For Immediate Release
April 18, 2012
Ministry of Finance
Fiscal discipline attracts investment
VICTORIA – Investor response to B.C.’s credit strength has prompted the Province to launch a $1.25-billion US-dollar global bond issue as part of its annual borrowing program.
The move follows Finance Minister Kevin Falcon’s annual investor tour, which saw investors buy more than $275 million in B.C. bonds after hearing about B.C.’s fiscal and economic position.
B.C.’s US-dollar global five-year bond was well over-subscribed amid strong demand from European, US and Asian investors, with an order book of more than US$2 billion. The Province expects it could save up to $3 million compared to its domestic cost of borrowing. The strong reception affirmed the high value accorded the Province’s credit strength and reputation in the capital markets.
B.C. bond yields are currently about 30 basis points below the Province of Ontario in the US-dollar market, showing the market considers B.C. bonds to be a secure long-term investment.
Falcon conducted four days of post-budget meetings with investors in New York, Montreal, Toronto and Chicago, April 10-13, to discuss B.C.’s strengths as a safe harbour for investment, including a track record of fiscal discipline, a newly affirmed triple-A credit rating from North America’s two major agencies, competitive tax rates and B.C.’s shifting trade mix toward Asia.
B.C. also issued two privately placed notes for a total of $210 million to a single domestic investor following the provincial presentation. Separately, a US investor who had attended the minister’s presentation purchased approximately USD$65 million of the Province's available bonds in the secondary market. Strong demand for B.C. bonds in the secondary market helps keep the Province’s costs of borrowing down.
The Province broadened its investor outreach this year by adding presentations to investors in Chicago, Illinois, who have participated in the Province’s bond program and showed interest in new offerings from B.C.
British Columbia is one of the few provinces able to borrow offshore a cost below its domestic cost of funds — primarily due to its stable triple-A credit rating. Access to international markets increases the number of potential buyers and helps keep B.C. debt costs low. The Province saved an estimated $11 million in interest costs last year by selling the equivalent of C$2.3 billion of debt in the international, rather than the domestic, market.
Minister of Finance and Deputy Premier Kevin Falcon –
“My meetings with national and international investors this past week once again underlined that now more than ever, governments that manage their finances well are rewarded and those that don't are penalized. That is why our government remains committed to balancing the provincial budget in 2013-14 through continued fiscal discipline.”
“Investors are impressed when I tell the B.C. story: how we have maintained fiscal discipline, reduced personal and business tax rates, exceeded our budget targets in nine out of the past 10 years, and earned back triple-A ratings — and held them in spite of the worldwide economic downturn. They recognize that B.C. is that important safe harbour for their investments.”
· B.C. issued two privately placed notes for a total of $210 million with a single investor who had attended the minister’s investor presentation. The notes had a term of 20 years and a weighted average all-in cost to the Province of 3.53 per cent. This compares to about 10 basis points lower than the Province of Ontario.
· A US investor who attended B.C. presentations purchased USD$66 million of the Province's available bonds in the secondary market.
· In October 2006, B.C. earned its current Aaa rating with Moody’s Investors Services — the first since Moody’s downgraded B.C. from Aaa in July 1983.
· Standard & Poor’s (S&P) upgraded B.C. to its current AAA in May 2007 — B.C. had last been rated AAA with S&P in August 1983.
· Dominion Bond Rating Services (DBRS) upgraded B.C. to its current rating of AA-High in May 2007.
· News release – April 12, 2012: AAA ratings confirm B.C.’s solid fiscal plan is working:
· Investor presentation: http://www.fin.gov.bc.ca/PT/dmb/investpres.htm
Director of Communications
Ministry of Finance
Connect with the Province of B.C. at: www.gov.bc.ca/connect