Canada: Bennett Jones Business Forecast 2009

Last Updated: December 18 2008

As a year of increased economic uncertainty approaches, Bennett Jones provides its forecast for Canadian business in 2009.

Short Term Economic Outlook Grim

Despite stimulative efforts of governments and central banks worldwide, global growth in 2009 is likely to be less than 2% and 2010 only a little better. Real recovery should take hold in 2011. Commodity prices are likely to be weak through 2011 but recover strongly thereafter. Canadian and U.S. growth will be negative in 2009 with very weak private investment and household consumption. Assuming significant fiscal stimulus in both countries, growth should begin to pick up in 2010 although the level of output in Canada is not likely to recover to the mid-2008 level until end of 2010. Outlook for 2011 is much brighter in Canada and the U.S. although unemployment will remain elevated.

David A. Dodge, O.C., Senior Advisor at Bennett Jones LLP, Former Governor of the Bank of Canada

Credit Crisis Continues, Cash Still King

The current credit crisis should begin to ease by mid-2009 as a result of massive infusions of liquidity by central banks and infusions of capital by governments. Frozen capital markets should begin to thaw later in the year although credit spreads will remain wide and credit conditions tough. Debt will remain expensive and equity dilutive. Challenges in renewing credit facilities, replacing bridge facilities and financing acquisitions or projects will necessitate creativity with alternative sources of capital and the structuring or restructuring of investments.

Insolvencies Up, Restructurings Down

2009 will bring more corporate insolvencies and restructurings. Increasingly, however, troubled companies well-deserving of restructuring will likely face break-up due to the dearth of liquidity, coupled with an extremely competitive business environment. Even those restructurings that do proceed will likely do so with less committed or DIP (debtor-in-possession) financing and more of a lock-in for those already invested.

Renewed Focus on Risk Management

The financial sector meltdown and the global economic crisis have moved risk management to the top of corporate and regulatory agendas. Companies must carefully assess their financial exposure and exposure to third-party providers, such as lenders, hedging counterparties, suppliers and technology licensors who may themselves face financial crises. Businesses must be prepared for all eventualities that could arise quickly: a liquidity crisis, sale or reorganization, significant litigation or regulatory or internal investigation. Data rooms, document retention programs, disclosure committees and multi-disciplinary teams must be operational, or available quickly.

Challenging Disclosure Issues

Publicly-traded companies will be increasingly challenged in managing disclosure of a broader range of risks, including liquidity problems, declining revenues and counterparty credit risks. Issuers face the double-edged sword of avoiding premature disclosure, which could result in undue loss or negative market impact, and tardy, incomplete or misleading disclosure that could result in regulatory or civil liability. New rules on executive compensation disclosure will also apply and reporting will be required on transitioning to IFRS rules.

Increasing Pressure on Directors

Boards of directors and management will work at developing improved processes to identify and assess risk. This will involve recognition that the task is not for the audit committee alone, but involves full board and deep corporate commitment. Boards will also look to ensure that adequate processes are in place to support new requirements for CEO and CFO certifications of internal financial controls. Watch for increased use of special committees to address related-party and conflict transactions expected as a means of survival in a world of limited options. Expect directors to insist on contractual indemnification. And, look for increased pressure on insurance procurement processes with the anticipated hardening in D&O insurance markets.

Vendor Beware

Bad times have illustrated that targets cannot rely on a buyer's reputation to use best efforts to complete an acquisition. Expect targets to focus on Material Adverse Change/Effect clauses and to draft more detailed specific performance and damage remedy clauses. More attention will also be given to how to secure completion obligations where the buyer is outside the jurisdiction or without financial resources.

Market Meltdown Means More Litigation

Any market meltdown brings with it disappointed investors who will look to their investment advisor for redress. Expect a huge increase in litigation against brokers and dealers as investors come to fully appreciate the extent of investment losses. Watch for more accounting manipulations and fraudulent schemes to be discovered and ensuing litigation. Also look for more Securities Act secondary market class action claims, which emerged in earnest in 2008, to flourish in 2009.

Oil and Gas Sector Challenges

With wildly fluctuating commodity prices, the lack of liquidity available to fund growth and increased uncertainty surrounding the environmental obligations of energy project developers, Expect 2009 to pose a multitude of challenges for oil and gas companies. Major oil sands projects will continue to be delayed or downsized as proponents await the return of $100 oil and easy credit, necessitating the renegotiation of supply arrangements. Junior developers may well have to look for a way out. On the conventional side, buyers and sellers will begin the year watching and waiting for the first movers, but when the "new normal" arrives, look for significant consolidation at the junior end of the market. And what about the larger Canadian independents about whom take-over rumors persist? We'll have to wait and see.

Green Economy not to be Delayed

The arrival of the green economy will not be delayed by the economic downturn. Increasingly, market-based solutions to environmental and social issues will be sought, found and implemented. For example, the great experiment with greenhouse gas emissions trading as a key element in the climate change solution will finally get traction in 2009 and be ready to roll in 2010. Beware potential new climate change rules in the U.S. which will make life difficult for a number of Canadian businesses producing both primary and manufactured products.

Increased Focus on Renewable Energy

Fossil fuels will continue to be critically important and in short supply despite the economic slowdown, accelerating the pressures to move to renewable energy and low carbon alternatives. Government-owned utilities will seek additional renewable power sources and the need will be met by new private renewable power developments. Geothermal, biomass and biogas based power will gain momentum, augmenting the Canadian wind and solar power development industries.

Income Trusts – Converts or Targets?

There will be more conversions announced of the approximately 200 income trusts ahead of the 2010 tax "deadline". Conversion at today's depressed market prices will help ease the churn in units which inevitably takes place following conversion announcements, when yield oriented investors sell and value-oriented investors buy. However, with more than half of the income funds having a market capitalization of less than $150 million, declining distributable income and the costs and risks associated with being a publicly-traded vehicle, expect to see more income funds acquired.

REITs - Real Estate in Trouble?

The market value of REITs has plummeted as the property market has fallen, capitalization rates have risen for many property types, credit spreads have increased and leverage has declined. Existing strategies regarding financing and acquisitions and dispositions of properties may no longer be feasible. As REITs rethink their strategies, expect to see divestitures of assets and significant consolidation.

Attractive Technology Opportunities

Innovative technology start-up companies will find it difficult to obtain private investment. Some promising technologies will therefore become available at favourable prices through acquisitions, licensing or other transactions. Private placement investment at the seed capital and venture capital stages, where available, will be able to extract more value in exchange for investment.

More "User Friendly" Competition Law

On the heels of this year's report of the Competition Policy Review Panel, look for the government to streamline the merger review process to include greater convergence with the timing of U.S. antitrust review, allowing most transactions to be cleared in a 30-day preliminary phase. Pricing practices like price maintenance, predatory pricing and price discrimination will likely be de-criminalized. A weakened economy may also result in more flexible review of mergers that increase efficiency and allow industries to undertake necessary consolidation.

Less Red Tape for Foreign Investors?

Also in response to the Competition Policy Review Panel, watch for the government to increase the general review threshold for foreign acquisitions of Canadian businesses, likely from $295 million to $1 billion. However, the cultural sector will probably be excluded. The government may also shift the onus from the foreign investor to the Minister of Industry to establish that a proposed acquisition is not in Canada's interest.

Trade Diversification: the New Mantra

Recession will lead to more international trade disputes as demand and pricing decline and international competition intensifies. Chinese exports in particular will be targeted. Expect more WTO and NAFTA complaints by Canada as the government seeks to protect Canadian companies' access to foreign markets in a more protectionist international environment. Weakened U.S. demand and retrenchment in Canada's manufacturing sector will give increased focus and urgency to bilateral and multilateral trade initiatives.

More Interest in Islamic Finance

Expect the Islamic financial sector, which still enjoys relatively high-liquidity, to play a larger role in international finance. Some portion of that sector's excess liquidity should find a home in Canada, as a result of Islamic investors diversifying their investment portfolios and capital-hungry Canadian businesses making greater attempts to tap into this available pool of funds.

Pension Underfunding Concerns

Concern over deficits in defined benefit pension plans will continue to be front and centre, as many businesses deal with crippling funding costs resulting from the market meltdown. There will be continued pressure on governments to provide relief from solvency funding requirements. Expect pension governance and disclosure to emerge as a key area of focus.

"New Deal" for Infrastructure

Canada has evolved into one of the world's most vibrant markets for public-private partnerships (PPP) in infrastructure. Mature provincial agencies are tackling an infrastructure deficit of over $125 billion, domestic and international proponents have committed to the market, and PPP is now recognized as a viable alternative for many projects. As governments announce fiscal stimulus packages with infrastructure as a key component, the pipeline for PPP activity promises to be robust, although financing structures may evolve in response to tighter credit markets.

To view more Client Updates from Bennett Jones click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions