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Resource deals fuel Canadian equity issues rebound in first half of 2016

Canadian equity issues

In the first half of 2016, Canadian equity issues were more active after a sluggish period.  One CIBC analyst said Suncor’s $2.9B offering was one of the highlights.  Suncor photo.

Canadian equity issues uptick shows capital returning to Canada

By John Tilak

TORONTO, July 7 (Reuters) – Canadian equity issues picked up steam in the first half of the year after a period of sluggish activity as resource companies took advantage of a rebound in commodity prices to tap capital markets, Thomson Reuters data showed on Thursday.

Royal Bank of Canada topped the league tables rankings for investment banks shepherding new shares to market, followed by Toronto Dominion Bank and CIBC Capital Markets. Bank of Nova Scotia and Bank of Montreal rounded out the top five.

After a lull in the second half of last year and early 2016, equity offerings began showing signs of renewed life late in the first quarter sustained by further momentum in the second quarter.

Both energy and mining companies took advantage of commodity prices rebounding from multi-year lows.

The price of gold is up nearly 15 percent since the start of the year, and oil prices have gained about 37 percent in the same period.

Equity issues rose to C$28.7 billion ($22.11 billion) in the first half of the year, compared with C$12.47 billion in the second half of 2015. The number was lower than C$30.2 billion in the first half of last year, when equity offerings hit a near-record high, according to numbers from Thomson Reuters.

“We saw very strong global demand from retail and institutional investors. Several offerings were multiple times oversubscribed,” said Derek Neldner, RBC’s head of Canadian investment banking.

“It’s a nice sign of capital returning to Canada,” he added. “Canada broadly came back on global screens this year.”

Highlights included Suncor Energy’s C$2.9 billion offering, led by TD Securities, CIBC Capital Markets and J.P. Morgan Securities Canada.

“The recent Suncor offering represented the largest treasury deal ever completed by a Canadian exploration and production company,” said Benoit Lauzé, CIBC’s head of equity capital markets.

The other issue investors focused on was Britain’s vote to quit the European Union which has caused increasing global macroeconomic uncertainty and volatility.

“We’re not panicking here. There will be periods of higher volatility, but we see no long-term impact from Brexit on our ability to raise equity,” Lauzé said.

Some of the biggest deals involved pipeline companies Enbridge and TransCanada. TransCanada’s equity deal, to fund its acquisition of Columbia Pipeline Group, was led by RBC and TD.

“There’s a lot of investor interest in putting cash flow to work in infrastructure,” said Aaron Engen, co-head of the power and energy infrastructure group at BMO Capital Markets. “In this environment, the steady, predictable cash flow and growth make these offerings pretty attractive.”

(Reporting by John Tilak; Editing by Phil Berlowitz)

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