Pacific Life to Build Loonie Bond Investor Base After Debut

(Bloomberg) -- Pacific Life Insurance Co. is the latest U.S. company looking at the Canadian bond market as a regular source of funding.

“We are committed to growing our relationship with the broader Canadian dollar market and to building out our CAD curve,” said Joseph Krum, vice president and managing director of the institutional capital markets group at Newport Beach, California-based Pacific Life, whose debt funding program included a deal in loonies last week. “Canada is an essential market for us.”

The maple market reached record levels in 2021 as foreign issuers transacting in Canadian dollars were able to lock in attractive funding costs after swapping proceeds from bond sales back into their home currencies.

This year, international public sector issuers such as the World Bank and the European Investment Bank have taken advantage of favorable terms for these cross-currency swaps using the Canadian dollar market to raise over C$4.1 billion ($3.2 billion) -- an amount that's set to increase as BNG Bank NV, a public-sector bank in the Netherlands, is issuing at least C$250 million of a three-year bond.

Pacific Life, whose first president was also the founder of Stanford University back in the 19th century, sold debt via a funding program known as Pacific Life Global Funding II, pricing at par C$600 million of five-year floating rate notes at a spread of 38 basis points over the three-month Canadian Dollar Offered Rate, according to Bloomberg data. Proceeds from sale will be used to purchase a Funding Agreement, or FA, from Pacific Life Insurance Co., which in turn invests in a portfolio of assets. The deal “was narrowly distributed,” said Krum, referring to a group of less than 10 investors.

“The offering was priced at a level and with terms that were very competitive relative to what Pacific Life likely could have achieved in the U.S. dollar market,” said Krum, adding that they may increase the size of what is Pacific Life's inaugural FA-backed maple bond offering.