Former Equity Financial Holdings executives have joined forces with Stephen Griggs, the former executive director of the Canadian Coalition for Good Governance.Gloria Nieto/The Globe and Mail
Bay Street's latest proxy fight reads like a revenge play.
In October, Nick Kyprianou and Darryl Ivan, former executives at subprime lender Equity Financial Holdings Inc., were let go.
Just a few weeks later the two men, who own shares of the company, came roaring back and launched a proxy fight. Their mission: Throw out seven of Equity's nine board members and reinstall themselves on the management team as chief executive officer and chief risk officer, respectively.
Sounds like a simple ploy. Yet the activist investor they've teamed up with swears there's more to it than that.
Mr. Kyprianou and Mr. Ivan joined forces with Smoothwater Capital Corp., run by Stephen Griggs, the former head of the Canadian Coalition for Good Governance, who also ran OPSEU Pension Trust, the pension fund for Ontario's government employees. Mr. Griggs launched Smoothwater as an activist investment firm after he was dismissed from OPTrust. Collectively, the three parties own 15 per cent of Equity's shares - Smoothwater holds 12 per cent and the two former executives own the remaining 3 per cent.
Equity's proxy battle isn't a ploy for revenge, Mr. Griggs said. It's about making sure the company is governed by experienced managers.
Mr. Kyprianou was hired by Equity in 2010 from subprime lender Home Capital, and he knows the ins and outs of this market. Without him, Mr. Griggs said Equity is lost, because the company has gotten out of the transfer agent business and is now solely a subprime lender.
"If [Equity] is run by highly experienced alternative mortgage executives, it has the potential to be a very successful company," he said. But Smoothwater argues that can't happen under the current management team. CEO Paul Smith, who co-founded Equity in 2004, has a background in telecom and is known for expanding Equity as a transfer agent, which is why he hired Mr. Kyprianou for his expertise in subprime lending. (Mr. Smith is an important name in certain circles, serving as Via Rail's chairman. He was also executive assistant to former prime minster Brian Mulroney from 1991 to 1993.)
In a statement, released Monday, Equity stressed that it is governed by the Office of the Superintendent of Financial Institutions, and that OSFI closely monitors the capabilities of managers at firms under its watch. The company declined to comment further.
It is also worth noting that Equity recently hired Michael Jones as its new president. Mr. Jones was most recently the head of Xceed Mortgage Corp., a subprime mortgage lender, and he worked in the mortgage world at banks as well as private lenders before that. (Xceed was recently sold after struggling to rebuild its business following the financial crisis.)
At the moment, both sides are posturing. Smoothwater has asked for a shareholder meeting no later than the middle of January.
Editor's Note: The percentage of ownership of Equity Financial Holdings held by Mr. Kyprianou, Mr. Ivan and Mr. Griggs has been corrected in the online version of this story.
Tim Kiladze