Deal-making soars to decade high in Canada as debt market overtakes equities
Naimul Karim
8 min read
It was a year of extremes for Canadian dealmaking with debt offerings soaring, while equity offerings were few and far between. (Credit: Cole Burston)
It was a tale of two very different stories for Canadian capital markets in 2024, with activity in the debt markets reaching record highs amidst a continued decline in the equity space.
Overall, Canada’s financial sector raised about $552.8 billion through 946 deals in 2024, the highest amount raised in the past decade and up 19.5 per cent from $462.4 billion in 2023, according to Financial Post Data.
The total amount of debt raised by corporate companies last year was $280.2 billion, up 11.9 per cent from 2023, while government entities raised $254.2 billion, up 32.2 per cent.
In contrast, capital raised by companies through selling shares declined 6.8 per cent to $17.8 billion in 2024. It was the third consecutive yearly decline and the lowest amount raised in almost a quarter-century.
The stark difference between the two markets is a sign of the economic backdrop, said Rosalind Hunter, co-chair of Capital Markets at Osler, Hoskin & Harcourt LLP, which participated in 28 deals and topped FP Data’s list of law firms providing counsel to debt and equity issuers.
“When the economy is not performing well, and there are these uncertainties and economic indicators that are not improving, it impacts the value of the stock price of issuers … which makes them less likely to want to issue shares at a depressed stock price,” she said. “It’s not a time when they want to have the dilutive effect of issuing more shares.”
Hunter said a lot of companies that “rushed” into the market during the pandemic didn’t perform as well as expected after their initial public offering (IPO), which has “raised the bar” for investors in terms of what they are looking for today.
“They have to be profitable or nearby,” she said. “That really limits the number of Canadian companies for whom IPO is an option.”
As a result, the performance on the equity side of things wasn’t a surprise, according to Nitin Babbar, global co-head of Equity Capital Markets at Royal Bank of Canada, which participated in the highest number of deals and helped raise the largest amount of capital — $79.2 billion — in 2024, earning it a market share of 14.3 per cent of all capital raised.
TD Securities Inc. was second with a market share of 13.3 per cent, raising about $73 billion through 253 deals, while National Bank Financial was third, raising $61.56 billion through 199 deals, giving it a market share of 11.1 per cent. CIBC World Markets Inc. and BMO Capital Markets raised $52.7 billion and $47.8 billion, respectively, giving them respective market shares of 9.5 per cent and 8.7 per cent.
Babbar said debt markets are “substantially larger” than equity markets and there’s always a greater pace of issuance, but the equity space did get off to a bit of a “sloppy” start in the fourth quarter in 2023 when inflation and high interest rates compelled the market to “pause substantially” and wait for conditions to improve.
“Debt markets reacted fairly quickly,” he said. “But equity markets were hanging on every Fed discussion and every Bank of Canada discussion. What we had was a bit of a lag from expectations in December 2023 as to what the rate cycle would look like to what actually happened. Really, what we saw was a paused level of activity that was completely supply driven, not demand driven.”
Babbar said every deal in the equity space his bank looked at was a good deal and was “very well-subscribed, with lots of investor interest.” But what they didn’t see was a lot of potential deals.
“It’s just the volumes,” he said. “It just means that companies’ balance sheets are in good enough shape, have enough access to credit, so they didn’t have to press the equity button, and that just gives them more flexibility.”
The biggest deal on the equity side came in February when Vancouver-based First Quantum Minerals Ltd. sold new shares to raise a total of $1.5 billion as it looked to boost its balance sheet after its biggest mine was shut down by the Panamanian government.
Vaughan, Ont.-based GFL Environmental Inc. was second on the list, as a secondary offering raised about $982 million in March. The third-biggest deal was a $614.3-million secondary offering in August related to Restaurant Brands International Inc., which owns brands such as Tim Hortons and Burger King.
The only major IPO last year took place in November when Montreal-based fashion retail firm Groupe Dynamite Inc. raised $313.6 million. In total, there were 16 IPOs worth $385.3 million, according to FP Data.
The other end of the spectrum — the debt market — posted several positive records during the year.
In June, Coastal GasLink LP, a pipeline project in Western Canada, refinanced $7.15-billion of its existing construction credit facility through a Canadian private bond offering that was deemed the country’s largest-ever corporate bond deal.
That was followed by Enbridge Inc. offering three tranches of medium-term notes worth $1.8 billion in August. Pembina Pipeline Corp. and Telus Corp. raised a similar amount in January and February, respectively, while Bell Canada raised $1.5 billion in May.
“There was a significant amount of debt issuance. It was a record year by our count,” Rob Brown, co-head of Canadian Debt Capital Markets at RBC, said. “It was certainly well ahead of last year and ahead of the pandemic-fuelled surge that we saw in 2021.”
Debt markets in five of the 12 months last year had record results, he said. A lot of that had to do with a “favourable funding cost environment, with yields trending lower from April until the end of the year.”
Credit spreads were also “multi-year tight,” Brown said, meaning there was an attractive cost of funding for issuers.
In addition, there was a record number of first-time corporate borrowers and it was the most active year for the high-yield market in Canada, Abeed Ramji, head of the Canadian Debt Capital Markets at Toronto-Dominion Securities, said.
He attributes the confidence in the market to the interest rate cuts by the Bank of Canada.
“Typically, companies will look at what’s maturing this year. But in 2024, companies started to think about their 2025 funding needs by 2026, 2027, and try to pre-fund some of those needs,” he said. “They got to be a lot more opportunistic as a result of that.”
Ramji said TD was advising borrowers to “front-load” their borrowing needs for the year since there was a sense of uncertainty due to the United States election in November. After the election, he said the market became “even more conducive” and activity has continued in the past couple of months, which is another reason for the record volumes.
There were also more foreign companies looking to raise capital in Canada last year, he said. For example, McDonald’s Corp. sold $1-billion worth of Canadian dollar bonds in a year for the first time since 2017.
“To see a global powerhouse like McDonald’s looking at the Canadian market, valuing the depth of the market, valuing the investor diversification and valuing the fact that we’re able to achieve pretty good competitive cost of funding was a highlight for me,” Ramji said.
“There’s going to be a lot more focus on these names next year. Maybe we can see an uptick of international issuers looking to access our market.”
There was also an increase in volume and diversity in the high-yield debt market in 2024, which was “sort of new,” Hunter said. High-yield debts are securities that have a higher risk of default, but offer higher yields than bonds that are rated positively.
“There’s always been a quite strong U.S. high-yield debt market, but in Canada, 2024 was one of the strongest years on record for Canadian high-yield debt, with many new entrants to the market, plus numerous offerings by existing issuers,” she said.
Hunter expects the trend to continue in 2025.
Interest rates and inflation are on the decline and there’s ongoing momentum in dealmaking, so analysts expect 2025 to be another good year for raising capital in the debt market.
Hunter said she is also “cautiously optimistic” about the dealmaking prospects in the equities space.
In a similar vein, TD’s Ramji expects conditions in 2025 to be favourable for the debt market. He said credit spreads should be “pretty rangebound” for the better part of the year and doesn’t expect them to “blow out.”
As a result, the demand for bonds will remain stable and volumes will be elevated, even if they don’t hit the same record levels as 2024.
However, all those themes could be affected by incoming U.S. president Donald Trump, who has reiterated his plans to place a 25 per cent tariff on all Canadian exports. There’s also increased uncertainty linked to Prime Minister Justin Trudeau‘s upcoming resignation and the possibility of a new Canadian government taking charge this year.
Together, these factors could dampen the mood for a year that was supposed to thrive on low interest rates, capital markets experts say.
“I think we’re pretty optimistic … although all bets are off if Trump does enact some of the crippling tariffs,” RBC’s Brown said. “That could be obviously pretty damaging to the Canadian economy that’s already suffering from fairly poor productivity metrics.
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