Infrastructure deals continue to make attractive ABS offerings on the Eastern Seaboard, with the latest backed by revenue from a natural gas pipeline for Atlantic Canada and New England.
CIBC World Markets and Morgan Stanley Dean Witter teamed up to bring a two-piece deal to market in both countries, with proceeds going to fund construction of Maritimes & Northeast Pipeline.
The deals have average lives of 15 years. The Morgan Stanley offering in the U.S. came in at $240 million, while the CIBC piece in Canada came in at C$260 million ($186 million). "Canadian buyers have been pretty hungry," said a Toronto-based trader. Lately, investors in Canada have had several East Coast infrastructure deals to munch on, from school building offerings to toll road deals.
The deal is backed by revenue that will be generated by firm shipping agreements and precedent agreements with distributors - agreements that are in place currently - once gas starts flowing.
The deal was rated single-A by Canadian Bond Rating Service and by Standard & Poor's. CBRS analyst Sunil Shah said the deal had "compelling" guarantees, including the investment-grade quality of the majority of the backing energy firms in the deal. Sponsors of the pipeline project include Mobil Corp., Westcoast Energy, Duke Energy, and Nova Scotia Power.
"In our minds this makes it a very strong deal," he said, adding existing agreements with distributors for all the production reduces the risk significantly.
The pipeline is being built from the shorefall in Nova Scotia, across New Brunswick, Maine and New Hampshire and into the main target market, Boston. The wells are located off Sable Island, about 200 miles off the Nova Scotian coast, where holes for three of six planned wells are completed.
Another Canadian pipeline deal, similar in structure, also priced last week. The Alliance Pipeline serves the western part of the continent. The C$300 million ($214 million) deal was led by Scotia Capital Markets.