Canadian Credit Markets Soak Up Deals

 |  Includes: BMO, BNS, HSBC, HUSKF, RY, TAC
by: Streetwise Blog

By Andrew Willis

Credit markets have been rocking over the past week, as corporate Canada locks in debt at historically low rates.

A series of blue chip companies tapping bond markets on Tuesday and Wednesday, spurred in part by the prospect of tightening by the Bank of Canada later this year.

Here’s a quick run down of who did what (all amounts are in Canadian dollars):

  • Royal Bank of Canada (NYSE:RY) took advantage of a clear federal endorsement of covered bonds in last week’s budget by selling $850-million of triple-A rated securities. Covered bonds are backed by both mortgages and the guarantee of the financing institution that issues the debt. It’s a financing tool that’s been used in Europe for generations, but is relatively new to Canada. Royal Bank pioneered this market two years ago, and Bank of Montreal (NYSE:BMO) and CIBC followed up with their own issues of covered bonds. Royal Bank’s latest offering began as a $500-million deal, and was super-sized in the face of strong investor demand. The five year bonds pay 3.18 per cent interest, and RBC Dominion Securities led the underwriting.
  • Husky Energy (OTCPK:HUSKF) sold a total of $700-million of bonds, a deal that was also boosted in size due to strong demand, as it started as a $600-million financing. CIBC World Markets, HSBC (HBC) and RBC Dominion Securities led the sale of $300-million in five year notes, with a 3.767 per cent interest rate, and $400-million of ten year bonds with a 5.047 per cent rate.
  • Bank of Nova Scotia (NYSE:BNS) sold $500-million (U.S.) of floating rate notes that pay 25 basis points over the benchmark short-term U.S. rate.
  • TransAlta (NYSE:TAC) sold $300-million (U.S.) of 30-year bonds with a 6.5 per cent rate. There’s a change of control provision on this long term debt – investors can cash in at 101 cents on the dollar if the utility is taken over. A private equity fund took a run at TransAlta two years ago. HSBC, Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) jointly led the offering.
  • Insurer Co-Operators Financial Services sold $150-million (Canadian) of 10 year debt in a private placement last Friday that was led by Scotia Capital. The bonds pay a 5.78 per cent rate.