CANADA’S INVESTMENT MOMENT: From Capital to Capability

Getting capital into production

On September 17, Pivotas convened After the Gold Rush—Defence Capital Beyond the Hype at the Royal Canadian Military Institute. In his prepared opening remarks, Justin R. Fogarty, Chairman and Chief Executive Officer of Pivotas AG and Chairman of the Board of Pivotas Canada Ltd., described the task as getting “capital off the bench,” arguing that the binding constraint is not the availability of capital but the basis on which it is underwritten and structured for companies whose growth is contracted rather than historical. He also challenged Canadians to move beyond being “mere custodians” of resources and industries. Invoking the wartime production efforts of C.D. Howe and Lord Beaverbrook, he emphasised the organisation of capital and industrial capacity rather than the possession of resources alone.

The discussions brought that argument down to individual businesses. A company may have substantial orders but lack the working capital to expand production. Asset-based lending was discussed as one response. Mineral development presents another problem: financing uncertainty before a deposit becomes a producing asset. The speakers distinguished that need for risk capital from lending against an established business. A large aggregate financing commitment does not demonstrate that these different needs have been met. (Read more...)