New upstart Coventree Capital Group looks to be jumping in with Canada's big boys following the firm's appointment as special advisor to a new highway consortium.

The prize could be a mammoth C$3 billion to C$4 billion ($2.1 billion to $2.9 billion) offering involving Ontario's Highway 407, a tolled ring road around Toronto. It would be the second toll road deal in Canadian history. The deal already marks the biggest privatization ever in Canada, with a C$4 billion price tag.

When ETRI Consortium - made up of Capitale D'Amerique, a subsidiary of fund giant Caisse de Depot et Placement du Quebec, engineering firm SNC-Lavalin and Spanish building behemoth Grupo Ferrovial-Cintra - won the bid to operate the highway last month, there was some debate on Bay Street as to whether the deal would include securitization or not, with some players saying "not a cent" would come to market, while others predicted the biggest single issue ever.

A source close to the deal said it is not known what form a debt issue would take, but there will definitely be a huge offering coming out of the deal. "You have confirmed traffic flows," the source said. "This is a valuable property." He said to expect a revenue bond for the first tranche, but securitization could be coming at a later date.

Toronto-based Coventree has been scouring the street for deals since breaking onto the scene in September 1998. Since then, the firm has also brought an ABS deal to market but continues to focus on advisory duties as well.

But the firm's president David Ellins said Coventree is looking to fill a niche left by the big chartered banks. "We're looking for deals downmarket on the credit spectrum and down market on the deal size," he said, despite the potential size of the highway deal on his plate.

"We had portrayed ourselves as trying to do smaller deals," he said of this project, calling it "a feather in our cap." But clients tell the firm "We think you can do larger deals," he added.

A syndicate for any deal will likely be led by Nesbitt Burns and Salomon Smith Barney, which acted as financial advisors on ETRI's successful bid. But hatchets will be buried in the name of bigger distribution, and despite losing bids from rivals Toronto Dominion, Bank of Nova Scotia and a joint CIBC World Markets/Newcourt try, those firms will likely be in on the deal.

"We're in for a piece," said a source at one of the unsuccessful bidders. "You'll probably see the whole street in on this deal." - TC

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