Issuers flood Canadian, U.S. markets; Feeding frenzy for AltaLink deal; Cara sale on hold

By Cristal Cody

Prospect News, Nov. 3 - Corporate and provincial issuers waiting for a window found it on Thursday and tapped the Canadian and U.S. bond and preferred stock markets.

The markets took their cue after the European Central Bank cut its key interest rates to 1.25% from 1.5%, while Greece said no referendum would be held on the euro bailout plan.

In primary activity on Thursday, the Canadian Imperial Bank of Commerce priced an upsized C$1.25 billion of five-year deposit notes, while AltaLink, LP sold C$275 million of 30-year bonds.

AltaLink's deal was the hot ticket for the day.

"It came at the tight end of guidance. There was a bit of a feeding frenzy there," a source said. "The books opened and shut very quickly with over 50 buyers."

Provincial issuers Hydro-Quebec and the Province of Ontario also tapped the market for more than C$1 billion of bonds on Thursday.

Hydro-Quebec's sale went well, though it was "somewhat slower to sell," a source said. "The 40-year term isn't for every investor."

The Province of Ontario's deal was a "quick sale with a lot of client interest," the source said. "Their existing benchmark was C$9 billion outstanding, so we knew it was just a matter of time before they did a new 10-year."

Meanwhile, details emerged from the late-day sale on Wednesday from CNH Capital Canada Receivables Trust, which priced C$450.743 million in three tranches of asset-backed notes.

Sun Life Financial Inc., which announced third-quarter losses on Thursday, also brought a preferred stock deal on Thursday.

Two Canadian issuers were among the flood of deals across the border.

Xstrata Finance (Canada) Ltd. sold $3 billion of debt in four parts on Thursday, and Toronto-Dominion Bank priced $1.85 billion of senior medium-term notes in two tranches.

More supply eyed

More deal activity may be seen on Friday and the first part of the upcoming week for other issuers kept waiting in the pipelines, sources said Thursday.

"Next week is a short week, so we might see a lot of corporate deals at the beginning of the week," one bond source said.

The bond markets will be closed on Nov. 11 in Canada and the United States for holidays.

Cara Operations Ltd.'s sale of C$75 million of senior second-lien guaranteed notes likely will not price until later in the month, a source said Thursday.

GreenField Ethanol Inc.'s high-yield bond deal may price in the week ahead as terms still are being negotiated, a source said.

Meanwhile, bond sources were interested in the announcement on Thursday from RONA Inc., which plans to hold two cash tender offers later in the month for the C$200 million outstanding of its 5.4% debentures due Oct. 20, 2016.

"It's a Dutch auction," a bond source said. "It's very unique - we don't see many tender offers in Canada."

RONA said in a statement on Thursday that the company has the financial strength and flexibility to make the offers and the buyback will allow it to optimize its capital structure.

Boucherville, Quebec-based RONA (DBRS: BBB) is Canada's largest distributor and retailer of hardware, home renovation and gardening products.

In the secondary bond market, AltaLink's notes broke for pricing 4 bps tighter at 158 bps bid, a source said.

"It proceeded to tighten another 2 to 3 basis points since then and is closing the day about 7 [bps] inside of where it came, 155 [bps] bid," the source said.

Trading over the day was busy and "volume's quite heavy," a bond source said.

TD's new notes due 2016 sold earlier in the day traded about 13 bps tighter.

Sun Life Financial's outstanding debentures traded unchanged on the day, a source said.

"The tone of the markets seems good, equities rallied, corporate spreads are tightening," a source said.

Government bonds moved lower. The 10-year note yield rose 2 bps to 2.2%. The 30-year bond yield ended up 3 bps to 2.85%.

AltaLink sells 30-years

AltaLink sold C$275 million of 30-year medium-term notes (DBRS: A) at par to yield 4.462% on Thursday, according to the company and bond sources.

The series 2011-1 bonds due Nov. 8, 2041 priced at a spread of 162 bps over the Government of Canada benchmark, at the tight end of guidance of 165 bps, plus or minus 3 bps.

The deal was about four times oversubscribed.

"It's proved to be a popular credit and popular sale," a source said.

Scotia Capital Inc. was the lead manager.

Proceeds will be used to repay outstanding commercial paper.

AltaLink last was in the market a year ago with the sale of C$150 million of 4.872% bonds due Nov. 15, 2040 priced at par, or a spread of 132 bps over the Canadian government benchmark.

The existing 4.872% bonds due Nov. 15, 2040 traded at about 157 bps earlier on Thursday, a source said.

Calgary, Alta.-based AltaLink is Alberta's largest energy provider.

CIBC sells C$1.25 billion

The Canadian Imperial Bank of Commerce priced an upsized C$1.25 billion of 2.65% five-year deposit notes at 99.898 to yield 2.672% on Thursday, a bond source said.

The notes due Nov. 8, 2016 (Aa2/A+/DBRS: AA) priced at a spread of 118 bps over the Canadian bond curve. The deal was upsized from C$750 million.

CIBC World Markets Inc. was the lead manager.

Canadian Imperial Bank of Commerce is a Toronto-based financial institution.

CNH Capital Canada wraps deal

CNH Capital Canada Receivables Trust raised C$450.743 million in the sale of three tranches of series 2011-1 receivable-backed notes in a late-afternoon deal, a bond source said Thursday.

The trust sold C$207.345 million in the 1.694% class A1 notes due July 15, 2014 (Aaa//DBRS: AAA) at par, or a spread of 77 bpss over the Canadian bond curve.

In the class A2 tranche, CNH sold C$232.58 million of the 2.338% notes due July 17, 2017 (Aaa//DBRS: AAA) at par to yield 2.337%, or a spread of 127 bps over the bond curve.

The third tranche of class B notes (A1//DBRS: A) were sold in a C$10.818 million offering due May 15, 2018. The 3.444% notes priced at par, or a spread of 219 bps over the bond curve.

BMO Capital Markets Corp. and RBC Capital Markets Corp. were the lead managers.

Proceeds will be used to acquire title and interest in a pool of receivables originated by CNH Capital Canada Ltd., a unit of Amsterdam-based agricultural and construction equipment manufacturer CNH Global NV.

Sun Life sells preferreds

In other market activity on Thursday, Sun Life Financial announced that it sold C$250 million of preferred shares that yield 4.25% annually for the initial period ending Dec. 31, 2016.

The company sold the series 12R class A non-cumulative rate reset preferred shares (Baa2/BBB+/DBRS: Pfd-1) at C$25.00 per share.

Scotia Capital Inc., CIBC World Markets and TD Securities Inc. were the managers.

The deal includes an over-allotment option of an additional C$50 million of preferred shares.

The shares may be redeemed on Dec. 31, 2016 and on Dec. 31 every five years thereafter.

Sun Life has applied to list the preferred stock on the Toronto Stock Exchange.

Proceeds from the sale will be used for general corporate purposes.

Sun Life Financial is a Toronto-based leading international financial services organization.

Hydro-Quebec retaps long debt

Hydro-Quebec announced that it sold C$500 million in a reopening of its 5% debentures due 2050 at 123.836 to yield 3.811% on Thursday, a bond source said.

The series JN debentures due Feb. 15, 2050 (Aa2//AA-/DBRS: A) priced at a spread of 98 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the bookrunner.

This is the ninth tranche in the issue, which was first sold on Jan. 15, 2009. Hydro-Quebec previously reopened the issue on Sept. 27 in a C$500 million offering priced at 121.978 to yield 3.892%.

The total outstanding is C$5 billion.

Hydro-Quebec is a government-owned corporation, which generates, transmits and distributes electricity in Quebec.

Ontario brings 10-year paper

The Province of Ontario (Aa1/AA-/DBRS: AA) sold C$750 million of 3.15% 10-year notes at 99.589 to yield 3.196% on Thursday, a bond source said.

The province sold the notes due June 2, 2022 at 87 bps over the Government of Canada benchmark.

The province was expected to price a new 10-year note since the outstanding 4% 10-year benchmark notes have more than C$8 billion outstanding.

RBC Capital Markets was the lead manager.

Xstrata Finance prices

Xstrata Finance (Canada) priced $3 billion of debt (Baa2/BBB) in four parts on Thursday after the sale was increased from a benchmark size of $500 million, an informed source said.

The $800 million of 2.85% three-year notes were priced at 99.906 to yield 2.883% with a spread of Treasuries plus 250 bps. They were sold at the low end of talk in the 255 bps area, plus or minus 5 bps.

The tranche features a make-whole call at Treasuries plus 37.5 bps.

A $700 million tranche of 3.6% five-year notes priced at 99.919 to yield 3.618% with a spread of 37.5 bps over Treasuries. They were sold at the tight end of talk in the 275 bps area, plus or minus 5 bps.

There is a make-whole call at Treasuries plus 45 bps.

The largest part was $1 billion of 4.95%10-year notes priced at 99.874 to yield 4.966% with a spread of Treasuries plus 290 bps. They sold at the low end of talk in the 295 bps area, plus or minus 5 bps.

This tranche also has a make-whole call at Treasuries plus 45 bps.

Finally, there was a $500 million tranche of 6% 30-year bonds sold at 98.779 to yield 6.089% with a spread of Treasuries plus 300 bps. They were priced at the low end of guidance in the 305 bps area, plus or minus 5 bps.

The securities have a make-whole call at Treasuries plus 45 bps.

Bookrunners were Barclays Capital Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

The notes were priced under Rule 144A and Regulation S.

Proceeds will be used to repay debt and for general corporate purposes.

The debt is guaranteed by Xstrata plc, Xstrata (Schweiz), and Xstrata Canada Financial Corp.

Xstrata Finance last priced $500 million of 6.9% 30-year bonds at Treasuries plus 230 bps on Nov. 13, 2007.

The finance unit of mining company Xstrata plc is based in Toronto.

TD Bank sells $1.85 billion

Toronto-Dominion Bank priced $1.85 billion of senior medium-term notes (Aaa/AA-/AA-) in two tranches on Thursday, a market source said.

The $1.25 billion of two-year floating-rate notes was priced at par to yield Libor plus 45 bps.

TD Bank also reopened its 2.375% five-year notes to add $600 million. They were priced at 101.379 to yield 2.08% with a spread of Treasuries plus 117 bps.

Total issuance is $2.1 billion, including $1.5 billion priced on Oct. 12 at Treasuries plus 135 bps.

Both tranches are non-callable.

TD Securities (USA) LLC was the agent.

In the secondary market, the notes due 2016 traded stronger at 104 bps bid, 100 bps offered, a trader said.

The bank and financial services company is based in Toronto.

Cara sale pushed back

Cara is still seeking a waiver to its outstanding 9 1/8% senior second-lien guaranteed notes due Dec. 1, 2015 to allow it to issue debt. The consent expiration was set for the end of the day on Thursday.

Pricing is "probably another week or two" away, the source said.

Vaughan, Ont.-based Cara is Canada's largest full-service restaurant operator with brands that include Swiss Chalet Rotisserie & Grill, Harvey's and Montana's Cookhouse.

GreenField wraps roadshow

GreenField wrapped its two-week roadshow on Wednesday for its offering of C$175 million of five-year senior second-lien notes (/B+/DBRS: B).

Scotia Capital 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.

Andrea Heisinger contributed to this review

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