Ontario sells C$750 million; Quebec reopens long bonds; September typically busy month

By Cristal Cody

Prospect News, Sept. 1 - The Province of Ontario followed the Province of Quebec with bond deals during a window of opportunity in the volatile markets, sources said Thursday.

Ontario came on Thursday with C$750 million in a reopening of its 4% benchmark notes due June 2, 2021.

"The deal was very successful and we saw good investor response, both from domestic accounts and from broad-based investor support," an informed bond source said. "Consistent with the more favorable tone to the equity market, provincial issuers have taken advantage and ramped up their issuance."

Quebec sold C$500 million in an add-on to its 4.25% bonds due Dec. 1, 2043, a bond source said Thursday.

The market was a "little better yesterday and a little bit better today, but it's still challenging," the source said. "It was a tricky week [to bring deals]. The last week of summer is generally much quieter."

No offerings are expected on Friday, a half day in the Canadian markets ahead of Monday's Labor Day holiday. The U.S. markets also will be closed for holiday on Monday.

After the holiday weekend, primary activity in Canada's provincial market is expected to jump in September, according to sources.

"It's noteworthy that really for much of the second half of August, we had very limited provincial supply as financial markets were quite volatile and summer vacations meant that markets were less liquid," one source said. "The tone has improved and as we move into September and desks are fully staffed, I would expect a fairly aggressive pace of provincial issuance at least until we get closer to October elections."

September traditionally is one of the busiest deal months in Canada, the source noted.

"Last September, we had almost C$10 billion of [total domestic and foreign-denominated] provincial issuance, and last year, September was second only to April in terms of the amount of issuance," he said. "In the Canadian-dollar market last year, September was the single busiest month of the year."

Meanwhile, federal government bonds rallied on Thursday as investors moved back into safer-haven debt, sending yields down 6 basis points to 8 bps across the curve. Canada's 10-year note yield fell to 2.38% from 2.46%. The 30-year bond yield dropped 6 bps to 3.03%.

Ontario sells C$750 million

As the window of opportunity continued on Thursday, the Province of Ontario (Aa1/AA-/DBRS: AA) brought C$750 million in a reopening of its 4% benchmark notes due June 2, 2021 at 105.409 to yield 3.344% on Thursday, an informed bond source said.

The notes priced at a spread of 89 bps over the Government of Canada benchmark.

CIBC World Markets Inc. was the lead manager.

The issue was previously reopened on Aug. 12 in a C$750 million add-on priced at 105.916 to yield 3.288%, or a spread of 85 bps over the Government of Canada benchmark.

The issue now has a total of C$7.5 billion outstanding.

Quebec reopens long bonds

The Province of Quebec (Aa2/A+/A) kicked off the end of the dry deal spell with the sale of C$500 million in an add-on to its 4.25% bonds due Dec. 1, 2043 at 103.467 to yield 4.056%, a bond source said Thursday.

The bonds priced at a spread of 100 bps over the Government of Canada June 2041 benchmark.

National Bank Financial Inc. was the lead manager.

The province first brought the issue on Aug. 12 in a C$500 million offering priced at 103.875 to yield 4.034%, or a spread of 97 bps over the Government of Canada benchmark.

The total outstanding now is C$1 billion.

NewPage still, Catalyst up

A trader said that NewPage Corp.'s bonds were about unchanged on the day. He saw the Miamisburg, Ohio-based coated-paper manufacturer's 11 3/8% first-lien senior secured notes due 2014 at 86¾ bids, 87½ offered, which he said was unchanged to maybe a half-point better on "decent volume."

He saw NewPage sector peer Catalyst Paper Corp.'s 11% senior secured notes due 2016 right around 69 bid, 71 offered. "There were some trades" in the Richmond, B.C.-based papermaker's notes.

He said that Catalyst actually "has been inching up" from levels around 65 seen a few days ago, estimating that the bonds gained 1 point to 1½ points on Thursday, with "some trading in those."

At another desk, Catalyst's 7 3/8% notes due 2014 were seen having fallen by 1¼ points on the day, ending at 271/4.

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