Newalta, Ford, Cara bring high-yield deals; Quebec reopens 10-years; GreenField on hold

By Cristal Cody

Prospect News, Nov. 8 - Canada's high-yield bond market stayed at the forefront on Tuesday with three new deals from Newalta Corp., Ford Credit Canada Ltd. and Cara Operations Ltd.

The Province of Quebec also tapped the provincial bond markets with a C$500 million reopening of 4.25% 10-year notes.

Canada's high-yield market had been dormant since the summer until Sherritt International Corp. priced a deal on Oct. 28.

Newalta's sale had more than 40 buyers and was "tons oversubscribed," a source said.

Ford Credit Canada's deal also attracted some interest in Canada's high-grade market, another source said.

"Even though they're high-yield in Canada, they're considered more of a crossover; so, they get a lot of investment-grade players," the source said.

Cara Operations (/BB-/DBRS: B) priced C$76 million of debt subscription receipts due Dec. 1, 2015 at 99 to yield 7.42% late in the day on Tuesday, according to an informed bond source.

The spurt of deals in Canada's high-yield market on Tuesday may be winding down for 2011, one bond source said.

"We don't expect other deals. This might be it before the end of the year," the source said.

The expected high-yield offering from GreenField Ethanol Inc. may be on the back burner for some time as the company negotiates terms, bond sources said Tuesday.

"The good thing is they don't want a ton, so at a higher yield they can probably get a few guys to play," one source said.

Another high-yield bond source noted that the "key" to the three high-yield deals priced on Tuesday is that they were "all repeat issuers. We have yet to see a new name come back to the market since July. That's going to be the next step to opening these markets."

New issues trader higher

In the secondary market, the new debt from Newalta and Ford Credit Canada traded higher at the close, a trader said.

Cara's existing 9 1/8% notes due 2015 traded in the afternoon at 99, where it has been range-bound for a couple of months, a source said.

"The Canadian market is a little better at kind of weathering the storms of what's happening in Europe than the U.S. market," the source said. "Generally, Canadian investors are more buy and hold so there's not as much secondary trading. But overall the risk trade is on now a little more than it has been in the last couple of months."

Canadian government bonds were mixed after Italy's prime minister said he would resign. The 10-year note yield rose 2 basis points to 2.18%. The 30-year bond yield fell 1 bp to 2.8%.

Newalta sells debentures

Newalta priced C$125 million 7¾% eight-year senior debentures (B1/DBRS: BB) at par on Tuesday, a bond source said.

The series 2 debentures due Nov. 14, 2019 priced at a spread of 578.2 bps over the Canadian bond curve.

"The successful completion of this refinancing will further enhance our financial flexibility and balance sheet by extending the average term of our debt outstanding," Mike Borys, Newalta's chief financial officer, said in a news release. "With a strong capital structure in place, we are well-positioned to meet the demand of future growth initiatives, while continuing to deliver attractive returns to our shareholders."

CIBC World Markets Inc. was the bookrunner.

Newalta last sold debt a year ago on Nov. 18. The company priced C$125 million 7 5/8% senior notes (B1/BB/) due Nov. 23, 2017 at par, or a spread of 496.9 bps versus the Government of Canada benchmark bond.

Proceeds of Newalta's latest issuance will be used to redeem the company's outstanding 7% convertible subordinated debentures and for general corporate purposes.

In the secondary market, the debentures traded up at 101 bid, 102 offered, a source said.

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

Ford Credit Canada prices

Ford Credit Canada (Ba1/BB+/DBRS: BB) priced C$450 million of 4.2% two-year senior notes at 99.949 to yield 4.227% on Tuesday, a bond source said.

The notes due Nov. 14, 2013 priced on guidance at a spread of 325 bps over the bond curve.

CIBC World Markets Inc., HSBC Capital (Canada) Inc., RBC Capital Markets Corp. and Scotia Capital Inc. were the lead managers.

Proceeds will be used for general corporate purposes.

Ford Credit Canada last sold two-year notes domestically on March 8, 2011. The company priced C$500 million of 4 7/8% senior notes due March 17, 2014 at par, or a spread of 255.2 bps over the Government of Canada benchmark.

In trading, a source said the notes traded up about 10 cents.

The company is a financing arm of the Ford Motor Co.

Quebec sells C$500 million

The Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million in a reopening of its 4.25% 10-year notes at 109.31 to yield 3.161% on Tuesday, a bond source said.

The notes priced at a spread of 100 bps over the Government of Canada benchmark.

Managers included National Bank Financial Inc., BMO Capital Markets Corp., Scotia Capital Inc., CIBC World Markets, RBC Capital Markets, Casgrain & Co. Ltd., Laurentian Bank Securities, Inc. and TD Securities Inc.

The total issue size is now C$6 billion.

GreenField on horizon

GreenField's potential sale of C$175 million of five-year senior second-lien notes (/B+/DBRS: B) is still being marketed, a bond source said Tuesday.

The company held a two-week roadshow for the deal in October.

Scotia Capital Inc. is the lead manager.

Proceeds will be used to repay debt, to terminate amounts outstanding under existing interest rate swap agreements and for general corporate purposes.

Ontario-based GreenField Ethanol is Canada's largest ethanol company and produces industrial and beverage alcohol, fuel ethanol and distillers' grains.

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