Molson Coors sells C$500 million seven-year notes; Nova Scotia Bank firms in trading

By Cristal Cody

Prospect News, Oct. 1 - The Canadian bond market closed the week out with a sale from the Molson Coors International Co.

The Canadian subsidiary of Denver-based Molson Coors Brewing Co. announced that it priced C$500 million in series A notes due 2017 (DBRS: BBB) on a private placement basis.

The notes carry a 3.95% coupon and priced at 99.685 to yield 4.002%, or a spread of 166.3 basis points over the Canadian government benchmark bond, a source said.

Bank of America Merrill Lynch and Toronto-Dominion Bank were the lead managers of the sale.

Proceeds will be used to refinance a portion of the company's current debt and for general corporate purposes, which may, in part, include payments to fund its pension obligations.

Molson Coors is a leading brewer that markets products including Coors Light, Blue Moon and Keystone Light beers.

Bank of Nova Scotia tighter

In other corporate bonds, the Bank of Nova Scotia's benchmark deal firmed in secondary trading on Friday, a source said.

The bank priced $1.25 billion of 2.05% five-year senior notes (Aa1/AA-/AA-) at a spread of Treasuries plus 83 bps on Thursday.

Late Friday, the notes tightened to 79 bps bid, 76 bps offered, the source said.

The financial services company is based in Toronto and Halifax, N.S.

RBC paper widens

Also on Friday, the Royal Bank of Canada's new paper sold earlier in the week continued to weaken in the secondary market, a trader said.

The 1.25% notes due 2014 (Aaa/AA-) traded Friday wider at an offer of 55 bps. RBC sold $1 billion of the notes on Wednesday at 53 bps over Treasuries.

The notes were seen trading Thursday afternoon at an offer of 54 bps, a source said.

The financial services company is based in Toronto.

Evraz sets roadshow

In new deals, Evraz Inc. NA and Evraz Inc. NA Canada will begin a roadshow for their $600 million offering of seven-year senior notes during the Oct. 4 week, according to an informed source.

The deal is set to price during the Oct. 11 week.

Credit Suisse and Barclays Capital are the joint bookrunners for the Rule 144A for life deal. Other syndicate names are expected to be announced.

The notes come with four years of call protection.

Proceeds will be used to refinance existing intercompany debt owed to parent Evraz Group SA.

Evraz is a Portland, Ore.-based steel company with operations in the United States and Canada.

Maple bonds offer yield pickup

On Wednesday, U.K.-based Lloyds TSB Bank plc priced C$350 million in five-year notes, its first issue of Maple bonds, which are a Canadian dollar-denominated bond issued by a foreign company.

The 4.57% notes priced at par to yield 260 bps over the Government of Canada curve.

The appetite is strong for Maple bonds, as well as other credit, said Mark Wisniewski, a portfolio manager with Toronto-based Gluskin Sheff + Associates Inc., which manages about C$5.5 billion in assets, including Maple bonds.

Lloyds' deal is the first Maple bond offered for sale in about a month, he said.

"The best time to issue Maples is when the market is void of product," Wisniewski said. "Usually Maples offer a good pickup in yield for a comparable credit rating. Typically, you can buy high quality credits in Maple bonds that would have a higher yield than what we could buy in the domestic market for the same rating."

Canadian bonds fall

Canadian government bonds fell, sending yields up on Friday. Canada's 10-year bond yield rose to 2.793% from 2.77%. The two-year note yield also rose to 1.374% from 1.37%.

U.S. Treasuries finished the week flat on mixed economic indicators.

The yield on the benchmark 10-year note was unchanged at 2.51%. The yield on the two-year note also finished flat at 0.4%.

U.S. economic data on personal income, construction spending and consumer prices came in slightly better than analysts expected, while manufacturing slowed, according to the Commerce Department.

The data helped fuel continued speculation the Federal Reserve will buy back Treasuries to stimulate the economy.

"The core PCE deflator, the FOMC's favorite inflation measure, rose 1.4% from last year, steady with July's rise," strategists at Confluence Investment Management LLC said in a research note. "The Fed has tended to employ monetary stimulus when the rate is below 2% and increase rates when this inflation measure exceeds 2.5%. The current rate explains the current push towards quantitative easing."

Bonds had fallen earlier in the day before comments from New York Federal Reserve president William Dudley in a speech on Friday that more Fed action is warranted unless the economic situation improves.

Chicago Federal Reserve president Charles Evans said Friday that he was concerned that the country is in a liquidity trap and more monetary easing may be desirable.

"We had another volatile morning in Treasuries during a window that was chock-full of releases/speeches and early rate lock activity," strategists at RBS Securities Inc. said Friday in a research note. "Prices then hovered nervously for the remaining hours and flows fell to almost nothing."

Paul A. Harris contributed to this review

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