier

Editor’s note: The Streetwise newsletter will return Wednesday, May 24.



Bay Street takes new run at Hydro One offering

Investment banks that underwrote Hydro One Ltd.’s $2.8-billion equity sale are taking a second stab at selling a large chunk of the shares after investors balked at the initial deal. Story (Tim Kiladze, Andrew Willis and Jeff Lewis)

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Bay Street takes new run at Hydro One offering

TIM KILADZE, ANDREW WILLIS and JEFF LEWIS

Investment banks that underwrote Hydro One Ltd.’s $2.8-billion equity sale are taking a second stab at selling a large chunk of the shares after investors balked at the initial deal.

Last week, Ontario Premier Kathleen Wynne’s Liberal government announced the bought-deal offering, selling 120 million shares at $23.25 apiece and reducing its stake in the Crown utility to 49.9 per cent.

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Lexpert: Appraisal rights, a live issue in the U.S., could come to Canada

LEXPERT

The Ontario Securities Commission has yet to publicly respond to a shareholder request to halt Cenovus Energy Inc.’s blockbuster offer for ConocoPhillips Canada’s assets and force it to be put to a shareholder vote following a major shareholder’s objection to the deal. And the OSC may simply allow the deal to close without intervening.

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Streetwise newsletter: Can markets remain resilient?; Oil mergers pick up

Deflating the 'hope rally'

The turmoil engulfing the White House rattled the world’s financial markets on Wednesday, leaving investors to question whether markets can remain resilient to U.S. political turbulence. Story (Tim Shufelt)



Oil-field services M&A activity picks up as drillers seek lower costs

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Streetwise newsletter: The great debate over the loonie; ownership limits raised on CN, airlines

Whither the loonie? Depends who you ask

Which way will the loonie head next? The market says down. Many of Bay Street’s leading economists say up. The stark difference in opinion between investors and experts underlines a key truth about currency markets: Nobody knows anything for sure. Story (Ian McGugan)

Ottawa loosens ownership limits on Bill Gates-held CN Rail and major airlines

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Lexpert roundup: Will the Cenovus deal be halted?; Chevron ruling has impact abroad

Lexpert identifies and reports on emerging business issues and practice areas in the business of law. Whether online, in our magazine or in the DealsWire e-newsletter, we chronicle deals and lawsuits of interest, and cover issues of broad concern to the legal profession and those who purchase legal services. We hope you enjoy this sampling of our latest content.

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Streetwise newsletter: PointNorth’s proxy war; CPPIB expands stake in India

PointNorth launches Liquor proxy war

Activist fund PointNorth Capital Inc. launched a proxy battle Monday at Liquor Stores N.A. Ltd. aimed at returning the 252-outlet chain to its roots in Western Canada. Story (Andrew Willis)



CPPIB buys into Indian logistics amid rising investor interest

Canada Pension Plan Investment Board is forging ahead with its plans to make significant new investments in India, taking a large stake in an industrial real estate partnership. Story (Jacqueline Nelson)

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PointNorth launches proxy fight at Liquor Stores N.A.

ANDREW WILLIS

Activist fund PointNorth Capital Inc. launched a proxy battle Monday at Liquor Stores N.A. Ltd. aimed at returning the 252-outlet chain to its roots in Western Canada.

PointNorth, a deep-pocketed private-equity firm founded by entrepreneur John Bitove, is waging a public campaign to put six directors on an eight-person Liquor Stores board at an annual meeting scheduled for June 20, after months of behind-closed-doors negotiations failed to reach an agreement.

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CPPIB buys into Indian logistics amid rising investor interest

JACQUELINE NELSON

Canada Pension Plan Investment Board is forging ahead with its plans to make significant new investments in India, taking a large stake in an industrial real estate partnership.

The country’s largest pension fund said Monday that it would spend $500-million (U.S.) to buy and develop modern logistics real estate, such as warehouses and industrial parks, through a joint venture with a local partner called IndoSpace.

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LNG backer plans merger with Quebec energy firm

JEFFREY JONES

A company proposing a liquefied natural gas project in Atlantic Canada has launched a reverse takeover of a Quebec exploration firm in a bid to bolster its ability to fund the multibillion-dollar development.

Privately held Pieridae Energy Ltd., backer of the Goldboro project in Nova Scotia, said it agreed to an amalgamation with TSX Venture Exchange-listed Pétrolia Inc., under which the resulting company would be a publicly traded, integrated LNG producer.

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Streetwise newsletter: last week’s best reads

Home Capital: Inside the lender’s meltdown

In the early hours of Monday, May 1, exhausted representatives for Home Capital and a group of lenders hung up the phone in frustration. A deal to give the company an emergency $2-billion loan appeared to be falling apart. Directors at the mortgage firm felt that without the money, they wouldn’t be able to open for business a few hours later.

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With PrivateBancorp takeover, CIBC must work to make deal pay off

ANDREW WILLIS

There’s an old line about the dog that catches the car. That’s Canadian Imperial Bank of Commerce.

The Toronto-based bank just sunk its teeth into PrivateBancorp Inc., scoring a landmark victory Friday when shareholders in the U.S. bank voted in favour of CIBC’s $4.9-billion takeover, an offer that was twice sweetened and very much in doubt until the final ballot was counted.

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Streetwise newsletter: Home Capital profit falls; Hydro One stock sale hits a wall

Home Capital profit falls

Home Capital Group Inc. reported a decline in first-quarter profit on Thursday and said the damage to its reputation that the business has sustained in recent weeks had resulted in “material uncertainty” about its ability to secure funding in the future.

The alternative mortgage lender’s profit fell to $58-million, or 90 cents a share, in the first three months of the year. That was down from $64.2-million, or 92 cents a share one year earlier. The company had delayed releasing its earnings by more than a week and said results were prepared on a “going-concern basis,” but added that issues such as regulatory proceedings, credit-rating downgrades and vacancies in the roles of CEO and CFO had “understandably shaken the confidence of the company’s stakeholders.” Story (Niall McGee and Jacqueline Nelson)



Hydro One stock sale hits a wall

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Hydro One stock sale hits a wall

TIM KILADZE and JEFF LEWIS

Ontario’s move to unload a $2.8-billion stake in Hydro One Ltd. has hit a standstill after investors balked at the stock sale, leaving underwriters with as much as half of the shares unsold.

The province’s cash-strapped Liberal government announced the huge offering Monday, selling 120 million shares at $23.25 apiece to a syndicate of investment banks on a bought-deal basis. That means the shares were purchased up front by the underwriters in hopes of reselling them quickly to public investors.

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Real Matters stock flat in long-awaited IPO

SHANE DINGMAN

Real Matters Inc. joined an exclusive club of publicly listed Canadian tech companies, becoming only the third such company since 2014 to raise more than $100-million in its initial public offering.

Unlike those other recent tech IPOs, Real Matters – which provides software tools to banks and lenders for real estate appraisals critical to the home-mortgage market – did not see the same kind of opening-day share price bump of either Kinaxis Inc. (up 14 per cent in its 2014 debut) or Shopify Inc. (up 51 per cent in its 2015 opener).

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Streetwise newsletter: Home Capital makes a deal with MCAP; Kinder Morgan has a plan to fund Trans Mountain

Deal with MCAP allows Home Capital to issue new mortgages

After three weeks of playing defence, lender Home Capital Group Inc. is attempting to move forward by cutting a deal with rival MCAP Corp. that allows Home Capital to make new mortgages and roll over existing ones.

Home Capital, Canada’s largest alternative-mortgage provider, said Tuesday that an “independent third party” intends to buy up to $1.5-billion of its commitments to new mortgages, along with home loans that are up for renewal and existing mortgages in its $18-billion portfolio. On Wednesday, sources familiar with the situation identified the mortgage buyer as MCAP, a sizable Toronto-based firm that does mortgage finance. Story (Andrew Willis, Niall McGee, Jacqueline Nelson and Christina Pellegrini)

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Kinder Morgan seeks $1.75-billion IPO to fund Trans Mountain

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Lexpert: Contract automation programs could redefine corporate law

LEXPERT

In the drive for greater efficiency, law firms and in-house counsel are exploring and using contract automation programs that stand to redefine the practice of corporate law.

While basic forms of contract automation have been present in Canadian corporate law since the 1980s, at least, the past couple of years have seen much more sophisticated systems emerge.

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Kinder Morgan seeks $1.75-billion IPO to fund Trans Mountain

JEFF LEWIS

Kinder Morgan Inc.’s Canadian unit is seeking to raise $1.75-billion in an initial public offering to help fund its contentious Trans Mountain pipeline expansion as the project inches closer to construction.

Houston-based Kinder Morgan plans to offer the restricted voting shares at between $19 and $22 apiece while retaining an ownership stake of up to 77 per cent, according to an updated prospectus filed Wednesday.

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PSP charts ambitious investment course with European hub

JACQUELINE NELSON

The Public Sector Pension Investment Board is ramping up plans for international expansion, opening a London office and charting a more ambitious investment course.

The pension fund said Wednesday that it would launch a European hub to boost the fund’s investment exposure to the region, primarily through asset classes such as private equity and debt, infrastructure and real estate. It’s the latest effort by PSP to expand to key financial markets beyond Canada, and catch up to other Canadian pension giants that have steadily built beachheads around the globe.

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