Wednesday, October 20

Scotiabank to sell LRCNs in US

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Bank of Nova Scotia is set to become Canada’s first bank to sell a junior bond known as limited recourse capital notes in a currency other than loonies.

Toronto-based Scotiabank is reaching out to US dollar-based investors Monday before deciding to go ahead with the deal, according to people familiar with the matter, who asked not to be named discussing a private transaction. In June, the bank sold LRCNs in the Canadian dollar corporate bond market.

Canadian banks have sold $15.8 billion of LRCNs since July 2020 when Office of the Superintendent of Financial Institutions deemed the securities eligible as Additional Tier 1 loss-absorbing buffers, according to data compiled by Bloomberg. Such transactions, which so far have been denominated in Canadian dollars, allow issuers tax deductions on interest payments — thus reducing their all-in borrowing costs.

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