Newfoundland and Labrador look to the London Stock Exchange to sell debt to Europe

ST. JOHNS, NL – The government of Newfoundland and Labrador is looking to the European capital market to lower borrowing costs, opening a listing on the London Stock Exchange to find new buyers for provincial debt that is already the highest per capita in Canada is.

Prime Minister Andrew Furey and Chancellor of the Exchequer Siobhan Coady were in London on Monday to ring the opening bell on the city’s stock exchange, on which the government plans to sell bonds worth €1 billion.

Furey said the government launched the loan program to expand its financing options and guarantee better interest rates.

We recognize the high cost of borrowing as incredibly punitive, and we’re taking every measure to try to lower it, he told reporters, adding, “We’re not here because we have to be here.” We’re here because we want to be here, and it’s the right and responsible thing to do.

According to Statistics Canada, Newfoundland and Labrador had a per capita net debt of $19,478 in 2021, the highest in the country. The government has long struggled to balance its accounts, as the cost of providing services to one of the country’s most sparsely populated provinces has often outweighed its revenue.

The county’s debt is about $16 billion and the government has budgeted about $1.1 billion to pay interest and other costs in the current fiscal year, which ends this month, Coady told reporters Monday.

Newfoundland and Labrador borrowed about $1.7 billion in the current fiscal year, she added, less than the $2.7 billion projected in the budget. The province says it expects its first surplus in more than a decade, largely thanks to higher-than-expected tax revenues. Coady said the increase in provincial revenues helped offset borrowing costs.

The province will only sell its debt in the European market if borrowing costs are lower than in the Canadian market, Coady added. And to reduce interest rate risks associated with currency exchanges, all bonds sold will be hedged at Canadian fixed rates, officials said.

Like most provinces, Newfoundland and Labrador raise money to cover its debts by issuing publicly traded bonds, which can be purchased by institutional investors, including banks and pension funds. The province has listed bonds on the Canadian market and can also list bonds on the European market from Monday.

We are not obligated, because we are here, to sell the bonds to the European market, Furey said. This only provides optionality. It’s no different than if you had a mortgage, or were about to get a mortgage, and you wanted several different options available to you.

He said government officials were in Europe last fall to meet with investors and begin the legal process to register on the stock exchange. The listing makes Newfoundland and Labrador the ninth province to enter European markets, he said; Prince Edward Island is the only province that has not yet done so.

Furey said that with new energy projects on the horizon, the province is well placed to attract European investors to its bonds and private sector.

This report from The Canadian Press was first published on March 6, 2023.

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