While new bond issues are few and far between, highly rated companies and governments are still doing debt financings.
Brookfield Asset Management, an investment grade, single-A rated borrower, raised $150-million (U.S.) on Friday. These funds, along with proceeds of a $150-million (Canadian) preferred share issue earlier this year, are earmarked for repaying $300-million of debt that comes due at the end of 2008.
Brookfield opted to raise money in a volatile credit market by doing a private placement, selling its notes directly to a U.S. life insurance company, not into the public market. The property and infrastructure play sold $75-million (U.S.) of unsecured five-year bonds that feature a 6.65 per cent rate, and $75-million of four-year notes that offer 6.4 per cent.
The province of Quebec sold $500-million (Canadian) of 10-year bonds on Tuesday in a deal led by National Bank Financial. The debt was priced to offer a premium of 141 basis points to the comparable Canadian government bond.
The latest statistics on new debt issues show the overall volume of financing has slowed dramaticly. Thomson Reuters numbers for the third quarter, which ended Sept. 30, show overall Canadian debt issuance fell from $45.3-billion in the second quarter to $21.2-billion, a 53 per cent decline. Of that total, 56 per cent came from various levels of government.
Financings from the Canada Mortgage and Housing Trust represented 80 per cent of the government debt activity in the third quarter of 2008.
"For the second consecutive quarter, not a single corporate or sovereign maple bond was priced in the Canadian market," noted Thomson Reuters, referring to the Canadian-dollar denominated issues from foreign companies that were all the rage in 2006 and 2007.