• Follows review of Ontario debt syndicate focused on liquidity
  • Big six Canadian banks and Desjardins left to lead debt sales

Bank of America Corp. has been dropped from the rotation of banks leading Ontario’s Canadian dollar debt sales after the province reviewed support lenders provide to trading its bonds after the initial sale.

Bank of America, the second-largest U.S. lender by assets, will maintain a junior role in those domestic bond sales and can still lead the province’s U.S. dollar and euro bond sales, as well as the province’s Canadian dollar green bonds, according to Charles Sousa, Ontario’s finance minister.

"Our objective in doing syndicate evaluations is to ensure that we have the strongest and broadest possible underwriting teams in place for all bond issuance programs that we have in place in Canada and internationally in order to minimize our borrowing costs,” Sousa said in an e-mailed statement. "This year’s evaluation determined that Bank of America Merrill Lynch fit into the banking group, rather than the management group. Only banks in the management group have the opportunity to lead our domestic bond issues."

New Survey

This year’s annual review of the banks that manage Ontario’s debt sales introduced a survey of investors that asked them to rank which banks were most willing to facilitate trading in the province’s bonds after the initial sale. Investors have begun rewarding issuers whose bonds are easier to trade with lower borrowing costs as new global regulations and global volatility has caused liquidity in the bond market to dry up.

Investment dealers have traditionally acted as middlemen in the bond market by taking securities on their own balance sheets and holding them until a more permanent buyer emerged. New regulations since the global credit crisis have made space on the balance sheet for trading more expensive.

Bank of America, based in Charlotte, North Carolina, declined to comment, according to spokesman Thomas Rottcher.

Bank of America Merrill Lynch’s Canadian unit hasn’t led a public Canadian dollar bond sale for Ontario since 2012, though it did a green bond in 2014 and earlier this year.

The remaining banks who can lead Ontario’s domestic debt sales now include Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada and Desjardins Group, Sousa said.

Ontario will need to borrow C$26.4 billion ($20.6 billion) in the current fiscal year, according to its latest budget.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE