Regent Pacific Properties Inc V.RPP

*** Article on Repap Bonds (Globe & Mail)

[bcwestcoast]

Little note from www.theglobeandmail.com Bcwestcoast http ://archives.theglobeandmail.com/s97is.vts?action=View&VdkVgwKey=%2Fhome6%2Fusr%2Flocal%2Fgam%2Fsearch%2Fhtml%2F20000830%2FRANDY%2Ehtml&DocOffset=4&DocsFound=4&QueryZip=Repap+&Collection=TGAM&SortField=sortdate&ViewTemplate=GAMDocView%2Ehts&SearchUrl=http%3A%2F%2Farchives%2Etheglobeandmail%2Ecom%2Fs97is%2Evts%3FQueryZip%3DRepap%2B%26ResultTemplate%3DGAMResults%252Ehts%26QueryText%3DRepap%2B%26Collection%3DTGAM%26SortField%3Dsortdate%26ViewTemplate%3DGAMDocView%252Ehts%26ResultStart%3D1%26ResultCount%3D10& Traders form new bonds with corporate world ANDREW WILLIS Wednesday, August 30, 2000 The bond trader used to be the Street's glamourpuss. Some of the better literature to emerge from financial circles -- Liar's Poker and Bonfire of the Vanities -- created a master-of-the-universe stereotype around the folks who made it possible for governments of all levels to run massive deficits for the better part of two decades. A funny thing happened in the past few years. Fiscal sanity among our elected officials took the glamour, and the big money, out of government debt. A dwindling supply of government bonds meant fixed-income trading desks now operate on razor-thin profit margins, a process that has been humbling for some, and meant finding new lines of employment for many. What's interesting here is that the demand for debt didn't drop in step with supply; if anything, the appetite for bonds is up. Money managers continue to allocate large portions of their portfolio to lower-risk debt and as the pool of pension and mutual fund savings grows, so does the demand for fixed-income products. Corporate Canada is moving quickly to fill this hole, issuing debt at an unprecedented rate, and that's creating a whole new hiring binge for bond specialists. A decade ago, when domestic bond funds typically held something like 90 per cent of assets in Government of Canada bonds, an average year would see $12-billion worth of corporate bonds issued in this country. These days, that's a good month -- $13-billion of corporate debt was sold in both June and July. This new world of bonds isn't quite as simple as the one that existed just a few years ago. When buying government debt, the big decisions revolve around currency risk and the interest rate call that dictates whether one buys short- or long-term paper. Unlike the Canadian government, corporations can go broke, a rather nasty experience for bondholders. The trick is to avoid deadbeat companies, and the smart money manager does this by backing up credit agency reports with its own internal research. This is where all the hiring is taking place these days. A glance at who's advertising through the Toronto Society of Financial Analysts shows a number of familiar names are scouting for talent. Manulife Financial, the country's largest insurer with assets of $119-billion, is trolling for both a fixed-income analyst and a structured-finance specialist. Royal & SunAlliance, one of the largest property and casualty insurers, is after a fixed-income analyst who can also run money market portfolios -- this insurer holds a $2.5-billion domestic debt portfolio. Among the mutual fund managers, Altamira Management is in the market for a research associate who can help sift through junk bonds and other debt that would fit into its high-yield bond fund. Canada's corporate bond market can't rival the depth of the U.S. market, where a single company has been known to crank off $12-billion worth of debt in one deal. But the growth of domestic demand and expertise in this area is a positive development. For Canadian companies, the cost of borrowing drops as the domestic market provides a viable alternative to selling bonds in the U.S. market. For domestic investors more issuers are coming forward, which helps diversify risk, and there are better yields available to those who buy the right credits. All this may not make for best-selling books, but it's good news for the local capital market. To understand just how much money a bond fund manager can make off good credit analysis, one need look no further than Repap. Yesterday, the debt-heavy paper company announced that Finland's UPM-Kymmene Corp. had offered to put Repap out of its misery with a 20-cent-a-share takeover offer, which valued the company at $160-million. In 1995, this was an $11 stock. If you're a long-term shareholder, Repap has been a disaster. The story is much brighter it you're a Repap bondholder: They made out wonderfully yesterday. On Monday, Repap's U.S.-dollar-denominated five-year debt was changing hands at $92. Yesterday, the prospect of being owned by one of Europe's largest forest products companies pushed the bond's price to $102. In the fixed-income world, owning bonds that post that kind of performance makes you a master of the universe, at least for one day. Everyone knows the secret to creating that essential buzz at a party is having just a few more guests than can comfortably fit the room. The Toronto Society of Financial Analysts, or TSFA, risks taking the concept just a bit too far. The TSFA's annual forecast dinner, the Street's single biggest schmoozefest, strained the limits of the city's largest ballroom last year when a record crowd of 1,600 showed up for prime rib and market insights from TD Securities, Deutsche Bank and Morgan Stanley experts. This year, the TSFA is even bigger. It just passed Boston as the second-largest such society in the world, trailing only New York. And this year's speakers list for the Sept. 28 dinner is even more impressive, with billionaire Bloomberg news service founder Michael Bloomberg and BCE head honcho Jean Monty scheduled to address the crowd. Organizers are pleading that those interested in attending order their tickets well in advance.