With a team of 11 professionals and offices in Edmonton, Calgary and Toronto, Midnight Integrated Financial Inc. and its subsidiaries provide private equity capital, commercial loans, tax dispute funding and other financial products and services to Canadian businesses.
The Midnight group invests in equity of privately-owned businesses of all sizes, in all sectors, and at all stages of development.
While the Midnight group will consider conventional private equity opportunities, as an innovation the Midnight group will purchase non-voting preferred shares from the shareholders of a company before undertaking a detailed review of the business. The Midnight group may not redeem the preferred shares for at least six months while the private company may redeem the shares at any time after one month. This approach provides the shareholders with immediate cash liquidity as well as the opportunity to use the capital gains exemption on the sale.
If all parties agree that a long-term investment by the Midnight group is appropriate, the preferred shares held by the Midnight group will be converted into common shares and the Midnight group may make an additional cash investment. Otherwise the preferred shares held by the Midnight group will be redeemed. Visit the website for our private equity arm, the Tecate Northern Trust, for more details. [link]
Tax Dispute Funding
Tax disputes can be very expensive, very uncertain and take significant time to resolve. Given those factors, if audited and challenged by the Canada Revenue Agency many taxpayers choose to concede legitimate positions rather than dispute tax reassessments.
To assist taxpayers, the Midnight group will fund up to 75% of the costs of select tax disputes at any stage in the dispute process. While our team of tax experts will offer advice and recommendations, the taxpayer will maintain control over all aspects of the dispute and may use the taxpayer’s choice of accountants and lawyers. The Midnight group will only be compensated if and when a successful
resolution is achieved. The amount of compensation will be negotiated at the outset of the arrangement and will depend on the nature of the issues involved in the dispute.
For many reasons, when selling a business a vendor typically prefers to sell equity while a purchaser typically prefers to buy assets. As a result a purchaser often will require a substantial price discount to be induced to purchase equity rather than assets. The Midnight group arbitrage operations seek to narrow this pricing gap between vendors and purchasers.
The Midnight group will purchase equity of business entities (corporations, trusts or partnerships) at a modest price discount, and then sell the assets to another entity owned by the vendor, to a third party, or to the Midnight private equity arm. If another entity controlled by the vendor purchases the assets, that entity would be well-positioned to resell the assets to another party. Simply stated, the Midnight group will absorb the due diligence, complexities, issues, income taxes and other costs associated with buying the equity of a business entity and then selling the assets, in order to provide a clean break for the vendor while allowing the purchaser of the assets to enjoy a fresh start. The strategy also allows vendors to use safe income and capital dividend tax planning techniques that are common with equity sales.
The Midnight group provides short and medium term loans at competitive rates and on competitive terms. The Midnight group is able to respond to all loan requests rapidly and with a view to establishing long-term relationships with entrepreneurs. As an innovation, if a corporation or another person that is affiliated with a borrower decides to make a cash investment in Midnight preferred shares, the interest rate on the borrower’s loan will be reduced from a market rate to a 1.5% fixed annual rate without taxable benefit concerns.
The Midnight-affiliated Tricen Yield Corporate LPs provide a unique investment alternative. Rather than investing to earn steady yield or through a buy-and-hold strategy, the LPs seek short-cycle profits by trading in volatility using quantitative analysis. To ensure investor liquidity, all LP units are redeemed each month, with the investor having the option to reinvest in new LP units the following month.
The LPs are designed to provide tax deductions to corporate investors equal to 20% of the capital invested per month. The trading activities of the LPs are structured to limit the amount of any loss that may be incurred in any month to 3.0% (including fees) of invested capital. Even if such a loss is incurred in a month, the minimum annualized after-tax rate of return for an investment in LP units to a corporate investor that may use the tax deductions is expected to be at least 25%.
The investment fund manager of the LPs is Clifton Capital Management Inc.(www.cliftoncapitalmanagement.com). All investments in units of the LPs must occur through a registered exempt market dealer.
Midnight subsidiaries receive 10% of the arbitrage trading profit of each LP as well as a fee based on capital invested.
The Midnight group selectively purchases interests in real estate. The Midnight group focus its real estate investments on properties that provide a stable rental stream, have potential for significant capital appreciation, and have a connection to other Midnight operations or investments.
The Midnight group will invest temporary cash balances to maximize returns while protecting capital using three separate strategies:
(a) engage in dividend capture by purchasing publicly-listed shares shortly before the ex-dividend date and selling them shortly thereafter;
(b) speculate in publicly-listed securities on a short-term basis to seek a net trading profit; and
(c) invest in low-risk and highly-liquid securities.