RBC sells U.S. dollar notes; First Capital retaps 10-year debentures; Canadian deals eyed

By Cristal Cody

Prospect News, Jan. 7 - First Capital Realty Inc. kicked off what is expected to be an active deal month for Canadian issuers with an upsized C$100 million add-on to its 3.95% 10-year senior debentures on Monday, while deal activity climbed over the day in the U.S. markets, sources said.

Royal Bank of Canada tapped the "Yankee market" and sold $1.25 billion of five-year notes at Treasuries plus 72 basis points, a source said.

The notes were not actively seen in late-afternoon secondary trading, another bond source said.

"It seems like it kind of got put away," the source said, quoting the notes at a 72 bps spread and adding the issue "didn't trade a lot."

Canadian domestic issuance is expected to pick up over the week and in January with new deals targeted for the high-grade and high-yield markets, according to sources.

"The kick-off is likely tomorrow for issuance [in Canada] if it's going to happen," one bond source said. "Nothing specific but I can't believe we would go the whole week without something."

Bonds, including bank and financial paper, traded mostly flat on the day, a market source said.

Bank of Montreal's 2.5% senior notes due 2017 went out unchanged, the source said. BMO's notes have come in more than 100 bps since the notes priced a year ago.

The Markit CDX Series 19 North American investment-grade index ended Monday flat at a spread of 85 bps.

The Markit CDX Series 19 North American high-yield index rose to 102.51 from 102.44 on Friday.

Government bonds closed mostly unchanged with bonds weaker on the longer end. Canada's 10-year note yield was flat at 1.94%. The 30-year bond yield rose 2 bps to 2.50%.

RBC sells $1.25 billion

RBC priced $1.25 billion of five-year notes (Aa3/AA-/AA) on Monday to yield Treasuries plus 72 bps, a market source said.

The notes were sold at the tight end of talk that was in the 75 bps area.

Full terms of the trade were unavailable at press time.

Bookrunners were RBC Capital Markets LLC and J.P. Morgan Securities LLC.

The financial services company is based in Toronto.

First Capital upsizes

In the Canadian market, First Capital Realty sold C$100 million in a reopening of its 3.95% 10-year senior debentures on Monday at 98.979 to yield 4.076%, according to the company and bond sources.

The series P debentures due Dec. 5, 2022 (Baa2/DBRS: BBB) priced at a spread of 214 bps over the Government of Canada benchmark. The deal was upsized from C$60 million.

RBC Capital Markets and TD Securities Inc. were the lead managers.

First Capital Realty originally sold the issue on Nov. 27 when it priced C$150 million of the debentures at 99.264 to yield 4.04%, or a spread of 224.87 bps over the Government of Canada bond curve.

The total outstanding is C$250 million.

The Toronto-based shopping center owner and developer will use the proceeds for development and redevelopment activities, acquisitions, repayment of debt and general corporate purposes.

BMO flat

Bank of Montreal's 2.5% senior notes due 2017 (Aa2/A+/) went out unchanged on the day at 48 bps over Treasuries in secondary trading, a market source said.

The bank sold a U.S. dollar-denominated $1.5 billion offering of the notes (Aa2/A+) on Jan. 6, 2012 at a spread of 170 bps over Treasuries.

The financial services company is based in Toronto and Montreal.

Andrea Heisinger contributed to this review

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