Bellatrix shares plunge on proposal to trade debt for 83.5% of its equity value

Bellatrix shares plunge on proposal to trade debt for 83.5% of its equity value

Shares in Bellatrix Exploration Ltd. fell by as much as 35 per cent Friday after it proposed a deal that would leave its existing shareholders with just 16.5 per cent of the company.

The Calgary-based oil and gas producer says it intends to exchange $146 million US in senior unsecured notes due in 2020 for $100 million US in new debt maturing in 2023, plus common shares totalling 51 per cent of the company’s float.

It is also offering to trade $50 million in convertible debentures for another 32.5 per cent of its common shares following the recapitalization.

Bellatrix says the transactions — which are subject to approval by debtholders and court and regulatory authorities — would reduce its total outstanding debt by about $110 million to about $328 million and reduce annual interest payments by over $12 million.

Two weeks ago, the company warned investors that its ability to continue as a going concern was in doubt given a pending credit review and uncertainty about refinancing its senior notes.

It said its net loss in 2018 was $146 million, compared with a net loss of $91 million in 2017.



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Trump issues new permit for stalled Keystone XL pipeline

Trump issues new permit for stalled Keystone XL pipeline

In an apparent bid to kick-start the long-stalled Keystone XL oil pipeline, U.S. President Donald Trump on Friday issued a new presidential permit for the project, two years after he first approved it and more than a decade after it was first proposed.

Trump said the permit issued Friday replaces one granted in March 2017. The order is intended speed up development of the controversial pipeline, which would ship crude oil from western Canada to the U.S. Gulf Coast.

A federal judge blocked the project in November, saying the Trump administration had not fully considered potential oil spills and other impacts. U.S. District Judge Brian Morris ordered a new environmental review.

An appeal filed by the project’s developer, Calgary-based TransCanada, is pending.

The company said in a statement that Trump’s order “clarifies the national importance of Keystone XL and aims to bring more than 10 years of environmental review to closure.”

Trump “has been clear that he wants to create jobs and advance U.S. energy security, and the Keystone XL pipeline does both of those things,” said Russ Girling, TransCanada’s president and CEO.

Calgary-based TransCanada said in a statement that Trump’s order ‘clarifies the national importance of Keystone XL.’ (Nati Harnik/Associated Press)

‘Safest, most efficient’

Keystone XL will create thousands of jobs and deliver crude oil to U.S. refineries “in the safest, most efficient and environmentally sound way,” the company said.

But project opponents said the White House order would not have an immediate impact.

Stephan Volker, an attorney for environmentalists who sued to stop the project, said he had not yet reviewed Trump’s permit declaration but could not foresee any action that would allow work on the pipeline to proceed without court approval.

“It would be highly unlikely that any court would allow an end-run on its well-considered injunction that’s been affirmed by the Ninth Circuit [Court of Appeals]. The likelihood of that is virtually non-existent,” Volker said.

The pipeline, first proposed in 2008, would begin in Alberta and go to Nebraska, where it would join with an existing pipeline to shuttle more than 800,000 barrels a day of crude to terminals on the Gulf Coast. (Nati Harnik/Canadian Press)

The Keystone XL, first proposed in 2008 under President George W. Bush, would begin in Alberta and go to Nebraska, where it would join with an existing pipeline to shuttle more than 800,000 barrels a day of crude to terminals on the Gulf Coast.

After years of delay, President Barack Obama rejected the project in 2015. Trump reversed that decision soon after taking office in 2017, saying the $8 billion US project would boost American energy and create jobs. A presidential permit is needed because the project crosses a U.S. border.

After environmental groups sued, Morris said the administration had not fully considered potential oil spills and other impacts and that further reviews were needed.

TransCanada disputes that, saying Keystone XL has been studied more than any other pipeline in history. “The environmental reviews are clear: the project can be built and operated in an environmentally sustainable and responsible way,” Girling said.



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Feeder plants to feel the pinch with FCA’s Windsor Assembly Plant losing third shift

Feeder plants to feel the pinch with FCA's Windsor Assembly Plant losing third shift

Two feeder plants for the Windsor Assembly Plant are waiting to find out what will happen once Fiat Chrysler Automobiles cancels the third shift on Sept. 30, 2019.

FCA announced its decision to indefinitely terminate the third shift Thursday afternoon. There are approximately 1,500 people who will be out of work as of September.

At Syncreon Automotive in Windsor, a sequencing (warehousing) facility, and Flex-n-Gate in Lakeshore, which makes Pacifica parts, it’s not clear how many jobs will be affected.

However, one worker worries it could be hundreds at his plant.

Bill Carathanasis, who has worked at Syncreon for three and a half years as a forklift driver, said layoffs are inevitable.

“If you’re getting rid of a shift [at FCA], you’re getting rid of a full shift here,” he said. “So basically, what Chrysler does, we follow suit.”

Second vice president for Unifor Local 195, Emile Nabbout, says the FCA announcement was a surprise to everyone. (Katerina Georgieva/CBC)

Unifor Local 195 represents workers at both feeder plants.

“We have no clear number at this point. But we will continue working … with Syncreon [and] Flex group to come up with additional measures to protect our members,” said Emile Nabbout, second vice president of Local 195.

He said about 480 members at Syncreon are represented by the union, and just under that at Flex-n-Gate.

Not like Oshawa

Flavio Volpe, president of Automotive Parts Manufacturers Association, said while it’s surprising that 1,500 WAP workers will be losing their jobs, this situation isn’t equivalent to what is happening with GM in Oshawa, where the company is closing its assembly plant entirely.

FCA isn’t shutting down a plant, or pulling out a product, according to Volpe, and eliminating a shift is part of the planning and replanning of a business.

“This is how one specific company in one plant has decided to reconfigure how it produces that product in response to a current market demand. It is not a harbinger of things to come,” said Volpe.

Sandy Gammon says her seniority will likely help her keep her job, but a lot of workers might not. (Katerina Georgieva/CBC)

Year-to-date sales reported by FCA in February 2019 showed a 55 per cent decline compared to last year.

Nabbout wants all three levels of government to find the “root cause of market collapse or shy sale on the Pacifica.”

In a news conference on Friday, Minister of Innovation and Economic Development Navdeep Bains talked about the federal rebate program which will offer $5,000 for buyers of some zero-emission vehicles — including the Pacifica Hybrid.

Initially, it was believed that the vehicle would not qualify for the program due to its base price being above $45,000, but Bains told reporters Friday that was not the case.

Bains also pointed to how the Ontario PCs need to step up, referring to the cancelled Electric and Hydrogen Vehicle Incentive Program, which offered a $14,000 incentive to Pacifica buyers.

Close to 1,000 people at the feeder plants are holding their breath to learn what will happen to their job.

Sandy Gammon has worked at Syncreon for 17 years. Her seniority will likely mean she can keep her job, but she said a lot of friends might become unemployed.

“It’s actually traumatising to most of us. A lot of our workers may lose their jobs.” she said.



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China, U.S. trade talks in Beijing ‘constructive,’ U.S. secretary says

China, U.S. trade talks in Beijing 'constructive,' U.S. secretary says

Chinese and U.S. negotiators adjourned trade talks in Beijing on Friday with U.S. Treasury Secretary Steven Mnuchin saying they had been “constructive.”

Neither side gave any details on whether the talks made progress on issues preventing them from reaching an agreement to end a wide-ranging dispute over technology and industrial policy between the world’s two biggest economies.

Mnuchin said in a tweet Friday that he and U.S. Trade Representative Robert Lighthizer had “concluded constructive trade talks.”

“I look forward to welcoming China’s Vice Premier Liu He to continue these important discussions in Washington next week,” he said.

Mnuchin and Lighthizer attended a working dinner with Liu on Thursday night, shortly after their arrival in the Chinese capital. It was not clear when the U.S. envoys planned to leave Beijing.

U.S. President Donald Trump expressed optimism about the talks last week, saying, “we’re getting very close.” Lighthizer said earlier this week that questions about details and enforcement remained to be answered.

The meetings are the latest in a rapid-fire series of exchanges seeking to end the conflict that is disrupting trade in goods from soybeans to medical equipment.

“Both teams are currently sparing no effort” on the negotiations, Chinese commerce ministry spokesman Gao Feng said during a regularly scheduled briefing on Thursday.

Stumbling block

A stumbling block appears to be Washington’s insistence on an enforcement mechanism with penalties if Beijing fails to follow through on commitments. But trade analysts expect at least a preliminary accord in coming weeks or months.

The negotiations are unlikely to resolve conflicts that have troubled U.S.-Chinese relations for two decades, including China’s massive trade surplus with the U.S. and accusations it has stolen or coerced the transfer of foreign technology for its own use.

Trump raised duties last year on Chinese imports in response to companies’ complaints over such issues. Last week, he said he wants to keep in place the 25 per cent taxes on $50 billion US of Chinese goods that he imposed in July.

Washington followed those with 10 per cent duties on an additional $200 billion. All told, the U.S. tariffs covered roughly half of what the U.S. buys from China.

However, Trump postponed another tariff hike that had been set for March 1. That may have reduced U.S. leverage in seeking Chinese concessions.

Beijing is not “in the biggest hurry” so long as Washington delays imposing additional tariffs, said Bryan Mercurio, a trade law specialist at the Chinese University of Hong Kong.

Moving to fulfil a promise to allow full foreign ownership of banks, insurance companies and other financial businesses that have been dominated by Chinese institutions, regulators have approved American bank J.P. Morgan’s application to set up a majority-controlled securities firm, the company said Friday.

Until now, foreign investors have been limited to minority shares in Chinese state-owned institutions.

J.P. Morgan gave no details of its planned venture. But the chairman of J.P. Morgan Asia Pacific, Nicolas Aguzin, said the Wall Street bank wants to bring “the full force of our firm to the country.”



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Investors hitch a ride on Lyft’s IPO at $72 a share

Investors hitch a ride on Lyft's IPO at $72 a share

Lyft had little trouble getting investors to hop on board its increasingly popular ride-hailing service, as its initial public offering fetched a $72 US per-share price that exceeded even its own expectations.

The price sets Lyft’s market value at $24 billion, though the San Francisco company still hasn’t turned a profit since co-founders Logan Green and John Zimmer started the service in 2012. 

The big test was underway Friday as the company’s stock begins trading on the Nasdaq exchange under the ticker symbol “LYFT.”

Around midday it was changing hands at $87 a share, up 20 per cent from the IPO price of $72.

It marks the first time that most people who have used their smartphone to summon a car dispatched by Lyft or its bigger rival, Uber, will have a chance to make a bet on whether the ride-hailing phenomenon will continue to transform transportation and eventually become a major money maker.

The institutional investors that bought into the IPO clearly think so, enabling Lyft to demand a price that was above its initial goal of $62 to $68 per share.

Uber is expected to go public later this spring.



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Canada’s economy surprises with 0.3% growth in January, offsetting two straight monthly declines

Canada's economy surprises with 0.3% growth in January, offsetting two straight monthly declines

Canada’s economy grew by 0.3 per cent in January, fully offsetting the small declines in the previous two months.

Statistics Canada reported Friday that 18 of 20 industries the data agency tracks got bigger.

Goods-producing industries grew by 0.6 per cent while the service sector eked out a 0.2 per cent gain. Economists had been expecting a slight gain of about 0.1 per cent, according to Bloomberg estimates.

Manufacturing grew by 1.5 per cent, also more than offsetting declines in November and December.

After shrinking for seven months in a row, the construction sector expanded by 1.9 per cent during the month — the biggest monthly expansion since the summer of 2013.

“It was nice to see construction turn in a positive performance after more than half a year in decline,” economist Brian DePratto with TD Bank said.

Finance and insurance grew by 0.4 per cent, while retail was flat.

One source of weakness was the mining, quarrying, and oil and gas sector, which was down for the fifth consecutive month in January, contracting 3.1 per cent.

Outside of energy, the only industry that shrank was accommodation and food services, which contracted by 0.5 per cent during the month.

Scotiabank economist Derek Holt said the weakness in oil was certainly significant, but he was encouraged by strength just about everywhere else.

“There is more to the economy in the Great White North than just oil and that’s the exclamation point attached to this growth reading,” Holt said.

“This is significant because it was not long ago when there was widespread agreement that the economy would stumble into the new year given energy sector challenges.”

DePratto was also encouraged by the breadth of the gains in just about every sector.

“We were expecting a more muted report, but … we got a solid print, front to back.”



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Canada lags behind the U.S. on putting women in corporate boardrooms

Canada lags behind the U.S. on putting women in corporate boardrooms

The gender diversity of Canada’s corporate boardrooms continues to lag that of the U.S., and “stronger headway” needs to be made in the country’s resource sectors and small firms, a Toronto-Dominion Bank economist says in a new report.

There has been “noteworthy progress” since the country’s largest securities regulator in 2015 implemented a so-called comply-or-explain rule aimed at increasing board diversity, but the S&P/TSX still shows lower aggregate female diversity at 24 per cent, compared to 25 per cent on the S&P 500, said TD’s Beata Caranci.

The Canadian benchmark index is resource industry-heavy, and has a higher prevalence of smaller organizations, relative to the U.S., she added.

“Ultimately, to move the needle in corporate Canada as a whole, stronger headway needs to be made among smaller firms, and disproportionately within the resource sector,” she said in the report.

Comply or explain

In 2015, the Ontario Securities Commission introduced a comply-or-explain rule, that requires most companies listed on the Toronto Stock Exchange to disclose annually how many women are on their board and in executive officer positions. It also compels disclosure on related aspects including whether the company has a policy for identifying and nominating female directors, and whether there are targets at either the board or executive level, and if not to explain why.

The latest data gathered from Canadian securities regulators shows that among the 648 issuers, 15 per cent of board seats were held by women, up from 11 per cent four years earlier.

Caranci says the comply-or-explain policy has been “highly effective in a number of areas,” such as an increase in the share of women on boards across all industries and firm sizes and a decline in the share of boards with zero women.

However, corporate Canada’s journey is not yet complete, as most publicly traded companies fall short of the important minimum 30 per cent threshold that constitutes critical mass, she wrote.

There are so many organizations showcasing board-ready women.– Beata Caranci, TD bank economist and report author

Also, the comply-or-explain policy has not resulted in a marked improvement representation of women within the senior executive rankings of firms, TD added.

In 2011, female representation on boards at U.S. companies on the S&P 500 index outpaced that of Canadian firms on the S&P TSX in eight out of 10 industries, and often by a large margin.

The 2018 data, however, demonstrates that the “tables are turning,” as Canada now outperforms the U.S. board gender representation in seven of those same 10 industries.

Canadian companies have usurped their U.S. counterparts on the benchmark index in health care, consumer staples, financials, telecom, utilities, industrials and information technology.

However, TD’s analysis showed that Canadian companies’ board diversity continues to lag in energy, materials and consumer discretionary sectors.

Slower board turnover with small companies

The TSX is more resource-heavy and has a higher prevalence of smaller companies than the S&P 500, they add. Small-sized resource firms capture 30 per cent of all board seats in the S&P/TSX, compared to just 12.5 per cent in the U.S. benchmark index, Caranci and Preston said.

Smaller companies have slower board seat turnover, and less opportunities to change the status quo, and are more likely to cite limited resources for candidate searches.

“I have some sympathy on that part, that you’re going to get less progress there,” Caranci said in an interview. “I have a little less sympathy when there are things cited about there not being quite enough women, or a supply side issue that I’m not quite buying … There are so many organizations showcasing board-ready women.”

TD estimates if all of Canada’s small-sized firms were to hit the tipping point of three women on their boards, that would single-handledly move the entire S&P/TSX index up by 10 percentage points to 34 per cent, she said.

“That would only entail about 206 women … that’s not a large amount, that’s feasible,” she said.

Meanwhile, institutional investors are increasingly pushing for greater female representation on boards by using their voting rights. Caranci and Preston cites such efforts by the Canada Pension Plan Investment Board, the Institutional Shareholder Services (ISS) Canada and the Ontario Teachers Pension Plan.

The ‘twokenism’ phenomenon

For example, CPPIB said in 2017 it cast votes at the shareholder meetings of 45 Canadian companies with no women directors and engaged with the companies as well, and a year later nearly half had appointed a female to its board.

These shareholder initiatives have potential, Caranci said, but it is important to guard against a phenomenon coined “twokenism,” in which companies become complacent after adding two or three women on their boards.

“If that means that investor scrutiny is less on you and more on those who have zero, that gets you out of the limelight or discontent with shareholders,” Caranci said. “You’re satisfying a perception or a number, versus actually changing mindsets and practices … This becomes the one to watch as we go forward.”

These investor efforts should be given time to generate results, given the progress seen by other countries with similar policies that were implemented years earlier, Caranci wrote.

“It is likely that Canada’s gender representation will continue to improve. If in a few years it is evident that progress has reached a point of stasis, then it might be time to consider designing targeted policy at the trouble spots.”



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Ottawa considering new retaliation to end U.S. tariff fight, source says

Ottawa considering new retaliation to end U.S. tariff fight, source says

Canada is considering new ways to retaliate against the United States in hope of getting steel and aluminum tariffs lifted.

A senior source with direct knowledge of the situation says Canada is considering launching consultations on whether it should increase its retaliatory tariffs.

The source says Canada is “going to have to refresh our retaliation to focus their mind.”

Last June, the Trump administration introduced 25 per cent tariffs on imported steel and 10 per cent tariffs on imported aluminum.

Prime Minister Justin Trudeau and Foreign Affairs Minister Chrystia Freeland have both called the move illegal and unjust, and introduced $16.6-billion in retaliatory tariffs targeting everything from maple syrup in Maine to Bourbon in Kentucky.

Canada has aggressively lobbied the White House, as well as anyone who has influence with U.S. President Donald Trump in the hopes of getting the tariffs lifted.

But multiple sources say there has been little progress in that effort, and that Trump is quite pleased with himself and his tariffs.

When Canada first retaliated, the government described the counter-measures as “dollar-for-dollar” when compared to the U.S. tariffs.

But the source says the dollar value actual falls significantly short of that threshold.

Increasing retaliatory tariffs

A second source said the reason the Canadian tariffs are not actually dollar-for-dollar is that some importers have been granted exclusions through the remittance process.

The consultations Canada is considering would look at how to increase retaliatory tariffs to actually meet the dollar-for-dollar mark.

“We will obviously look for items that will hurt Canadians the least,” the senior source said.

If Canada does look at increasing retaliatory tariffs, it would target products for which Canadians have other purchasing choices.

The idea is up for discussion “given the intransigence of the U.S.” the senior source added.

When Trump first introduced the tariffs, the move was widely seen as a NAFTA negotiating tactic. And it was expected that once a new trade agreement was reached, the White House would lift the tariffs.

But the U.S. has not changed its policy.

Trudeau has been criticized by the opposition for signing the agreement before getting the tariffs removed.



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Huawei rebuked over security flaws by UK report

Huawei rebuked over security flaws by UK report

Britain publicly chastised China’s Huawei Technologies for failing to fix long-standing security flaws in its mobile network equipment and revealed new “significant technical issues,” increasing pressure on the company as it battles Western allegations that Beijing could use its gear for spying.

In a report published on Thursday, the government-led board that oversees vetting of Huawei gear in Britain said continued problems with the company’s software development had brought “significantly increased risk to UK operators.”

The board, which includes officials from Britain’s GCHQ communications intelligence agency, said in the report that the company had made “no material progress” addressing security flaws and it didn’t have confidence in Huawei’s capacity to deliver on proposed measures to address “underlying defects.”

The unusually direct criticism is a fresh blow to the world’s largest maker of mobile network equipment, which has been under intense scrutiny in recent months.

Officials in the United States and elsewhere have been increasingly public in voicing concerns that Huawei’s equipment could be used by Beijing for spying or sabotage, particularly as operators move to the next generation of mobile networks, known as 5G.

Huawei takes concerns ‘very seriously’

Shenzhen-based Huawei said in a statement it took the oversight board’s concerns “very seriously” and that the issues identified in the report “provide vital input for the ongoing transformation of our software engineering capabilities.”

Huawei pledged last year to spend more than $2.7 billion ($2 billion US) as part of efforts to address problems previously identified by Britain, but has also warned it could take up to five years to see results.

Mobile phones are seen at Huawei store in Madrid, Spain February 7, 2019. The new report said Huawei had failed to follow through on security commitments made as far back as 2012. (Juan Medina/Reuters)

British security officials previously said they believed any risks posed by Huawei could be managed.

In the report, the government-led board said: “These findings are about basic engineering competence and cyber security hygiene that give rise to vulnerabilities that are capable of being exploited by a range of actors.”

“NCSC (National Cyber Security Centre) does not believe that the defects identified are a result of state interference,” it added.

The work of the oversight board and its findings will help inform future government policy on network security, officials say, but the final decision lies with ministers.

British officials now need to see evidence of significant change, the report said, adding that Huawei had failed to follow through on security commitments made as far back as 2012.

“The evidence of sustained change is especially important as similar strongly worded commitments from Huawei in the past have not brought about any discernible improvements,” it said.

‘Major defects’

The 40-plus-page report identified several new technical issues with Huawei equipment and revealed that the problems were at a greater scale than previously publicly acknowledged.

These include concerns related to a product called eNodeB, which provides a connection between the network and a user’s mobile phone.

According to the report, the oversight board looked at updated versions of software that were intended to incorporate security improvements but found “the general software engineering and cybersecurity quality of the product continues to demonstrate a significant number of major defects.”

A staff member stands in front of a Huawei shop in Beijing, China, March 7, 2019. Shenzhen-based Huawei said in a statement it took the oversight board’s concerns ‘very seriously.’ (Thomas Peter/Reuters)

The report also said the lab had reported to UK operators “several hundred vulnerabilities and issues” during 2018.

The board added that overall, the problems reveal “serious and systematic defects in Huawei’s software engineering and cyber security competence.”

And, as a result, the board could still only provide limited assurances that the security risks posed by Huawei equipment could be managed long term.

It added: “The oversight board advises that it will be difficult to appropriately risk manage future products in the context of UK deployments, until the underlying defects in Huawei’s software engineering and cyber security processes are remediated.”

The board first downgraded its level of assurance in its last report, published in July 2018. In addition to top British government officials, the board includes senior representatives from British telecom operators and Huawei executives.



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CRA executes search warrants on Vancouver properties in tax evasion case

37% of Metro Vancouverites think real estate market is 'extremely corrupt': report

The Canada Revenue Agency says its investigators executed search warrants on two properties in Vancouver today — part of an effort to find further evidence in a $77 million tax evasion case related to the Panama Papers.

The CRA says 40 criminal investigators took part in the operation.

The agency says investigators uncovered a series of transactions involving offshore tax havens linked to an alleged attempt by a non-resident to avoid paying tax he was withholding. Investigators relied on various sources, including records obtained through the Panama Papers leak, according to a news release.

“These complex investigations can take months or years to complete and I’m encouraged and very pleased with the search warrants that were executed this morning,” said National Revenue Minister Diane Lebouthillier in a written statement.

“The net is tightening.”

The Panama Papers are the millions of documents leaked in 2016 that revealed financial and lawyer-client information for more than 200,000 offshore entities.

The CRA says this investigation is one of 52 international and offshore tax evasion cases in which it is involved. Those cases include some involving five taxpayers named in the Panama Papers.

More than 3,000 Canadian companies, trusts, foundations and individuals appeared in the papers, including an NHL hockey team, several billionaires and a yacht captain.

In 2016, the CRA went to court in the wake of the Panama Papers leak to compel the Royal Bank to hand over decades worth of records on clients with offshore companies. It is not clear whether today’s investigation is related to that.

Citing confidentiality rules under the Income Tax Act, the agency would not comment further on the status of today’s investigation, provide details on the exact location of the searches or reveal where the non-resident man in question is from.

In 2017-2018, 14 taxpayers were sent to jail for tax evasion for a total of 40 years, according to the CRA. 

None of those cases were related to the Panama Papers. In fact, almost three years after the leak, the agency has yet to charge or convict anyone based on the papers.



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