Tuesday, January 25, 2011

Globe: Trust tax tilts the balance to foreign takeovers

Boyd Erman in today’s Globe writes:

"Houston-based Magnum is buying NuLoch Resources for $327-million, in a deal announced last week. Since then, some bankers report heightened interest from more mid-tier American buyers.

One perceived advantage for American oil and gas companies looking at buying in Canada is that they can get more leverage than Canadian acquirers, giving them a cost of capital advantage. American banks are willing to lend smaller oil companies more, with as much as twice as much debt per dollar of cash flow on offer. They also have access to more financing in other areas of the capital structure such as bond debt and preferred shares, bankers say.

The disappearance of the trust structure, which allowed many Canadian producers to trade at high multiples, is also tilting the balance back toward American buyers."


Anonymous said...

I lost 115,000 dollars on Harvest Energy when they were bought out by the Koreans. I also lost quite a large sum when Prime West was purchased by the Arabs. If that is what the corporations call a 'level playing field' why am I falling off? Where is the justice? BB

Dr Mike said...

This is what happens when big business runs the gov`t.

This is what happens when John Manley & Thomas D`Aquino tell the likes of Flaherty to jump----how high John , how high Tom.

This is what happens when the CCCE places PMs into their position of power.

The little guy gets the screws put to him every time & Canada as a democratic state suffers a little more.

Sad but true.

Dr Mike Popovich

Anonymous said...

One reason energy trusts happened in the nineties was that major oil decided western Canada was too small for their liking, and they sold off big swatches of oilfields. The Canadian energy trusts actually liked those old plays, and used them to build some pretty nice producers of reliable cash-flow. Just the sort of thing that investors would want for their retirement assets.

For a Canadian, investing in energy trusts is still a real good idea; but you can't use your RRSP or RIF. The double-taxation will blowout your rate of return. Too bad, especially at a time when other investments have yields lower than a rat-hole.

For Harper's small group of hardcore corporate supporters in DT highrise Calgary, the double-tax on energy trusts is taking Canadian companies outta of the industry -- which is the old normal from the fifties to the seventies.

Kid Leduc

Bruce Benson said...

The squeek from Boyd Erman is a tad too little and a whole bunch too late.

Anonymous said...

What Erman doesn't report is the real advantage of American oil & gas companies.

Since the 2007 changes to withholding tax and inter-co debt, foreign corporations can now use interest expense 'paid' to a related company to shelter Canadian income from Canadian tax. If the foreign corporation (or sub) has tax losses, the income from the Canadian source goes tax free.

Why doesn't Erman do a story on how much new Canadian corporate income tax is coming from energy producers in 2011?

Anonymous said...

Sorry guys, i just got home and i cant find the story in today`s G&M.
Brent, can you post the story or print the link.

Dr Mike said...

here`s the link I have


Dr Mike

Brent Fullard said...

Thanks Dr. Mike. The article consists of three parts on three unrelated topics. The trust tax comment appears in the second part of the article.


Brent Fullard said...
This comment has been removed by the author.
Anonymous said...

I have a neat idea. Why doesn't Manulife become an Income Trust? Just think of the distributions they could give out to their unitholders. BB

Anonymous said...

Boy this Harper / Flaherty /Carney
clan really handed the USA a gift to purchase Canadian assets on the cheap.

While this goes on , the USA get to enjoy the Master limited Partnerships.



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