Ontario sells C$1 billion; week ahead steady with deals; Viterra's bonds tighten 40 bps

By Cristal Cody

Prospect News, Feb. 11 - The trade of the day on Friday was a C$1 billion offering of 3.2% five-year bonds from the Province of Ontario, sources said.

The bonds priced at a spread of 40.5 bps over the Government of Canada benchmark.

In the broader Canadian bond market, "we're ending the day higher on the long end, weaker on the short dates," a source said.

Coming up, NAL Energy Corp. is expected to fill a slot on the primary calendar, while more details emerged for a debt offering from Kruger Inc.

In addition, size details on the quarterly refunding from Canada Mortgage and Housing Corp. are likely to emerge early in the week ahead, a source said. The deal is talked to include five-year floating-rate notes and 10-year fixed-rate notes totaling more than $2 billion.

"We expect them to be in the market next week," a source said.

Canada Mortgage and Housing offers financing, mortgage loan insurance, mortgage-backed securities and other programs.

In the secondary markets, new bonds sold over the week were stronger, with Viterra Inc.'s notes considered the standout, sources said. Viterra's new bonds traded 40 basis points tighter on Friday, a source said.

Also in trading, Toyota Credit Canada Inc.'s new 3.55% medium-term notes due Feb. 22, 2016 firmed 3 bps to 4 bps, a source said. The deal on Thursday attracted strong interest since it was the company's first Canadian fixed-rate offering since 2007, a source said.

Ontario's five-year bonds weakened slightly and were seen ending the day at issue price, a source said.

Canadian government bonds were lower, sending yields up, on stronger trade data, and benefiting less than U.S. Treasuries on safe haven bids after Egyptian president Hosni Mubarak resigned.

Statistics Canada said Friday the trade balance went from a C$115 million deficit in November to a C$3 billion surplus in December, the first surplus in a year.

Canada's 10-year bond yield rose to 3.471% from 3.45%. The two-year note yield rose to 1.903% from 1.86%.

U.S. trade data released Friday showed the deficit was $40.6 billion wider in December from $38.3 billion in November, the Commerce Department said.

Treasuries ended the week with some gains on the mid to longer end of the curve. The 10-year note yield was down 6 bps at 3.63%, and the 30-year bond yield dropped 6 bps to 4.7% on the day.

Ontario sells C$1 billion

The Province of Ontario (Aa1/AA-/DBRS: AA) sold C$1 billion of 3.2% bonds due Sept. 8, 2016 at 99.752 to yield 3.249% on Friday, a source said.

The bonds priced at a spread of 40.5 bps over the Government of Canada benchmark.

"This will be their benchmark bond that will get opened a number of times going forward," a source said.

CIBC World Markets Inc. was the lead manager.

In the afternoon, Ontario's bonds were trading in the secondary about 20 cents lower in price from where they launched, a source said.

"I see it going out at 40.5 [bps] bid," the source said. "It will close at issue spread bid or better."

NAL Energy plans deal

NAL Energy plans to sell C$150 million to C$250 million of bonds by the end of February, a source said.

RBC Capital Markets Corp. and BMO Capital Markets Corp. will manage the sale.

NAL Energy is a Calgary, Alta.-based oil and gas producer.

Kruger to sell PIK notes

An offering recently announced for Kruger is expected to be upsized by C$10 million, lifting the deal to C$210 million, a source said Friday.

GMP Securities is expected to manage the sale of PIK toggle notes. Other details have not been finalized.

The offering "looks very interesting," one source said.

Kruger is a Montreal-based paper and packaging producer.

Viterra firms

The new bonds from Viterra (Ba1/BBB-/DBRS: BBB) narrowed in trading on Friday, sources said.

"We saw it closing about 40 basis points tighter," a source said. "It's now in the 240s bid side."

The company sold C$200 million of split-rated 6.406% senior notes due Feb. 16, 2021 at par on Thursday.

The company priced the notes at a spread of 296.9 bps over the Government of Canada benchmark.

Regina, Sask.-based Viterra provides agricultural ingredients to global food manufacturers.

Toyota Credit Canada tighter

Toyota Credit Canada's five-year bonds were slightly stronger in the secondary market on Friday, a source said.

Toyota Credit Canada (Aa2/AA/DBRS: AA) sold C$300 million of 3.55% medium-term notes due Feb. 22, 2016 at a spread of 79 bps over the Canadian bond curve on Thursday.

"It closed at 75, 70 [bps] over the curve," the source said.

The deal had more than 40 buyers, a source said.

"They haven't been in the market for some time," the source said. "The last time they came for a Canadian transaction was back in March for a floating-rate note and the last fixed-rate offering was in 2007."

Toyota Credit Canada is the financing arm of Toyota Motor Corp.

OPTI less busy, unchanged

Investors continued to keep OPTI Canada Inc. bonds busy, but far less so in Friday trading than on Thursday, traders reported.

One trader said just $30 million to $40 million of the Calgary, Alta.-based company's assorted issues changed hands, compared to hundreds upon hundreds of millions that turned over Thursday on the back of the company's earnings release.

The trader said the subordinated issues - the 7 7/8% and 8¼% notes due 2014 - were unchanged at 48 bid, 48½ offered.

Another trader said the notes continue to trade, but with "not a lot of price movement." The trader pegged the paper with a 48 handle.

In addition to releasing its fourth-quarter and full-year earnings on Thursday, the company held a conference call to discuss its operations status, specifically those at the Long Lake project. Though the project began 2010 positive, it ended without the company reaching the production levels it had previously expected. As such, company executives warned that the forecast given in November might not be met "unless operations improve in the near term."

Stephanie N. Rotondo contributed to this review

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