Ford Loonie Junk Bond Lures Buyers With Yield Pickup Over Dollar

(Bloomberg) -- Ford Motor’s credit unit in Canada priced the largest widely marketed bond from a high-yield issuer since 2019, with the new notes offering significantly more yield than similar securities issued in the dollar market.

Ford Credit Canada priced C$600 million ($460 million) of three-year bonds to yield 3.5%, in the largest junk-rated deal since Videotron priced a C$800 million transaction in late 2019, according to Bloomberg data. The bonds, which rallied after pricing yesterday, are quoted Tuesday at an equivalent spread over the U.S. yield curve of around 315 basis points, about 40 basis points wider than a comparable bond issued in the U.S.

“Ford’s Canadian bonds trade at a substantial discount to Ford bonds issued in other currencies,” said Alex Schwiersch a portfolio manager at Algonquin Capital Corp. “We think that is unwarranted.”

Ford, one of the largest fallen angel issuers, is issuing bonds in the Canadian dollar high-yield market at a time when risk premiums for such securities are at the tightest since March, according to the ICE BofA Canada High Yield Index. The transaction’s order book was more than 1.5 times the size of the deal, according to people familiar with the matter.

“Ford benefits too from familiarity from the investment-grade crowd as it was BBB up until March,” said Geof Marshall, who runs Toronto-based CI Global Asset Management’s Signature Global Asset Management, which has about C$30 billion under management. “It is easier for BBs to raise capital than Bs in any market but it is especially true in the Canadian dollar high-yield market.”

Aside from widely-marketed deals, Air Canada priced a C$840 million bond in June via JPMorgan Chase & Co., Bloomberg data show.

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