A process continues to be put in place through which another Canadian bank will issue Property Secured Line of Credit Backed Notes.
The Bank of Montreal has formed Fortified Trust, a special purpose entity. That entity (which apparently is not related to alcohol) will purchase “undivided co-ownership interests inside a revolving pool of receivables generated in a few property secured credit line accounts” from the bank and fund that purchase through the sale of asset-backed securities to institutional and retail investors.
For BMO the issuer represents an alternative supply of low-cost financing. It also means that BMO can redeploy the capital elsewhere.
BMO will join TD Bank, that has had a similar funding vehicle for more than Fifteen years. TD Bank set up Gensis Trust in 2000 and in its initial offering raised $1 billion via the sale of PowerLine Credit Receivables. Throughout the next eight years it returned three times raising $3.32 billion. Next issuance dried up as well as in September 2011, the rating agency DBRS discontinued the ratings “as the Notes have been fully repaid.”
At the end of 2011, TD Bank returned with Genesis Trust 11. Nevertheless it took about two years before that issuer completed its first asset backed transaction: a $1 billion funding. Since then it’s done two other offerings raising $1.75 billion.
The Bank of Quebec has additionally been active within this market. In 1999 it setup Hollis Receivables Term Trust, which completed numerous transactions, but a decade later it had bowed from the business. Like TD it returned this time around with Hollis Receivables Term Trust 11, and has completed four transactions with $1.95 billion of remarkable receivables. Unlike BMO and TD, Hollis issues unsecured receivables-backed notes.
GFL looking for US$ high-yield market
While BMO is going to make its own history, a Toronto based “diversified environmental services company providing a comprehensive fall into line of solid waste, soil remediation, and liquid waste services,” is starting your well-trodden path.
GFL Environmental – which this month announced a definitive agreement to acquire Vancouver-based M&R Environmental Ltd. and which last October bought TransForce’s solid waste division for $800 million – is going to visit the US-dollar high yield market.
GFL needs US$250 million of five-year money. Monday S&P’s Rating Services issued a B rating on the of offering of senior unsecured notes. Additionally, it gave GFL a B rating for its long-term credit having a stable outlook. The reason: GFL “generate stable cash flow from its businesses, of which a larger portion is contracted, and will not experience any operating challenges that will reduce margins.
GFL, which is also getting a $468 million equity infusion, and which Macquarie Infrastructure Partners 111 (which invested $393 million) owns 30 per cent from it, has been to the U.S. market before. According to Bloomberg it raised US$250 million of five-year debt at a 7.875 per cent coupon in 2015. In 2013 it raised $300 million within the domestic high yield market at a 7.Half coupon of which $53 million continues to be repaid.
Because of regulatory changes in 2015, restrictions have been put on which firms can have fun playing the high-yield market. Those rules mean just those underwriters registered in both countries can participate. Some U.S. firms declined to join up in Canada under those new rules, meaning they cannot underwrite Canadian issuers within the U.S.
Credit Suisse, Barclays and BMO Capital Financial markets are underwriters on the issue. (CS and BMO were underwriters on its previous US$ high-yield financing.