/Stormy weather: Why DBRS’s founder spent his money backing a Newfoundland musical
Stormy weather: Why DBRS’s founder spent his money backing a Newfoundland musical

Stormy weather: Why DBRS’s founder spent his money backing a Newfoundland musical

Walter Schroeder says he didn’t set out to produce a propaganda musical about Newfoundland and Labrador’s impending bankruptcy — it just sort of turned out that way. The musical, No Change in the

Weather, just wrapped up a national tour that took it to nine cities, including Winnipeg, Calgary, Edmonton and Toronto, culminating in a mid-October show in St. John’s, N.L., the end of the current scheduled production run. But Schroeder says he hopes to take the musical on a second tour next year with the ultimate aim of staging the show off-Broadway in New York.

By then, though, the founder of Dominion Bond Rating Service believes Newfoundland and Labrador will be teetering on the brink of bankruptcy, in dire need of a bailout from Ottawa. No Change in the Weather is his way of sounding the alarm. “Newfoundland debt trades now as though it was Canada sovereign debt,” he says. “If it was independent right now, it’d be trading probably into non-investment grade BB. And the interest rate that they’re ultimately going to have to pay is probably going to go up 300 to 500 basis points. They’re going to trade as junk debt if Ottawa doesn’t help them. It’s as simple as that.”

Schroeder is quite familiar with the problem, too. He’s spent most of his life assessing debt, and he’s always taken a special interest in Newfoundland and Labrador. He founded DBRS in 1976 and remained controlling shareholder as it grew into Canada’s largest bond rating agency, before it was sold in 2014 for reportedly more than US$500 million.

In DBRS’s early years, Schroeder says he would travel to Newfoundland and Labrador for meetings and fell in love with the place: the culture, the people and especially the music. At 77 years old, the Winnipeger who built his business in Toronto, still has an affinity for the rugged island on Canada’s eastern edge. On a trip there in the 1980s, Schroeder bought a tape of folk music — Uncle Harry’s Bar Band — at a shop, and wound up listening to the album for years afterwards.

“We had 400 people working for us right across the world, so Newfoundland was one of many, many, many entities. But it’s one I stayed closer to, because I enjoyed it. I enjoyed the culture, so I kept going back there year after year,” Schroeder says. “I actually went to Churchill Falls as part of the rating. I ate, slept and drank with the guys at Churchill Falls for about three days. That was in the ’90s. I really got to understand it.”

Churchill Falls, the massive hydroelectric dam in Labrador, figures prominently in No Change in the Weather.

The waterfall itself was perfect for a hydroelectric project, but the location was a problem. The only way to get power from central Labrador to Ontario and the United States is by going through Quebec. A deal was struck in the 1960s, which allowed Hydro Quebec to buy power at fixed prices from a company controlled by Newfoundland and Labrador. The power-purchase contract with Quebec is massively lopsided, with Hydro-Québec reaping almost all the profits until 2041, for an energy project completed in 1974.

“The thing is, Churchill Falls is the significant event that separates Newfoundland from prosperity,” Schroeder says. “Newfoundland should be 50 per cent and Quebec should be 50 per cent, but, instead, it’s more like Quebec 96 per cent, and Newfoundland four.”

Walter Schroeder in 2008 at the Toronto offices of DBRS. He founded DBRS in 1976 and remained controlling shareholder as it grew into Canada’s largest bond rating agency, before it was sold in 2014.

Tory Zimmerman for National Post

It wasn’t until DBRS was sold that Schroeder felt like he could devote time and money to his passion projects. “I was an insider with government. I was an insider with probably 1,000 corporations. The SEC watched me like a hawk, so I couldn’t do very much because of conflict of interest potential. And, of course, I could never get involved with anybody political,” he says. “We sold the company and it kind of freed me to start doing some things that before I couldn’t do.”

It was around 2017 when Schroeder had the idea for a “jukebox musical” of Newfoundland and Labrador folk songs. Around the same time, Come From Away — another musical set in Newfoundland — was receiving critical acclaim and, eventually, seven Tony Award nominations, winning one. He says his main intention behind the new play was to showcase the province’s music and culture, but the final production is heavy on politics. “It started out being just a play that showed the beauty of Newfoundland artists. The rest fell into place when I did the research, found that Newfoundland was still in the same position,” he says. “Seeing how bad it was, that’s what got me motivated about the second part.”

After Schroeder came up with the original concept, he connected with Berni Stapleton and Ruth Lawrence, well-known names in the Newfoundland and Labrador theatre community, to write and direct the show. He also brought on former Great Big Sea musician Bob Hallett to serve as producer. Hallett also worked as a musical consultant on Come From Away.

The easiest call I think I’d ever have to make as a debt rater would be a Newfoundland bankruptcy

Walter Schroeder

Set in a fictional Newfoundland outport — a remote coastal fishing community, only accessible by boat — the musical is about family and friends coming together to grieve the death of Mary Margaret, the community matriarch. But one of the key plot elements involves James, the suit-wearing son of Mary Margaret who got seduced by the big city of St. John’s and wound up working in the provincial government for decades. Through the voice of James, the play includes a heavy helping of exposition and revelations about the Churchill Falls hydroelectric project, and the theory that Newfoundland and Labrador failed to assert its rights to an energy transmission corridor through Quebec at the behest of then-prime minister Lester Pearson, who was worried about Quebec separatism.

“Take one for the team, they said, and we’ll see you right,” James says, in the climax at the end of the show’s first act. “And so we did, and then we waited. And here we wait, waiting still for our country to do the right thing. It wasn’t that we chose Canada; it was that Canada didn’t choose us.”

In addition to a detailed discussion of the Churchill Falls deal, the show’s 28-page playbill includes 11 pages of other information, including the province’s relationship with Canada and a table of figures about the federal equalization formula that takes up more than half a page. Much of this history is contested, and more complicated than it seems in a musical studded with upbeat folk songs. The province has launched legal cases to try to break the hydroelectric contract, losing multiple times at the Supreme Court of Canada. The lopsided Churchill Falls deal remains a major source of animosity between the province and Quebec.

The playbill also includes an insert for the Schroeder Policy Group, a think-tank that Schroeder recently launched. It has spent more than $62,000 promoting its causes on Facebook since June, with more than half that money being spent in October alone. The policy institute has two main issues that it advocates for: increased health-care spending, and action to address Newfoundland and Labrador’s impending bankruptcy. Schroeder says he’s devoting a lot of his money towards three main issues that he cares about: Indigenous people, health care and the province’s precarious fiscal situation.

Schroeder says he’s convinced some sort of insolvency is imminent for the province, driven partly by unsustainable debt and partly by a different hydroelectric project called Muskrat Falls that went wildly over budget. If the provincial government doesn’t come up with hundreds of millions of dollars to subsidize ratepayers, electricity rates are set to sharply increase once the project is brought online. He expects the federal government will ultimately need to bail out the province, something that also comes up in No Change in the Weather, although it’s framed as recompense for the Churchill Falls deal.

The only reason bond markets aren’t running scared from the province’s debt, Schroeder says, is because investors assume Ottawa will come through with a bailout. In the recent election campaign, all the federal leaders vaguely nodded at the possibility of financial assistance for the province, but the clock is ticking. Muskrat Falls is nearly built, and the economic consequences will soon hit in either the form of higher electricity rates, or huge subsidies from the provincial government at a time when the budget is already soaked in red ink.

“The minute they do that, which is going to be in the next few months, that’s when the shit is going to hit the fan because the economy can’t take it,” Schroeder says. “The easiest call I think I’d ever have to make as a debt rater would be a Newfoundland bankruptcy. It’s a sure thing.” FPM

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