UNCLASSIFIED
PAGE 01 MONTRE 01967 152143Z
ACTION EUR-12
INFO OCT-01 ISO-00 SP-02 USIA-15 AID-05 EB-07 NSC-05
CIEP-02 TRSE-00 SS-15 STR-04 OMB-01 CEA-01 CIAE-00
COME-00 FRB-01 INR-07 NSAE-00 XMB-04 OPIC-06 LAB-04
SIL-01 DODE-00 PM-04 H-02 L-03 PA-02 PRS-01 ( ISO ) W
--------------------- 023570 /70
R 152055Z DEC 76
FM AMCONSUL MONTREAL
TO SECSTATE WASHDC 8399
INFO AMEMBASSY OTTAWA
AMCONSUL QUEBEC
UNCLAS MONTREAL 1967
E. O. 11652: N/A
TAGS: ECON, EFIN, EINV, CA
SUBJ: ARRANGEMENTS COMPLETE FOR PLACEMENT OF QUEBEC DEBT ISSUE
REF: MONTREAL 1916
1. QUEBEC HAS APPARENTLY PASSED FIRST MAJOR TEST IN FINANCIAL
MARKET SINCE PQ WAS ELECTED NOVEMBER 15 IN QUEBEC'S PROVINCIAL
ELECTION. PRESS IN BOTH CANADA AND U.S. REPORTED THAT SIDBEC-
NORMINES, INC. HAD COMPLETED ARRANGEMENTS FOR PRIVATE-PLACEMENT
IN U.S. AND CANADA OF DLS 398.4 MILLION OF FIRST MORTGAGE
BONDS. FUNDS WILL BE USED FOR DOLS 500 MILLION PROJECT UNDERWAY
TO DEVELOP IRON ORE RESERVES IN NORTHERN QUEBEC.
2. U.S. PORTION OF FINANCING TOTALS DOLS 330.3 MILLION OF
23-YEAR FIRST MORTGAGE BONDS WITH COUPON RATE OF 10 1/8 O/O.
CANADIAN PORTION OF FINANCING TOTALS DOLS 68.1 MILLION OF 23-YEAR
BONDS WITH 11 1/8 O/O COUPON RATE. TERMS OF AGREEMENT ARE
REPORTED TO BE SAME AS THOSE ANTICIPATED IN AUGUST BEFORE QUEBEC
PROVINCIAL ELECTIONS WERE HELD.
3. MAJOR PURCHASERS OF THE ISSUE IN THE U.S. WERE PRUDENTIAL
LIFE INSURANCE (DOLS 131.1 MILLION), EQUITABLE LIFE (DOLS 36.3
MILLION), AETNA LIFE (DOLS 27.5 MILLION), ALABAMA PROFESSORS
RETIREMENT FUND (DOLS 17.6 MILLION), BOWERY SAVINGS BANK (DOLS
16.5 MILLION) AND MUTUAL LIFE (DOLS 14.3 MILLION). QUEBEC'S
CAISSE DE DEPOT WAS MAJOR PURCHASER OF ISSUE IN CANADA, TAKING
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PAGE 02 MONTRE 01967 152143Z
ABOUT 40 O/O OF CANADIAN PORTION.
4. PARTICIPANTS IN IRON ORE PROJECT ARE BRITISH STEEL CORP.
(INTERNATIONAL) LTD., 41.67 O/O; SIDBEC LTD., A QUEBEC GOVERNMENT-
OWNED AGENCY, 50.1 O/O, AND QUEBEC CARTIER MINING CO., 8.23 O/O.
QUEBEC CARTIER IS A UNIT OF U.S. STEEL CORP.
5. PRODUCTION CAPACITY OF THE IRON-ORE PELLETIZING PLANT WILL
BE SIX MILLION TONS OF PELLETS A YEAR. OF THAT TOTAL, BRITISH
STEEL WILL TAKE ABOUT 2.5 MILLION TONS, SIDBEC ABOUT THREE
MILLION AND QUEBEC CARTIER 500,000 TONS FOR U.S. STEEL CORP.
THE PLANT IS BEING BUILT AT PORT CARTIER, ABOUT 400 MILES FROM
QUEBEC CITY.
6. ELSEWHERE IN FINANCIAL SECTOR, CITY OF LAVAL ISSUE WHICH
UNDERWRITERS WERE UNABLE TO PLACE IN U.S. MARKET (SEE REFTEL) IS
NOW REPORTED TO BE SELLING WELL ON CANADIAN MARKET. OF TOTAL DOLS
13 MILLION ISSUE, DOLS 10 MILLION HAS REPORTEDLY BEEN PLACED.
EFFECTIVE COST OF FINANCING FOR LAVAL WAS STATED TO BE 10.54 O/O.
7. COMMENT: ANNOUNCEMENT OF COMPLETION OF SIDBEC-NORMINES
FINANCING IS VIEWED HERE AS PROVIDING SOME REASSURANCE THAT
FOREIGN INVESTORS STILL WILLING ACCEPT QUEBEC DEBT ISSUES.
ALTHOUGH AGREEMENT WILL NOT BE SIGNED FORMALLY UNTIL DECEMBER 23,
THERE ARE NO EXPECTATIONS OF PROBLEMS ARISING IN ARRANGEMENTS
BEFORE ASSIGNMENT IS COMPLETED. FURTHER REASSURANCE FOR
INVESTORS CONCERNED ABOUT QUEBEC SHOULD BE FORTHCOMING NEXT WEEK
AS CONSULATE HAS LEARNED THAT HYDRO-QUEBEC HAS COMPLETED ARRAN-
GEMENTS FOR PLACEMENT OF DEBT ISSUE IN EUROPE. PUBLIC ANNOUNCE-
MENT OF LATEST HYDRO-QUEBEC FINANCING IS EXPECTED TO BE MADE
NEXT TUESDAY, DECEMBER 21.
HARPER
UNCLASSIFIED
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