Canada's high yield debt market, while still small, is picking up steam. This week two new issues came to market and both were scooped up by investors craving yield.
The yield story has been playing out for a few months now because government bond rates haven't rebounded, and the longer it lasts, the wider the range of clients looking at these issues. Now balanced fund portfolio managers, who invest in both equity and debt, are looking at these products to fill the fixed-income portion of their portfolio.
This week Livingston International brought $135-million of five-year bonds that pay 10.125 per cent to market. The deal came at a spread of about 814 basis points over Government of Canada bonds. CIBC World Markets and RBC Capital markets co-led the offering.
Gateway Casinos and Entertainment Ltd. also brought $170-million of 7-year bonds that pay 8.875 per cent to market. The spread was 660 basis points over Canada and Royal Bank of Scotland and Jefferies & Co. were part of a team that co-led the offering, which is unusual for a Canadian issue.