Bailout?
(On the aquisition of the Traditional Territory of Cowichan Coast Salish people)
Why in the world do fund managers for Canadian federal and provincial pension funds want to invest a BILLION dollars of pension money in a company that has been losing money for the past three years and is up to its eyeballs in debt?
On second thought, it's described in press releases as a cash sale for $1.03 billion dollars "including debt." If you go look up the financial statements of the company, the Q1 2011 you find total liabilities of $969.2 million. Well that's almost the whole billion right there. 94% of this offer appears to be just assuming debts TimberWest has run up. Just in time, too. At least $134 million of this debt comes due in just eight months. Could this company pay that off or refinance it if this deal doesn't go through? With three straight years of losses and not much daylight left on the balance sheet before equity is eclipsed by debt? I wouldn't loan them money. At first glance, this is starting to look like some kind of covert billion dollar bailout.
These debts are now to be paid off with money from the pension funds of federal and provincial government employees? A BILLION DOLLARS? Who dreamed this up? And why?
Well, the company is TimberWest and they do own 800,000 acres of land that's worth a fortune. Unless, of course, there's something to this talk going around that the Indians actually still own that land. Not the long-dead, in-the-history-books Indians, but approximately 9,559 alive and angry Indians on Vancouver Island who crown representatives are actively trying to negotiate a treaty with. Maybe they're not all angry. Undoubtedly, some of them haven't heard about this deal yet.
While the Indians live in third world conditions on reserves right here on Vancouver Island next to the timber lands that are at issue, news stories say a "big corporation" is going to get a billion dollars for selling what seems to be Indian land. That land may be as much as a third of all the territory of a dozen or so native nations. If we do the math and divide the proposed $1.03 billion purchase price by approximately 10,000 native people, we find that if the Indians were selling that land for that price, instead of watching TimberWest sell it, they'd get about $103,000 each for every man, every woman and every little kid playing in the garbage-strewn dirt streets on the reserves. Maybe the natives, most of whom can't afford a used car, will decide they can afford $103,000 each and just let this go. Or maybe they'll protest, barricade roads or file a lawsuit. Maybe they'll just go out and start logging the timber on their lands themselves instead of letting TimberWest or its successors do it.
Yes, we all know, Indians on reserves have it tough and yada, yada, yada. Is this a real issue for TimberWest investors or is this just political talk between the government and the Indians? That's the burning question for investors right now because obviously this deal is affecting the price of TimberWest stapled units on the Toronto Stock Exchange (TSX:TWF.UN). Is there really some possibility that the deal will be called off because of native opposition as Richard Kelertas of Dundee Securities said in an analyst's report? TimberWest CEO Paul McElligott went out of his way to comment on that saying the analyst was "ill informed."
Well, I'm glad he cleared that up. I never believe anything until it's been officially denied. Does Kelertas know something the rest of the market doesn't? Maybe, but there is no way he has better sources in Indian country than I do. Especially not on Vancouver Island.
There is something to this, but it's coming from an different direction. The only native voices that have been heard from on this in the press so far are the Hul'qumi'num Treaty Group. Robert Morales, the "chief negotiator" there, has been making his usual self-defeating comments about how maybe nothing will come of it and essentially taking the same view of the situation as the crown negotiators on the other side of the table. He's only talking about seeking redress of grievances from the Canadian government. That suits TimberWest just fine.
TimberWest's May 16, 2011 press release is careful to refer to native "claims" as being only against the government, as if TimberWest has nothing to do with it. That, indeed, is the way the crown negotiators have tried to set up the rules of the treaty game.
TimberWest CEO Paul McElligott was quoted in the Globe and Mail saying, "This is a matter between a treaty group and the Government of Canada and it's been going on for years frankly".
That's right, treaty negotiations have been going on for years and nothing is happening while the Indian land they are negotiating about continues to be quietly "sold" to forestry companies and real estate developers under the pretense that it is "crown" land. More and more houses for non-natives are being built on Indian land without payment to the real owners. More and more trees are being harvested by forestry companies like TimberWest without any payment to the real owners. More and more Indians are dying in poverty. More and more Indian children are growing up in poverty. Robert Morales and the Hul'qumi'num Treaty Group continue to make ineffectual noises and collect their paycheques which come ultimately from the same government they are supposed to be negotiating against. Having accepted the government's preconditions for negotiations, Morales and all the other negotiators were already checkmated before the negotiations even started.
So the path seems clear for TimberWest to leave all this to the government and get on with business. Not quite. The treaty game Morales is playing is so clearly stacked in favor of the government that a large number of the Indians he claims to represent have been trying for years to get someone else to represent them. Unfortunately, they have no choice... so says Robert Morales. So say the chiefs and councils of the Indian bands. So says the BC Treaty Commission. Oh well. All sorts of rules and laws have been broken to install puppet governments on Indian reserves and make them the "official" negotiators for the Indians. What kind of negotiation involves one side insisting on choosing the other side's negotiators? All sorts of rules and laws have been broken to hide from public view the Indians who have appointed their own negotiators and are refusing to accept the preconditions trap set by the government. They are hidden from view, but they exist.
A recently released internal report from the Harper government shows that while the government is publicly ignoring traditional native leaders, pretending they don't exist and refusing to meet them at the negotiating table, they are actually very well aware that it is the traditional leaders who typically hold real power in Indian tribes. Harper even has CSIS spying on them.
Well here's a news flash: traditional leaders and grassroots activists on Indian reserves in Vancouver Island are well aware of the TimberWest deal and they are mobilizing to try to stop it. Whether people like Robert Morales and the Hul'qumi'num Treaty Group staff are going to do anything effective or just keep playing the government's game, there are others who are not going to surrender in advance by accepting preconditions to negotiation or play the treaty game so TimberWest, real estate developers and others can get billions of dollars of value from Indian lands that have never been sold, ceded or leased to anyone and certainly have never been paid for.
I can see why TimberWest would want this deal to go through. Their debt goes away. They walk away with a little bit of money and their Indian problem becomes someone else's problem. It would have been better if they had at some point actually talked to the traditional leaders that everyone pretends don't exist and maybe tried to negotiate something everyone would be happy with. That would be bucking the trend, though. TimberWest has done what almost all the other companies have done and passed the problem on to the government.
So now a billion dollars of government money comes in to buy out TimberWest. The odd thing is, it's pension money from BC Investment Management Corporation which manages pension funds for the province of British Columbia. So this money to pay off TimberWest's billion dollar debt is coming out of BC government employee pensions?
Turns out, BC already loaned TimberWest $107 million by buying convertible debentures. Could this be an effort to save that investment by pouring good money after bad in huge amounts or does bcIMC just want to be in the timber business really bad? The offer is not only from bcIMC. They have a partner. Public Sector Pensions Investment Board ("PSP"), a crown corporation that manages employee pensions for the federal government, is also apparently just itching to get into the timber business where TimberWest has been losing money on lands that they may or may not have good title to.
If politics enters into this, and how can it not, it makes a brutally cynical sort of sense to get the big timber corporation out of the picture and try to pit natives against pensioners and public sector unions to argue over who really owns that land in the political debates. I'm rather surprised there's been no great outcry from the people whose pensions are being handled in this way. They really could be left holding the bag here.
It's not just a matter of what's fair to the Indians, though bcIMC has about the importance of the social impact of their investing