Canada equity financings drop 27 pct in second qtr

TORONTO, Aug 25 (Reuters) - Canadian equity financings fell 27 percent in the second quarter to C$11.6 billion ($11 billion), and a recent drop in commodities prices does not bode well for a more active second half of 2008, an industry group said on Monday.

Equity financings for the rest of the year may be hurt by the recent pullback in oil and other commodity prices "as well as any further deterioration in economic health," Jack Rando, director of capital markets at the Investment Industry Association of Canada, said in a statement.

The dominant energy and materials sectors propelled the Toronto Stock Exchange's benchmark index to new heights in the three months ended June 30. The S&P/TSX composite index .GSPTSE hit a record of 15,154.77 on June 6, and overall it rose 8.5 percent during the second quarter.

Lower private placements and secondary offerings pushed common equity financings down 37 percent to C$6.9 billion in the quarter from a year earlier, the investment industry association said.

Pipeline and power-plant operator TransCanada Corp (TRP.TO) raised C$1.3 billion in a stock issue in May, the largest deal done in the April-June quarter.

Income trusts raised just C$1.8 billion in capital during the second quarter, a 40 percent drop from the year-earlier period. Trusts are alternative structures to corporations and currently get tax breaks by distributing most of their cash to unitholders, but those tax advantages will end in 2011.

Bucking the downward trend, preferred share issuance jumped 49 percent to C$2.3 billion, as financial institutions continued to issue more preferred shares to beef up their balance sheets in the wake of sector writedowns, the IIAC said. ($1=$1.05 Canadian) (Reporting by Lynne Olver; editing by Rob Wilson)