Capital Markets Mid-Year Report 2013

Overview: Capital Markets in 2013 in North America

Two themes emerge in this year’s mid-year report: Canadian investors’ appetite for yield products and complexities associated with non-domestic issuers.

We have commented on Canadian investors’ appetite for yield products in past mid-year capital markets reports. This year it’s the same, only more so. Through April 30 this year, $10.76 billion in equity capital has been raised on the TSX (down from $17.25 billion in the comparable period in 2012); $2.0 billion of the 2013 funds were raised in the real estate (REIT) sector, by far the largest of the eight sectors the TSX ranks, excepting financial institutions. The four new international listings on the TSX in 2013 are cross-border REITs. High-yield bonds are an increasingly prominent part of the Canadian capital markets.

Our report includes a review of the 20-year history of the Canadian REIT industry – the quintessential yield product – which began with RealFund in 1993. We also assess the greater role the bond market is playing in Canadian infrastructure funding, and provide a review of the growing Canadian high-yield debt market, including how it differs from the U.S. market.

Advisers continue to develop structures to effectively deliver yield products to meet demand. Issues arise in the design of efficient cross-border distribution of cash flows to investors. We outline innovative approaches that have led to growth in cross-border income fund IPOs in Canada. Many recent CBIFs have been in the real estate sector, marrying the Canadian yield appetite to the increasing strength of the U.S. real estate market. We also note another development relating to non-domestic issuers: the marked decline of Chinese companies listed in the United States.

Our report also addresses issues around two of the pillars of the Canadian equity markets: recent oil and gas capital activity and an analysis of why no Canadian bank has issued non-common share equity in 2013.

We look forward to the rest of the year. Several IPOs are in the pipeline, so it will be interesting to see if they make it to market and whether we see any resurgence outside of real estate.

Click here for a PDF of the report or click on any of the links below to read the individual articles.

Canadian High-Yield Debt Market
by Kevin A. Fougere, Janan Paskaran, Amanda Balasubramanian
We provide analysis of the ongoing activity in the Canadian high-yield debt market across a number of industries.

Real Estate Investment Trusts
by Patricia Koval and Simon Knowling
With a legacy of two decades of evolving sophistication, the REIT model has thrived in both good and uncertain times.

Basel III
by Blair Keefe
A review of how the changes outlined in Basel III help explain why Canadian banks have not yet issued any subordinated debt or preferred shares this year.

U.S. Capital Markets
by Mile Kurta and Leslie McCallum
The latest in American capital markets–from rigorous enforcement to foreign investment and say-on-pay-related shareholder litigation.

The Role of Capital Markets in P3 Financing
by Daniel A. Ford
Increasingly pressing infrastructure demands in Canada and abroad create opportunities for investors, institutions, and industry.

Oil and Gas Capital Markets
by Scott R. Cochlan, Neville Jugnauth and Leah Dickie
A survey of Canadian oil and gas trends, including new sources of financing from private equity and foreign investment.

Innovation in Cross-Border Trusts
by Karrin Powys-Lybbe, Simon Knowling and Corrado Cardarelli
Cross-border trusts present unique benefits—and similarly unique complexities in optimizing their design. We explore new approaches, particularly for REITs, that are positioning these structures to keep pace with an evolving cross-border landscape.

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Torys' Capital Markets Practice

Torys LLP is entrusted to advise on our clients’ most significant transactions. We are known for delivering high-quality capital market services in both Canada and the United States.

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