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How bonds took over Canada's PPP market
28 November 2011
Canadian institutional investors looking for higher yields are driving the boom in publicly-rated PPP infrastructure bonds. Would the market survive a substantial default? Edward Russell reports.
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[ppp]
[canada]
[lifeco]
[indexe]
The bond market for Canadian public-private partnerships is booming. Half of the PPP concessions that have reached financial close so far this year used long-term publicly-rated bonds, compared to a third in 2010.
Investors are flocking to the instruments. New issues have been significantly oversubscribed since SNC-Lavalin and Innisfree’s C$1.57 billion ($1.54 billion) McGill University Health Centre concession in Quebec closed in July 2010. The bonds set a yet-to-be-broken record of attracting more than 50 investors and marked the beginning of a trend of steadily tightening spreads on long-term PPP bond debt. Pricing is currently between 200bp and 210bp over the equivalent Government of Canada bond with large Canadian bank underwriters Bank of Montreal, Canadian Imperial Bank of Commerce, Royal Bank of Canada (RBC), Scotia Capital and Toronto-Dominion, as well as Casgrain and National Bank Financial leading the charge. Despite the competition and diminishing yields, Canadian institutional investors want more.Spreads...
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