TD Bank, ‘huge’ in Canada, launching U.S. platform starting with rates

By Emma Trincal

New York, Aug. 4 – The re-entry of Toronto-Dominion Bank into the U.S. structured products market is seen as good news by several market participants, who learned about the initiative from a 424B5 filing with the Securities and Exchange Commission on Friday.

For many, TD Bank is almost the new kid on the block because of the very minimal presence of this issuer in the U.S. market. The bank has not registered any deal with the SEC in eight years, according to Prospect News.

“It goes with the theme that investors want diversification of credit risk. The more issuers the merrier!” a sellsider said.

Creditworthiness

TD Bank registered to sell a wide range of income structured products, according to the filing, including accrual notes, fixed-rate notes, step-up notes, floating-rate notes, fixed-to-floating-rate notes, floating-to-fixed-rate notes, inverse floating-rate notes, leveraged notes, range accrual notes, dual range accrual notes, non-inversion range accrual notes and leveraged steepener notes.

The last time the bank was in the registered structured product market was in November 2006 when it priced $680,000 of 11% notes due Nov. 28, 2007 linked to the common stock of Las Vegas Sands Corp. with TD Securities (USA) LLC acting as the agent.

Part of the appeal of Canadian banks among U.S. investors is their high credit ratings, the sellsider said.

TD Bank and Royal Bank of Canada have AA- credit ratings from Standard & Poor’s. Bank of Montreal has an A+ rating.

The five-year credit default swap spread for TD Bank is 44 basis points, according to Markit, the financial information services company.

In comparison, other than Wells Fargo with a spread of 51 bps, most U.S. banks have much wider spreads ranging from 62 bps for JPMorgan to 86 bps for Goldman Sachs.

“TD has a fabulous balance sheet, a great credit rating and strong potential proprietary distribution, but it will be a real challenge for another conservative Canadian issuer with tight funding to make its way into a crowded U.S. structured notes market,” a market participant said.

Rates at first

It is not clear why TD Bank chose to re-enter the market just now after a long leave of absence from the publicly registered market in the United States, an industry source said.

As an agent, TD has only priced $7 million in five offerings since 2001 on the behalf of TD Bank Financial Group, according to the Prospect News database, which compiles notes filed with the SEC only.

“They never really had a strong platform in the U.S.,” the industry source said.

“But they just filed a shelf. They’re planning to establish a structured products platform in the U.S. That was the purpose of the filing.

“They intend to focus on rate-linked products. That will be the first step. They’ll just roll out category by category.

“They already have a fixed-income platform in the U.S., so it makes sense to begin with rates.

“The U.S. team will be operating from New York but also from Toronto. Both teams will be working jointly.

“Considering the fact that they are very successful in Canada – they’re huge over there in structured products – it’s not really surprising to see them making a move to the U.S. market.”

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.