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Bloomberg
Bank of Nova Scotia is set to become Canada’s first bank to sell a junior bond known as limited recourse capital notes in a currency other than loonies.
Toronto-based Scotiabank is reaching out to US dollar-based investors before deciding to go ahead with the deal. In June, the bank sold LRCNs in the Canadian dollar corporate bond market.
Canadian banks have sold $12.5 billion of LRCNs since July 2020 when Office of the Superintendent of Financial Institutions deemed the securities eligible as Additional Tier 1 loss-absorbing buffers, according to data compiled by Bloomberg. Such transactions, which so far have been denominated in Canadian dollars, allow issuers tax deductions on interest payments — thus reducing their all-in borrowing costs.
Scotiabank’s C$1.25 billion of 3.7% notes due in 2081 with a call option in June 2026 are quoted at an equivalent spread of around
252 basis points over US
Treasuries, according to Bloomberg data.
The notes are rated by S&P Global Ratings and Moody’s Investor Service at their lowest investment grades.
A press officer for Scotiabank didn’t provide immediate comment on the potential deal.