Doug Ashbury
Northern News Services

NNSL (Jun 24/98) - When Barclays Bank decided its Canadian operations were no longer a "strategic asset," David Taylor's first thought was that all the work he had done would evaporate.

At the time, Taylor was a Barclays vice-president based in London, Ont., where he still lives.

With the writing on the wall, Taylor thought about starting his own bank.

He didn't go quite that far. Instead, he took over an existing trust company, Saskatchewan-based Pacific and Western Trust Corporation.

Taylor bought $1 million worth of shares in Pacific and Western's controlling shareholder.

"When I had control, I started to reorganize the trust company into new wave financing," Taylor said.

It was 1993 and Taylor knew the company would have to focus on electronic banking. That in itself is far from revolutionary but eliminating the company's retail arm was more than a bit out of the ordinary.

Eliminating retail meant huge cost savings. With just 17 staff, Pacific and Western carries out $350 million worth of transactions yearly based on 25,000 guaranteed investment certificates offering market-rate interest.

"Today we have the most efficient deposit gathering system in Canada," Taylor said.

And to keep risk low, Pacific and Western primarily finances hospitals, school boards and municipalities.

The idea being the trust company wants some government light at the end of the risk tunnel.

"There needs to be a government component. As long as I can see my way to a government component," Taylor said.

He estimates it costs Pacific and Western 35 cents to earn a dollar in revenue versus 68 cents for big banks.

"We've got a serious competitive advantage."

Combine that type of efficiency with reluctance on the part of big banks to finance some Northern projects and you have demand.

"To me, the NWT is a classic example of a niche market. Government risk and specialized lending."

Earlier this year, Pacific and Western set up a program that will save Yellowknife taxpayers $3 million.

The city had $15 million in debentures, debt obligations to the GNWT, at fairly high interest rates.

"We said we'd buy the debentures, then turn around and reduce interest rates more than two per cent to the city. Our money's cheaper," Taylor said.

"I like this market best of all. It's remote. It's unique. And I get to fly up in my Cessna."

Some Yellowknifers may have spotted Taylor's aircraft last weekend. It's easily recognizable due to its somewhat unusual propeller configuration. The Skymaster, a push-pull, has a prop in front, as well as behind, the cockpit.

Taylor and several other Pacific and Western executives were in Yellowknife over the weekend. The trust company's Northern business extends well beyond Yellowknife.

Pacific and Western holds 60 per cent -- or $30 million -- of the North's municipal debt.

The presence also includes playing the role of financier in the GNWT's Aurora fund, a venture capital fund in which immigrant money is used to finance Northern business.

"We finance the immigrant who puts the money in the fund. The risk of the investment has to be low because the immigrant needs the money back in five years. We structured the fund so it will work," Taylor said.

The fund invests 60 per cent into what Taylor calls "high quality assets" and 40 per cent into "bankable transactions."

One example of the former is financing an NWT Power Corporation waste heat recovery operation.

A quality project does not just mean financial quality, he said. "We are down where the rubber meets the road."

Bankable transactions said Taylor, are deals banks would do "if the deals were any where is else in Canada."

Taylor said the company approved financing of airplanes for NWT companies because he is familiar with them and they make for good security.

"We call that bankable risk."

But before the money started flowing, there needed to be legislative changes.

Pacific and Western's representative in the NWT, Arctic Financial's Alan Vaughan, said last year's legislative changes resulted from the city of Yellowknife trying to refinance its debentures.

"They (the city) wanted to see of they could save the ratepayers money. The legislation was broadened giving more flexibility."

Prior to the change, municipalities had to borrow from the GNWT or banks, Taylor said.

Broadening the rules meant lower better interest rates.