Royal Bank of Canada to Break Ground with First Public US Covered Bond Issuance

IFR reported last week that Royal Bank of Canada is closing in on the first ever SECregistered offering of Covered Bonds in the US market.

Those that have followed the Euro-covered bond market for several years may see this as a potentially groundbreaking event.  While there has been more than US$90Billion in covered bonds issued in the US, these transactions have all been done under a private placement (144A) structure.  Expected to close by the end of August, the transaction has undergone an extensive regulatory review; one that may not be so attractive to other Canadian issuers but perhaps will draw European banks  (ones that are already SEC-registered) into the market, as an alternative distribution channel for those issuers that have developed an affinity for the structure.

We suspect that with any first time issuance there have been some bumps in the road for RBC.  Hopefully, they have made the road smoother for issuers that follow behind.  We also hope for greater clarity in the US rules for covered bond issuance in the coming months.  We do not envision this asset class becoming much more than “one option” for structured finance issuers but it certainly wouldn’t hurt to see some momentum in a US covered bond market.

About markferraris
Managing Principal Orchard Street Partners LLC

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