Cogeco Cable sells C$200 million; high-grade deals top C$1 billion; VW Credit firms 8 bps

By Cristal Cody

Prospect News, Nov. 10 - A few Canadian bond deals were squeezed in before the early market close on Wednesday, sources said.

In Canadian high-grade debt, Cogeco Cable Inc. sold C$200 million of 10-year senior secured debentures (DBRS: BBB) on Wednesday in a deal upsized from C$150 million, according to an informed source.

The company sold 5.15% series 2 debentures due Nov. 16, 2020 at 99.807 to yield 5.175%, or 219 bps over the Government of Canada's bonds due 2020.

The notes were talked at 220 bps versus the Government of Canada benchmark curve and priced 5 bps tighter at 215 bps versus the curve.

CIBC World Markets Inc. was the bookrunner.

Proceeds will be used to fund the redemption in full of the outstanding $175 million principal amount of the series 2001 notes due Oct. 31, 2011, for working capital and for general corporate purposes.

The Montreal-based television, internet and telephone operator is a subsidiary of communications company Cogeco Inc.

Market activity was mostly quiet ahead of the early close. The Canadian markets are closed Thursday for Remembrance Day and in the United States for Veterans Day.

"Yesterday we saw a lot of buying," one source said. "The market opened up softer this morning, but spreads are relatively unchanged today."

No new deals are expected on Friday, according to sources.

"Next week, we're expected to be busy," a source said. "There's quite a few roadshows scheduled."

Most of the week's new debt traded stronger in the secondary market, with $1.3 billion in Canadian investment-grade bonds sold since Monday, according to sources.

VW Credit Canada, Inc.'s three-year notes sold on Monday firmed 8 bps, new debt from AltaLink, LP tightened 5 bps in secondary trading and Capital Power Income LP's offering was mostly flat but narrowed slightly.

"On the Volkswagen and Capital Power deals, the strength was from the success of the roadshows for both of them," a source connected to the sales said. There was "strong appetite for these names and corporate issuance."

Government bonds weaken

Canadian government bonds were driven lower Wednesday after the auctions of C$3 billion of two-year debt and $16 billion of U.S. Treasuries.

Canada sold C$3 billion of two-year bonds to decent demand on Wednesday, sources said.

The Government of Canada sold the 1.5% bonds due Dec. 1, 2012 at an average yield of 1.556%, according to a Bank of Canada news release.

The auction was "helped by how much the market has cheapened over the last week," said Fergal Smith, managing market strategist at Action Economics in Toronto.

"The spread versus Treasuries is trading near its trend peak," he said. "The bid-to-cover was 2.45 so it improved a little bit from the previous auction in October, which was 2.42. The tail was very narrow at 0.1 of a basis point."

Government bonds have cheapened since the stronger U.S. jobs data report released on Friday and the Federal Reserve's announcement it would purchase $600 billion of Treasuries to boost the U.S. economy in the program known as quantitative easing, or QE2, traders said.

The 10-year Canadian bond yield fell to 2.972% from 2.98%. The two-year note yield fell to 1.576% from 1.6%.

"Looks like a continuation of the weakness we've seen for the past while," said Sheldon Dong, vice president of fixed-income strategy at TD Waterhouse Canada in Toronto.

"The markets have been front running the QE2, pulling back quite severely at the long end," he said.

The Federal Reserve announced on Wednesday that it would buy $105 billion of Treasuries over the next month as part of the $600 billion purchase program, with the first purchases scheduled for Friday.

VW Credit Canada narrows

In the secondary market on Wednesday, VW Credit Canada's new three-year notes (DBRS: A), which were sold at the start of the week, narrowed 8 bps, a source said.

The company sold C$550 million of 2.55% notes due Nov. 18, 2013 at 99.871 to yield 2.595%, or a spread of 93 bps over the Canadian benchmark bond.

In secondary trading on Wednesday, one source saw the notes at 85 bps.

VW Credit Canada is the Quebec-based financial service provider for Volkswagen Group Canada dealerships.

AltaLink firms

The new bonds from AltaLink sold on Tuesday firmed 5 bps in next-day secondary trading, a source said.

The company sold C$150 million of 4.872% bonds (DBRS: A) due Nov. 15, 2040 at par to yield 132 bps over the Canadian government benchmark.

The notes traded early afternoon at 127 bps over the benchmark bond.

Calgary, Alta.-based AltaLink is Alberta's largest energy provider.

Capital Power unchanged

Elsewhere, Capital Power Income's notes were mostly unchanged in secondary trading, a source said.

Capital Power sold C$300 million of 10-year notes at par on Tuesday, an informed source said. The 5.276% notes due November 2020 priced at a spread of 229.1 bps over the Canadian benchmark bond.

"It's opening up this morning at 229," a source said.

Capital Power is a subsidiary of Edmonton, Alta.-based energy producer Capital Power Corp.

Enbridge Income Fund flat

In another new offering from earlier in the week, Enbridge Income Fund's debt sold on Monday was slightly weaker to mostly flat in secondary trading, according to a source.

The company sold C$100 million of 4.85% senior medium-term notes (DBRS: BBB) due Nov. 12, 2020 at 99.906 to yield 4.862%, or 199 bps over the Canadian government benchmark bond.

"Enbridge is at 200, so it's flat," the source said.

Calgary, Alta.-based Enbridge Income Fund is an unincorporated open-ended trust that focuses on energy infrastructure assets.

Mercer prices $300 million

In deals sold by Canadian firms in the United States, Mercer International Inc. priced a $300 million issue of seven-year senior notes (B3/B) at par to yield 9½% on Wednesday, according to an informed source.

The yield printed at the wide end of the 9¼% to 9½% price talk.

RBC Capital Markets and Credit Suisse were the joint bookrunners.

Proceeds, along with cash on hand, will be used to fund the tender for the company's 9¼% senior notes due 2013.

Mercer International is a Vancouver, B.C.-based pulp manufacturing company.

U.S. dollar sales

In other U.S. dollar-denominated sales on Wednesday, Calfrac Holdings LP sold an upsized $450 million issue of 10-year senior notes (B2/B+/) at par to yield 7½%, according to an informed source.

The yield printed on top of the price talk.

In the secondary market, a source saw the notes at 101.25 bid, 100.75 offered.

Calfrac Holdings is a Delaware limited partnership that is indirectly wholly owned by Calfrac Well Services Ltd., a Calgary, Alta.-based provider of oilfield services, including fracturing, coiled tubing, cementing and other stimulation services.

Also, Precision Drilling Corp. priced an upsized $650 million issue of 10-year senior notes (Ba2/BB+/) at par to yield 6 5/8% on Wednesday, according to an informed source.

The yield printed 12.5 bps beyond the wide end of the 6 3/8% area price talk.

In trading later in the day, the notes were quoted at 102 bid, 102.5 offered.

Precision Drilling is a Calgary, Alta.-based provider of energy services to the oil and gas industry.

Newalta to sell C$125 million

Still on tap, Canada's Newalta Corp. is expected to sell C$125 million of senior notes, according to market sources.

A roadshow could start as early as the Nov. 15 week, according to a trader of Canadian high-yield bonds.

However a source close to the deal said on Wednesday that the company has not finalized its plans to issue notes.

CIBC World Markets is expected to lead the offering.

Proceeds would be used to refinance bank debt.

Moody's Investors Service assigned its B1 rating to the notes on Wednesday.

Newalta is a Calgary, Alta.-based industrial waste management and environmental services company.

Paul A. Harris and Paul Deckelman contributed to this review

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