Canada’s Bond Market Holds Steady As Issuers Consider Strategies for Accessing Equity Financing

April 6, 2020
  •  What We Are Seeing:  this post is part of Stikeman Elliott’s series on evolving market insights emerging during the COVID-19 pandemic
Like every other aspect of daily life, the capital markets are going through a period of rapid adjustment. Unprecedented equity market volatility has generally limited the opportunities for issuers to raise equity in recent weeks, although there are some signs of life. On the brighter side, the debt capital markets have begun to open up.

Debt Capital Markets

Bond market activity has steadied, with a number of investment grade issuers and government issuers successfully completing deals or preparing to access the Canadian debt markets in the near term. The investment grade market has seen a number of significant offerings with good pricing. The U.S. market is most active, which should help to provide confidence to the Canadian market and opportunities for issuers to diversify funding sources.

In terms of U.S.-based issuers that have looked north of the border, Disney recently accessed the maple bond market, completing a C$1.3 billion offering at the end of March.

Equity Capital Markets

While debt seems to be available for quality names, access to equity markets remains tight, although there are indications that deals can get done. Popular discussion topics include putting in place a base shelf prospectus to provide speedier access to the market, as well as facilitate at-the-market (ATM) offerings. ATM offerings are a particularly effective way for issuers to quickly access equity markets in the coming months with minimal execution risk. While Canadian markets have not seen rights offerings used as liberally as other deal structures, perhaps conditions are conducive to the increased use of rights offerings as a means of raising funds with support from existing shareholders. Many issuers are looking at private capital and discrete offerings to meet funding needs and are starting to actively test that market.

On a related note, while the Canadian Securities Administrators have provided welcome relief in respect of extending filing deadlines for financial statements and other periodic disclosure, it must be noted that issuers availing themselves of such relief will not be able to access public markets by way of prospectus offerings until filings are up-to-date.

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