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“Issue activity just about dried up in the first half of March amid the COVID-19-induced uncertainty, but April and May were record-setting, with year-to-date totals up over 70 per cent by the end of May,” MacDonald said.
What appears to have happened, according to RBC, is that well-funded corporate issuers weren’t forced to access the market during the sell-off and instead capitalized on the subsequent rally in late March and early April. As markets stabilized but uncertainty continued, issuers looked to pre-fund borrowing requirements or convert short-term liquidity facilities taken on during the crisis, leading to record activity in April and May. The upshot is that the first half of 2020 saw an all-time high of $160.1 billion in corporate debt supply.
There were a lot of opportunistic deals where people didn’t really need the money
Andrew Parker, co-head, McCarthy Tétrault LLP capital markets practice
“In 2020, some companies were pre-funding as much as one year before maturity, and some even longer than that,” said Sean St. John, the Toronto-based executive vice president, managing director, and co-head, fixed income, currencies & commodities at National Bank of Canada, which processed 43 corporate debt mandates worth $5.94 billion.
Andrew Parker, the Toronto-based co-head of McCarthy Tétrault LLP capital markets practice, is of similar mind.
“There were a lot of opportunistic deals where people didn’t really need the money,” he said.
Needless to say, it all came as more than a bit of a surprise.
“We spent early March working on contingency planning with our clients, particularly those for whom things weren’t looking so good,” says Tom Zverina, a corporate finance partner in Torys LLP’s Toronto office. “Then things exploded.”
