Rating: Aa2/AA+
Amount: C$100m
Maturity: April 8, 2002
Issue price: 100.8875
Fixed reoffer price: 99.70
Coupon: 5.25%
Spread at re-offer: 11bp over the 5.5% September 2002 Canada
Launched: Friday March 19
Lead mgr: CIBC Wood Gundy
Bookrunner's comment:
We had been talking about this deal with the province for a couple of weeks and had been looking at accessing the three year part of the curve with an issue that would coincide with the maturing SBC Finance issue, owned mainly in Switzerland.
In consultation with the issuer we decided to hold off until after their budget and in the meantime we saw a couple of deals for Commerzbank. Despite this we felt that the rarity of the Alberta name would slice through inventories and decided to go ahead with the deal.
We only syndicated C$28m of the deal and deliberately wanted to keep it fairly tight in terms of the amount that we would syndicate. Despite the fact that the market rallied we only bought back a handful of bonds.
We broke syndicate at +16bp and the deal is now trading at +14bp/+11bp. In the context of a rising market this is a pretty good performance. The pricing was probably 1.5bp inside their domestic spread and so the deal was good for them too.
Alberta deals are pretty aggressive on the face of it but we were able to produce the same 5.25% coupon as Commerzbank.
We have had a few small institutional sales and a number of investors have taken heart from the fact that the province is viewed as a rare borrower for which there is always a market in Canada. We had a few sales into Canada but most of the paper went to Europe.
Market appraisal:
"...a good issue which has been well traded. It was cosmetically quite tight because Euro-C$ margins are very low at the moment. However, it is basically flat to where Alberta would trade in Canada.
Alberta is an issuer which no Canadian bank would turn down hence the large number of Canadian banks in the group. There aren't many Belgians in the group but I suppose that is the decision of the borrower."
"...of all the C$ issues that had to come out this was probably the best. It is a great name and people are looking at the Canadian currency at the moment.
With commodities bottomed out the currency seems to be clawing its way back out of the doldrums. The Canadian dollar is now seen in a favourable light and a lot of bigger houses seem to be saying buy C$ at the moment.
The name itself is good and rare. We saw some interest in the deal back in Canada. The issue broke 5¢ over full fees -- most C$ issues break at full fees."
"...the last two Canadian dollar issues we saw were for Commerzbank and it was nice to see something that offers some diversification.
Some people seem to prefer five year deals to three year issues, but we have seen good flows in this maturity because even in this short tenor you can offer a decent coupon.
We only have a C$2m ticket and don't anticipate any problems as we are seeing the usual redemption driven flows from the Benelux."
