TC Energy to Compensate Investors for Bond That Didn’t Close

TC Energy Corp. will provide compensation to buyers of a C$1 billion ($735 million) Aspen Investments bond deal that failed to close, the company told Bloomberg.

Aspen Investments sold the bond last week, with the proceeds earmarked to buy an interest in TC Energy’s network of natural gas infrastructure in western Canada. But the bond sale failed to close this week when the equity transaction was delayed.

“The aggregate compensation is not material to TC Energy and will be paid directly by the Company and not via customers or partners,” TC Energy said. “We are providing this compensation voluntarily with no legal obligation.”

This is an “excellent outcome,” according to Earl Davis, head of fixed income at BMO Global Asset Management. Though immaterial to TC Energy, it’s “very material” to the confidence and continued smooth functioning of the market, he said.

The failed transaction marks the first time a syndicated Canadian-dollar bond deal has been canceled, Bloomberg records show. Bank of Nova Scotia analysts said it was the result of a financial-modeling error, while TC Energy has not provided an explanation.

Indigenous Participation

TC Energy’s planned sale of a 5.3% stake in its NGTL and Foothills pipelines to an indigenous consortium is Canada’s largest indigenous equity ownership agreement, according to the firm. The deal, which is backstopped by the Alberta government, is still expected to go ahead, according to Scotia analysts. Aspen has also said it’s committed to completing it.

The bond sale was expected to receive a credit rating similar to Alberta’s and was put together with two 30-year portions. It likely won’t be the last offering to finance equity purchases of infrastructure development by indigenous groups.

“As the use of equity loans and equity loan guarantees gains an operating track record, direct Indigenous equity participation will become a meaningful and standard part of energy project development, with larger deals and greater Indigenous communities’ ownership stakes,” Biao Gong, senior vice president, project finance at Morningstar DBRS, wrote in a July note.

Separately, the Canadian federal government is looking to sell a 30% stake in its Trans Mountain pipeline to indigenous groups. A decade-long expansion on the oil pipeline was completed in May.