2010 will be remembered as the year the high-yield market came
to Canada and the IPO market returned. Davies' Capital Markets
group has produced this report to capture significant developments
in the capital markets in 2010 and to identify the trends and
developments most deserving of your attention in 2011.
What to Watch for in 2011
Bonds - High-yield bonds were the darling of
the Canadian capital markets in 2010, with over $3 billion of
high-yield notes sold by over a dozen issuers during the year. 2011
may prove to be yet another record year for Canadian high-yield
bond deals with a number of new issues already anticipated by
Pre-marketing - The basic rule under securities
legislation in Canada is that underwriters may not solicit
expressions of interest in connection with a public distribution of
securities until a receipt has been issued for a preliminary
prospectus. However, some are asking whether the rules are out of
step with practice.
PIPE transactions - Norms are developing around
Canadian-style PIPEs. We expect to see more PIPEs in 2011 driven by
foreign investment and private equity funds.
IPOs - While many IPOs were successful in 2010,
some failed to launch. Companies considering an IPO must be well
prepared and able to navigate quickly through the issues.
Governance - As a result of shareholder pressure
for a greater voice in corporate affairs, 2011 will see an
increased focus on majority voting and Say-on-Pay and a dialogue on
the flawed proxy voting system.
U.S. law in Canadian boardrooms - Canadian issuers
may find themselves subject to some unusual new laws for which
there are no domestic parallels, including the executive
compensation clawback and whistleblower incentives provisions under
the United States' Dodd-Frank legislation.
Regulatory landscape - A new accounting regime and
a new OSC Chair, coupled with announced regulatory initiatives on
derivatives and securitized products, shareholder democracy,
executive compensation, the exempt market and material contract
filings, signal a busy year ahead for capital market participants
and their advisors.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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