Capital Markets Mid-Year Report 2014


As we approach the sixth anniversary of the global financial crisis, our report this year examines the current state of some of the key sectors in North American capital markets.

Public capital markets in North America appear to be rebounding with strength. May saw the announcement of one of the largest public offerings in Canada—Bank of Nova Scotia’s sale of C$2.3 billion in shares of CI Financial by way of a bought deal. U.S. public markets have been very active—2013 was one of the strongest U.S. IPO markets in recent memory and positive trends continue into 2014. Despite continued scrutiny of the fairness of the public markets, and claims like those from Michael Lewis that the stock markets are rigged, investor confidence appears to be building, and recent regulatory initiatives, such as the implementation of the JOBS Act in the U.S. and the liberalization of marketing rules in Canada, have proved successful in creating a friendlier regime for companies looking to access North American public markets. Forthcoming changes in the Canadian private placement market are also expected to increase financing options for pre-IPO companies.

For Canadian banks, the preferred share market has finally re-opened over a year after the Basel Committee implemented requirements on non-viable contingent capital (NVCC) designed to reduce systemic risk. In the first five months of 2014, Canadian banks raised C$2.0 billion in preferred share offerings. The first offering of NVCC subordinated debt, however, is yet to surface and we expect the new rules will result in significantly less subordinated debt raised by financial institutions in Canada. While preferred share offerings by Canadian financial institutions have been well received by the market, mining companies have faced constraints raising sufficient traditional equity and debt capital and have increasingly been turning to streaming transactions, attracting investors outside the traditional stream space, such as pension funds and private equity firms.

Alongside encouraging activity in North American capital markets, some sectors continue to face regulatory uncertainty. Reform related to over-the-counter derivatives, often cited as an aggravating factor of the 2008 financial crisis, continues to drag. Similar to the U.S. experience under the Dodd-Frank Act, progress in establishing a comprehensive Canadian regulatory regime has been slower than expected. In the Canadian mortgage market, securitization programs sponsored by the federal government provided critical liquidity during the financial crisis. Current levels of government support are unlikely to go on indefinitely, but before the government can reduce its support, a more robust private market will need to develop. In the U.S., the trend toward inversions—transactions in which a U.S.-based multinational company lowers its overall effective tax rate by expatriating to a low-tax jurisdiction—appears to be accelerating. Some believe this surge may indicate that the window of opportunity for inversions may vanish as U.S. lawmakers apply greater scrutiny to these transactions.

To discuss any of the issues in the report, please contact the authors.

Click here for a PDF of the report or click on any of the links below to read the individual articles.

Cross-Border Financing Opportunities: IPOs and Alternatives
by Mile Kurta, Rima Ramchandani and Richard Willoughby

The Preferred Share Market Finally Re-Opens For Canadian Banks
by Blair Keefe, David Seville and Thomas Yeo

Streaming Transactions in the Mining Sector: a Financing Linchpin
by Michael Amm and Ian Arellano

United States Inversion Opportunities
by Corrado Cardarelli, Peter Keenan and David Mattingly

OTC Derivatives Regulation: End Users Mark Time
by Christopher Fowles

CMHC Insurance and Covered Bonds—What Will Happen When the Training Wheels Come Off?: Revisited
by Michael Feldman and Jim Hong


Torys' Capital Markets Practice

Torys LLP is entrusted to advise on our clients’ most significant transactions. We are known for delivering high-quality capital market services in both Canada and the United States.

We provide a broad range of services to clients in all major industrial sectors, and we are regularly retained by governments and regulatory authorities to provide advice in developing and implementing major policy initiatives. Our longstanding relationships with our clients endure through generations. Our growing Calgary office uniquely positions us to provide clients with valuable insights into several new sectors, including Canada’s emerging global oil and gas markets.

The lawyers in our cross-border Corporate and Capital Markets Practice have particular expertise as both lead transaction counsel and strategic advisers in structuring and implementing sophisticated, innovative financing transactions, as well as traditional financing deals, in domestic and international capital markets.

Our practice is highly ranked globally by various sources, including Bloomberg, IFLR, Chambers Global, Mergermarket, Thomson Reuters and Lexpert, particularly for our lawyers’ world-leading expertise and our exceptional bench strength.

For further information about our Capital Markets Practice, please contact:

Kevin Morris

Rima Ramchandani

New York
Andrew J. Beck

Scott R. Cochlan

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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