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UPDATE 1-City of Ottawa prices Canada's first municipal green bond -term sheet
November 2, 2017 / 6:56 PM / in 16 days

UPDATE 1-City of Ottawa prices Canada's first municipal green bond -term sheet

(Adds portfolio manager quotes and details on green bond market)

By Fergal Smith

TORONTO, Nov 2 (Reuters) - The City of Ottawa priced its first green bond offering, raising C$102 million ($79.6 million) of a 3.25 percent bond that matures in November 2047, a term sheet seen by Reuters showed on Thursday.

The deal, which is the first municipal sale in Canada of the climate friendly debt, was priced at a spread of 97 basis points over the Government of Canada benchmark, the terms showed.

“It’s a good name, good credit. Liquidity will be potentially an issue because of the (small) size and the curve,” said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management.

A long bond in Canada’s green bond market is unusual. Most of the deals have been of a 10-year maturity or less.

The City of Ottawa did not have an immediate comment on the green bond issue.

The proceeds of the deal will be used to finance light rail transit capital work that meets the requirements of the city’s Green Bond Framework, the terms said.

Issuance of these types of bonds has been common in the U.S. municipal bond market. While the Canadian provinces of Ontario and Quebec have been issuers of green bonds, private sector companies and the Canada’s federal government have been slow to tap the market.

If the federal government releases guidelines for the use of proceeds of green bonds, that could spur private-sector interest in these bonds, market participants say. The market could also thrive if the federal government were to meet a campaign pledge to turn to this type of financing.

In August, Export Development Canada priced its first green bond issue in Canadian Dollars, raising C$500 million. ($1 = 1.2809 Canadian dollars) (Reporting by Fergal Smith; Editing by Chris Reese and Chizu Nomiyama)

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