Osler has published its 2012 Capital Markets Review which includes a look back at the year in Canadian corporate finance by Desmond Lee and Michael Innes. Desmond and Michael made the following observations regarding Canadian debt markets in 2012:
2012 in the Canadian debt markets is perhaps best described as a year of opportunity for many issuers of corporate debt. A historically low interest rate environment, combined with a moderate easing of concerns over the sovereign debt crisis in Europe by mid-year, provided issuers the opportunity to issue debt at historically low coupon rates. As in previous years, market windows were erratic and opportunity-driven, but the pace of issuance year-over-year indicated that demand for credit remains strong.
We saw opportunities for Canadian issuers of high-yield debt, as investors continued to seek yield in a low rate environment. Issuance volume was up year-over-year, with a significant number of transactions taking place in the energy sector. Covenant patterns in Canada continue to evolve, but generally still follow those seen in the high-yield market in the United States.
In 2012, there was a notable increase in the issuance of long-term bonds with maturities over fifty years, including the issuance of a bond by Enbridge Pipelines Inc. in July 2012 that matures in July 2112 and carries a coupon of 4.1% – reported as the first hundred year bond issued in Canada since 1997. To date, the market for these bonds has been limited to utilities and pension fund issuers, as these entities are viewed by investors as most likely to be still in existence at the time of maturity. For the right issuer, long term bonds are an opportunity to take advantage of current low interest rates as part of a stable, long-term financing strategy.