FMO sells Maple bonds; primary calendar light; provincials stable, high yield tightens

By Cristal Cody

Prospect News, May 27 - The Netherlands Development Finance Co. (FMO) raised C$100 million in its "inaugural Maple issue" on Friday, according to a bond source.

"It was interesting to see that deal get priced," the source said. "That market's been quiet over the last couple of years. Before KBN, we hadn't seen a SSA [super sovereign agency] Maple issue priced in Canada for quite a while."

Kommunalbanken Norway, a state-owned local government funding agency, priced C$275 million in 3.74% 10-year fixed-to-floating rate Maple bonds (Aaa/AAA/) on May 18 at a spread of 123 basis points over the Canadian government benchmark.

"Both issuers are wanting to diversify their funding base," the source said.

A deal for C$200 million to C$300 million of long bonds from the City of Toronto also remains in the works but has not priced yet, one bond source said.

"We know how much the city is going to have to do this year and we know they have an interest in longs," a bond source said. "We think it's going to come in the next couple of weeks but there's nothing specific yet."

The Province of Ontario also "may tap the long end next week. We've seen better interest in longs," the source said.

Provincial bond spreads remained stable on Friday. "They tightened by about a half basis point in fives and 30s yesterday," a source said. "Longs are unchanged on the day. On the week, fives and longs have widened by about half a basis point and 10s widened by a basis point and a half."

On the high-yield side on Friday, corporate issuers stayed on the sidelines.

In trading, high-yield bond spreads narrowed on Friday.

The "market is better for sure after a rough week," the source said.

Flint Energy Services Ltd.'s new eight-year notes rose in trading on Friday, though Savanna Energy Services Corp.'s seven-year notes weakened on the bid side.

Government bonds were lower, sending yields up 1 bp, following the move of U.S. Treasuries. Canada's 10-year bond yield rose to 3.06% from 3.05%. The 30-year bond yield also rose 1 bp to 3.5%.

The Canadian markets likely will be quiet on Monday, which is a holiday in the United States. "We figure our markets are going to be affected as well with a number of investors out," a source said.

Also coming up in the week ahead, the Bank of Canada is not expected to increase the key rate at its policy meeting on Tuesday. Market participants do not forecast a rate hike until September or later.

FMO sells Maple bonds

Netherlands Development Finance sold C$100 million of 2.25% three-year Maple bonds on Friday, an informed bond source said.

The bank (/AAA/) sold the notes due June 10, 2014 at a spread of 38.3 bps over the Government of Canada benchmark to yield 2.255%.

BMO Capital Markets Corp. was the lead manager.

The company is an entrepreneurial development bank for the Netherlands.

Flint Energy better

Flint Energy Services' new notes rose in the secondary market on Friday, a bond source said.

The company sold C$175 million of 7½% eight-year senior notes (B2/BB-) at 99 to yield 7.669% on Wednesday.

The bonds traded Thursday at 98.25 bid, 99.25 offered and were seen trading higher at 99.125 bid, 99.375 offered late Friday.

Flint Energy is a Calgary, Alta.-based provider of products and services to the oil and gas industries.

Savanna dips on bid side

Savanna Energy Services' new debt was weaker on the bid side in trading, a source said.

The company priced C$125 million of 7% senior notes due May 25, 2018 at par on May 19. The notes (/B+/DBRS: B) traded Friday at 99.50 bid, 100.50 offered.

Calgary, Alta.-based Savanna Energy is a drilling and well servicing provider in the oil and gas industry.

Catalyst Paper flat

Meanwhile, a trader said Catalyst Paper Corp.'s 7 3/8% notes due 2014, which "had been heading lower the whole week," were unchanged at 51 bid, 53 offered.

The Richmond, B.C.-based papermaker's 11% senior secured notes due 2016 were unchanged to "maybe up a half point by the end of the day," at 88½ bid.

Paul Deckelman contributed to this review

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