In a deal that shows investors are willing to buy into plays on an economic rebound, Chinese paper company Sino-Forest Corp. TRE-T rolled out a stock sale last week, and was able to super-size the financing to $330-million in the face of strong demand.
TSX-listed Sino-Forest needed cash to expand its tree plantations in China, after striking what's known as a "master agreement" to purchase properties in Jiangxi province (near Hong Kong).
There's an enticement to those willing to put new money into this commodity play, in the form of a sizable discount on the new Sino-Forest shares. The bought deal was announced late Thursday at a hefty 14 per cent below the closing price of the stock during TSX trading. That's twice the discount seen on recent bought deals from large-capitalization Canadian companies, such as the banks.
The new Sino-Forest shares were sold at $11 each, and the original financing for $291-million was bumped up to $330-million after underwriters spent the better part of 24 hours marketing. Credit Suisse and Dundee Securities led the offering.
In a research report on Sino-Forest, RBC Dominion Securities said expansion of the company's plantations is a "key catalyst" for this stock and that "the latest master agreement does not detract from RBC's outperform rating, despite the equity dilution."
Recent months have seen a shift in the kind of Canadian companies selling stock, a shift that reflects a change in the attitude of the institutional crowd that buys the bulk of these deals. Most portfolio managers are flush with cash, and the focus is on putting this capital to work at companies that will benefit from the expected economic rebound. From November of last year until recent weeks, stock sales came from companies desperate to shore up their balance sheets, with banks and insurers accounting for much of the traffic.
CIBC taps Merrill talent
CIBC World Markets Inc. ramped up its presence in the booming corporate bond market by hiring Merrill Lynch Canada's top fixed-income financier as its new head of debt capital markets.
Susan Rimmer is joining the investment banking arm of Canadian Imperial Bank of Commerce after an impressive run of global deals at Banc of America Securities/Merrill Lynch. On Ms. Rimmer's watch as head of debt capital markets, the Wall Street firm led recent global bond sales for Potash Corp., EnCana and all favours of government entities, from the federal level through all the provinces. She is also an expert in what's known as Maple bonds, which see foreign companies raise debt denominated in Canada dollars.
This is the latest in a string of hires at CIBC World Markets under new CEO Richard Nesbitt, who is attempting to build a dealer that delivers steady profits for shareholders, with far fewer surprises in the form of deals gone sour. Ms. Rimmer's predecessor as head of debt capital markets, Geoffrey Reeves, is now a rainmaking, client-focused vice-chairman at the dealer.
This is also the latest in a string of departures from Merrill Lynch, which is in the midst of a jarring merger with Bank of America. Among the more notable departures, former head of Canadian equities Pat Burke moved to Scotia Capital late last year, and chief economist David Rosenberg joined money manager Gluskin Sheff + Associates.
See Andrew Willis's Streetwise Blog at ReportonBusiness.com
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