VW Credit, National Bank of Canada in market; calendar fills up, Plenary offering emerges

By Cristal Cody

Prospect News, Jan. 24 - VW Credit Canada Inc. and the National Bank of Canada opened the week with bond sales in Canada and the United States, while several issuers announced plans to bring new paper to market later in the week, sources said.

"Credit seems a little bit firmer last week and into the open this morning and today," a source said. "The bank space reopened a smidgen tighter."

Also, the Province of Ontario sold an additional £50 million in a second tranche to its 2% series 109 medium-term euro notes due Dec. 10, 2013.

Coming up this week, new deals are expected to price from Institutional Mortgage Securities Canada, Plenary Properties LTAP LP and the Inter Pipeline Fund, according to sources.

In secondary trading, Catalyst Paper Co.'s bonds rose on the announcement that Rock-Tenn Co. will acquire Smurfit-Stone Container Corp., traders said.

In other activity, OPTI Canada Inc.'s bonds were flat in trading.

Canadian government bonds were mostly higher following U.S. Treasuries and a lack of data. The Canadian 10-year bond yield fell to 3.315% from 3.33%. The two-year note yield fell to 1.721% from 1.73%.

"There was no data in Canada or the U.S. today," said Kam Bath, a fixed income strategist with RBC Capital Markets Corp.

Yields "just drifted lower a little pretty much in line with the U.S. move," he said.

Traders were waiting for the Canadian consumer price index data, which is scheduled for release on Tuesday before Canada's auction of C$3 billion of two-year notes.

"That's pretty much our sole data point," Bath said. "Tomorrow's CPI number will set the tone for the two-year auction on Wednesday."

U.S. Treasuries started the week mostly flat before upcoming debt auctions, the Federal Reserve's two-day meeting and president Barack Obama's State of the Union address.

The 10-year note yield fell 1 basis point to 3.4% on Monday. The two-year Treasury note yield was unchanged at 0.61%.

National Bank of Canada prices

National Bank of Canada sold $1 billion of 1.65% three-year covered bonds on Monday at mid-swaps plus 35 bps, or Treasuries plus 62.2 bps, a source close to the deal said.

The bonds (Aaa/AAA/AAA) were sold at 99.974 to yield 1.659%.

The bonds were priced under Rule 144A and are non-callable.

Barclays Capital Inc., Citigroup Global Markets Inc., Morgan Stanley & Co. Inc. and National Bank Financial were the bookrunners.

In the secondary market, National Bank of Canada's notes firmed to 61.5 bps bid, 58.5 bps offered, a trader said.

The financial services company is based in Montreal.

VW Credit Canada upsizes

VW Credit Canada sold an upsized C$500 million in two tranches of bonds (A3//DBRS: A) on Monday, sources said.

"The deal went very well," said a source close to the sale. "There was very strong support for this name and those terms. The books were well over-subscribed."

The sale included C$250 million in a reopening of the 2.55% notes due Nov. 18, 2013 priced at 99.514 to yield 2.731%. The notes priced at a spread of 77.6 bps over the Canadian government benchmark, according to a term sheet. The sale was upsized from C$150 million and talked at the 78 bps area.

The company also sold C$250 million of 3.6% notes due Feb. 1, 2016 at 99.905 to yield 3.621%. The bonds priced at a spread of 101.9 bps over the Canadian government benchmark. The five-year notes, which were upsized from C$200 million, were talked at a 100 bps spread.

TD Securities Inc. and RBC Capital Markets Corp. were the lead bookrunners. BMO Capital Markets Corp. was a co-manager.

In the secondary market, the 2.55% notes were quoted tighter at 73 bps bid, 70 bps offered, a source said.

The new 3.6% notes also firmed to 96 bps bid, 93 bps offered.

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

Ontario adds £50 million

Also, the Province of Ontario sold an additional £50 million of 2% series 109 medium-term euro notes due Dec. 10, 2013 at 99.904 to yield 2.035%, the province said in a final term sheet released Friday.

The sale was the second tranche from the series 109 notes (Aa1/AA-). The province sold £250 million in the first tranche on Jan. 11 at a spread of 72 bps over gilts.

Deutsche Bank AG, RBC Capital Markets Corp. and RBS Securities Inc. were the bookrunners.

The proceeds will be used for general provincial purposes.

Plenary Properties on tap

In new deals coming up, Plenary Properties plans to sell C$1.05 billion in two tranches of bonds (/A/DBRS: A), an informed source said Monday.

The offering includes C$167.4 million of notes due 2014 talked in the 115 bps area over the relevant benchmark and C$838.2 million of bonds due 2044 talked in the area of 200 bps to 205 bps over the June 2033 Government of Canada benchmark bond.

RBC Capital Markets Corp. is the lead manager.

Pricing is expected on Tuesday.

Plenary Properties is a special-purpose entity created to build and maintain a high-security office and special-purpose building and 800-car parking facility for the Communications Security Establishment Canada Long-Term Accommodation project in Ottawa. The Communications Security Establishment Canada agency protects the Government of Canada's communication and electronic information.

Inter Pipeline preps notes

In another new offering, the Inter Pipeline Fund (DBRS: BBB) is expected to sell C$300 million of 11-year notes, an informed source said Monday.

The notes are expected to price on Thursday.

Inter Pipeline Fund is a Calgary, Alta.-based petroleum transportation, storage and natural gas liquids extraction business that operates in western Canada, the United Kingdom, Germany and Ireland.

Also on Thursday, the Institutional Mortgage Securities Canada is expected to sell C$206 million of series 2011-1 commercial mortgage pass-through certificates, an informed source said.

Investor one-on-one meetings are scheduled from Monday through Wednesday, with pricing expected on Thursday.

TD Securities is the lead manager.

The sale is a securitization of 16 Canadian commercial mortgages with two borrowers, Toronto-based RioCan Real Estate Investment Trust and Vaughan, Ont.-based Calloway Real Estate Investment Trust, the source said.

Catalyst Paper up

With the whole of the paper and packaging space better on news that Rock-Tenn will acquire Smurfit-Stone Container for $3.5 billion plus debt assumption, a trader said that Catalyst Paper's 7 3/8% notes due 2014 had moved up to 83 bid, 84 offered, up from their recent levels around 80 bid, 81 offered.

Last week, Catalyst's bonds - which had firmed to around the mid-80s from around 80-81 before on the company's recent announcement of a smallish bond redemption slated for next month - gave up all of those gains and sank back down to around the 80 area.

Another trader quoted Richmond, B.C.-based Catalyst's 11% senior secured notes due 2016 up a point at 101¼ bid, 102 offered, while seeing the 7 3/8s a half-point better at 83. "The bigger ones, the 11s, are a little more active," he said.

OPTI Canada flat

A trader said that OPTI Canada's bonds were mostly unchanged on Monday, quoting the Calgary, Alta.-based oil sands energy company's 7 7/8% notes due 2014 trading in a 65-66 context on "decent volume."

Within that range, he said that more of the trades took place at the lower end, around 65 to 651/2, which he called "maybe down ½ point" on "some trading" - although there was no fresh news out about the company.

Andrea Heisinger and Paul Deckelman contributed to this review

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