Tuesday, November 10, 2009 10:38 PM
Ontario lands $4-billion bond deal
Andrew Willis
Ontario funded a chunk of its deficit on Tuesday with $4-billion (U.S.) of bond sales, financings that pave the way for additional borrowing in the deep American debt market.
Ontario established a new benchmark issue by selling $3-billion of three-year fixed rate debt, and another $1-billion of floating rate paper. With a benchmark established, the province is able to go back to market relatively easily, and sell more bonds with the same maturity.
Going into this financing, the province needed to borrow an estimated $18-billion (Canadian) to fund the remainder of this year's financial shortfall. Ontario provided a grim update on its economic position last week, and saw rating agencies DNRS and S&P downgrade its rating as a result. None of these recent economic developments seem to weigh on investor demand, as Tuesday's bond issue was relatively large and sold quickly.
The fixed rate bonds feature a 1.875 per cent interest rate, or 55.2 basis points over the comparable U.S. government bonds. The floating rate notes are pegged at 15 basis points over three month Libor – the standard reference for short-term borrowing.
Barclays Capital, Crdit Suisse, J.P. Morgan and TD Securities led this massive financing, which had to be completed quickly ahead of the Rememberance Day holiday for markets.
