Peel sells C$300 million 30-year bonds; Tervita prices U.S. dollar deal; provincials widen

By Cristal Cody

Prospect News, Oct. 19 - The Regional Municipality of Peel kept the Canadian debt markets active on Friday with a C$300 million offering of 30-year senior bonds.

Canadian environmental and energy services firm Tervita Corp. tapped the U.S. high-yield market on Friday with its sale of $290 million of seven-year senior notes, the fourth U.S. dollar deal by a Canadian issuer for the week.

Xstrata Finance (Canada) Ltd. sold a U.S. dollar-denominated $4.5 billion four-tranche offering on Thursday.

The Province of Ontario also tapped the U.S. market for $2.25 billion of 1.1% five-year notes (Aa2/AA-/) on Thursday, and the Province of British Columbia sold $1.25 billion of 2% 10-year notes on Tuesday.

The new U.S. dollar deals from the provinces "both went well" as the issuers try to diversify their investor bases, a provincial source said. "British Columbia probably saved 4 to 5 basis points doing the 10-year and Ontario paid up about 4 or 5 bps to do their five-year."

Ontario probably saw the "best relative funding in five-years they've seen in some time," the source said. "It would be 15 to 20 basis points more expensive in Canada based on the last few months, so 4 to 5 basis points is not that big of a deal."

Otherwise, the markets mostly were quiet as desks emptied ahead of the weekend.

BCE Inc.'s preferred stock spiked in trading over the week, climbing from about 25.17 on Monday to 25.28 on Thursday before settling back to 25.25 on Friday on news that regulators had rejected the Bell Canada owner's C$3 billion takeover bid for Astral Media Inc., according to a market source.

BCE's 4.15% cumulative redeemable preferred shares due 2016 opened Friday at 25.22.

Corporate and provincial bonds traded wider on the day.

The Markit CDX Series 18 North American investment-grade index eased 3 bps to a spread of 94 bps.

The Markit CDX Series 18 North American high-yield index fell to 100.70 from 101.35.

Provincial bond spreads closed about 1 bp wider but stayed flat across the curve on the week, a bond source said.

Corporate and provincial issuance is expected to be more active in the week ahead before the Oct. 31 fiscal year-end for Canadian banks, sources said.

Only two provincial offerings were seen domestically over the week, from the Region of Peel and the Province of Quebec.

Quebec sold C$500 million in a reopening of its 4.5% medium-term notes due Dec. 1, 2017 at a spread of 62 bps over the Government of Canada benchmark on Tuesday.

Quebec's five-year notes traded unchanged at 62 bps bid on Friday, a source said.

Canadian government bonds traded higher as stocks fell on disappointing quarterly U.S. corporate earnings.

The 10-year note yield fell 5 bps to 1.8%. The 30-year bond yield dropped to 2.44% from 2.49%.

In the week ahead, the Bank of Canada will release its latest monetary policy statement. The overnight rate is expected to be left unchanged at 1%.

Peel sells C$300 million

The Regional Municipality of Peel (Aaa/AAA/) sold C$300 million of 3.85% 30-year senior bonds at 99.436 to yield 3.882% on Friday, an informed bond source said.

The bonds priced at a spread of 140 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the bookrunner.

The Regional Municipality of Peel consists of the cities and towns of Brampton, Caledon and Mississauga located in the Greater Toronto Area.

Tervita sells U.S. deal

Tervita priced a $290 million issue of 9¾% seven-year senior notes (Caa2/CCC+) at 98.756 to yield 10% on Friday, according to an informed source.

The yield printed at the wide end of the 9¾% to 10% yield talk.

Deutsche Bank Securities Inc. was the left bookrunner. Goldman Sachs & Co., RBC Capital Markets and TD Securities were the joint bookrunners.

The Calgary, Alta.-based environmental and energy services company plans to use the proceeds to repay debt under its U.S. dollar- and Canadian dollar-denominated revolvers, as well as to pay fees and expenses related to an amendment to its senior secured credit facilities, and for general corporate purposes.

Paul A. Harris contributed to this review

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