Canadian primary action cools; Coors, Connacher, Air Canada better in trading, Ontario firms

By Cristal Cody

Prospect News, April 27 - Primary activity tapered off as expected on Friday in the Canadian bond markets.

"Literally nothing," one bond source said. "Very slow week."

The bond market generally was stronger over the day. The Markit CDX Series 18 North American investment-grade index firmed 2 basis points to a spread of 94 bps.

Molson Coors Brewing Co.'s new U.S.-dollar denominated senior notes (Baa2/BBB-/DBRS: BBB) sold Thursday stayed 10 bps to 12 bps tighter in secondary trading.

In Canada's high-yield secondary market, Connacher Oil & Gas Ltd.'s bonds were "better bid" on Friday after the company announced an update to its strategic process, a trader said.

Air Canada Inc.'s bonds traded up 1 point on better quarterly guidance.

Russel Metals Inc.'s 6% senior notes due April 19, 2022 edged higher Friday on "buying from retail," a trader said.

Government bonds ended weaker on the shorter end of the curve with the yield on Canada's 10-year note up 4 bps to 2.09%. The 30-year bond yield rose 2 bps to 2.63%.

Ontario gains, Hydro-One wider

The Province of Ontario's bonds were "little affected" by Moody's Investors Service downgrade of the issuer to Aa2 from Aa1 on Thursday, a bond source said on Friday.

"Week over week, Ontario was still 4.5 and 3.5 basis points tighter in fives and 10s," the source said. "They had a good week, despite the downgrade, actually."

Standard & Poor's reaffirmed this week its AA- rating on the province but revised its outlook to stable from negative, while DBRS confirmed its AA rating.

Moody's on Friday downgraded Hydro-One Inc.'s senior unsecured rating to A1 from Aa3 as part of the province's downgrade. The electric utility 's bonds "widened by about 2 basis points as a result," the source said.

Molson Coors stronger

Molson Coors Brewing's 3.5% notes due 2022 traded 10 bps tighter at 150 bps bid, 147 bps offered on Friday, a trader said.

The company sold $500 million of the 10-year paper at 160 bps over Treasuries.

The tranche of 5% bonds due 2042 traded better at 178 bps bid, 175 bps offered. Molson Coors sold $1.1 billion of the 30-year bonds at Treasuries plus 190 bps.

Molson Coors is a beer brewer based in both Denver and Montreal.

Connacher rises

Connacher Oil & Gas' Canadian-dollar denominated 8.75% senior notes due 2018 traded higher on Friday to 99 bid, 101 offered, a trader said.

The issue priced nearly a year ago on May 20 at par.

The bonds were "better bid now after the company announced a strategic review is coming along," the trader said.

On Friday, the company said in a statement that it will issue first quarter earnings results on May 15 and preliminary data indicates financial results will show improvement.

"With regard to the strategic review process, Connacher and its advisors continue to be engaged with a number of highly qualified parties regarding the future plans of Connacher," the company said. "Interested parties' due diligence examinations are ongoing and the company will be advising shareholders of any significant developments in due course."

Connacher said in January that it had begun a strategic review to examine the company's business plans and strategic options. Connacher rejected an unsolicited takeover offer in December.

The integrated oil company is based in Calgary, Alta.

Air Canada better

Air Canada's 10.125% senior secured first-lien notes due 2015 (B2/B+/) rose 1 point in secondary trading Friday, a trader said.

"Quarterly guidance was good," the trader said.

Air Canada said after the markets closed on Thursday that it expected first quarter 2012 EBITDAR of $170 million to $180 million, higher than analysts' estimates,

On April 4, Moody's lowered Air Canada's corporate family rating and probability of default ratings to Caa1 from B3, its first-lien senior secured rating to B2 from B1 and its second-lien senior secured rating to Caa2 from Caa1.

Air Canada sold C$300 million of the 10.125% three-year notes at 99.046 on July 27, 2010.

The airline is based in Montreal.

Russel Metals edges up

Russel Metals' notes due April 19, 2022 traded at 100.25 bid, 100.75 offered, a trader said on Friday.

The 10-year senior notes (Ba1//) priced at par to yield 6% in a C$300 million offering on April 12.

The Mississauga, Ont.-based company is one of the largest metal distribution and processing companies in North America.

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