TC Energy Completes Big Bond Deal After Getting Help From Alberta

Esteban Duarte

03 Apr 2020, 02:52 AM IST

(Bloomberg) -- TC Energy Corp. sold U.S. dollar-denominated bonds Thursday just as the company’s new loonie notes rally in their trading debut.

The pipeline operator’s C$2 billion ($1.4 billion) 3.8% debt due 2027 is quoted at a spread of about 300 basis points over Canadian government bonds after pricing Wednesday at 325 basis points, according to Bloomberg Valuation bid prices. Meanwhile, the company’s TransCanada Pipelines Ltd. unit tapped the U.S. high-grade market for $1.25 billion of new 10-year notes at 350 basis points over Treasuries.

“The investment-grade market has opened up. Yes, spreads are a little wider but they should be because of the environment,” Toronto-Dominion Bank Chief Executive Officer Bharat Masrani told reporters Thursday. “Banks are playing an important role here in channeling the liquidity to the right companies as well. So I think the market seems to have corrected itself, particularly the bond market.”

Read more: TD CEO Doesn’t See Need for Bank of Canada to Buy Corporate Debt

Currently, investors demand 245 basis points over Canada’s government bond yield to hold corporate debt, according to Bloomberg Barclays indexes. That compares with as much as 274 basis points on March 25.

Calgary-based TC Energy’s deal from yesterday is the biggest non-financial corporate bond in loonies so far this year. It boosted the year-to-date volume of widely-marketed corporate bond sales to nearly C$30 billion compared with C$27.2 billion for the same period last year, according to data compiled by Bloomberg. The Canadian corporate bond market has been stabilizing after the country’s central bank set an array of easing measures including cutting interest rates to the lowest since 2009, widening the collateral it takes in its liquidity mechanisms and buying debt securities, including at least C$5 billion per week of government bonds.

Other energy names have joined TC Energy by raising fresh funds in the bond market this week. Ontario Power Generation priced C$400 million of five-year notes Thursday alongside C$800 million of 10-year green bonds while Brookfield Renewable Partners ULC sold C$350 million of new sustainable debt on Wednesday.