Playing catch-up

There is a gaping three week hole in the worm’s eye view coverage provided in this corner of the blogosphere, so here is a taste for what might have been nattered about had we not been on that principled hunger strike.

1. The Wall Street Journal ran a piece on Wellington Financial Fund III portfolio co. Glasshouse Technologies a few days ago. Glasshouse is a datacentre software & services company based in the Boston area, backed by Cisco, Dell, GrandBanks, Kodiak Ventures, Palladin Capital and Sigma Partners; a wonderful group of investors for us to work with. We provided the company with a US$9.75 million financing in March, but haven’t been able to talk about it while they’ve been amending their NYSE initial public offering documents with the SEC. The lead underwriters on the proposed IPO are Goldman Sachs and Credit Suisse. Here’s a copy of the WSJ link.

2. Did you see that Bruce The Shark (aka The Business Development Bank of Canada) has done it again? They beat out multiple private sector candidates to provide a $7.5 million term loan to SME broadband provider Terago Networks (TGO:TSX). Terago is listed on the TSX, has a market cap of something north of $65 million, and just came off a record quarter.

Does a publicly-listed company with positive EBITDA with live proposals from private sector capital providers strike you as the kind of firm the BDC should be doing business with? Of course they’ll win. The federal government borrows 10 year money in the bond market at about 3.07% right now, but should they be re-lending that capital to firms that have other credible choices? Of course not. I’d like to save money on new patio furniture, so why doesn’t the government get into that business as well?

We usually run into problems with BDC’s sub debt group, but this deal was closed by the senior loan credit division. According to the Act of Parliament that governs them, the BDC is to “complement” the private sector by law. This is just one other example of their indifference to their own governing legislation, as has been highlighted here over the years (see prior post “BDC Fact #1” Dec 3-07).

That’s one of the luxuries of doing business in the USA. No one (politicians, CFOs, VCs) thinks the federal government should ever step into a financing situation where the private sector is willing to play.

3. Speaking of the BDC, management consulting firm McKinsey & Co. has been engaged to look into the state of affairs of BDC’s Venture Capital arm. Something to do with losing $291.5 million on venture deals over the past 5 years one would surmise. To give you a sense of what that figure means, BDC’s VC portfolio had a carrying value of $608 million as of the end of their 2009 fiscal year. I’m a big fan of many of the people in the BDC Venture arm, and I suspect they’ll impress the McKinsey team as they go about their work. Will be interesting to see what comes of it, and I even have a suggestion once BDC gets around to asking its key stakeholders for input into the future of their VC business.

4. The Decade of Daddy Mirror Fund is treading water as at the halfway point in 2010. Last time I checked, we had a portfolio value of $46.5 million, which is up 16.6% since the fund got rolling two years ago last week (see prior post “Decade of Daddy Mirror Fund” July 2-08). During the same time frame, the Dow is down 14.4%, the S&P 500 has dropped 18.5%, and the NAV of OGE.UN (our benchmark) is at $9.27 (plus $1.46 of cumulative distributions) — off 10.6%. OGE trades at $8.70, which is really more relevant than NAV, since that’s the price you’d get if you sold your unit today. Using the trading figure, the Decade of Daddy fund is down 15.3% including distributions.

5. In Vancouver today, the Federal Court will hear arguments from the Toronto Port Authority and Porter Airlines in response to the complaints of Air Canada. If you are interested in AC’s 20 year history at Billy Bishop Toronto City Airport, have a read of this.

6. On the business front, things couldn’t get going better. We have four live deals in due diligence, which is making for a busy July/August. In a one week timeframe, we had teams in three different States/Provinces, none of which were closer than an hour by airliner. We are delighted with the welcome we’ve received in the U.S.A., and the relationships we are building there are serving to be helpful to our Canadian relationships.

Thanks for your patience over the past three weeks. Nice to be back.

MRM