HIGHWAY 407 DRIVES INTO NEW ISSUE SECTOR


Promises of a more active tomorrow seems to be the major theme in the securitization wing of the Canadian debt market.

Though dealers are quite vocal in their expectations for a plethora of deals next month, they deny having knowledge of any new deals that have been done or are reluctant to divulge information of any upcoming financings.

"There will be a lot of bank deals coming next month," is a common comment. But in a country with few banks, it always seems to be the other bank that is going to be an issuer.

Apparently unwilling to concede some activity, a number of dealers even rejected the mammoth Highway 407 bonds as qualifying for asset-backed securities status.

In any event, the Highway 407 deal - the largest-ever single-issue, nonfinancial, Canadian corporate bond offering - is proving to attract lots of attention. Strong demand for all three tranches enabled the Nesbitt Burns underwriting group to increase the size of the offering from an anticipated $800 million to an actual $1.1 billion.

Highway 407 notwithstanding, there was an interesting sidelight to the securitization market as questions were raised about the recent Milit-Air bond deal.

The bonds were part of a transaction to sell 24 military training craft to Bombardier Inc. to train NATO fighter pilots. The Clinton administration is now demanding that the Canadian government take charge of the craft rather than a private company.

Market sources, though, seem unconcerned by the reports, at least as far as the bonds are concerned. The issue has an unconditional, iron-clad, government guaranty on the cash flows. - David Feldheim