Hey there, time traveller!
This article was published 13/3/2013 (1409 days ago), so information in it may no longer be current.
In the last week, four Manitoba companies raised a total of $257 million in public debt offerings in addition to $1.25 billion Great-West Life raised to help pay for its Irish Group acquisition.
Two other Manitoba companies have also announced their intention to raise more money in potential new share offerings.
Such a flurry of activity is a good sign for the economy in general. More specifically and locally, it is an indication of growth activity among local companies.
Great-West Life's offering stands out from the other four because of that company's global reach, blue-chip status and institutional customer base.
But just like the other four companies, GWL raised new money to finance growth. From any perspective, that's a good sign.
The others -- primarily targeted at retail investors -- were bought deals, an indication of the level of confidence the market players have in these companies.
None of them were common share issues but were structured in various forms of dividend-yielding or interest-bearing unsecured debt instruments that could be converted to equity.
Artis REIT, Exchange Income Corp., and Temple Hotels Inc. are using the capital raised for specific acquisition deals. In the case of the fourth company, San Gold Inc., the company used a window of opportunity to raise funds it would need soon to cover its intended capital projects for the next year-plus.
(IMRIS Inc. and Diamedica Inc. -- both of which have recently announced their intentions to move to the Minneapolis area -- are looking to issue additional common shares.)
While the equity markets are strong these days -- with the New York Stock Exchange trading at all-time highs -- a good deal of the attraction for investors in the new offerings from the Winnipeg companies is the yield that is being offered.
That ranges from eight per cent for the convertible debentures of San Gold to the 4.75 for Artis REIT's trust units.
Artis, now one of the largest REITs in the country after acquiring about $1 billion worth of properties last year, recently received an investment-grade rating in its first-ever credit rating from DBRS.
That probably helped juice demand for its trust units offering, allowing underwriters to double the amount raised from $50 million to $100 million within hours.
Exchange Income Corp. quickly sold out its $69-million convertible debenture offering with a 5.35 per cent coupon that includes an additional 15 per cent allotment underwriters chose to exercise after the markets gave the thumbs-up to its purchase of Florida aircraft parts aftermarket business Regional One, its largest acquisition yet.
Temple REIT raised $38 million on a seven per cent convertible debenture offering. It was the lowest coupon rate yet for a Temple Hotels offering after it acquired three hotels in Nova Scotia.
Unlike the others, San Gold is not an acquisition-oriented operation and it's in the mining sector, which is currently in the equity market doghouse. Even though its share price is slipping, the company was able to close its bond issue and secure the funds it will need for development work over the next couple of years without having to dilute equity during a down price period.
The deal flow is keeping a few local investment banks very busy -- CIBC Capital Markets' Winnipeg shop was involved in three of them and Laurentian's Winnipeg office was in on two of them.
Kevin Hooke, director of Laurentian Bank's Winnipeg investment banking operation, said the strong take-up of the Winnipeg offerings shows retail investors' demand for income-generating securities.
"Demand for yield has been around for some time but the major distinction recently is that there has been a flight to quality," Hooke said. "The perceived quality is higher in stocks that pay dividend. That's why you are seeing that emphasis on yield."
Exchange Income just reported 2012 revenue of $800 million and added another $30 million with the Regional One acquisition. It's becoming a real darling of the capital markets, having raised a total of $184 million in interest-yielding convertible debentures over the past year. During that time, its dividend-paying common shares are up 11.8 per cent.
Jason Stefanson, who is in charge of CIBC's busy Winnipeg investment banking operation, said, "There are several Manitoba companies experiencing strong growth and the capital markets have been very supportive."
It's also a recognition of the underlying strength of the provincial economy.