Evergreen Capital Partners closed its doors

Boutique investment dealer Evergreen Capital Partners closed its doors after losing $25-million (U.S.), a loss that could translate into major pain for Penson Financial Services Canada, the company that cleared Evergreen's trades.

Evergreen shut down on Wednesday, and regulators at the Investment Industry Regulatory Organization of Canada are now helping wind down the firm. Evergreen was a tiny dealer, with 16 employees and a focus on financing and trading small-cap energy, mining and technology companies. Sources say the investment dealer had less than $4-million in shareholder equity.

Employee-owned Evergreen lost money on a number of positions held by its trading desk, according to sources, and Penson appears to have confirmed the amount of the loss, saying in a press release Friday that it holds “an unsecured receivable from Evergreen Capital, a correspondent firm of Penson Canada, in the approximate amount of $25 million.”

Penson has opened an investigation into the loss and is working with Canadian regulators. Publicly-traded Penson's stock is down 38 per cent Friday on Nasdaq, at $7.30.

“The receivable is the result of a number of transactions involving listed Canadian equity securities by Evergreen on behalf of itself and/or its customers, for which Evergreen and/or its customers have been unable to post requested margin,” said Penson. The company said if it “is unsuccessful in reducing the exposure associated with this receivable, the Company would likely incur an after tax loss in the amount of approximately U.S.$15.5 million, equal to approximately U.S.$0.59 per share."

"We deeply regret this development, which is unprecedented in our history," said Pension chief executive officer Philip A. Pendergraft. "We are doing everything possible to learn all the facts surrounding this issue, in order to maximize the possibility of recovery, and to prevent any such issue from ever again happening."

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Evergreen Capital loss pounds Penson
Andrew Willis, 31/10/08 at 11:01 AM EDT

Boutique investment dealer Evergreen Capital Partners closed its doors after losing $25-million (U.S.), a loss that could translate into major pain for Penson Financial Services Canada, the company that cleared Evergreen's trades.

Evergreen shut down on Wednesday, and regulators at the Investment Industry Regulatory Organization of Canada are now helping wind down the firm. Evergreen was a tiny dealer, with 16 employees and a focus on financing and trading small-cap energy, mining and technology companies. Sources say the investment dealer had less than $4-million in shareholder equity.

Employee-owned Evergreen lost money on a number of positions held by its trading desk, according to sources, and Penson appears to have confirmed the amount of the loss, saying in a press release Friday that it holds “an unsecured receivable from Evergreen Capital, a correspondent firm of Penson Canada, in the approximate amount of $25 million.”

Penson has opened an investigation into the loss and is working with Canadian regulators. Publicly-traded Penson's stock is down 38 per cent Friday on Nasdaq, at $7.30.

“The receivable is the result of a number of transactions involving listed Canadian equity securities by Evergreen on behalf of itself and/or its customers, for which Evergreen and/or its customers have been unable to post requested margin,” said Penson. The company said if it “is unsuccessful in reducing the exposure associated with this receivable, the Company would likely incur an after tax loss in the amount of approximately U.S.$15.5 million, equal to approximately U.S.$0.59 per share."

"We deeply regret this development, which is unprecedented in our history," said Pension chief executive officer Philip A. Pendergraft. "We are doing everything possible to learn all the facts surrounding this issue, in order to maximize the possibility of recovery, and to prevent any such issue from ever again happening."

Oppenheimer shows CIBC escaped just in time

Boyd Erman, 31/10/08 at 9:28 AM EDT

Canadian Imperial Bank of Commerce made some mistakes on Wall Street, where it spent big and paid dearly in a bid to run with the big dogs. The bank got one thing very right, however, and that's the timing on its exit from New York, announced almost exactly a year ago.

CIBC CEO Gerry McCaughey doesn't look much like an action star, but his nick-of-time escape from the crumbling caverns of American finance, with banks tumbling around him in ruins, brings to mind the final scene of some thriller where everything collapses but the hero manages to just make it out.

Results from Oppenheimer Holdings Inc., which bought CIBC's New York investment banking operations, show just what the Canadian bank would have been in for had it stuck around. It's not a pretty sight.

There's nary an encouraging word in the Oppenheimer review of the recent quarter. (The third-quarter earnings release is available here.)

"The investment environment during the third quarter was as hostile to investors as anything seen in decades," said Oppenheimer CEO Albert Lowenthal, whose firm went on to detail a life of cost cutting that's outpaced by revenue declines and an environment that's unlikely to get better any time soon.

"We continue to believe that the long-term benefit of our January acquisition will be substantial; however we do not foresee a quick return to profitability for the enlarged capital markets business segment, given the present state of the markets and of the U.S. econonomy," Oppenheimer said.

Knowing that Mr. McCaughey is a movie buff, it's unlikely he'll head back to New York anytime soon. After all, anyone who's seen an action movie sequel knows they're rarely any good.

What's next for Compton Petroleum?

Andrew Willis, 31/10/08 at 3:50 PM EDT

Investors are taking a deeply pessimistic view of Compton Petroleum's prospects after the debt-heavy natural gas play failed to find buyer.

After a three-month formal auction, and a far longer period of being open to offers, Compton announced late Thursday that it couldn't attract a buyer at an acceptable price. EnCana was seen as a natural suitor, and there was also talk of Enerplus Resources Fund kicking tires.
News that Compton was off the auction block knocked the stock down 21 per cent to $2.45 on the TSX. The company also said Thursday that president and CEO Ernie Sapieha will retire once a successor is choosen.

Looking ahead, Compton now must deal with $903-million of debt, against an equity market capitalization of $320-million. At the moment, Compton is maintaining that it wants to keep its reserve base intact, despite numerous offers for specific properties. If natural gas prices continue to be weak, and debts come due, that resolve may fade.

Miners getting crushed by commodity price crash

Miners getting crushed by commodity price crash
ANDY HOFFMAN



The global credit crisis and commodities collapse has pushed High River Gold Mines Ltd. to the brink of insolvency in what could foreshadow a wave of liquidity crises at mining companies.


Delays in starting up gold mines in Burkina Faso and Russia put the Toronto company offside with lending arrangements and it is now scrambling to sell assets or secure an emergency cash infusion.


"We are looking at all of the alternatives. From a sale of assets to strategic investors to strategic financings to other financial alternatives," High River chairman Terry Lyons said in an interview.


High River is among the first mining firms to hit a wall as commodity prices plunge and corporate financing dries up amid the global financial crisis.


Analysts say there are scores of other cash-strapped miners, including Canadian zinc producer Breakwater Resources Ltd. that are struggling to survive.


High River has breached the covenants of a $35-million loan from Denver royalty company Royal Gold Inc. High River's Taparko-Bouroum mine failed to achieve "project completion" by Oct. 1 - a stipulation of the financing deal.


Royal Gold is not willing to relieve High River of its obligations and could foreclose on the mine, although Mr. Lyons said that was unlikely. Royal Gold officials did not respond to a request for comment.


High River also has a looming deadline with another lender, Russia's Nomos Bank. A loan repayment of $15.2-million (U.S.) from a High River subsidiary is due to be paid to Nomos on Nov. 21.


High River has just $4.1-million (Canadian) in cash on hand and 8,300 ounces of unsold gold worth about $6.2-million (U.S.). As of Sept. 30, the company's outstanding short-term payables amounted to $32.9-million (Canadian). High River's overall debt load totalled $187-million at the end of its second quarter.


"The ability of the company to continue as a going concern is therefore dependent on the ongoing discussion with and/or forbearance of lenders, accommodations from trade creditors, establishing steady production at the two new mines and obtaining additional financing," High River said in a statement.


Mr. Lyons, who joined the beleaguered company in September, conceded that High River had failed to conserve enough cash to weather the unexpected credit crisis, its mine start-up problems, and the plunge in commodity prices, including gold.


"They really didn't have enough rainy day capital at the parent company level to anticipate all of the situations," he said.


Two of the company's directors, Graham Farquharson and Robert Buchan, have resigned, the company said yesterday.


High River shares plummeted 21 per cent to 11 cents on the Toronto Stock Exchange yesterday. They had traded as high as $3.50 this year.


Chief executive officer David Mosher was in Moscow yesterday seeking financing. "I have been having meetings with a number of interested parties who are considering taking an investment in High River," he said in an e-mail.


High River has four gold mines in Russia and West Africa that the company has said could annually produce 300,000 ounces of gold.


High River is unlikely to be an isolated case. Other mining firms, both large and small, are facing liquidity issues in varying degrees.


Breakwater Resources shuttered two zinc mines this week in response to dismal prices but analysts believe that may not be enough to save it.


"We question the company's ability to continue as a going concern despite the production cuts announced earlier this week. At current spot copper and zinc prices and exchange rates our model indicates that the company's cash reserves could be drawn down to minimal levels by year end," TD Newcrest analyst Greg Barnes said in a note to clients.


Even mining majors are reeling from the credit crunch and the worst monthly fall in commodity prices in more than half a century that has already put about $50-billion (U.S.) worth of development projects on hold.


AngloGold Ashanti, the world's third-biggest gold producer is reviewing its capital spending and may sell assets because it is having trouble refinancing a $1-billion convertible bond that is set to mature.


High River Gold (HRG)


Close: 11cents, down 3cents
The Globe and Mail

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