Alberta to Return to U.K. Bond Market After Debut Sterling Deal

  • Province sells GBP650 million of 2021 bonds on Thursday
  • The Canadian province seeks to ‘build a curve,’ official says

The Province of Alberta plans to return to the U.K. bond market after it placed debt denominated in the pound for the first time on Thursday.

The Canadian province sold 650 million pounds ($811.9 million) of senior unsecured bonds maturing in November 2021 at 58 basis points above similar-maturity U.K. Treasuries. The oil-rich province has increased its presence in international bond markets in recent months, finding buyers for debt denominated in the dollar and the euro.

“The sterling market fits very well into our off-shore strategy -– our current target is to borrow 30 percent to 40 percent outside of the Canadian market,” said Lowell Epp, assistant deputy minister at Alberta Treasury Board and Finance. “We hope to come back to the sterling market again in the future and build a curve.”

Alberta’s borrowing needs rose amid a downturn in oil and wildfires that swept through Fort McMurray, the hub of the province’s oil-sands industry, last year. Bonds issued by Canadian provinces have been appealing to investors globally as they are viewed as safe bets offering positive yields at a time when many issuers are charging investors to hold their debt.

The sale of bonds in the pound is a chance for Alberta to diversify its funding at attractive pricing, Epp said. The order book was “just short of” 800 million pounds and was made up of “high quality names, including central bank, bank treasuries, and U.K. real money,” he said.

The province found buyers for 385 million euros of bonds ($411 million) maturing in 2043 in September last year, following it up with a sale of another 50 million of the same bond in last month. It also sold $2.25 billion of three-year notes in the U.S. market in December, its biggest sale in the U.S. currency.

“Alberta is making a concerted effort to advance its borrowing program at home and abroad, finding receptive audiences in U.S. dollars and now sterling,” said Warren Lovely, the Toronto-based head of public-sector research and strategy at National Bank Financial. “With oil prices gaining traction, prospects for pipeline development brighter and the provincial economy returning to growth, conditions for a gradual fiscal recovery are falling into place.”

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