Category: Equity

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.

General Fusion – How to make money appear from nowhere

I really have to give credit to these guys. Through a SPAC (Spring Valley Acquisition Corp. III, ticker SVAC), General Fusion is effectively going public. The SPAC traded up from US$10 to about US$11.50, give or take, on the announcement. The SPAC shareholders will own about 22% of the remaining entity after all is said and done – 23 million SPAC units are outstanding so the entity is already worth about US$1.2 billion off the get-go.

However, this is not the point of the post. I am writing about them internally cashing in before doing this. It isn’t like one day where you pick up the phone and order that your company get SPAC’ed – there is some lead time involved.

On August 20, 2025 they filed with SEDAR a report of exempt distribution, where from August 6 to 12, 2025 they sold $25.3 million in preferred shares, which will undoubtedly be converted into common shares. I am not sure what the conversion ratio of this transaction is, so let’s just leave it.

On November 28, 2025, less than two months before the announcement, $51.5 million in “Simple Agreements for Future Equity” and warrants with a strike price of $2.8035/share were issued. Unfortunately I do not know what the common share price subscription was effectively at, but one can infer from the warrant strike price that it was likely around CAD$2.50-ish.

So in two months, this is now worth about CAD$16/share, a cool transformation (or should I say creation?) of about $250 million from nothing in two months!

Well done! As much as this thing is going to get hyped up, I will be a spectator. And if their technology actually manages to produce sustainable and cheap fusion, they will be worth trillions in addition to decimating the natural gas market but as a physics major, I remember the in-house joke about fusion power, “Fusion is the energy of the future, and always will be”.

Velan – When getting bought out doesn’t mean going private

Velan (TSX: VLN) had an interesting transaction reported last Wednesday:

Velan Inc. (TSX: VLN) (“Velan” or the “Company”) today announced that its controlling shareholder, Velan Holding Co. Ltd. (“Velan Holding”), the sole holder of the Company’s multiple voting shares, has agreed to sell its 15,566,567 multiple voting shares and one subordinate voting share (representing approximately 72.1% of the Company’s outstanding shares and 92.8% of its aggregate voting rights) to funds managed by Birch Hill Equity Partners Management Inc. (“Birch Hill”), at a price of C$13.10 per share, for aggregate gross proceeds of C$203,922,040.80 to Velan Holding and two other entities associated with shareholders of Velan Holding (the “VH Transaction”). Birch Hill is a leading Canadian investment partner with a 30-year track record of deploying patient capital and operational expertise to scale market leaders for long-term global growth.

Velan, for those that are unfamiliar with the company, are a producer of industrial parts. It has been selling valves for roughly 20-25% gross margins (aside from the Covid times) for time immemorial and is relatively unremarkable other than when the founding family wanted to get out.

The voting shares were privately held by the family and the public (lesser-voting ‘subordinate’ shares) are traded on the TSX.

Subordinate shareholders were clearly anticipating that such a sellout would include the entire company.

Upon the announcement, the stock traded from around $19/share to under $15, likely because any speculation that they would be taken out at a premium faded away, and the final negotiated price was well under what the market was trading at.

Financially the company has had better days – like a decade ago. It is understandable how a $19-20/share valuation would be lofty.

But the overall lesson here is that when it is well known a controlled company is going to go private, the minority shareholders might not necessarily get a good deal, or in this case, any deal at all.

Is Dye and Durham going to… die?

Dye and Durham (TSX: DND) has an interesting story but sadly it may be coming to a close simply because they couldn’t produce financial statements and creditors tend to not like it when the entities they lend money to aren’t in any position to pay back, let alone knowing how much money they are making! As there is a possibility it may be delisted in the near future, I will post its 5-year chart:

During the Covid era the company made many software acquisitions and paid for it with debt financing – amassing about $1.6 billion net from their last reported date, albeit generating $150 million in free cash flow in the past 12 months they have reported. Other than the software they have acquired (amounting to $1.8 billion in goodwill and intangibles) and the material amount of debt, there is nothing else of note on the balance sheet – tangible book value is about negative $1.5 billion.

However, reporting is one of the issues going on – their last financial statement available is from March 31, 2025 (their Q3-2025 as they have a June 30 fiscal year end!).

After they produce the audited financial statements (if they do!), it would not surprise me if there was a massive writedown in the goodwill.

The other issue is that they have been perpetually at war with their shareholders. The drama is simply too much to repeat here, but just giving a scan of the press releases over the past couple years should give a good indication of what is going on.

Notably, despite any lack of financial reporting, one significant shareholder (Plantro) reportedly was going to offer CAD$5.72/share for the entity.

However, just yesterday the TSX finally halted trading on the stock for prolonged non-reporting. Pretty much whichever shareholders are in the stock are locked in until the company either produces audited financial results, or their creditors lower the boom on them.

One interesting data point is that despite the stock not being tradable, their corporate debt is – their 8.625% issue maturing April 2029 (senior secured!) is currently trading at a yield to maturity of just over 12%, about 90.5 cents on the dollar. Given the seniority status of the debt, if DND does go into CCAA, there will likely be some form of recovery by the debtholders (they share the status with the bank creditors, for a total of about USD$905 million plus whatever is on the revolving loan facility).

There is no point for a small fish like myself to get involved with this, but it is interesting to watch. It is also a cautionary tale of companies that expand themselves with debt financing too rapidly.

Thankfully, no positions.