Category: Equity

Accord Financial – or why small finance firms are difficult to measure

I noticed that the debentures of Accord Financial (TSX: ACD.DB) has fallen off a cliff:

There should have been a hint of what was going on earlier this year when they extended the debenture term and increased the coupon rate (to now 12%) but the firesale of assets has made it quite clear that the subordination of the public debentureholders is not placing them in a very good position to negotiate – let alone getting payment on maturity.

Is it really that much of a train wreck? Let’s quickly examine things. Their March 31, 2026 balance sheet:

We have $21M in cash, and $138M in “finance receivables”.

This is what is needed to pay off notes 7, 8, 9 and 10 (the debt capital used to issue the loans).

Note 8 is a non-recourse loan. Note 7 is the primary credit facility with the bank (extended to June 19, 2026… they’re doing things nearly in monthly increments, never a good sign!). Note 9 is for notes payable, linked with the maturity date of the bank loan from a related party (the related party keeping the corporate entity afloat… for now). Note 10 is the $20.65 million in publicly traded debentures and $5 million in non-listed debentures (same terms). They mature on July 31, 2026.

When doing the math, you have about $159M in financial assets that are going to pay off $127M in loans and debts. That’s nearly $30M leftover, so surely paying off those debentures is going to be no problem, right, right??

The finance receivables are the lion’s share of assets and they are primarily structured to within 1 year of repayment:

Looks good, right? What’s the issue?

SICR is a “significant increase in credit risk” measurement.

So it turns out that about $41 million in loans are at risk. This makes the threshold for repayment much more narrower. Coupled with the fact that the corporation is loss-generating (specifically the interest expenses and G&A is well higher than the interest income being generated by the loan portfolio), the trading price of the debentures is not surprising.

Finally… the irony wasn’t lost on me when looking at the first page of their quarterly report:

Rollercoaster

Avis/Budget Group’s stock over the past month has gone fully psychotic:

It is almost as if somebody set an infinite dollar buy program to accumulate shares at increasing prices and then two days ago realized their computer program was broken and pulled the plug on it.

Skimming their financial statements, the explosion in the stock (going both directions) surely isn’t due to them being a hugely profitable entity. They are in a completely miserable industry.

Goeasy – not going so easy

I’ve been looking at the carnage left behind in Goeasy (TSX: GSY) and holy moly:

(Q4-2025 warning)

… announced today that it expects to incur an incremental charge off in Q4 2025 of approximately $178M against gross consumer loans receivable of $5.5B as at December 31, 2025, and a related write down of approximately $55M for loan interest and fees.

… $178+$55 is roughly the net interest income the company makes in a quarter. Oops!

The Company also expects a net increase in allowance for credit losses on gross consumer loans receivable in the quarter of approximately $86M compared to the amount reported as at September 30, 2025.

… this is quite a material increase given the typical top line of about $328M for Q3-2025. A +$86 allowance raise is a 26% increase in expected defaults – ouch!

The historical reporting practice resulted in certain customer payments being recorded as received while they were in fact in the process of being settled at month end, some of which were ultimately not collected, and also impacted the Company’s reported delinquencies.

… talk about counting your chickens before the eggs hatch!

Not surprisingly, the company’s stock took a huge bath today – down 56%.

Looking at the corporation in general, their reported Q3-2025 has (rounding to the nearest $100M) about $500M cash, $5.2B in loans receivable and on the liabilities side, capitalized with $4.7B in debt.

It’s pretty evident they are clearing out the books with this purge – the question remains whether this company actually ended up making any money or not on their core business. Doing a very rough projection with the above numbers suggests after fixed expenses, they did not. The company managed to get to $210/share in the middle of 2025 clearly with false profitability.

Are they a value at $50? I’ve always shied away from these types of financing companies since you never know when this sort of event will occur as it is difficult to ascertain the credit quality within the loan portfolio. On one hand, you have the Element Fleet Managements of the planet, and then on the other hand you have the Crown Capital and Accord Financials of the planet that are in much more questionable shape. I am not good at picking winners in this space.

This also might be a reflection of what’s going on in the downward-sloping part of the so-called “K-shape economy”.

Cenovus Energy preferred share redemption

Cenovus Energy called their remaining preferred share issue (TSE: CVE.PR.A/B, inherited from the Husky Energy transaction) and it will be redeemed out at the end of March.

Notably, the preferred share was incredibly low-yielding: 2.577% and a rate reset of 1.73% above the Government of Canada 5 year.

At today’s GoC 5yr at 2.68%, the preferred share would have reset at 4.45% yield at par.

Yesterday, the preferred shares closed at $24.75 (a mild discount to par). The redemption at $25 is obviously the company deciding to clear out the books entirely on one class of its securities.

A 4.45% after-tax drain, at a notional tax rate of 25% is the equivalent of issuing a perpetual debt at 5.93%, notwithstanding the 5 year changes in the reset rate – a 1.73% spread is quite narrow.

This is extraordinarily cheap capital, yet it is being redeemed. Despite blowing a bunch of cash on the MEG Energy transaction (don’t get me wrong – it was strategically the correct thing for the company to do), Cenovus has ample cash and free cash flow to spend $300 million to save $13.35 million after-tax annually.

This kind of exemplifies the yield wasteland in the preferred share market in general.

Slate Office REIT’s nearly cooked

It’s not looking good for Slate Office REIT, now rebranded as Ravelin Properties (TSX: RPR.UN):

Toronto, Ontario–(Newsfile Corp. – February 20, 2026) – Ravelin Properties REIT (TSX: RPR.UN) (“Ravelin” or the “REIT”), an internally managed global owner and operator of well-located commercial real estate, announced today that it does not expect to make principal or interest payments on the upcoming maturity date of its 9.00% convertible unsecured subordinated debentures (the “9% Debentures”).

The maturity date of the 9% Debentures is February 28, 2026. In connection with the upcoming maturity date, the 9% Debentures, which currently trade on the Toronto Stock Exchange under “RPR.DB”, will be halted at the market open and delisted at the close of trading on the business day following the maturity date, being March 2, 2026.

The REIT has been in default of its obligations to pay interest on the 9% Debentures since March 1, 2024. The repayment price due on maturity is $1,180 per $1,000 principal amount of 9% Debentures, representing aggregate principal amount of $28,750,000, and $5,175,000 for accrued and unpaid interest thereon to, but excluding, the maturity date.

The big question I have in my mind is – how will George Armoyan, who went through a huge effort to take over the REIT, be able to salvage this situation? It is incredibly unlikely anybody from the public will be able to make lemonade from the lemons (the units and debentures are well subordinated), but Armoyan’s corp, G2S2, has lent Slate/Ravelin a ton of money and maybe this was the plan all along when they will get to eat away at the entrails of this soon to be extinct REIT.