Allied Nevada Gold allocates deal; provincial deals forecast; bank deposit notes widen

By Cristal Cody

Prospect News, May 18 - Allied Nevada Gold Corp.'s high-yield offering of C$400 million of senior notes priced in a Canadian private placement and under a Rule 144A wrap on Friday, sources said.

Meanwhile, the domestic high-yield market in Canada has some "good buzz even with the volatility," a source said on Friday.

"We will be looking forward to some transactions hopefully," the source said. "We do expect something to materialize over the next month before it slows down for the summer in July."

Corporate issuance in Canada has been down over the year and high-yield issuance remains sparse.

In the week ahead, some marketing for various high-grade issuers are expected but "nothing really in the pipeline," a source said.

Provincial offerings are expected to pick up, a source said.

"This week, provinces stayed away from the market because of the CMB deal, but next week the window is wide open for them to tap the market," the source said.

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

Canadian activity was mostly quiet on Friday with the bond markets closed early ahead of the long holiday weekend. Canadian markets will be closed on Monday for the Victoria Day holiday.

"Risk-off mode started off today," a Canadian high-grade bond source said. "It was pretty quiet so we didn't really see that many flows. It was weaker in the morning."

Corporate bond spreads stayed wider on the week. The Markit CDX Series 18 North American investment-grade index ended Friday flat at a spread of 123 basis points. The investment-grade index closed a week ago at a spread of 109 bps.

"We opened slightly wider on Monday and spreads are still weaker week over week, about 2 to 3 bps," a source said. "We do see a sell-off in deposit notes. Deposit note spreads are out 5 bps or more."

HSBC Bank Canada and Canadian Imperial Bank of Commerce each priced C$1 billion of three-year deposit notes on Thursday.

Government bonds traded slightly lower on the day. Canada's 10-year note yield rose 1 bp to 1.89%. The 30-year bond yield closed up 1 bp to 2.43%.

Allied Nevada Gold yields 9%

Allied Nevada Gold priced its C$400 million offering of 8¾% seven-year senior notes (B3/B/) at 98.716 to yield 9% on Friday, informed sources said.

The notes due June 1, 2019 were announced on Wednesday that they were sold on a bought deal basis and the bonds allocated on Friday. Guidance on the bonds was given early Friday at an 8¾% to 9% yield.

The deal was offered in a private placement in Canada and in the U.S. high-yield market via Rule 144A.

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

The bonds have a three-year 35% equity clawback at a redemption price equal to 108.75 and a 101% poison put.

The issue may be redeemed at 101 plus the Canada Yield Price prior to June 1, 2016; 104.375 in 2016; 102.188 in 2017 and par in 2018 and thereafter.

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

As part of the deal, Allied Nevada Gold 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 company's expansion of its Hycroft Mine in Nevada and for general corporate purposes.

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

© 2015 Prospect News.
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