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TORONTO, Jan 9 (Reuters) - Low interest rates and favorable market conditions spurred a banner year for corporate and government debt issues in Canada in 2013, with Royal Bank of Canada emerging as the big winner among banks that worked on the deals.
RBC, Canada's largest bank, was the lead book runner on the lion's share of the issues, accounting for about 22 percent of overall debt deal volumes in 2013, according to data released by Thomson Reuters on Thursday.
The data also shows that the value of issues of corporate and government debt in Canada rose just over 10 percent in the year as tight credit spreads and low underlying interest rates, coupled with a favorable economic outlook, encouraged issuers to tap the market.
"It was a very healthy year. We saw strong appetite from investors and very attractive market conditions for issuers," Patrick Macdonald, RBC's co-head of debt capital markets, said in an interview. "In addition to strong demand for fixed rate product, we have also had very healthy demand for floating rate notes in the expectation that interest rates are going to move higher in the next six to 18 months."
The year proved to be an all-around banner year for Toronto-based RBC, with the bank also dominating the loan-syndication and equity-issue markets, while also claiming the No. 1 spot as the top adviser on Canadian mergers and acquisitions in 2013.
Debt issues in the year were bolstered by some major M&A transactions, including Sobeys Inc's acquisition of Safeway's Canadian assets; and Loblaw Cos's C$12.4 billion ($11.48 billion) acquisition of Canada's top pharmacy chain, Shoppers Drug Mart Corp.
Canadian Imperial Bank of Commerce came in at the No. 3 spot in the Thomson Reuters league tables for the top book runners on debt deals in Canada in 2013, just behind Toronto-Dominion Bank.
RBC also came in as the top book runner in the syndicated loan market, accounting for some 18 percent of loan volumes. It was closely followed by Bank of Nova Scotia and CIBC, which captured 17 percent and 16 percent of market share in this segment.
While M&A played a role, most of the activity was driven by financing, executives said, as companies took advantage of stable pricing and debt availability.
The Thomson Reuters data shows that the syndicated loan market in Canada grew more than 10 percent to about $200 billion in 2013.
Bankers expect the record levels of activity in the debt and syndicated loan market to continue into 2014.
"I would expect that we will see issuers accelerating their borrowing in the early part of 2014 in anticipation of a back-up in rates through the course of the year," said Doug Bartlett, who heads CIBC's debt capital markets business as it relates to government and infrastructure debt.
Bankers expect that floating rate notes or FRNs will grow in popularity in 2014, as they are an ideal instrument in a rising interest rate environment.
Although FRNs so far remain a fairly small component within the market, RBC's MacDonald notes that the issue of these securities roughly doubled in 2013 from year-before levels as the market attempted to position itself for interest rates to rise.
"I certainly think demand for FRNs will be sustained as we look forward. That is a key trend we expect to continue."