RBC sells C$2 billion debentures before Basel III deadline; Enbridge flat; Algonquin firms

By Cristal Cody

Prospect News, Dec. 3 - The Royal Bank of Canada came on Monday with an upsized C$2 billion offering of subordinated debentures, an informed bond source said.

The deal "went very well," a source said. "It's about 3 [basis points] to 4 tighter."

As other banks release earnings over the week, the market may see one or two more subordinated offerings before the Basel III Jan. 1 capital rules deadline starts, another bond source said.

"We're expecting more before the calendar year when they can no longer issue this type of sub-debt under the Basel III rules. So it's issue now or never issue again," the source said.

Another Canadian bank source said it was unlikely there would be much new sub-debt issuance.

"We think the two banks that did those deals most recently had the most room to do those types of deals, so that takes care of everybody," the source said.

The week likely will see a steady deal pipeline, bond sources said.

"There's probably going to be a few more deals going into the end of this week and then we think it's going to start winding down," one source said.

Calgary, Alta.-based Trilogy Energy Corp. started a roadshow on Monday for a C$250 million offering of seven-year senior notes (/B/DBRS: B) that are talked to yield in the low to mid 7% area. The roadshow continues through Thursday.

Canadian markets were a little soft on the day in part due to digesting a jump in cash the previous week, according to market sources.

"We just had a big coupon maturity reflow on Dec. 1, but we did have a lot of issuance last week and to start this week, so that might be putting a little bit of softness into the market," a bond source said.

The Markit CDX Series 18 North American investment-grade index eased 1 bp to a spread of 100 bps.

The Markit CDX Series 18 North American high-yield index fell to 99.75 from 99.99.

Bank and financial paper has traded a "little soft on expectation there would be some issuance, so we've seen a little bit of weakness in bank financials," one source said.

In secondary trading, RBC's new debentures traded 1 bp to 2 bps tighter after pricing and came in 3 bps to 4 bps going out on the day, sources said.

New paper that priced the previous week traded flat to better.

Paramount Resources Ltd.'s 7 5/8% notes due 2019 edged up in trading.

Enbridge Inc.'s 3.19% medium-term notes due 2022 traded at the new issue price.

Westcoast Energy Inc.'s 3.12% medium-term notes due Dec. 5, 2022 also traded flat, a source said.

The Vancouver, B.C.-based natural gas processor and distributor sold C$250 million of the 10-year medium-term notes (/BBB+/DBRS: A) at a spread of 135 bps over the interpolated Government of Canada bond curve on Wednesday.

New offerings from Cominar Real Estate Investment Trust and Algonquin Power Co. are trading as much 10 bps to 15 bps better.

"The higher spread/yielding bonds are probably doing a little bit better than the better quality credits in here," a source said.

Canadian government bonds ended mixed on the day ahead of the Bank of Canada's key interest rate announcement on Tuesday. The 10-year note yield closed flat at 1.70%. The 30-year bond yield rose 1 bp to 2.30%.

RBC sells C$2 billion

Royal Bank of Canada (A1/A/DBRS: AA) sold an upsized C$2 billion of 2.99% subordinated debentures at par on Monday, an informed bond source said.

The debentures priced at a spread of 150 bps over the Government of Canada benchmark, tighter than talk of 151 bps, plus or minus 2 bps.

The deal was upsized from C$1.2 billion.

The notes are due Dec. 6, 2024 but are callable on Dec. 6, 2019. After Dec. 6, 2019, the notes pay the three-month Banker's Acceptance rate plus 110 bps until the Dec. 6, 2024 maturity.

RBC Capital Markets was the bookrunner.

The deal priced through Royal Bank of Canada's Canadian medium-term note program.

The Toronto-based financial services company plans to add the proceeds to the bank's general funds for general banking purposes.

Paramount edges up

Paramount Resources' 7 5/8% senior notes due 2019 (Caa1/B/) traded at 100.125 bid, 100.625 offered on Monday, a bond source said.

The company sold C$300 million of the notes at par on Thursday.

Calgary, Alta.-based Paramount Resources is an oil and natural gas exploration, development and production company.

Enbridge flat

The 3.19% 10-year medium-term notes that Enbridge Inc. (Baa1/A-/DBRS: A) sold on Thursday traded at the new issue price, a bond source said on Monday.

The company sold C$350 million of the notes at a spread of 143 bps over the Government of Canada bond curve.

Enbridge is a Calgary, Alta.-based oil and gas distributor and transportation company.

Cominar REIT tightens

Cominar Real Estate Investment Trust's 4.23% senior debentures due Dec. 4, 2019 traded in to 267 bps bid on Monday, a source said.

Cominar REIT (DBRS: BBB) priced C$200 million of the seven-year senior debentures on Thursday at a spread of 273 bps over the interpolated Government of Canada bond curve.

Quebec City-based Cominar REIT owns office, retail and industrial properties in Canada.

Algonquin Power firms

Algonquin Power's 4.82% senior debentures due Feb. 15, 2021 tightened in the secondary market to 315 bps bid, a bond source said.

The utility sold C$150 million of the debentures (/BBB-/DBRS: BBB) on Wednesday at a spread of 325 bps over the Government of Canada bond curve.

Oakville, Ont.-based Algonquin Power, a subsidiary of Algonquin Power & Utilities Corp., owns and operates regulated and non-regulated water, electricity and natural gas utilities in Canada and the United States.

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