Maturity: April 21, 2006
Issue price: 99.894
Spread at launch: 80bp over the 1.625% January 2005 UST
Launched: Wednesday February 12
Joint books: Deutsche Bank, TD Securities
There were two reasons for tapping the US dollar market. First, we needed some US dollars in terms of financing requirements and second the market was in good shape for a name such as EDC in that maturity. In fact everything looked right in terms of being able to launch a transaction.
We were happy with the distribution, with, as expected, a large proportion placed in North America, somewhere in the region of 12%-15% in Europe, and, again as expected, in the neighbourhood of 30% in Asia.
We were pleased with the funding levels, which currently beat our domestic costs. But that is not what drove the transaction. It was more the demand that existed for a US dollar global at this time.
Our funding requirements for 2003 are going to be similar to last year. On the long term side, we will be looking to issue $4bn plus in this calendar year. This issue sets us up nicely for the first quarter and we will be looking at the market again in the second quarter.
We are pleased with the issue and with the syndicate - particularly the lead managers.
We have seen the spread tighten a little today (Thursday) to 79bp-78bp and we expect that to continue in the following days.
Deutsche - The deal went very well. We have seen good demand for triple-A sovereign credits and we went out with the announcement on Tuesday with a proposed pricing no later than Thursday morning New York time.
The deal grew well overnight in the Asian time zone and also in Europe, so by the time we walked in on Wednesday morning the deal was about three quarters oversubscribed.
By the time New York had some time to work on it we were able to accelerate pricing and bring the deal on Wednesday.
The deal came at 80bp over Treasuries. On a Libor basis that is in the mid-teens. This deal reflects good value if you look at some of the other supras and sovereigns trading in March 2006 maturities. It also offers value when you compare it to the Freddie Mac April 2006s which were trading around 77.5bp bid when we priced this deal.
TD - This is the first time TD has led a US dollar transaction for EDC and we have been pleased with its execution and performance.
We launched the issue late afternoon on Tuesday London time with a view to pricing no later than Thursday. The price range was 80bp-81bp over Treasuries.
We were oversubscribed and, given the quality of the order book, were able to price it at the tight end of the range, which was in line with EDC's normal funding targets. We were also able to bring the pricing forward to Wednesday.
The deal was marketed 2bp back of agencies. Agencies at the short end of the curve have performed well recently, which gave us an opportunity to price EDC at a positive spread to agencies - something that investors, particularly in the US, found appealing.
Distribution was around 55% US, 30% Asia and the balance in Europe with a mixture of life insurance companies, financial institutions and real money accounts taking down bonds.
The issue today (Thursday) is trading 79bp-78bp against the two year.
"...the pricing was spot on for a name that works well in the US dollar market. It has a strong following, particularly with the US and Asian investor bases and the strong response from Asia gave the issue a good start.
EDC is a great name. It is Canada and it offers a decent yield pick-up to the sovereign so it could not fail."
"...we were a co-lead for 2% of the issue and had retention, which was nice. We sold our bonds into New York easily.
Many investors thought the deal was too tight at around Libor minus 14bp, especially as the coupon is only 2.375%. EDC is an excellent credit and in this sort of environment it is a good name to be holding but for traditional buy and hold investors, it does not offer enough.
We had two accounts with large interest in the issue but we were never going to fill that as we were not one of the leads. They were looking to switch out of an old Canada global. We also knew of an outright buyer for $30m."
"...the perception of EDC is that the deal is not fully sold. A global issue should be placed with institutional investors and sold out on day one, but it sounds like this has not been the case. In addition, trading in the aftermarket has been at wider levels.
The reason for the poor performance is the pricing, which was too tight. There are a lot of comparable outstanding issues that come cheaper."