Canada markets slow on hurricane wait; Ainsworth Lumber plans November deal; bonds widen

By Cristal Cody

Prospect News, Oct. 29 - Canadian market activity slowed to a crawl on Monday as the U.S. bond markets closed early and will remain closed Tuesday in preparation for Hurricane Sandy.

"Credit opened up weak but, really, nothing's traded," one Canadian source said. "We've done a few token trades with clients, but there's been pretty much no follow-on of anything."

Another Canadian source also said primary activity cooled and remains less likely with the U.S. markets closed on Tuesday and the Oct. 31 fiscal year-end for Canada banks, though the "Canadian market will be open tomorrow. Secondary market activity will be slow going in to the year-end," the source said.

The hurricane also may have delayed some planned Canadian issuance, a source said.

"There's a deal or two that's softly planned for this week," the source said. "We think it's all going to be delayed until next week. The market's already done for the week. Things may get better Thursday or Friday, but I doubt the market will be open enough to be liquid."

Burlington, Ont.-based homebuilder Mattamy Group Corp. planned to start a roadshow on Monday for a U.S. dollar- and Canadian dollar-denominated $450 million equivalent of eight-year senior notes. Pricing is expected late in the week.

Looking ahead, Ainsworth Lumber Co. Ltd. is expected to come to market before mid-November for a portion or more of C$350 million of debt, a high-yield portfolio manager said on Monday.

Canadian bonds traded wider over the day with new issues out 2 basis points to 3 bps, a source said.

Alimentation Couche-Tard Ltd.'s three tranches of senior notes (Baa3/BBB-/) sold in a C$1 billion offering on Thursday are 4 bps to 5 bps wider.

"Couche-Tard widened about 2 or 3 [bps] at the get-go and this morning, they were calling them a total of 5 wider," the source said. "They gained a point, so they're out 4 to 5 [bps]."

Lower Mattagami Energy LP's 2.228% senior secured bonds due 2017 traded 2 bps to 3 bps weaker.

"Pretty much everything is at 2 or 3 [bps] wider," the source said.

The Markit CDX Series 18 North American investment-grade index eased 3 bps to a spread of 101 bps in light volume on Monday.

The Markit CDX Series 18 North American high-yield index fell to 98.78 from 99.30.

Government bonds traded higher on the flight-to-safety bid. Canada's 10-year note yield fell to 1.79% from 1.84%. The yield on the 30-year bond closed lower at 2.38% from 2.42%.

Ainsworth Lumber eyed

At least a portion of an announced C$350 million of new debt from Ainsworth Lumber is expected to come to market in the form of bonds before mid-November, a high-yield portfolio manager said on Monday.

Bank of America Merrill Lynch is expected to lead the bond deal, the source added.

As reported, proceeds, along with proceeds from the issuance of common shares, will be used to repay the company's senior secured term loan due 2014 and to refinance its 11% senior notes due July 2015.

Ainsworth is a Vancouver, B.C.-based manufacturer of engineered wood products.

Alimentation Couche-Tard's three tranches of senior notes (Baa3/BBB-/) traded 4 bps to 5 bps wider on Monday, a bond source said.

The company had sold C$350 million of 2.861% series 1 five-year notes at a spread of 140 bps over the Canadian bond curve.

The second tranche of C$450 million of 3.319% series 2 seven-year notes priced to yield 165 bps over the bond curve.

In the final tranche, C$250 million of 3.899% series 3 10-year notes priced at a spread of 195 bps over the Canadian bond curve.

The convenience store operator is based in Quebec.

Lower Mattagami weakens

Lower Mattagami Energy's 2.228% senior secured bonds due 2017 widened to the 83 bps to 84 bps area in secondary trading, a source said on Monday.

The company (A2//DBRS: A) sold C$200 million of the series 2012-2 bonds at par to yield 81 bps over the government benchmark in a private placement on Oct. 18.

Lower Mattagami Energy, a partnership of Ontario Power Generation Inc. and LM Energy Inc., operates hydroelectric generators on the Mattagami River.

Paul A. Harris contributed to this review

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