407 East Development, York, Talisman tap markets; Canada Housing to sell mortgage bonds

By Cristal Cody

Prospect News, May 15 - Canadian issuers tapped the bond markets in Canada and the United States despite the sloppy market tone on Tuesday, sources said.

407 East Development Group General Partnership sold C$571.41 million in two tranches of public- private partnership senior bonds.

The Regional Municipality of York priced C$150 million of 4% 20-year bonds.

Market tone was weak on Tuesday and bonds stayed wider in trading, but the tone did not affect Canada's pricing action.

"Aimia priced yesterday in the face of huge risk-off mode," a bond source said on Tuesday.

Aimia Inc. sold C$250 million of 5.6% seven-year senior secured notes on Monday.

The Markit CDX Series 18 North American investment-grade index eased 2 basis points to a spread of 117 bps on the day.

Across the border, Talisman Energy Inc. priced $600 million of 30-year high-grade bonds, while Inmet Mining Corp. tapped the U.S. high-yield bond market for $1.5 billion of 8¾% senior notes due June 1, 2020 (B1/B+) to yield 9%.

Coming up on Wednesday, Canada Housing Trust is expected to sell C$3 billion in two tranches of Canada Mortgage Bonds.

Government bonds ended mostly flat. Canada's 10-year note yield was unchanged at 1.94%. The 30-year bond yield rose 1 bp to 2.46%.

Ford Trust taps market

Ford Auto Securitization Trust raised C$503.04 million in three tranches of series 2012 R1 asset-backed notes (DBRS: AAA) on Tuesday, an informed bond source said.

The notes are guaranteed by the Ford Motor Credit Co. LLC.

In the first tranche, the trust priced C$186.79 million of class A1 notes due April 15, 2014 at par to yield 1.754%, or a spread of 60 bps over the Canadian bond curve.

The second tranche of C$214.35 million of class A2 notes due March 15, 2016 priced at par to yield 2.025%, or a spread of 73 bps over the Canadian bond curve.

The trust also sold C$101.9 million of class A3 notes due April 15, 2017 at par to yield 2.359%, or a spread of 95 bps over the bond curve.

Ford Auto Securitization Trust also sold three tranches of lower-rated asset-backed notes. Additional details were not available.

BMO Capital Markets Corp., CIBC World Markets Inc., RBC Capital Markets Corp. and Scotia Capital Inc. were the managers.

Proceeds will be applied by the trust to finance the purchase of a pool of retail conditional sale contracts secured by new and used cars, light trucks and utility vehicles acquired by Ford Credit Canada Ltd., the Canadian financing arm of the Ford Motor Co.

407 East Development prices

407 East Development Group priced C$571.41 million in two tranches of public-private partnership senior bonds (DBRS: A) on Tuesday, a bond source said.

In the first tranche, the group sold C$451 million of 2.813% notes due Dec. 18, 2016 at par, or a spread of 138.4 bps over the Government of Canada benchmark.

In the second tranche of the P3 deal, 407 East Development Group sold C$120.41 million of 4.473% bonds due June 23, 2045 at par, or a spread of 203 bps over the Canadian government benchmark.

The group held a roadshow on May 1.

BMO Capital Markets Corp. and Desjardins Securities Inc. were the bookrunners. Co-managers were Casgrain & Co. Ltd., National Bank Financial Inc., RBC Capital Markets, Scotia Capital and TD Securities Inc.

Proceeds will be used to extend Highway 407 with the project expected to start in May and be completed in 2015.

The special entity was created to design, build, finance and maintain a portion of highway in the Province of Ontario.

York sells 20-year bonds

The Regional Municipality of York (Aaa/AAA/) sold C$150 million of 4% 20-year bonds at 99.822 to yield 4.013% on Tuesday, an informed bond source said.

The bonds due May 31, 2032 priced at a spread of 170 bps over the Government of Canada benchmark.

CIBC World Markets was the lead manager. Co-managers were RBC Capital Markets, Scotia Capital, BMO Capital Markets and National Bank Financial.

The issuer was last in the market on Nov. 2 with a C$300 million offering of 10-year notes and 30-year bonds. The province sold C$200 million in a reopening of 4% notes due June 30, 2021 at a spread of 119 bps over the Government of Canada benchmark.

The region sold C$100 million of 4.15% bonds due Nov. 18, 2041 at a spread of 131 bps over the government benchmark.

The issuer is a regional group made up of nine municipalities in Ontario.

Talisman sells 30-year bonds

In the U.S. investment-grade market, Talisman Energy priced a $600 million deal of 5.5% 30-year bonds on Tuesday at a spread of Treasuries plus 270 bps, a market source said.

The bonds were priced at the low end of guidance in the 275 bps area, plus or minus 5 bps, the source said.

The notes (Baa2/BBB/BBB) were priced at 98.143 to yield 5.629%. There's a make-whole call at 40 bps over Treasuries until Nov. 15, 2041, and a par call after that date.

Citigroup Global Markets Inc. and J.P. Morgan Securities LLC were the active bookrunners. Passive bookrunners were Barclays Capital Inc., BNP Paribas Securities Corp. and HSBC Securities (USA) Inc.

Co-managers were Daiwa Capital Markets America Inc., DnB NOR Markets, Inc., Bank of America Merrill Lynch, RBS Securities Inc., SG Americas Securities, LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., Mizuho Securities USA Inc., Morgan Stanley & Co. LLC and Santander Investment Securities Inc.

Proceeds are being used for general corporate purposes, including capital expenditures and debt repayment.

The upstream oil and gas company is based in Calgary, Alta.

Valener upsizes

In other market activity on Tuesday, Valener Inc. sold an upsized C$100 million of cumulative rate reset preferred shares that yield 4.35% for the initial fixed-rate period ending Oct. 15, 2017.

The company sold 4 million shares of the series A stock (DBRS: Pfd-2) at C$25.00 per share.

The deal was upsized from C$75 million, or 3 million shares.

BMO Capital Markets Corp. and TD Securities Inc. were the lead managers.

The dividend rate will reset on Oct. 15, 2017 and every five years thereafter at a rate equal to the five-year Government of Canada bond yield plus 281 bps.

The shares are redeemable by Valener on or after Oct. 15, 2017.

Proceeds will be used to subscribe to additional units of Gaz Metro LP in order for Gaz Metro to finance part of its proposed acquisition of Central Vermont Public Service Corp. and any balance for general corporate purposes. If the acquisition does not proceed, Valener will use the net proceeds to repay amounts under its credit facility and for general corporate purposes.

The company is Quebec's leading natural gas distributor and owns about 29% of Gaz Metro.

Canada Housing Trust eyed

On Wednesday, Canada Housing Trust (Aaa/AAA/DBRS: AAA) plans to raise about C$3 billion in two tranches of five- and 10-year Canada Mortgage Bonds, a bond source said Tuesday.

The trust is expected to sell about C$2 billion in a reopening of the 2.65% notes due 2022 with guidance of about 61 bps over the Government of Canada benchmark.

Canada Housing Trust originally sold the 2.65% notes due 2022 on Feb. 14 at a spread of 48 bps over the Government of Canada benchmark.

In the second tranche, the trust is expected to sell C$1 billion of floating-rate notes due 2017 with price talk at 11 bps over the three-month Canadian Dealer Offered Rate.

The trust sells bonds quarterly and was last in the market on March 15 with an offering of C$5 billion of 2.05% five-year mortgage bonds priced at a spread of 39 bps over the Government of Canada benchmark.

The trust is a unit of Canada Mortgage and Housing Corp., which provides financing, mortgage loan insurance, mortgage-backed securities and housing policy and programs.

Andrea Heisinger contributed to this review

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