Royal Bank Extends Winning Streak in Canadian Bond Deals

Royal Bank of Canada extended its winning streak in managing corporate bond sales in 2014, while National Bank of Canada returned to top spot for a third time in four years for overseeing debt sales for governments.

Royal Bank’s RBC Capital Markets was the No. 1 arranger of Canadian corporate bonds last year, extending a streak going back at least 14 years, with 111 sales totaling C$14.7 billion ($12.5 billion) excluding self-led deals, data compiled by Bloomberg show.

Canadian Imperial Bank of Commerce followed with C$9.9 billion from 78 issues, while Toronto-Dominion Bank’s TD Securities was third with C$9.8 billion from 72 issues, the data show. Bank of Montreal’s BMO Capital Markets was fourth and Bank of Nova Scotia ranked fifth. Rankings and data were accurate as of today and may change as more deals are recorded.

Canada saw declines in both corporate and government issuance in 2014, the data show. Company debt sales fell 18 percent from a record year in 2013 to C$89 billion, the lowest since 2011, as banks issued fewer bonds domestically, while issuance by provinces, municipalities and government agencies slid 8.5 percent to C$107.8 billion as Quebec pared borrowing. A rebound may be in the cards for 2015.

“Companies may issue more bonds in Canada this year, with elevated maturities and banks ramping up issuance of subordinated debt under new regulatory standards, while borrowing by governments will be flat to modestly higher than 2014,” Robert Brown, RBC’s co-head of Canadian debt capital markets, said in an interview.

Corporate Forecast

Companies will issue C$95 billion to C$100 billion in bonds in 2015, according to RBC estimates. Last year’s drop in corporate issuance came as banks, Canada’s most active debt issuers, pared issuance domestically while tapping overseas markets with better borrowing terms.

“Financial institutions are finding healthy opportunities outside of Canada to diversify their funding source,” said Patrick MacDonald, who also co-heads RBC’s debt capital markets business.

Banks may issue more subordinated debt this year in the form of non-viable contingent capital notes, now that regulations on this debt are established. These notes, which convert to equity if a lender gets into financial distress, comply with international banking standards aimed at preventing a repeat of the 2008 financial crisis.

“The product has been well received by investors, and that will drive further year-over-year increases,” said MacDonald, whose firm was the first to issue the subdebt in July.


Including self-led deals, RBC was No. 1, followed by TD and then CIBC, the data show. Scotiabank ranked fourth and BMO was fifth.

National Bank Financial ousted TD Securities to become the top manager of debt sales by governments last year, with C$22 billion raised from 119 deals, data show. TD was second, with C$18.8 billion from 46 deals, while RBC ranked third, at C$18 billion with 114 deals. CIBC was fourth, while BMO ranked fifth.

“We’ve continued to grow our presence across Canada,” Sunil Bhutani, head of government finance and syndication for National Bank Financial. “We executed a very broad range of lead mandates for provinces, municipalities and Crown corporations, with notable leads including the provinces of Quebec, Ontario, B.C. and Canada Housing Trust.”

Muskrat Falls

Debt issuance by Canadian provinces, municipalities and government agencies slid in 2014 from the C$117.8 billion sold in the prior year, according to Bloomberg data. Quebec and British Columbia pared domestic issuance from 2013, a record year bolstered by a C$5 billion debt deal to fund a hydro-electric dam at Muskrat Falls in Newfoundland and Labrador, the largest provincial-backed bond sale in Canadian history.

Debt sales by governments may rise moderately in 2015, Bhutani said in a telephone interview from Toronto.

“Borrowers are looking to finance to help them pay for new infrastructure,” Bhutani said. “There are upcoming maturities and there’s wanting to fund your deficits in a very, very attractive interest-rate environment, so I expect issuance levels to remain elevated in 2015.”

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