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142 Canada | Project finance Canada through offices in Montreal, Quebec and Toronto. While the firm saw two of its M&A partners depart in the summer of 2008 to rival firms, the return of another lawyer – partner Michael Fortier – to the Montreal office is a noteworthy addition. Fortier’s return comes after years of private sector work for TD Securities, Credit Suisse and, most recently, in public office as the minister of international trade for Canada. During May 2008, Ogilvy acted for the Montreal Exchange trading platform in its merger with the TSX (Toronto Stock Exchange). Ultimately called the TMX Group, the $1.3 billion merger integrated the TSX’s standard securities platform with Montreal’s futures and derivatives trading. Ogilvy lawyers also acted for long-time firm client RBC (Royal Bank of Canada) in the bank’s strategic acquisition of the Canadian commercial leasing division of ABN Amro. Closed in October 2008, at the height of uncertain market conditions, the deal left RBC with the largest bank-owned commercial leasing platform in Canada. Leading lawyers Jean-Pierre Colpron Renaud Coulombe Terence Dobbin Marc Lacourcière Norman Steinberg Torys Two highlights in the energy sector have given Torys an impressive start to 2009. First, in February, the firm secured the role of lead counsel to IPIC (the International Petroleum Investment Company) on the acquisition of all outstanding shares of Nova Chemicals. Agreeing on $6 per common share, the $2.3 billion acquisition also included IPIC assuming Nova’s debt obligations. Torys’ regulatory group lent their expertise to the transaction as well, clearing the way for IPIC to be the first sovereign wealth fund wholly to acquire a Canadian public company. The firm has also been chosen to represent Petro-Canada in response to the crude oil producer’s proposed acquisition by Suncor Energy. Yet to be finalised, the deal hinges upon a share exchange to allow the merger of the investor bases, giving 60% control to Suncor’s base and 40% to Petro-Canada. Torys also boasts a cross-border capability, aided by a New York office, which helps make it a consistent threat to market competitors. “They do good work and you see them on some of the bigger deals,” remarks a peer of the firm. In spite of the departure of Geoffrey Creighton for the general counsel position at www.iflr1000.com firm client IMG Financial Group, Torys’ M&A group hasn’t missed a beat. Leading lawyers Philip Brown Sharon Geraghty For analysis of the other leading law firms in Canada’s M&A market please visit the website at www.iflr1000.com Project finance Recommended firms Tier 1 Blake Cassels & Graydon McCarthy Tétrault Osler Hoskin & Harcourt Torys Tier 2 Bennett Jones Davies Ward Phillips & Vineberg Fasken Martineau Ogilvy Renault Stikeman Elliott Tier 3 Borden Ladner Gervais Burnet Duckworth & Palmer Davis Fraser Milner Casgrain Gowling Lafleur Henderson Macleod Dixon McMillan Appetite for new project financings underwent a predictable reduction in the fall of 2008 as the growing financial crisis restrained lenders’ already conservative balance sheets. What began as a potential banner year for some Canadian law firms’ project finance teams suddenly fell apart after Lehman Brothers’ collapse fuelled negative speculation in the market. Credit became a scarce commodity even for borrowers with historical relationships with banks. According to lawyers here, most loans operated below a $225 million threshold. In the spring of 2009, the lending environment showed signs of modest improvement. “The money is still there for good projects,” says one partner. But as deals entered preliminary stages, unanticipated market shifts became evident. Standard long-term debt had vanished as many foreign investment banks retreated from Canada. Replacing the typical 30-year agreements were mini-perm loans offering seven-to-ten-year commitments with Canadian institutions. The predominance of short-term money only compounded uncertainty in the market, raising refinancing concerns for borrowers and lenders alike. “The practical reality is that the only people taking the risk on long-term debt were institutional investors, and now they’re having second thoughts,” says a lawyer. With Canadian banks reluctant to rush into any new underwriting agreements, club deals dominate the market. The debate now focuses on whether Canadian institutions will become comfortable with extending loan horizons to match the 30-year terms typically offered by foreign lenders. Another question is whether Canada’s pension funds will discard their historical equity preference and begin taking debt positions on projects. Lawyers here say this would be a complete turnaround for pensions, who typically see concession schedule returns on project financings as too long. Still, after a year of uncertainty, the allure of a stable income stream cannot be underestimated. Infrastructure and renewable energy are the Canadian government’s focus in the near term. Ontario’s passage of the Green Energy Act has spurred deal activity in that province, with Infrastructure Ontario’s sponsorship of projects ranging from transit renovations to energy distribution technologies. The bulk of these projects have been contracted through PPPs (public-private partnerships) on the DBFM (design-build-finance-maintain) structure, but there has been debate as to whether the ratio of public-to-private investment should shift toward the government in the current market. Blake Cassels & Graydon Blakes is renowned for its work for borrowers and lenders in the energy sector. Representations like last year’s Southern Lights Project typify the high-profile work often awarded to the firm on the merits of partners like Daniel Fournier and Kevin Fougere in Calgary. Fournier and Fougere advised a host of financial institutions, including RBC (Royal Bank of Canada), Société Générale, Bank of Tokyo-Mitsubishi UFJ, ABN Amro and Mizuho Corporate Bank, to create separate credit facilities for Enbridge’s Southern Lights and Southern Access pipeline projects. With C$434 million ($393 million) for Southern Lights and $1.3 billion for Southern Access, the financing was secured to construct a pipeline carrying light hydrocarbons from the US midwest to oil refineries in the oil sands of western Canada. “We use Blakes quite a bit, especially on the west coast,” notes one client, praising the firm’s national presence – which includes offices across Canada. Lawyers at other firms also highlight the depth of talent in Blakes’ Vancouver office. “Anne Stewart and Ian 2010 EDITION
Project finance | Canada 143 MacIntosh are strong, constant competitors,” says a partner at a rival firm. Aside from energy work, Blakes enjoys consistent success in the mining sector. In February 2009, Edward Perlmutter and Chris Javornik negotiated a $70 million credit facility for clients RMB Australia Holdings and Macquarie Bank as the lenders. The credit facility funded Apollo Gold and its Black Fox mine in Ontario. Leading lawyers Kevin Fougere Dan Fournier Anne Stewart McCarthy Tétrault McCarthy Tétrault has built one of the preeminent projects groups in Canada, with offices in Vancouver, Calgary, Ottawa, Toronto and Montreal, and a deep pool of talent. “We have always thought very highly of them,” says one peer of the group, which includes Byran Gibson, David Lever, Gordon Willcocks and Marc Dorion. Possessing established platforms in infrastructure as well as traditional and renewable energies, McCarthy receives high praise from past clients. “We consider McCarthy as our most important counsel from a project finance standpoint. We’ve been using them since as far back as I can remember,” says a client. “We use a lot of other firms but I would put McCarthy at the top of the list. They’re very knowledgeable from the institutional long-term debt perspective. They understand the nature of our business well.” Byran Gibson comes highly recommended for his expertise in public-private partnerships. McCarthy has extended its presence in the renewables industry this year. Most notably, two wind farm deals exhibit not only the firm’s knowledge but also its ability to execute deals despite the financial downturn. Marc Dorion led a transaction for Innergex in November 2008, establishing credit facilities equalling C$53.4 million ($46.1 million) for a 109.5MW wind farm in Carleton, Quebec. The firm also advised Manulife Financial as the lender in an $89 million credit facility for a 51MW wind farm in New Glasgow, Nova Scotia. In infrastructure work, the firm has most recently been involved in the refinancing of hospitals throughout the Ontario region. The Bluewater and Henderson hospitals both hired McCarthy’s Byran Gibson in March 2009 to renegotiate covenant terms for contracts equalling C$123 million and C$95 million, respectively. Leading lawyers Linda Brown Marc Dorion Stephen Furlan Byran Gibson David Lever Gordon Willcocks Osler Hoskin & Harcourt Osler rounds out its strong reputation for corporate work with a project finance group that has focused recently on the Ontario infrastructure sector. Senior talent like Bob Beaumont and Rocco Sebastiano in Toronto come recommended by peers for their knowledge of privatisation schemes and public-private investment models. As head of the firm’s energy group, Sebastiano is recognised for his engineering background, which came in useful during the firm’s involvement with the Deh Cho Bridge project in the Northwest Territories. In the last year, Osler secured crossover work from two returning projects clients. The firm was issuer-side counsel to the Greater Toronto Airports Authority for the establishment of a medium-term note programme worth $500 million. Acting again as issuer’s counsel, Osler also represented Hydro One on the creation of its $1.05 billion note programme. Advising Infrastructure Ontario, in conjunction with Fasken Martineau, Osler negotiated the C$261 million ($236 million) financing for the redevelopment of St Joseph’s Health Care and the London Health Sciences Centre, both in London, Ontario. Infrastructure Ontario was teamed with development partner EllisDon Corporation in the transaction. Leading lawyers Bob Beaumont Harvey Kirsh Rocco Sebastiano Torys Already seen as having an enviable traditionalpower practice, Torys has set its sights on making inroads into the growing renewables sector. Hiring Valerie Helbronner and Charles Keizer in Toronto from rival Ogilvy Renault is a good start. Keizer, in particular, brings energy regulatory and compliance expertise that could prove increasingly valuable in the wake of Ontario’s passage of the Green Energy Act. Singled out by competitors as a standout in the practice, Jonathan Weisz led Torys’ representation of Aim Sop and Fortis Capital in the Aim Sop Phase I project. Weisz helped negotiate C$75 million ($67 million) in financing for the Cultus, Clear Creek, Frogmore, and Mohawk Point wind farms across Ontario. Longstanding client relationships are one significant reason for Torys’ consistency in the projects market. Hydroelectric developer and operator Brookfield Renewable Power hired the firm on two separate files in the past year, ranging from acquisition work to traditional project financing. In June 2008, Torys advised Brookfield in securing the $120 million financing for its 470MW Itiquira hydroelectric facilities in Mato Grosso, Brazil. Torys negotiated the financing with Calyon, Crédit Agricole and Export Development Canada. February 2009 saw Brookfield return to the firm to lead on its sale of 49.9% in Prince Wind farm and 50% in the Pingston hydroelectric facility to the Great Lakes Hydro Income Fund. Brookfield walked away from the transaction with $65 million and a 50.01% exchangeable ownership of Great Lakes. Leading lawyers Sabrina Gherbaz Krista Hill Alison Lacy Jonathan Weisz Bennett Jones With a reputation for oil and gas work in western Canada, Bennett Jones has made a concerted effort to further its brand in the infrastructure market to the east. Working with Infrastructure Ontario and the Niagara Health System, Bennett Jones secured $759 million in commitments for a greenfield medical centre in St Catharines, Ontario. The DBFM (design-build-finance-maintain) project was the largest ever conducted by Infrastructure Ontario and was the most sizeable to receive financing since credit conditions worsened significantly in October 2008. In other hospital work, Bennett Jones advised TD Bank (Toronto-Dominion Bank) as the lender in $142 million designated for proposed developments and renovations to the facilities at Kingston General Hospital in Ontario. In the largest PPP (public-private partnership) for Canadian schools, Bennett Jones represented TD Bank, again as the lender, to a project developing 18 greenfield elementary and junior high schools in Alberta. The schools are to be divided equally between Edmonton and Calgary. As part of the shortterm debt tranche, TD Bank’s $15 million investment has a repayment horizon of 22 months, following the openings of the new school facilities. 2010 EDITION www.iflr1000.com
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