Maturity: May 28, 2008
Issue price: 100.57
Fixed re-offer price: 98.945
Spread at re-offer: 21bp over the 4.5% September 2007 Canada
Launched: Tuesday April 29
Lead mgr: RBC CM
SNCF has not visited the Canadian dollar market since 1991 and the response to its return transaction has been good.
SNCF is a great retail name, which was highlighted by the very positive reception afforded to the recent New Zealand dollar issue we brought a month ago, and it follows that a similar result will be achieved with the Canadian dollar bond. It provides customers with diversification in the triple-A sector.
We have already had a good take-up over the last day or so and we expect that the traditional investor base in Switzerland, the Benelux and Germany, as well as Asia will take this on board.
The deal was priced at 21bp over the September 2007 Canada, which is reasonable for the credit and in line with comparables. In the 2008 part of the curve, a lot of recent issuance has been concentrated on Q1 2008 or December 2008. The fact that this is a May maturity where there is a bit of breathing space will be of benefit.
"...SNCF is the kind of name that is relevant in the current market, which is focused on triple-A credits. The only problem is that there has been a lot of Canadian dollar issuance and, although there are significant redemptions coming up, we are not seeing that much being reinvested on a pro rata basis.
But SNCF is a rare name and it provides welcome diversification to the usual round of triple-As we see in the non-core dollar markets.
The deal comes at an interesting level for the borrower of around Canadian dollars plus 2bp-3bp.
On a general note, Benelux investors are not buying dollar bloc issues in any great quantity, with perhaps the exception of Kiwis.
The core currency portfolio of our clients is the euro and the pick-up is not big enough for them to take the currency risk of buying Canadian dollar issues so there is little new money going into the sector."
"...SNCF is a good name but there is a Rabobank 4.25% 2008 issue in the market, also triple-A rated, paying an extra 25bp in yield and our customers will go for the Rabo deal first."
"...SNCF did a New Zealand dollar issue a month ago that went well and hopefully this bond will have a similar reception.
It is on the expensive side but it is a triple-A issuer and we were happy to participate.
There has been a lot of Canadian dollar issuance in the last few weeks covering most parts of the curve and we are seeing interest in most maturities. For SNCF, this is virtually a debut - they haven't been in this market for many years - and it provides diversification from the usual triple-A credits."