Royal Bank

"Munk got his money on December 31, 1984 (he was skiing on the mountains of Klosters). From the proceeds the Gold Company of America advanced to Barrick US$40 million (C$53 million) against Barrick’s commitment to deliver to the Gold Company of America each year a number of ounces of gold that varied with the price of gold. For example, in 1984 the price was US$365, against which Barrick delivered 8,767 ounces. That package produced C$53 million, which was used to pay the Royal Bank debt. In January 1985, Munk sold the Camflo energy holdings for $32 million. With the initial private placement of $30 million made before the finalization of the Camflo merger, the total of $114 million was more than enough to take out the Royal Bank debt. It was a remarkable achievement by any standard, starting with Peter Munk’s practically door-to-door effort for the private placement; he claims to have approached at least fifty potential investors to raise that key first $30 million. Without it there would have been no Camflo merger."

"The last thing Bob Fasken wanted to do was sell out to me. He had a private jet and had a good time with it. Nobody wants to give up a company that they’re living off. His two or three sons were with him in the company. It was a family bonanza for him, and Camflo was also his company. Who wants to sell out? And he was a fishing buddy with the big shots in the Royal Bank. But the hundred million was /is debt."

"He has also invited several retired politicians and senior civil ser¬ vants to occupy senior executive posts or seats on the board of Power Corporation or its subsidiaries. A snapshot of the Power board in 1986 would have captured William Davis, retired Premier of Ontario, in a director’s chair (his predecessor in office, the late John Robarts, also sat on the Power board) and Senator Michael Pitfield, former Clerk of the Privy Council under Pierre Trudeau, who occupied a Power vice-presidency. The financing arrangements of the Quebec Autobus deal comprised a typically creative Desmarais package of personal cash and loans granted him because of his track record as a person who always meets his obligations and keeps his word. Industrial Acceptance Corpora¬ tion, one of his old creditors in Sudbury Bus Lines, which knew and trusted Desmarais, lent him $700,000; British American Oil Company (later Gulf) lent him $800,000 on his promise to buy all his gas from the company, and the Royal Bank lent him $500,000 against proceeds from the sale of Gatineau Bus."

"So, while restructuring was simplifying Desmarais’s task of bol¬ stering income, it still didn’t deal with Power’s debt. Personally, he still didn’t have complete control of Power. Desmarais’s final moves in 1970 — all of which were intertwined in a complex shifting of assets, cash and debt — solved Power’s debt problems, Gelco’s debt problems, Desmarais’s desire for control, and improved Power’s in¬ come picture. Step One: In early December, Power sold its oil and gas holdings for $13.25 million and paid off Power’s $12 million debt, about which Power’s backers, the Royal Bank, were becoming edgy. The edginess resulted because not only did Power carry a large debt; so did Gelco, the Desmarais-Parisien holding company through which they held their Power shares. Step Two: A week later, through Gelco, Desmarais bought the rest of the Power 10-vote 6-percent participating preferred shares that Thomson held through Wamock-Hersey International, for $7.2 million. At this point, Thomson was left with just under 2 percent of the voting power in the company that his father had helped found, and Desmarais had well over 50 percent of Power votes, with just under 19 percent of the company equity. Step Three: Since Desmarais now owned majority control of Power, it could no longer be viewed as an “English establishment” corporation. So, he sold to Power for $19 million the Gesca Ltee. income debenture that Power had sold to Gelco in 1969 to defuse public and government criticism that an “English establishment” company controlled the"

"By late 1967, it had been pointed out to Desmarais that Power was a likely purchase for him. By then, enough people who mattered indicated they wouldn’t oppose, and might even welcome his buying control of Power, that Desmarais looked closely at the situation. His bankers, the Royal Bank, also had a hand in Desmarais’s buying control of Power Corp."

"“It [the purchase] moved him from being a small operator, largely in the French Canadian milieu, to the big leagues,” said journalist Amy Booth. “It was a major turning point, and the Royal Bank was clearly involved. One day Desmarais was doing his own thing and the next day the Royal Bank was effectively his partner. Booth was referring to the large block of Desmarais-owned (through Gelco) Trans-Canada Corporation Fund shares which the Royal Bank held as security for loans and returned so he could have bargaining chips when working out the Power deal. Until the Power acquisition, the Royal Bank had bankrolled most of Desmarais’s deals since 1955, but not out of any conscious attempt to become kingmakers. “I don’t think they’ve ever thought that far,” said Booth. “Maybe the bank would like to think so now, that it set him up in Power, but I don’t think that was the case. Bankers aren’t that smart.”"