} f c4_CastlégarNews _Fetvor 22.196 Publishing com Ae inti pany _ top merchant bank By MARIO POSSAMAI Canadian Press When Christopher Ondaatje set up a fledgling publishing house in 1967, he named it after the pagurian, a hermit erab that lives in the shells of mollusks, adopting larger and larger. shells as it grows. “I thought it was a great name for a publishing company because with each book, the company would get larger,” he says with a smile. Toronto-based Pagurian Corp. has outgrown its roots and blossomed into one of Canada's leading merchant banks, which raise capital for companies. “In fact,” says Ondaatje, “the name really does accurately reflect what pagurian has done, We have gotten larger and larger in size.” Pagurian’s net earnings are a case in point. They've risen from $2,686 in 1967 to $28.8 million in 1985 — and a projected $100 million this year, Pagurian's nearly $600 million in holdings include $250 million in liquid assets — and a 15.6 per cent stake in Hees International, the merchant banking arm of the business empire headed by Peter and Edward Bronfman. The balance sheet isn’t all that glitters at Pagurian. Singer Diana Ross caused a stir at last ye: annual meeting. Her husband, Norwegian financer Arne Naess, is a company director who led an expedition to Mount Everest in 1985. Naess is featured on the cover of Pagurian’s 1985 annual report, standing on top of Everest reading a copy of a company report. BUILDS CHARISMA Notes one Bay Street insider: ‘Pagurian is built around Ondaatje’s charisma.” The tall, angular Ondaatje was born in 1933 ip Sri Lanka — then the British colony of Ceylon—to a prosperous family that had been on the island since the 16th century. His voice still carries a trace of a British accent. The family's fortunes began to sag and, after a stint learning the banking business in England, Ondaatje came to Canada in the mid-1950s. Since then, Ondaatje bas racked up an track record, incl founding the dealer Loewen, Ondaatje,McCutcheon Inc., says analyst Terry Shaunessy of Merrill Lynch Canada Ine. Despite Ondaatje's reputation — and Pagurian's performance — not everyone is a fan of the company. Some investors consider Pagurian’s structure and philosophy too difficult to understand — so much so that many leading analysts don’t follow it. ‘As Stephen Jarislowsky, the dean of Canadian pension fund managers, put it: “It’s all too complicated for me. I stay away from them.” “Thére are more companies that look like Pagurian in Europe than there are here,” says Shaunessy. “That's always been a problem (for Pagurian) . . . it had a complex structure that was new to the North American market.” Though innovative, he describes Ondaatje, who is also an author and an art collector, as being “pretty conservative.” A sign of that is Pagurian’s lack of debt, fairly unusual at a time when debt financing is the rage of North American boardrooms. . “I'm terrified of debt,” working for the banks.” Pagurian’s forte is merchant banking. In—partieular; Pagurian has focused on helping companies get off the ground through well-timed infusions of capital. Take Enfield Corp., a rising Toronto industrial management company. Without Pagurian, Enfield would not be operating today, says chief executive officer Michael Blair. “impressive” says Ondaatje. “I don't believe in Enfield’s net income has soared from $500,000 in 1984, its first year of operation, to $47.9 million inthe first half of its current fiscal year. During the same period, assets have grown from $16.2 million to $371 million, “Traditional banking asa gource of (corporate) financing has gone a bit by the boards,” says Shaunessy, noting that this is due, in part, to the sharp reduction in corporate lending during the recession? “I don't think the (chartered) banks made too many friends on the corporate front” in the early 1980s. In its financings, Pagurian likes to use preferrence shares, a type of stock that pays investors a fixed dividend out of net earnings. For corporate borrowers, preferreds stabilize the raising of capital because the cost of the debt is fixed, mys Shaunessy. “With a bank, the after-tax cost of financing will be very reasonable (at the present time), but there's no guarantee it will stay there.” Preferred shares also have a tax advantage: dividends from Canadian corporations — unlike other sources of corporate income — are not tax: Further, if a company is liquidated, preferred share- holders rank ahead of owners of common stock in getting a crack at the assets. TAKES ADVANTAGE Looking to the future, Pagurian purchased, subject to regulatory approval, a 40-per-cent stake in’ Loewen, Ondaatje, putting it in a good position to take advantage of the sweeping deregulation of Canada’s financial services industry, says Shaunessy. But also important to Ondaatje is getting back to communications and publishing, which he describes as his “true love.” “We've made no decision on that, although that’s a key intent of ours. That will satisfy my heart.” Ondaatje’s books include a history of Canada’s prime ministers, while brother Michael is a Governor General Award winning poet. “What I must be careful to do is to use my head to Satisfy my heart. I will not make any investment unless they (shareholders) get at least the same amount of return as from my other activities.” Drivers report Audi problems WASHINGTON (CP) — Drivers of Audi 5000 auto- mobiles have reported 1,400 accidents related to unin- tended sudden a including 880 incidents just made public, says an auto- safety group. of which Audi of America Inc. is a subsidiary. The letter was placed in a file open to the public last week. Audi Joseph Bennett stressed that while the automaker is required to report all cases of alleged sudden acceleration, The private Centre for Auto Safety said the latest complaint figures on auto- matic transmission 1978-86 Audi 5000s show one of every 180-vehicles sold has exper- ienced a sudden-acceleration accident. The centre said its figures are based on a Jan. 14 letter to the government from Volkswagen of America Inc., many incidents probably weren't related to the defect. Te letter to the National Highway Traffic Safety Ad- ministration, which is inves- tigating sudden acceleration, said Volkswagen received 714 reports of accidents and 178 other legal claims related to unintended acceleration accidents. thermal coal has relatively low sulphur content, making it attractive to an Ontario governnient committed to reducing acid rain. By 1992, the province plans to sharply cut sulphur di- oxide emissions at its coal- powered Ontario Hydro gen- erating plants, which burn as much as 16 million tonnes of thermal coal annually. That amounts to almost half Can- ada’s annual thermal coal production. Ontario Hydro can cut emissions by either buying more low-sulphur coal from Western Canada — which supplies about one-third of the utility's current needs — or by installing expensive scrubbers to remove some of the sulphur in coal imported from Pennsylvania and West Virginia. A federal-provincial com- mittee told Ontario Hydro last year a heavy shift toward western Canadian coal would create 13,000 mining jobs by the end of the century. The industry, hard hit by falling demand and sagging prices, has lost 24 per cent of its workforce during the last two years. But it’s not an easy choice for Ontario Hydro. The $35-a-tonne cost of shipping coal across the Prairies is so high it can double the price of the product to eastern markets. The freight rate for U.S. coal is only $7 a tonne, meaning it’s a better buy for Ontario Hydro even if the utility invests in expensive serubbers. “We don't have any eco- nomic incentive to increase our percentage (of western Canadian coal),” Allan Holt, Ontario Hydro's fuels di- rector, said in a telephone interview from Toronto. Holt estimated Ontario Hydro is paying an extra $70 million a year for the higher- cost coal it buys from West- érn Canada. Orders Immediate Reduction of 1986 Inventory! Now you save like never before! yundai E Gl OVER DEALER COST While the supply lasts. Brand New Excel GL Here's how it works . . Dealer Cost Dealer Margin You Pay........... 1270" $99 00 Down WILL DELIVER! *Dealer Prep $210., Freight $190 and Dealer Options Extra. LOPS IWACR MW THIS MONTH WHEN YOU BUY OR LEASE ANY NEW NEW OR USED VEHICLE FROM CASTLEGAR HYUNDAI. WE WILL DONATE $25.ON YOUR BEHALF TO THE HEART FUND. REMEMBER, FEBRUARY IS HEART MONTH. PLEASE JOIN. 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