CANADA - The giant C$73bn (US$48.4bn) Ontario Teachers Pension Plan (OTPP) has issued C$600m (US$383m) worth of debentures to finance its real estate ventures, a groundbreaking move in the Canadian pensions world.
The issuance of bonds by the OTPP is a first for a Canadian pension fund according to Standard & Poor's. The debentures have been rated triple-A by both S&P and the Dominion Bond Rating Service and include the OTPP's unconditional guarantee.
The issue will be made by Ontrea, a wholly owned real estate subsidiary managed by Cadillac Fairview. Cadillac Fairview is the OTPP's real estate management / development arm. The move is unusual as pension funds normally buy, rather than issue, debt.
S&P claims that the triple-A rating reflects the creditworthiness of OTPP and its position as one of the largest Canadian pension plans invested in the public market, combined with a highly effective governance structure.
Other factors contributing to the strong rating include the OTPP's independence from its sponsors are: the excellent track record in asset growth; surplus and risk management; and the strong financial ratios of the fund, which S&P says compares favourably with other triple-'A'-rated pension funds.
Claude Lamoureux, president and chief executive officer of OTPP, said: We are pleased to provide the market with such a high quality debenture - we stand firmly behind this issue. Guaranteeing this debenture is an innovative and cost-effective way for us to support the financing objectives of our subsidiary.
TD Securities and BMO Nesbitt Burns will act as lead agents for the sale, heading an agency group that includes RBC Dominion Securities, CIBC World Markets, Scotia Capital, Merrill Lynch and Deutsche Bank Securities.
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