Finally an IPO with MCAP Corp seeking $250 million via regular voting common shares

It has taken almost six months, but the stage has been set for the year’s first initial public offering.

And the 2016 debut issue, set to be launched with a road show next week, will come from a company that provides services in an area of vital interest to all Canadians: home ownership.

The other piece of good news: MCAP Corp., which has been private for more than 20 years, and regards itself as the “second largest mortgage finance company in Canada based on both 2015 origination volumes and mortgages under administration,” is planning to offer common shares in its offering. It’s understood that MCAP, which has $55 billion of mortgages under administration, is seeking at least $250 million.

Unlike 2015, when a number of companies went public and offered subordinate voting shares, MCAP has decided to take on new owners as equals. Those new owners can also expect to receive a quarterly dividend, as it “is the intention of the board following closing to declare quarterly cash dividends.”

MCAP’s business model is to “originate and underwrite mortgages, fund them by selling them to Canadian banks, trust and loan companies, credit unions, life insurers and pension funds or a securitization vehicle, and then provide ongoing mortgage servicing back to that institutional investor or securitization vehicle.”

MCAP’s offering will feature both shares from treasury and shares from selling shareholders, one of which is, Otéra Capital CADCAP Inc., an indirect subsidiary of Quebec’s Caisse de dépôt et placement du Québec.

MCAN Mortgage Corp. is the other selling shareholder, though Otéra has a stake that’s about five times as large as that held by MCAN. The two selling shareholders own about 93 per cent of the issuer. Employee shareholders own the rest.

Equity raisings

Numbers published by FP Data Group show the amount of equity raised this year is below what was garnered in the comparable period of 2015.

So far, using announced deals as the yardstick, $26.251 billion of equity in the form of common, convertibles and trust units has been raised. That amount raised, which compares with $31.664 billion in the comparable period of 2015, is the second best first half in the 23 years that the Financial Post has been compiling statistics.

So far this year there have been seven deals of at least $1 billion with the $4.419 billion raised by TransCanada Corp. being the top of the pile. This week Suncor added that list with an offering of at least $2.5 billion.

Numbers also show Canadian companies issue far more equity, on a relative basis, than their counterparts south of the border. When preferred shares are added to the mix, Canadian companies have issued more than $31 billion of equity. That compares with the more than US$82 billion that has been raised by U.S. counterparts. Accordingly the 10 to 1 ratio between the sizes of the two economies is not at work.

A couple of factors explain the higher percentage of issuance by Canadians:

  • the bulk of equity deals done here are via a bought deal, an arrangement, where the underwriters buy a block of stock before filing a prospectus, and which allow all parties to act quickly. (Such arrangements aren’t the norm in the U.S.); and,
  • on a given Canadian deal, a higher percentage of the shares are sold to non-Canadian investors, compared to U.S. companies.

Financial Post

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