Cara sets roadshow for Canada's first junk bond offering in three months; corporates widen

By Cristal Cody

Prospect News, Oct. 17 - Cara Operations Ltd. announced on Monday that it will hold a roadshow for Canada's first high-yield bond offering in three months.

The restaurant operator intends to sell C$75 million of senior second-lien guaranteed notes to finance the acquisition of Prime Restaurants Inc.

This week's activity will depend on market tone, sources said.

A sale of asset-backed notes is expected from CNH Global NV. The Amsterdam-based agricultural and construction equipment manufacturer held a roadshow the previous week for the Canadian dollar offering of tractor loan asset-backed securities.

BMO Capital Markets Corp. is the lead manager.

"No issuance today. It's very infrequent still and just when the window opens," one bond source said. "Last week was a pretty good week. We'll see if it still opens up tomorrow."

The Canadian bond markets saw a busy week last week with deals from FortisAlberta Inc. and AltaGas Ltd.

Corporate bond spreads were wider on Monday.

The Markit CDX Series 17 North American high-grade index eased 4 basis points to a spread of 134 bps.

Canadian government bonds traded stronger across the curve on Monday as optimism regarding a quick resolution to Europe's debt problems faded.

The 10-year note yield dropped to 2.29% from 2.4%. The 30-year bond yield fell to 2.88% from 2.95%.

Canadian bond purchases

Foreign purchases of Canadian securities fell to C$7.9 billion in August from C$12.1 billion in July, with most of the investment focused on the bond market, Statistics Canada said on Monday.

Nonresident investors bought C$6 billion of bonds in August, the largest investment in three months, the agency said. The purchases totaled C$31.6 billion in the first eight months of the year, less than half the inflows recorded in the same year-ago period.

Residents in August divested C$1.4 billion of foreign bonds, led by U.S. Treasuries, for a total reduction of C$10.8 billion year to date.

"Long-term interest rates in the United States have declined each month since February to reach levels last seen at the end of 2008," the agency noted.

Cara to raise C$75 million

Cara Operations announced on Monday that it will hold a roadshow for a C$75 million offering of senior second-lien guaranteed notes to finance the acquisition of Prime Restaurants.

Cara will hold an investor call on Wednesday and hold a roadshow for the private sale Thursday through Friday in Toronto.

Scotia Capital Inc. is the manager.

The bond offering is expected to close in early November.

Proceeds will be put into escrow to acquire the outstanding shares of Prime Restaurants for C$6.75 a share, to repay Prime's credit facility and to finance the cash settlement of Primes' restricted share units. The acquisition is valued at C$58.9 million.

The takeover must receive court support and approval from shareholders of Prime Restaurants. The acquisition is expected to close in January.

Cara also announced that it began a solicitation from the holders of its outstanding 9 1/8% senior secured second-lien guaranteed notes due Dec. 1, 2015 to amend terms and provisions, including the company's guarantors, to add Computershare Trust Co. of Canada as trustee governing the 2010 notes.

The company sold C$200 million of the notes (DBRS: B//BB-/) at par on Nov. 24, 2010.

The amendments, if approved, will allow the company to increase the amount of security that it can grant for debt to allow for the sale of bonds. The solicitations expire on Oct. 31. If the amendments are approved and the acquisition closes in January, the company will pay holders of record of the 2010 notes C$5.00 in cash for each C$1,000 principal.

Vaughan, Ont.-based Cara is Canada's largest full-service restaurant operator with brands that include Swiss Chalet Rotisserie & Grill, Harvey's and Montana's Cookhouse.

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