By Michael Ganley -- The Pacific & Western Bank of Canada has lent hundreds of millions of dollars in the NWT and Nunavut since the mid-1990s. The bank also spawned Discovery Air, which in recent years purchased Air Tindi, Great Slave Helicopters and Discovery Mining. Over the years the North's been very good to Taylor and, to hear it told, Taylor's been very good to the North.
"I think they have a long-term commitment to the North and being small and creative they're not caught in a lot of the other policy and provisions that other bigger charter banks might be running into."
Joe Handley, former NWT premier commenting on Pacific & Western bank
“All our work with them so far has been great,” he says. “They’ve been accommodating, they really understand it. They’re leaving us alone to run the company and make them money and for us that works well.”
Rod Brown, president of Discovery Mining
When David Taylor began lending money in the Northwest Territories in the mid-1990s, he flew around in a little Cessna 337. An avid pilot and the chief executive officer of Pacific & Western Bank of Canada, he travelled the length and breadth of the territory seeking safe borrowers. He financed hospitals and schools and health centres and governments themselves. "At one time I think we held all the debt of the city of Yellowknife, for example," he says.
A biologist by training and a banker since the 1970s, Taylor was testing his theory that a small, agile bank specializing in niche financing could make it in the cutthroat world of Canada's chartered banks. He elected to concentrate on markets that were neglected because they were remote, or too small, or were otherwise not getting the attention that southern Ontario gets from the big banks. But he also wanted reasonably secure loans. Enter the NWT. "In the early years the majority of our assets were in the North," Taylor says. "With a little more careful lending practices you weren't taking on much more risk and a lot of the projects were government sponsored in one way, shape or form."
His theory has passed all tests convincingly. London, Ont.-based P&W has grown to have assets worth $1.5-billion and projects across the country. But it remains deeply indebted to, and deeply involved in, the economy of the NWT and to a lesser extent that of Nunavut. The bank has had an average of $100-million at work on any given day in those two territories over the last decade, reaching into every corner of the economy.
In an effort to become further entrenched in the Northern economy, the bank incorporated Discovery Air in 2004. Discovery Air has quickly become a major player by buying stalwarts Air Tindi, Great Slave Helicopters and Discovery Mining Services. David Taylor, his bank and his airline are, quite simply, taking over.
On a cold weekend in January Taylor came through Yellowknife, met with his people here, and planned to continue on to Inuvik. He's still a frequent flyer in the North, but "time's progressed a little bit," he says: Now the plane's a jet. He was to meet with Fred Carmichael of the Gwich'in Tribal Council in Inuvik to further pursue another of his Northern interests. In a curious role the Council has in recent years been a partner with P&W in financing the construction of a number of hospitals in the south. Most recently, the Council assisted with the $198-million financing of a redevelopment project at a hospital in Hamilton, Ontario. Formally, the Gwich'in are owners of the company that is building the addition, but basically they've assumed some of the risk for a share of the interest that comes in. "The bank wins by being able to bid for large government contracts and the Gwich'in win because they find a new revenue source," Taylor says.
But his trip to Inuvik was cancelled. "We couldn't get hangar space in Inuvik and it was just too cold to leave the plane outside," Taylor says. He headed back quickly to the company office in Saskatoon.
When he took the helm of P&W in 1993, Taylor set out to create a new type of bank, to, in his words, “revolutionize the banking industry.” P&W was designed to be, and remains, branchless, and focuses on underserved markets. It uses a system of brokers to take deposits and then lends to relatively safe borrowers like hospitals and school boards.
In the early years Taylor got to know former premier Joe Handley, who was then the deputy minister at Resources, Wildlife and Economic Development. Taylor provided RWED with advice on how to handle immigrant investor funds. "He gave us a lot of good advice," Handley says. "We made a lot of good investments. We got our money back and the immigrants got their money back. Since that time we've kept in touch." Much of the immigrant investor money, interestingly, went into helicopters and fixed-wing aircraft, and Taylor began doing more and more business with Air Tindi and Great Slave Helicopters.
The plan for Discovery Air was to bring together niche aviation companies that would do better together than apart. "There would be economies of scale, there would be better access to capital," Taylor says. The company went on a buying spree, snapping up Ontario-based air operator Hicks & Lawrence in 2005, Great Slave and Air Tindi in 2006, Top Aces (which provides air combat support services to the Canadian Forces) in 2007 and Discovery Mining in 2008. Discovery Air went public in 2006 and has a market capitalization of some $160-million.
Taylor describes Discovery Air as the banker and public interface for its subsidiaries, with each continuing to operate as it did before the purchases. "Management's still in place and they still have the same authorities they used to have," Taylor says, "but now Discovery Air is their banker instead of dealing with a multitude of other banks." Discovery Air also provides its subsidiaries with a variety of corporate services such as the management of investor relations, accounting and legal services, and group-wide human resources policies.
Taylor and his colleagues at P&W have won over some powerful Northern friends with their approach. "It's a really creative bunch of guys," Handley says. "I think they have a long-term commitment to the North and being small and creative they're not caught in a lot of the other policy and provisions that other bigger charter banks might be running into." In an effort to shore up representation in the North, Handley has been brought in as an advisor to the bank. “A guy like Joe who has spent most of his adult life living in the NWT can help us understand which are good projects and which aren’t, and who might be the right person to meet to talk to,” Taylor says.
Discovery Air has also hired the former NWT deputy minister of health and social services, Chuck Parker, to be responsible for "coordinating Discovery Air's organic growth in the North."
Support for the role Discovery Air is playing also comes from the private interests that have sold to him. "There's nothing we can say that's bad about Dave Taylor or Discovery Air," says Alex Arychuk, the 52-year-old patriarch of Air Tindi. "As I stated when I joined him, 'The sandbox just got bigger and better." Arychuk says he decided to sell for two reasons: for easier access to capital and because he's thinking ahead. "I was planning succession and it walked through my door."
Rod Brown, president of Discovery Air’s most recent acquisition, Discovery Mining, is equally supportive. “All our work with them so far has been great,” he says. “They’ve been accommodating, they really understand it. They’re leaving us alone to run the company and make them money and for us that works well.” He also notes that the deal includes a benefits package for employees that is making a job with Discovery Mining that much more attractive.
Brown is hoping the new structure will allow Discovery Mining to venture out of the North more. The company already does work in Saskatchewan, Manitoba and Newfoundland, but expanding their presence in those markets is important because, he says, things are starting to dry up a bit in the NWT.
He also says there’s no reason to be concerned about a hollowing out of the North because of so many sales to a southern-based company. “I’m here, Malcolm [McLean]’s here, his family’s here, my whole family’s here. The idea is not to move down to London.”
Indeed, Arychuk makes the case that Discovery Air is absolutely a company that should be embraced as Northern. "It's the first real public company in the North for Northerners to invest in," he says. "It's something they can watch and participate in and if they all join us it's for all of our own good."
Taylor’s not done in the North, not by any means. He says the North will continue to grow, even with the US headed for recession, and he intends to be a part of it. "It might put a little bit of a damper on it but I think the fundamentals are very much in favour of the North continuing to grow and grow," he says. Those fundamentals being that the North is filled with natural resources that the rest of the world wants and is willing to pay up for. “In this vast area of Canada where there are very few people living and hardly any roads or rail, there are a lot of minerals and natural resources, the prices of which are going to be bid higher and higher. I see no end in sight."
