Ontario, More Indebted Than California, Ignores S&P in Borrowing
Bloomberg - Jul 20, 2015
Ontario, the world’s most indebted sub-sovereign borrower, is ploughing ahead with Canada’s most ambitious infrastructure plan -- risking the censure of Standard & Poor’s and underperformance for its C$307 billion ($237 billion) of bonds.
The nation’s most-populous province is keeping a goal of spending C$130 billion over the next decade on work such as roads and mass transit in Toronto even after S&P dropped its credit grade this month to the lowest level ever. Yield spreads on some of the province’s debt reached the widest since January after the ratings move.
Ontario, with about 13.7 million residents, wants to carry out some of the projects using public-private partnerships, or P3s, an approach it used to build the athlete’s village for this month’s Pan Am Games in Toronto. While bringing in the private sector may reduce risk or speed up work, Ontario would still have to borrow for the financing.
“It’s not free debt,†Mario Angastiniotis, an analyst at S&P in Toronto, said by phone Thursday. “The P3 is just an alternative vehicle for financing, it’s not a different way that doesn’t cost you anything. You’re still adding to your debt.â€
Debt Pile
While Ontario’s population is about one third of California’s, its debt load is more than double that of the biggest U.S. state. Ontario forecasts that it will pay C$10.7 billion in interest on its debt in the 2014-2015 period, or about 8.2 percent of expenses, figures from the province show.
