November 19, 2006

Nov. 19, 2006: 12

Photo released of cabbie stickup
Taxi driver had knife, pistol pointed at his head during robbery
, Rob Lamberti, TorSun, Nov. 17, 06

Crown Taxi driver Jagjit Bhatti had no fear as he faced death at the hands of two teens.

As one teen held a pistol to his head during an Oct. 23 robbery, the father of three said yesterday he had accepted whatever fate offered him.

[....] A judge yesterday granted police five days to distribute the pictures of the two suspected teens. Under the Youth Criminal Justice Act the identities of suspects under 18 are normally protected. [....]

New Vancouver airport bonds light on rights , Barry Critchley, Financial Post, November 13, 2006

... the rights of leasehold mortgagees ....

... a $150-million financing of floating rate debt that was issued this past week by the Vancouver International Airport Authority.

... AA (low)-rated issue ... don't have them....different from those investors who participated in the December, 1996, two-tranche issue by the VIAA.

Back then VIAA -- a non-share capital corporation that was the country's first airport authority to borrow in the debt markets
-- raised $300-million, half with a term of 10 years and the rest with a term of 30 years. That debt was unsecured. At the time, VIAA was rated A (high.) It was upgraded in August, 2001.

So what rights do the new group of investors fail to receive relative to the former group of investors, and why does it matter?

In its report, DBRS said because of "technical reasons," future debt holders won't be recognized by the federal government as leasehold mortgagees under the airport ground lease. As a result, new debt holders would be unable to indefinitely postpone a termination of the airport ground lease triggered by an event of default under the lease." [....]

Magna in deal with Russian carmaker , Nicolas Van Praet, Financial Post, November 08, 2006

[....] Magna executives confirmed the company's Magna Steyr assembly unit has signed an engineering contract with AvtoVAZ, Russia's biggest carmaker, to build a C-segment vehicle. Russian business daily Vedomosti said on Oct.5 the two companies would develop a new car under the Lada brand and work on a new factory with a maximum output capacity of 450,000 vehicles a year in the southern Russian city of Togliatti. [....]

GAZ is owned by Russian business tycoon Oleg Deripaska. The company builds mostly light commercial vehicles, but is seeking to expand its passenger car business. In April, GAZ announced it would buy DaimlerChrysler AG's production-line equipment in Sterling Heights, Mich., move it to Russia, and use it to pump out 65,000 Dodge Stratus and Chrysler Sebring cars a year under licence. [....]

Nepal as transit point , Prakash A. Raj


New equations between China and India
Impact of Nepal becoming a Transit Point between China and India
How Bangladesh and Central Asian countries could also use Napal as a transit point?
Alternatives to Nepal as a transit country between India and China

Stilwel Road supposed to be the shortest road linking southwest China with northeast India was constructed during the Second World War. It connects Ledo in Assam with Kunming in Yunnan Province in southwest China and passes through Burma. China has already constructed 639 km in its sector as a six lane highway and out of the 1040 km sector in Myanmar, 80 km is not in good shape. There is a 57 km sector in India that passes through Assam and Arunachal Pradesh. This road will be re-constructed in the near future giving a boost to trade between Northeast in India and Southwest in China. At present, the cost of container shipping from parts of India to China is prohibitively high (12).

Credit Suisse, UBS signal cessation of dealings with embargoed Cuba , NatPost/Reuters, Nov. 13, 06

Swiss banks Credit Suisse and UBS said they have severed relations with Cuba and are not conducting any business dealings with the country. UBS said it had not had any dealings with Cuba since 2005, while Credit Suisse said it adopted a similar policy at the start of the year, but would consider handling non-dollar payments. "We do not do payments in U.S. dollars, but payments in other currencies are possible if we can find a correspondent bank. But this is very difficult," a spokesman for Credit Suisse said. In October, Cuba's communist government said U.S. trade sanctions over the past year had cost the country US$4.1-billion in higher financial and shipping costs, lost business and cancelled contracts. [....]

Income trusts

Trusts: 'The focus is now on 2011' , Carrie Tait, Financial Post, Nov. 13, 2006

[....] Trusts, it appears, will have to pay in to the government's coffers in 2011, and the market is going to have to live with it.

Some, however, are reveling in it. The frantic response made by some investors created opportunity for others [....]

Income trusts -- diversify, diversify, diversify

Risky trusts: Properly diversified investors would have been protected , Mohammad Fadel, Financial Post, November 09, 2006

With the surprise announcement last week by the Conservative government that distributions by income trusts would no longer be exempt from corporate-level taxation, investors in income trusts have suffered material losses to those investments.

Interestingly, investors with diversified portfolios of Canadian equities would have hardly noticed a difference in their wealth and are probably wondering what all the fuss is about. [....]

Part of the risk that investors were taking on by investing in the income trust sector was regulatory risk: the risk that Canada would cease preferential taxation of income trusts. [....]

The moral of the trusts fiasco , By Margaret Wente, Globe and Mail, Nov. 9, 06

My husband and I don't own income trusts. Our investment manager wouldn't let us. "Too risky," she would say. We used to be unhappy about this because it seemed like everyone but us was getting rich. Now we're happy, because it turns out she was right.

The chickens have come home to roost for a lot of dumb clucks (a.k.a. retail investors). They've been thoroughly plucked, and are they ever mad. [....]

Trusts delaying financings in wake of tax switch -- $1.275B in limbo , Carrie Tait; with files from Lori McLeod, Financial Post, November 08, 2006

The oilpatch -- a world that depends on financing to fund expensive exploration and development projects, as well as acquisitions -- has at least four companies wondering what will happen to their deals.

Enterra Energy Trust's $155-million financing [....]

Harvest Energy Trust [....]

Chartwell Housing Real Estate Investment Trust [....]

Sound Energy Trust, [....]

Analyst finds a few gems beneath income trust rubble

[....] For investors looking for some short-term value out of business trusts, what matters most are the price declines. The ones that have been hit hardest are Contrans, BFI Canada, KCP, Davis + Henderson and CML Healthcare, Mr. Berry wrote. [....]

Trusts that look attractive under those metrics include Cineplex Galaxy, Bell Nordiq, CanWest Mediaworks, Jazz Air, Parkland and KCP, he said.

The ones that look high-priced, on the other hand, include Aeroplan, Livingston, North West Company and CML Healthcare.

There's hope for income trusts, Al Rosen, National Post, November 08, 2006

Now that the tax disparity and economic productivity issues of income trusts have been addressed by the government, it's time to focus on the last major problem -- the weak financial reporting.

I first highlighted the severe drawbacks of income trust financial reporting in this column more than 18 months ago. The large losses then being suffered by some trust investors were largely attributable to virtually non-existent financial reporting requirements.

Fast forward to today and little has changed. The Canadian Securities Administrators have issued limited guidance, but have failed to effectively deal with the most serious issues. Specifically, the critical need for a distinction between earned income and a mere return of investors' own capital has not been addressed.

Likewise, the Accounting Standards Board bowed out early on, based on a self-imposed restriction that widespread manipulation of financial reporting is simply not their concern. [....]

Schulich wants to bend Flaherty's ear -- Says income trust move ill-advised, poorly executed , Barry Critchley, Financial Post, November 06, 2006

The right people lose? Did the wrong people win?

... Seymour Schulich, one of the country's savviest owner-investors ....

... grandfathering the existing trusts, banning new ones and putting a levy on the payouts to non-Canadians ....

.... give the government the benefit of the doubt for the economic rationale for the decision, namely worries about productivity and investment in and by the trust sector. [....]

There's hope for income trusts, Al Rosen, National Post, November 08, 2006

Now that the tax disparity and economic productivity issues of income trusts have been addressed by the government, it's time to focus on the last major problem -- the weak financial reporting.

I first highlighted the severe drawbacks of income trust financial reporting in this column more than 18 months ago. The large losses then being suffered by some trust investors were largely attributable to virtually non-existent financial reporting requirements.

[....] critical need for a distinction between earned income and a mere return of investors' own capital

[....] widespread manipulation of financial reporting

[....] little more than modified pyramid schemes. [....]

For instance, distributable cash has to be clearly separated into distributable cash obtained from operating, investing and financing activities.

In other words, it should be more apparent when a company is unsustainably funding its cash distributions with borrowed money. [....]

Trust policy could boost natural-gas prices , NatPost, Nov. 8, 06

Energy Encana pondered trust switch , NatPost, Nov. 8, 06

BCE put gun to Ottawa's head
Board believed if trust plan killed, Telus would die too
, Sean Silcoff, Financial Post, November 02, 2006

The income trust era is over, and BCE Inc. chief executive Michael Sabia and his board of directors are to blame.

[....] And here's what the directors could see clearly: BCE is a very public public company -- one of the most widely held and best-known firms in Canada. Despite years of sluggish results, it was the 13th-most profitable firm in the country last year. It also hadn't paid taxes in a while, thanks to costly past mistakes it was able to write off.

But starting next year the taxman would collect $250-million and the year after $800-million. If BCE were an income trust, it would not only raise the spectre of one of Canada's biggest and most profitable firms skipping out on its tax bills, but it could also push other large firms to follow suit.

In other words, despite inaction by successive governments on the income trust file, it would be hard to ignore BCE. The board was aware of the political and policy dragons its move would awaken, sources familiar with the situation indicated. [....]

EnCana's trust plans triggered crackdown , Sinclair Stewart, Andrew Willis, David Ebner, Nov. 4, 06, Globe and Mail

Toronto and Calgary — Canada's largest oil and gas company was poised to transform the country's energy sector this week with a record $43-billion income trust that was shelved when Ottawa swept in with its surprise crackdown on trusts.

EnCana Corp. had secretly hired Canadian and U.S. investment bankers to help spin off a significant chunk of its business into the tax-friendly confines of an income trust, leaving only a portion as a conventional company, according to sources familiar with the deal. The massive trust conversion was to have been announced this week.

The prospect ... the final straw for Finance Minister Jim Flaherty ....

[....] Former British Columbia Conservative MP John Reynolds ... “the right thing” to do ...

[....] Mr. [Gwyn] Morgan wrote ... “It is fair to say that Canadian directors and management teams have increasingly been faced with shareholders who are demanding to know why their corporations were not converting to a trust. If, as Mr. Flaherty predicts, inaction would have resulted in ‘an income-trust economy,' then taking action is certainly in the longer term interest of Canadians.

Trusts demand PM hear their side -- A $30-billion rebuttal , Claudia Cattaneo, Financial Post, with files from Reuters, November 04, 2006

[....] But he added, "The government is obviously concerned that we were looking at the prospect of major companies in the oil-and-gas sector converting to income trusts, which would have meant prospectively billions of dollars in forgone revenue that would be shifted on to the backs of ordinary taxpayers."

He said that was "just not responsible or acceptable."

Meanwhile, Marcel Coutu, chief executive of Canadian Oil Sands Trust, ... is worried his firm is a sitting duck and could be taken over by foreign interests.

Many foreign companies have been eyeing Canada's oilsands industry, and Canadian Oil Sands is viewed as one of its crown jewels as the top shareholder, with a 35% stake, of the Syncrude Canada Ltd. oilsands plant.

Memory Lane: Income trusts, Kyoto / global warming, China ... from the recent past

Tax regime under scrutiny -- Trust explosion: Ottawa seeking stakeholder input on revamping

[. . . . ] Observers say that if changes are contemplated for trusts, they will probably apply to new trust structures only. [.... Was that a hint to investors in the time of the former, Liberal government?

[....] So You Want to Do Business in China

"Mr. Cai added that cultural barriers face people of Chinese origin who don't speak Chinese."

[....] Protectionism, PM, China, Hu Jintao -&- Protest

[....] China won't agree to target for cutting greenhouse emissions, says Dion -- "not even in the post-2012 phase of the Kyoto climate pact." [....]


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