Ontario Debt Sale Breaks Record After Post-Election Absence

(Bloomberg) -- Canada’s most indebted province sold C$3.65 billion ($2.8 billion) of bonds in a return to debt markets after a longer-than-usual break following a change in government.

Ontario priced C$1 billion of 10-year fixed-rate securities earlier today, and followed that up shortly afterwards with a sale of C$2.65 billion of five-year floating-rate notes, a record for a domestic deal.

Ontario’s 76-day abstention from debt markets came after an election victory of Doug Ford’s Progressive Conservatives that ended 15 years of Liberal Party rule. The break was over a month longer than after the province’s prior change of government in 2003. Ontario typically sells up to C$1 billion of bonds in a single transaction in the domestic market.

“It’s proof yet again of just how efficient Ontario can be in raising money,” said Warren Lovely, National Bank’s head of public sector research. “Clearly, Ontario is focused on significantly advancing its borrowing program ahead of an Independent Financial Commission of Inquiry report.”

The commission, which is reviewing Ontario’s past spending and accounting practices, will provide the government with a report by Aug. 30.

The transactions came two days after Gadi Mayman, the chief executive officer of Ontario Financing Authority, said the province would return to debt markets “immediately” after a quiet period post-election. With the deals, the province has completed C$15.35 billion, or around 48 percent, of its long-term borrowing program of C$31.7 billion for the 2018-19 fiscal year ending March 31.

Its borrowing requirements may increase to C$33.1 billion in 2018-19. That would occur if the government decided the province, rather than Ontario Power Generation and the Fair Hydro Trust, would borrow in order to make payments to power generators, Mayman said two days ago. The payments are part of the so-called Fair Hydro Plan, established by the previous government to reduce electricity bills in the province.

Ontario had initially set out to sell as much as C$2 billion of the floaters, only to increase the size later, according to people familiar with the matter. The transactions were its first forays into debt markets since June 1.

“The fact that Ontario managed to raise C$3.65 billion in one morning underlines both their strong following with the domestic investor base as well as the exceptional access to liquidity the issuer enjoys in their home market,” said Alex Caridia, head of government finance at RBC Capital Markets, which led the fixed-rate transaction and was part of the consortium underwriting the floater.

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