Author: Consultant

Months of simmering tensions over a nearly $170-million debt owed by Peguis First Nation to failed lender Bridging Finance Inc. have boiled over, with critics in the community accusing the band council of arbitrarily writing down the debt to just $25-million ahead of an April band council election.

The writedown was revealed in financial statements posted last week on the website of Peguis First Nation, raising concerns from its members and accounting experts about whether the writedown disguises the size of the debt facing the community.

Peguis, a First Nation that has a registered population of 11,000 and whose main reserve is located about 190 kilometres north of Winnipeg, has borrowed millions from Bridging.

A Toronto-based lender, Bridging was placed into court-ordered receivership in April, 2021, at the request of the Ontario Securities Commission over allegations that Bridging managers funnelled millions to themselves at investors’ expense.

Receiver PricewaterhouseCoopers Inc. is now working to wind down Bridging operations and recover funds for Bridging investors through negotiations or through legal action, including lawsuits against Peguis.

In December, PwC filed claims in Ontario and Manitoba courts, seeking to recover nearly $170-million in principal and interest owed by Peguis First Nation and related entities.

According to a statement of claim filed Dec. 30, 2022, in the Court of King’s Bench in Manitoba, Peguis in 2017 arranged three separate credit facilities through Bridging: $19-million to build new homes and $3-million to renovate existing ones; $6-million to build two new gas bars in Winnipeg and Selkirk; and $30.6-million to replace credit facilities Peguis previously had with Bank of Montreal.

The amount available through those credit facilities was increased on several occasions at Peguis’s request, according to the statement of claim. As of Dec. 29, 2022, the housing facility was sitting at $58.4-million (including a $40-million mortgage initially issued by BMO); the gas-bar loan was at $6.9-million; and the new credit facility was at $48-million, for a principal balance of$113.4-million. Fees and interest of$56.4-million pushed that total to $169.8-million.

A court action in the Ontario Superior Court of Justice, filed Dec. 30, 2022, claims the same amounts: $113.4-million in principal plus $56.4-million in interest.

In January, news of the Ontario court action began spreading among Peguis members. A dissident group, 269 Silent No More, held a rally and meeting that month in the community of Peguis to highlight the Ontario court action – handing out copies to band members – and to call for more transparency from the chief and council. (269 is Peguis’s band number under the federal Indian Act.)

Then, last week, updated financial statements for the band were posted on the Peguis website.

According to those financial statements, the chief and council sought legal advice in the wake of the receiver’s Manitoba lawsuit to review the documentation and terms of the Bridging loans, including whether the loans complied with provisions of the Indian Act.

Under the Indian Act, on-reserve property and assets are in general protected from seizure by creditors, but those provisions can be waived. Peguis says its legal counsel believes that some of the Bridging loans required Bridging to obtain fresh waivers under the act, as opposed to relying on those previously obtained by BMO for its loans, and Peguis claims Bridging did not take that step.

The chief and council therefore passed a band council resolution to write down the loan to $25-million, the financial statements say.

Chief and council planned to discuss the new financial statements at a community meeting in Peguis on March 20, but that discussion was put off after protesters disrupted the gathering, calling on council to delay the discussion until after the band council election.

In a statement released later that day, Chief Glenn Hudson, who is running for re-election, said the protesters’ actions “were a total breach of the democratic rights of all Peguis members” to have access tofactual, transparent and accountable information on the First Nation’s finances.

Mr. Hudson has not responded to requests for comment from The Globe and Mail. But he has publicly stated that the PwC legal actions were only made for procedural reasons and that he and council are working with PwC on a negotiated settlement.

Members of 269 Silent No More allege Mr. Hudson is using the financial statements to play down Peguis’s debt to improve his chances of re-election.

“It’s a complete and utter joke for the current chief and council to think that a band-council resolution, like a magic wand, will somehow make the debt magically disappear,” said Stan Bird, a member of 269 Silent No More who is running for chief against Mr. Hudson.

“It is yet another attempt to mislead the people.”

In an e-mail, PwC spokeswoman Chiara Battaglia said Bridging receivership proceedings are still under way and that PwC does not publicly comment on active proceedings.

The financial statements come with a “qualified” opinion from the Winnipeg office ofBaker Tilly Canada, an accounting firm,that cites several issues, including uncertainty related to the Bridging debt.

When an auditor has an “unqualified” opinion, it believes the financial statements fairly present the financial condition of the company or entity that put them out. An auditor “qualifies” its opinion when it finds issues that prevent it from saying that.

The financial statements also include a “going concern” note. Companies or other entities prepare financial statements under the assumption that they will continue to operate and be a “going concern.” If there is meaningful doubt about that, they or their auditors must insert a warning to the people reading the financial statements.

Baker Tilly said it was unable to comment on the Peguis statements.

Shanker Trivedi, an associate professor of accounting at Schulich School of Business, said he was struck by the large amount of money that falls under the umbrella of the qualified audit opinion, including more than $100-million in relation to the Bridging debt and $22-million related to what is identified as a “bad debt” in connection to loans to a company affiliated with Peguis.

Prof. Trivedi, who said he reviews many such statements for universities and other groups, also questioned how Peguis handled the Bridging debt. He noted that how the debt is presented in financial statements has a significant impact on the overall financial picture for the band.

“I mean, usually people write off what people owe them. … Nobody writes off loans that you owe to others, especially when nobody has told you that we are going to forgive the loan that you owe us,” Prof. Trivedi said.

LondonCNN — 

A nationwide strike in France to protest a rise in the retirement age drew more than a million people onto the streets on Thursday before ending in violent clashes with police in Paris and other cities.

The protest followed a strike of a similar magnitude in January and days of smaller walkouts and demonstrations in between. And more industrial action is planned for next week.

What’s making the French so angry is a new retirement age that will still be one of the lowest in the industrialized world.

Under a new law, pushed through parliament without a vote last week, the retirement age for most French workers will be raised from 62 to 64.

That will still keep France below the norm in Europe and in many other developed economies, where the age at which full pension benefits apply is 65 and is increasingly moving towards 67.

In the United States and the United Kingdom, the retirement age is between 66 and 67, depending on the year you were born. Current legislation envisages a further rise from 67 to 68 in Britain between 2044 and 2046 (although the timing of this increase is being reviewed and could change).

https://edition.cnn.com/2023/03/24/business/pension-age-developed-countries-oecd/index.html

Russian President Vladimir Putin on Saturday said the country planned to station tactical nuclear weapons in Belarus in retaliation for the U.K.’s decision to provide Ukraine with armor-piercing rounds containing depleted uranium. 

Russia falsely claimed these rounds have nuclear components.

Putin said the construction of the storage facilities for the weapons in the Russian-allied country, which borders Ukraine and three NATO countries – Latvia, Lithuania and Poland – would be completed by the beginning of July. 

https://www.foxnews.com/world/putin-says-russia-station-tactical-nuclear-weapons-belarus-warning-west

As of March 20, five of the six big Canadian banks had seen net insider accumulation over the past month through either public market buying or derivative exercises. The one exception is Royal Bank of Canada, which has flat insider holdings. Today, we highlight Canadian Imperial Bank of Commerce CM-T -0.11%decrease, which has buying and no selling over the past month. During the period, three insiders spent a combined $5.169-million buying shares in the public market. President and CEO Victor Dodig was the biggest buyer, acquiring 86,440 common shares at an average price of $57.91.

Ted Dixon is CEO of INK Research which provides insider news and knowledge to investors. For more background on insider reporting in Canada, visit the FAQ section at www.inkresearch.com. Securities referenced in this profile may have already appeared in recent reports distributed to INK subscribers. INK staff may also hold a position in profiled securities.

There are any number of items you could include on a list of Canada’s defence spending failures.

There’s the fact the Canadian Armed Forces has a chronic recruitment problem that has left it short 10,000 personnel and counting.

There’s our minuscule and antiquated submarine fleet – four diesel-powered vessels purchased from the British army in the 1990s. The Victoria-class subs cost billions to keep in service, and their last-century vintage sinks Ottawa’s claim that it can preserve Canada’s sovereignty in the Arctic.

That naval deficit is made worse by Canada’s embarrassing exclusion from the AUKUS military pact, in which three of our biggest allies – the United States, Britain and Australia – will together equip Australia with nuclear-powered submarines to respond to China’s growing aggression in the Pacific.

And no list would be complete without Ottawa’s inability to procure armaments and equipment in a timely manner – a reality illustrated by the long-overdue agreement made earlier this year to purchase 88 F-35 fighter jets. That deal was first announced by former prime minister Stephen Harper in 2010; the F-35s will not be operational until 2029 at the earliest.

Federal budget 2023

This is part of a series on the federal budget to be unveiled on March 28. Check our editorials section for more instalments this week. Other topics include:

Seniors: The growing gap between what Ottawa spends on older and younger Canadians

Child care: Ottawa must follow through on subsidized system

Health care: Ottawa should give provinces more tax room, not a blank cheque

But taking three decades to upgrade a critical air defence capability, and all the other failings listed above, do not represent the worst of it. That honour goes to Ottawa’s refusal to meet its NATO obligation to spend 2 per cent of gross domestic product on defence.

Even as Russia continued to bombard and kill Ukrainian civilians this week, NATO said on Tuesday that Canada’s defence spending will amount to just 1.29 per cent of GDP in fiscal 2022-2023. That’s essentially the same percentage as 2021-2022, when it stood at 1.28 per cent and Russia had only just begun its invasion.

It’s also well below the highwater mark of 1.44 per cent that Canada hit in 2017-2018.

In constant 2015 Canadian dollars adjusted for inflation, Canada is this fiscal year spending less on defence than it did five years ago.

It is frankly astonishing that Russia’s illegal war and China’s increasingly aggressive posture have not pierced the Trudeau government’s isolationist armour.

While allies such as Britain, Germany and Japan (which is not part of NATO) are ramping up their defence spending in response to clear and present threats, and the U.S. continues its pump billions of dollars worth of cash, equipment and weapons into Ukraine, Canada hovers near the bottom of the NATO rankings, beside Slovenia, Spain and Luxembourg.

Over the past four years, the gap between Canada’s actual defence spending, as recorded by NATO, and the amount that would be required to hit 2 per cent of GDP has risen to $21-billion from $17-billion.

That’s a lot of money, but Canada’s $2.86-trillion economy can absorb it. Much smaller NATO economies that don’t have the luxury of naiveté – Poland, Estonia, Lithuania, Latvia – routinely meet and surpass the 2-per-cent benchmark.

Even more damning is the fact that Canada is by far the lowest NATO contributor as a share of GDP among Group of Seven countries.

It comes down to a choice for Ottawa: spend less on some programs so that more can go to defence. That’s what writing a federal budget is all about – prioritizing. And right now, in the world we live in, the Trudeau government patently has its priorities wrong.

Ottawa needs to rapidly increase its defence spending, with the ultimate goal of meeting the NATO threshold. Doing so would put our armed forces on a better standing. More importantly, it would demonstrate that Canada is shoulder to shoulder with NATO in the defence of our values.

Canadian luxury jet maker Bombardier Inc. BBD-B-T +6.42%increase is boosting its financial targets as it sets a new course towards consistent profitability after years of strife.

The Montreal-based manufacturer said Thursday a five-year turnaround strategy launched in March 2021 is yielding results that are either meeting or exceeding its initial plans. Jet sales are holding strong and other revenue streams like servicing planes are helping fuel the bottom line, prompting the company to hike its financial objectives on several key metrics.

Bombardier is now aiming to generate at least US$900-million in annual free cash flow by 2025, up 80 per cent from the US$500-million initially projected. Revenue should top US$9-billion, up 20 per cent from its initial target of US$7.5-billion while adjusted earnings before interest, taxes, depreciation and amortization should hit a minimum of US$1.625-billion, up from the previous US$1.5-billion target, according to the company.

“We are confidently raising the bar,” Bombardier Chief Executive Officer Eric Martel said in a statement released Thursday morning ahead of an exchange with equity analysts for its investor day. “While we are carefully monitoring the current market situation, we know that we have all the ingredients in place to remain a driving force in the industry.”

Mr. Martel took over as Bombardier CEO in the spring of 2020, inheriting a heavily-indebted company still in the throes of crisis as it tried to complete the sale of its train unit to France’s Alstom SA and reinvent itself as a single-business manufacturer of private jets. At the time, its share price had fallen to lows not seen in a quarter century and its business prospects were clouded by the fallout from the Covid-19 pandemic.

The CEO and chief financial officer Bart Demosky hatched a blueprint for recovery that hinged on cementing its share of new aircraft sales, cutting costs, paying down debt, and dramatically increasing its aircraft repair and service capability. They’re also building out Bombardier’s defense business, and now see that unit being able to triple its revenue to more than US$1-billion in the second half of the decade.

Bombardier’s top executives set initial financial goals that some investors have labelled overly conservative and therefore easier to achieve. But there’s no doubt their plan has put the manufacturer on firmer footing.

The company, controlled by its founding Bombardier-Beaudoin family through a special class of super-voting shares, more than quadrupled its profitability on an adjusted EBITDA basis between 2020 and 2022 while growing revenues 23 per cent. Including this year’s transactions, the corporation has reduced its debt by $4.5-billion over the past three years, earning credit rating upgrades from Moody’s Investors Service and Standard & Poor’s.

Bombardier announced two years ago that it would narrow its manufacturing to bigger and pricier jets such as the US$75-million Global 7500 and end production of the smaller-cabin Learjet models. That decision is now paying dividends because the high net-worth customers buying those planes are less affected by inflation and regional economic slowdowns than those with lesser means.

The corporation also benefitted from a surge toward private plane travel during the COVID-19 pandemic, seeing strong sales to individuals and fleet operators as more people chose to avoid the airport chaos and flight schedule disruption that became common in commercial air travel. It now has a backlog of orders worth two years of work.

Walter Spracklin, an analyst at RBC Capital Markets, says the pandemic has “structurally increased demand” for private jets and private travel among wealthy individuals. Data from business aviation intelligence firm WingX shows business jet activity as measured by flights is down 3 per cent this year through March 13 compared to the same period last year but 16 per cent ahead of 2019.

Still, it remains to be seen whether the changing fortunes of Bombardier’s billionaire clients will affect demand. Soaring equity markets and rising valuations of everything from mansions to cryptocurrencies to commodities boosted the collective fortune of the world’s 500 richest people by more than US$1-trillion in 2021, according to Bloomberg data. Last year, the ultra-wealthy saw US$1.4-trillion erased from their net worth.

“March 2022 was the record peak in business aviation activity, reflecting the pent-up demand as the pandemic faded and lockdowns were released, so it’s not a great surprise to see lower year-over-year activity,” WingX said in its latest weekly bulletin. “However, with emerging concerns of another global financial crisis, we may well see further softening in business jet usage in the next few months.”

Bombardier faces pressure on other fronts.

Two bondholders previously locked in a dispute with the manufacturer over its move to sell the train business and other assets are now suing the company. They say the decision violates the terms of debt covenants on a US$250-million debenture maturing in 2034 and deprives them of basic credit support for their investment that came from a diversified transportation business.

In a claim filed with the New York Supreme Court, Antara Capital Master Fund and Corbin Opportunity Fund are demanding relief and damages over alleged breach of contract. They say the covenant stipulates that Bombardier cannot dispose of “the whole or substantially the whole” of its assets for the 30-year term of the debt, and argue that Bombardier’s move to sell US$260-million worth of new 2034 bonds through private placement to Canso Investment Counsel Ltd. in May 2021 diluted the dissenting bondholders and was illegal.

Bombardier says the allegations are without merit and that it has never been in breach of any covenant under the relevant indenture. When the bondholder issues first surfaced in 2021, Mr. Martel characterized them as “a little bump in the road” that would not distract management from its effort to turn the company around. More recently, he said he remains confident that Bombardier it will win the legal battle but says a resolution could take years.

LondonCNN — 

The Bank of England is expected to hike rates by a quarter of a percentage point Thursday following an unexpected jump in inflation.

UK consumer prices surged by 10.4% in February compared with a year ago, the first acceleration in inflation in four months, as food prices soared and the cost of visiting restaurants and hotels increased.

The surprise uptick in inflation increases the likelihood that the central bank will raise rates for the 11th consecutive time, despite turmoil in the banking sector and concerns about weak economic growth in the United Kingdom.

Other major central banks are continuing to raise borrowing costs. The US Federal Reserve hiked rates by a quarter of a percentage point Wednesday. The European Central Bank increased its rates by half a point last week — even as markets were being roiled by the banking crisis — and the Swiss National Bank followed with a hike of the same magnitude earlier Thursday.

UK inflation rises to 10.4% as food prices soar

“There had been hopes that inflation could have retreated from its double-digit heights, but the lurch upwards… is likely to refocus minds on the need to dampen down demand further and rein in the price spiral,” Susannah Streeter, head of money and markets at broker Hargreaves Lansdown, wrote in a note Thursday.

The Bank of England’s job is made more difficult by the fact that the UK economy is expected to shrink this year, because higher interest rates constrain consumer demand and business investment. Turmoil in the banking sector, which is expected to cause banks to further tighten lending criteria, could depress growth even further.

https://edition.cnn.com/2023/03/23/economy/uk-interest-rates-hike/index.html

The federal government is set to carve out a bigger role for itself in electricity policy – an area of mostly provincial responsibility, but one that Ottawa has identified as pivotal to national economic interests as Canada competes for low-carbon investment.

New spending commitments to help modernize and expand the capacity of the country’s power grids will be a major component of a federal budget aimed at keeping pace with massive clean-energy investment in the United States, according to government sources.

Policy levers that the government has been considering, the sources say, include some combination of tax credits, grants, financing mechanisms and the pursuit of joint funding agreements with provinces. There is growing recognition that grid investment is currently nowhere near what is needed to meet electricity demand that is expected to at least double as electricity is increasingly used to fuel transportation, heat buildings and power industry.

• These are Canada’s electric vehicle hot spots

U.S. crude oil stockpiles rose unexpectedly last week to their highest in nearly two years, while gasoline and distillate inventories fell, the Energy Information Administration said on Wednesday.

Crude inventories rose by 1.1 million barrels in the week to March 17 to 481.2 million barrels, their highest since May 2021. Analysts in a Reuters poll had expected a 1.6 million-barrel drop.

Oil inventories have mostly built since mid-December, the data showed.

“(The build) is obviously a concern for the bulls here,” said Bob Yawger, director of energy futures at Mizuho. “We just have a lot of crude oil in storage and it’s not going to go away any time soon as it looks like we keep on posting builds.”

Oil futures turned positive after the data. Brent crude futures and U.S. crude futures last traded up about 0.8 per cent to $75.93 a barrel and $70.25 a barrel, respectively.

Inventories on the East Coast, however, fell to 6.53 million barrels, the lowest on record, despite refinery utilization in the region falling to the lowest since February 2021, the data showed.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.1 million barrels last week, the EIA said.

Refinery crude runs fell by 22,000 barrels per day (bpd) and refinery utilization rates rose by 0.4 percentage point in the week.

Gasoline stocks fell by 6.4 million barrels to 229.6 million barrels, the EIA said, compared with analysts’ expectations for a 1.7 million-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell by 3.3 million barrels in the week to 116.4 million barrels, versus expectations for a 1.5 million-barrel drop, the data showed.

Net U.S. crude imports rose last week by 51,000 bpd, the EIA said.