TORONTO Jan 9 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
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
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
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
"I certainly think demand for FRNs will be sustained as we
look forward. That is a key trend we expect to continue."