Canadian financial institutions’ regulator moved to reassure investors as the country’s riskiest bank debt joined a global selloff after the value of some Credit Suisse Group AG bonds was wiped out in the bank’s takeover by UBS Group AG.
Canada’s “capital regime preserves creditor hierarchy which helps to maintain financial stability,” the Office of the Superintendent of Financial Institutions said in statement on its website.
Prices of Canadian limited recourse capital notes, known as LRCNs, fell between 2 cents and 5 cents on the dollar Monday before OSFI’s announcement, according to people familiar with the matter who asked not to be named. That has widened the spread on the notes by over 60 basis points compared with Friday’s levels, the people said. Specific levels vary depending on the security.
The bonds are another form of so-called additional tier 1 securities, issued by financial institutions and designed to act as a shock absorber in the system. They can be converted to equity to bolster a bank’s capital if it runs into trouble.
Over the weekend, Swiss regulators triggered a complete writedown of 16 billion francs (US$17.2 billion) of Credit Suisse’s AT1 bonds as part of the rescue plan for the venerable bank. While it wasn’t a surprise that the bonds were likely to take a loss, some investors in the instruments were shocked to be wiped out when Credit Suisse’s shareholders were not.
Under Canada’s capital regime “additional tier 1 and tier 2 capital instruments to be converted into common shares in a manner that respects the hierarchy of claims in liquidation,” said OSFI, referring to a situation in which a bank would reach non-viability status. “Such a conversion ensures that additional tier 1 and tier 2 holders are entitled to a more favorable economic outcome than existing common shareholders who would be the first to suffer losses.”
“Our view is that we don’t expect LRCNs would be wiped out before common equity,” said Furaz Ahmad, a Toronto-based corporate debt strategist at BMO Capital Markets. “OSFI has said that they would convert to common equity, since that is more consistent with traditional insolvency norms and respects the expectations of all stakeholders.”
Earlier Monday, European authorities sought to restore investor confidence in banks’ AT1s by publicly stating that they should only face losses after shareholders are fully written down. AT1s from UBS Group and Deutsche Bank AG fell by more than 10 cents earlier on Monday.
Toronto-Dominion Bank has named new co-heads of its U.S. commercial banking business.
TD says Andy Bregenzer and Jill Gateman will jointly lead the operations.
The bank says the appointments follow the announcement earlier this year of Chris Giamo’s retirement.
Bregenzer will focus on leading all aspects of the regional commercial bank, including small business.
Gateman will lead TD’s national commercial banking effort in the U.S., including middle market, sponsor-backed finance and TD’s other specialty lending lines of business.
TD, which is working to resolve investigations into failures in its anti-money laundering program in the U.S., announced last week that chief executive Bharat Masrani would retire next year and be replaced by Raymond Chun.
This report by The Canadian Press was first published Sept. 26, 2024.
MONTREAL – Lightspeed Commerce Inc. says it is conducting a review of its business and operations including talks relating to a range of potential strategic alternatives.
The Montreal-based payments technology company made the comments after reports concerning a potential transaction involving the company.
Lightspeed says it periodically undertakes a review of its business and operations with a view of realizing its full potential.
A strategic review is often seen by investors as a prelude to a sale by a company.
Lightspeed says its board of directors is committed to acting in the best interests of the company and its stakeholders.
Company founder Dax Dasilva returned to the role of chief executive officer earlier this year and has been working to return the company to profitability.
This report by The Canadian Press was first published Sept. 26, 2024.
MONTREAL – National Bank of Canada says it has cleared a key regulatory hurdle in its proposed acquisition of Canadian Western Bank.
The Montreal-based bank says it has received the Competition Bureau’s clearance for the deal.
The transaction still requires approval by the Office of the Superintendent of Financial Institutions and the minister of finance.
Canadian Western shareholders voted to approve the deal earlier this month.
National Bank announced an all-stock deal to buy Canadian Western earlier this year in a proposal that valued the Edmonton-based bank at about $5 billion.
It has said its acquisition of Canadian Western will significantly expand its western footprint and create a stronger national competitor.
This report by The Canadian Press was first published Sept. 26, 2024.
