28 | LEXPERT • June 2019 | www.lexpert.ca/usguide
and Vineberg LLP in Toronto. "at
slowly bubbles over into the non-cross-
border market.
"So we've seen Canadian lenders a
great deal of pressure over the last couple
of years to relax covenants, allow greater
leverage within their borrower company,
far fewer restrictions in their covenants
— even slightly relaxed events of default.
But particularly we've seen quite a large
increase with respect to the amount of
debt they'll permit their borrower to
have. So we're seeing greater leverage in
the sense of what your financial covenants
have to look like, how much debt you have
to have compared to earnings.
"e Canadian market has tradition-
ally been a bit more conservative than the
American market, but with so much activ-
ity, those expectations, those differences,
Attracting US
Investment Dollars
When it comes to cross-border deals, the
lion's share of buyers chasing transactions
in Canada these days are American with
private-equity firms snapping up both
public and private businesses at a steady
pace. And they are affecting Canadian
financing practices.
Most of the cross-border private-equity
acquisitions are being done with 10 to 20
percent equity and the rest is financed. e
more a fund can lever up its acquisitions
using cheap debt, obviously, the better the
potential return.
"e US debt markets have been very
frothy and borrower-friendly and the
US PE funds making acquisitions – even
when coming to Canada and dealing with
Canadian banks – are really expecting to
get comparable terms," says Carol Penny-
cook, a partner at Davies Ward Phillips
CANADA IS AN
INTERESTING OPTION
TO US INVESTORS
FOR A NUMBER OF
REASONS, FROM
CANNABIS TO
TAX CHANGES
BY SANDRA RUBIN
Financing
PHOTO:
SHUTTERSTOCK
