Let's overlay a little Elizabeth Kubler-Ross on the income trust market.
Remember Dr. Kubler-Ross from first-year psychology courses? She was the one who said people go through five stages of dealing with the fact they're dying.
Denial comes first. That was the brief period between the Finance Minister's announcement that he was looking at the sector and the massive selloff that came when Ralph Goodale signalled he was serious about ending the party by halting advance tax rulings on planned conversions.
Anger follows denial. There was a whole lot of cussing and screaming from those income-hungry investors who actually took the time to understand what the Finance Minister might do.
The final three stages of this process -- I don't mean to signal that trusts may be near-death, but the sector has been permanently changed -- are bargaining, depression and acceptance. Which is where the market finds itself, waiting on Mr. Goodale's next move.
This week saw Versacold Income Fund shrug off the sector's woes and move forward on its growth plans by striking a bargain with shipping firm Peninsular and Oriental Steam Navigation Co. Versacold paid $382-million to acquire P&O's refrigerated warehouse division, a move that makes the buyer a dominant player in this industry.
This deal means both Versacold and P&O accept the reduced valuations that trusts now sport after last month's decline, prices that reflect the fact that trusts are likely to soon be hit with some sort of tax.
Versacold, which looked to Scotia Capital as its adviser on this acquisition, will borrow from Bank of Nova Scotia and Toronto-Dominion Bank to pay for the purchase. Down the road, the company will knock down debt by selling $130-million of subscription receipts -- securities that flip into units once the deal closes. P&O is taking $60-million of Versacold convertible debentures as partial payment.
In another example of a trust raising money at today's depressing levels, Provident Energy Trust sold $275-million of units and another $150-million of debentures this week in a bought deal led by National Bank Financial, BMO Nesbitt Burns and Scotia Capital.
No one likes the way Mr. Goodale has handled the income fund file, and the pace of activity remains sickly. But trusts are now accepting reality.
Trading places at the top
A generation back, the Street featured dealers with dominant fixed-income desks -- McLeod Young Weir or Burns Fry -- and the big stock jockeys -- Gordon Capital and Wood Gundy. You had your bond traders. You had your stock traders. They worked on different floors, and retreated to different watering holes after work.
These days, everything is blurred together. The market maker in equity derivatives might be seated next to a trader in bonds future. The whole gang reports to the same risk managers and compliance departments. And as a rule, getting everyone working together means better service for clients.
Which brings us to structural changes put in place this week at the top ranks of two big dealers.
BMO Nesbitt Burns yesterday gave vice-chairman Eric Tripp responsibility for all capital markets activities, where he used to just run the equity division. Being responsible for bonds, derivatives and stocks won't require a whole lot of training for Mr. Tripp, who is also a TSX Group director, as he started in fixed-income derivatives with Burns Fry in 1983.
Over at Scotia Capital, former head of fixed income John Schumacher picked up responsibility for the equity side of the business this week when he became co-head of the dealer, replacing David Wilson, who went over to the Ontario Securities Commission.
Shakeup at Paradigm
The sign on the door at Paradigm Capital looks the same, but there are a whole lot of new faces this week at the boutique investment dealer.
Yesterday saw Osler Hoskin & Harcourt rainmaker Peter Dey join Paradigm as the employee-owned firm's new chairman, and former Altamira equity portfolio manager Ian Joseph signed on to start a new career as an investment banker. Mr. Dey was head of Morgan Stanley Canada, and the new position still affords the former OSC chairman time to consult on corporate governance.
As these two arrive, a number of Paradigm veterans headed out the door this week. The sales desk is now without the services of John Cooke, and on the trading side, Paul Dorland has departed. Both have left to join Orion Securities, a firm that's been rebuilding steadily since changing its name from Yorkton Securities and bringing aboard new management.
Paradigm also recently lost Jeff Green, its president at one point and former co-president and guiding light on the sales desk at Gordon Capital. Mr. Green is now hanging his hat at Jovian Capital. That's a publicly traded company that's home to both an investment dealer and a collection of money managers with $8-billion in assets.
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.
