* Debt, equity sales so far have lagged 2011's
* Central bank moves boost sentiment
* Possibility of Ivanplats IPO signals market is improving
By Alastair Sharp
TORONTO, Sept 16 A chill in Canadian capital
markets that has kept equity and debt sales below 2011 levels
looks set to thaw soon, thanks largely to fresh U.S. and
European central bank stimulus plans.
The central bank efforts to boost economic growth have
triggered a rally in commodity prices and on Toronto's stock
market. Canadian investment bankers said the resulting rise in
investor sentiment could help push through a large backlog of
deals before year-end.
The dismal market for Canadian initial public offerings was
already given a boost last week by Robert Friedland, the
billionaire mining magnate who advanced long-delayed plans to
list a new venture, Ivanplats, on the Toronto Stock Exchange.
"Access to capital is quite good and getting better, whereas
maybe six or eight months ago issuers might not have had as
ready access," said Daniel Nowlan, co-head of equity capital
markets at CIBC World Markets in Toronto.
Equity issuance has languished in Canada so far this year,
with companies raising less than $30 billion from stock
offerings, a 16 percent dip from last year, according to data
from Thomson Reuters Deals Business Intelligence.
The number of deals is down 19 percent, while the value of
IPOs is down by nearly half.
MARKET LAGGARDS LEADING REBOUND
But first-time access to equity markets should pick up as
long as the stock market continues to show strength, according
to Andrew Federer, head of Canadian corporate finance at Royal
Bank of Canada.
"There are a number of IPOs being considered," he said.
Toronto's benchmark S&P/TSX composite index hit
its highest level since March on Friday, led by mining, energy
and other natural resources stocks that had dragged on the
index's performance for much of this year.
With valuations improving, bankers say publicly traded
resource companies are more likely to issue stock to fund
growth, and privately held entities will be encouraged to list.
That said, it's not just commodity-related companies that
are eyeing equity markets.
"In the background, a lot of companies are getting
themselves ready to go public," said Neil Manji, a partner in
Price Waterhouse Coopers' IPO service group, pointing to sectors
from retail to manufacturing as well as oil and gas, and mining.
"So when they see an opportunity they can take that
opportunity and go to market fairly quickly."
DEBT PICKUP ALSO EXPECTED
A stronger economic outlook and improved sentiment are also
expected to boost the sale of non-government debt, bankers said.
Year-to-date sales of Canadian corporate bonds, asset- and
mortgage-backed securities and similar debt is down almost 6
percent from 2011 at $75.7 billion.
One bright spot has been a surge in high-yield issuance.
Sales of so-called junk bonds rose 72 percent from 2011 to hit a
record $8.6 billion.
With stock markets sluggish, many commodity-producing
companies this year have been issuing debt rather than equity,
noted Paul Taylor, a chief investment officer at Bank of
Montreal's asset management unit.
One such company is Iamgold, a mid-tier gold miner
that operates in West Africa, South America and Canada. It is
selling $650 million worth of eight-year bonds this month as its
shares sit some 35 percent below a late 2011 peak.
Analysts said with two of the world's major central banks
signaling they will keep rates low, corporate debt should prove
popular with investors already tired of the dismal returns
offered by safe-haven government bonds.
"Yields are on top of people's minds because things are so
tight, but at the same time there is a safety and soundness
argument," said Michael Ho, managing director of business
development at DBRS, a Toronto-based rating agency.
Hybrid securities that offer regular payments, such as real
estate investment trusts (REITs), are also expected to continue
to sell well in the current environment.
"Unquestionably offerings with yields have been very popular
and about 90 percent of issuance has been from REITs or people
who pay dividends or from convertible debentures or preferred
shares," CIBC's Nowlan said.