Allied Nevada Gold, Canada Housing, Kellogg heat up primary; H&R REIT offers C$400 million

By Cristal Cody

Prospect News, May 16 - Issuers came out in force on Wednesday to tap the Canadian high-grade and high-yield bond markets on Wednesday, syndicate sources said.

U.S.-based Allied Nevada Gold Corp. woke the market early with the announcement of its C$400 million offering of seven-year senior notes in a bought deal on Wednesday.

The issue is expected to be allocated late Thursday or on Friday, an informed source said.

"It's only had a day of marketing and we have another day of marketing in New York tomorrow, but we're already building up a book and taking orders," a syndicate source said.

Canadian, European and U.S. accounts are in the deal, the source said.

The company also simultaneously entered into a cross-currency interest rate swap that guarantees a U.S. dollar-denominated $400.4 million at an effective annual interest rate of 8 3/8%.

"When you do the swap, you actually save money going the other way," a bond source said.

Other U.S. issuers also may consider similar arrangements to sell in the Canadian market, the source said.

"There's definitely a few" considering the option, the Canadian high-yield source said.

Also in primary action on the day, Kellogg Canada Inc. sold C$300 million of two-year senior notes late in the afternoon.

Canada Housing Trust raised an upsized C$4.5 billion of Canada Mortgage Bonds in two tranches.

In the U.S. market, the Province of Ontario sold $3.5 billion of three-year bonds on Wednesday.

Coming up, a deal is expected from H&R Real Estate Investment Trust, which announced plans to sell C$400 million of mortgage bonds.

Market tone was a "bit soft" on Wednesday, a source said.

High-yield bonds traded down about a "quarter point in cash at the most. The equity market is performing terribly," a source said.

Bonds continued to trade wider on Wednesday. The Markit CDX Series 18 North American investment-grade index eased 2 basis points to a spread of 119 bps.

Government bonds stayed positive on the day. Canada's 10-year note yield dropped 2 bps to 1.92%. The 30-year bond yield fell 1 bp to 2.45%.

Allied Nevada Gold prices

Allied Nevada Gold sold C$400 million of seven-year senior notes (B3/B/) at par to yield 8¾% in a bought deal on Wednesday, syndicate sources said.

The notes due June 1, 2019 will be offered in Canada on a private placement basis and are Rule 144A eligible.

Scotia Capital Inc. and GMP Securities LP were the bookrunners.

The notes are guaranteed by Allied Nevada Gold's wholly owned domestic restricted subsidiaries.

A roadshow and national investor conference call was held on Wednesday.

The company has simultaneously entered with Scotia Capital into a cross-currency interest rate swap that guarantees a U.S. dollar-denominated $400.4 million at an effective annual interest rate of 8 3/8%.

Proceeds will be used to fund the expansion of the company's Hycroft Mine in Nevada and for general corporate purposes.

Reno, Nev.-based Allied Nevada Gold is a gold mining and exploration company.

Kellogg prices C$300 million

Kellogg Canada sold C$300 million of two-year senior notes (Baa1/BBB+/BBB+) at 99.977 to yield 2.112% on Wednesday, a syndicate source said.

The notes due 2014 priced at a spread of 79.8 bps over the Government of Canada benchmark.

TD Securities Inc., Merrill Lynch Canada Inc. and HSBC Capital (Canada) Inc. were the lead managers.

The company held a roadshow in Canada on May 1 and May 2.

Kellogg Co. is the guarantor.

Proceeds will be used for general corporate purposes, including the repayment of intercompany debt.

The company is a subsidiary of Battle Creek, Mich.-based Kellogg Co.

Canada Housing upsizes

Canada Housing Trust (Aaa/AAA/DBRS: AAA) sold C$4.5 billion of Canada Mortgage Bonds in two tranches on Wednesday, a bond source said.

Both tranches priced on top of guidance.

The trust sold C$2 billion in the reopening of the 2.65% notes due 2022, priced at 101.654 to yield 2.459%, or a spread of 61 bps over the Government of Canada benchmark.

The 2.65% notes due 2022 initially priced on Feb. 14 at a spread of 48 bps over the Government of Canada benchmark.

In the second tranche, the trust sold an upsized C$2.5 billion, up from C$1 billion, of five-year floating-rate notes at par to yield 11 bps over the three-month Canadian Dealer Offered Rate.

CIBC World Markets Inc. was the lead manager.

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.

Ontario prices $3.5 billion

The Province of Ontario sold $3.5 billion of 0.95% three-year bonds on Wednesday at a spread of Treasuries plus 57 bps, or mid-swaps plus 21 bps, according to an FWP filing with the Securities and Exchange Commission.

The bonds (/AA-/) were priced at 99.979 to yield 0.957%. They are non-callable.

Underwriters were CIBC World Markets, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. International plc, BMO Capital Markets Corp., National Bank Financial Inc., RBC Capital Markets, LLC, Scotia Capital (USA) Inc. and TD Securities (USA) LLC.

Manulife sells preferreds

In other pricing activity, Manulife Financial Corp. said on Wednesday that it sold C$250 million of non-cumulative rate reset shares that yield a 4.4% annual dividend for the initial period ending Sept. 19, 2017.

The company sold 10 million shares of the series 9 class 1 preferred stock (/BBB/DBRS: Pfd-2) at C$25.00 per share.

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

The dividend rate will reset every five years at a rate equal to the five-year Government of Canada bond yield plus 286 bps.

Proceeds will be used for investments in subsidiaries to partially fund the proposed redemption of Manulife Financial Capital Trust securities on June 30.

Manulife Financial is a Toronto-based financial services group.

H&R REIT to sell C$400 million

Looking ahead, H&R Real Estate Investment Trust plans to sell C$400 million in two tranches of mortgage bonds (DBRS: A) on a private placement basis.

The deal includes C$200 million of nine-year series A bonds and C$200 million of 10-year series B bonds.

The bonds are secured by The Bow, a skyscraper in Calgary, Alta.

Pricing is not expected for a couple of weeks, an informed bond source said.

Proceeds will be used to repay debt and for future acquisitions.

RBC Capital Markets is the bookrunner. Co-managers are CIBC World markets and TD Securities.

Downsview, Ont.-based H&R REIT owns office, single-tenant industrial and retail properties.

Andrea Heisinger contributed to this review

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