First Nations Finance Authority Tops Up 2032 Bond by C$840 Million

What happened

The First Nations Finance Authority, which finances Indigenous governments, added C$840 million (US$600 million) to an existing 2032 issue on Monday, taking that bond to C$1.19 billion. The larger pool underscores FNFA's lending capacity as it gears up for a busy slate of resource and infrastructure deals.

Ernie Daniels, the organization's CEO, said he expects the proceeds to help finance projects tied to Prime Minister Mark Carney's agenda, with Indigenous participation central to mines, ports and pipelines. He also said the latest sale's proceeds will go toward efforts that include Cedar LNG, a majority-Indigenous-owned liquefied natural gas plant being built on Canada's west coast.

How the law and financing work

FNFA was created under legislation passed in 2005, and today it can only make loans directly to First Nation governments. According to Daniels, an update from Carney's office last week said the government intends to change the law, allowing FNFA to extend credit to Indigenous-owned special purpose vehicles "where there's government guarantees and contracts and so forth." In his words, "That's going to make it more available to larger types of projects that First Nations are going to get involved in."

FNFA Chair Derek Epp noted in the authority's latest annual report that such a legal change could have enabled participation in transactions like Enbridge Inc.'s sale last year of a stake in a natural gas pipeline to dozens of Indigenous groups.

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Market footprint and deal pipeline

Daniels said FNFA is preparing for a wave of sizeable projects and is already talking with project sponsors, though he declined to name them due to non-disclosure agreements. He said FNFA bonds are bought by Canadian pension funds as well as US mutual funds and insurance companies.

Borrowers sometimes secure FNFA loans with pledged revenue streams rather than traditional collateral. As issuance has accelerated, FNFA's outstanding debt totals reflect C$4.9 billion of debentures plus C$1.4 billion of commercial paper. The authority is rated Aa3 at Moody's, AA- at Standard & Poor's and AA-low at DBRS Morningstar.

Why investors should care

If the law changes as outlined, FNFA could finance a broader set of Indigenous equity stakes and project vehicles, widening the opportunity set for buyers of high grade paper linked to Canadian infrastructure and resources.

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