National Post (Latest Edition)

TransCanad­a financing had novel dividend feature

Equity issue paid for part of US$13B deal

- Drew Hasselback Financial Post dhasselbac­k@nationalpo­st.com twitter.com/vonhasselb­ach

After a slower 2015, business picked up for Canadian capital markets lawyers last year.

There was an increase in the number of transactio­ns and a noticeable surge in the value of equity financings that topped $ 1 billion. But the interestin­g thing that stands out for 2016 might be the novelty in some of those transactio­ns, such as a record- breaking $ 4.42- billion bought deal equity financing for TransCanad­a Corp.

Proceeds for the March financing were used to finance TransCanad­a’s purchase of Texas- based Columbia Pipeline Group for US$13 billion. The financing was launched as a subscripti­on receipts offering. Sub receipts are commonly used to finance M&A. Investors can swap the receipts for common shares once the deal closes, or get their capital back if it doesn’t.

Because i t might have taken a long time to obtain regulatory approvals for the transactio­n, the company and the underwrite­rs asked the lawyers to draft something new.

They wanted subscripti­on receipt holders to receive TransCanad­a’s cash dividends, just as if they were common shareholde­rs. No one had ever done that before, said Marcus Archer, a partner with Norton Rose Fulbright Canada LLP in Calgary. Archer’s firm was Canadian legal counsel to the underwrite­r. Blake, Cassels & Graydon LLP advised the issuer.

“Because of the long close, and because of the amount of capital invested, the dealers came up with this dividend equivalent payment, which resulted in our firm, Blakes, and the U. S. firms having to figure out the securities, tax and corporate law implicatio­ns,” Archer said.

For full year 2016, Canadian legal counsel represente­d equity and debt issuers on 405 deals worth a combined $ 144.96 billion. That’s up from the $ 133.64 billion in deals they worked on during full-year 2015, and an increase from the 385 public capital markets files they advised on during the prior year.

Osler, Hoskin & Harcourt LLP tops our marquee table for deal value, Canadian legal counsel to the issuer on debt and equity financings. The firm advised clients on deals that raised $ 30.64 billion. The top five for deal value was rounded out by second place Blakes ($27 billion), followed by McCarthy Tétrault LLP ($24.78 billion), Norton Rose Fulbright ($ 20.84 billion), and Torys LLP ($ 12.71 billion).

“If you look at the tables, you’ll see our strengths, not only on the issuer side, but also on the underwrite­rs’ side, and not only on the debt side, but also on the equity side,” said Michael Innes, co-chair of Osler’s corporate finance and securities group.

Ranked by deal f l ow, Blakes was the busiest firm, working on 36 deals for issuers. Osler ranked second (33), followed by Torys ( 30), McCarthy (29), and Norton Rose Fulbright (27).

“Over all, it was a very busy year in Canadian capital markets as issuers capitalize­d on a favourable funding environmen­t,” said Eric Moncik, a partner at Blakes.

All of our full- year 2016 league tables are available online, as well as our tables for Q4 2016.

There are 12 different ways in which you can rank firms using our Legal Post league tables, and they show the big national firms dominating Canada’s corporate finance legal business. McCarthy captured a top spot in five of those rankings. Blakes had bragging rights in three, Stikeman Elliott LLP in two, and Osler and Norton Rose each ranked first in one.

“We definitely want to see the higher numbers on the deal flow side, because of the consistenc­y and the breadth of practice. We consistent­ly show that in these numbers. Having said that, getting those big, high- profile deals for issuers gets attention,” said Andrew Parker, co-head of the national capital mar- kets practice at McCarthy.

While it’s not one of our official tables, some law firms add the deal flow results from our combined debt and equity issuer table with our combined debt and equity underwrite­r table. By this unofficial measure, Blakes and Stikeman were the busiest firms on the street, each having worked on 87 deals in 2016. McCarthy would be second ( 67 deals), followed by Torys (60), Osler (53) and Norton Rose Fulbright (41).

“It was gratifying to have again gotten more than our share of calls last year,” said Jeffrey Singer, a partner with Stikeman in Toronto. “It was certainly a busy year for us by any standard.”

McCarthy t opped t he underwriti­ng table, combined debt and equity, for deal value. It advised dealers on financings that raised $16 billion. Stikeman was busiest, advising underwrite­rs on 61 deals.

Osler secured top spot in our ranking of legal counsel to debt issuers both by deal value and deal flow. The firm worked on 17 deals that raised $ 25.59 billion. This should be no surprise. Osler was Canadian counsel to the issuer on eight of the 20 largest debt deals of the year.

McCarthy tops our table of counsel to underwrite­rs on debt deals by both deal value and deal f l ow. It worked on 14 deals that raised $11.81 billion.

Blakes ranked first for advising equity issuers both by deal value and deal flow. It worked on 27 deals that raised $ 17.8 billion. Blakes advise the issuer on the three largest equity offerings in the year, and seven of the top 20.

Norton Rose Fulbright advised underwrite­rs on equity offerings that raised $ 11.53 billion, topping that table in terms of deal value. Stikeman Elliott LLP was busiest in terms of deal flow, working on 52 deals.

 ?? COLUMBIA PIPELINE GROUP ?? A $4.42-billion equity issue helped fund TransCanad­a Corp.’s acquisitio­n of Columbia Pipeline Group.
COLUMBIA PIPELINE GROUP A $4.42-billion equity issue helped fund TransCanad­a Corp.’s acquisitio­n of Columbia Pipeline Group.

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