First Capital Realty sells C$175 million debentures, breaks dry spell; bonds mostly flat

By Cristal Cody

Prospect News, March 28 - First Capital Realty Inc. sold an upsized C$175 million of nine-year senior debentures on Wednesday and broke the nearly three-week dry spell in new bond deals in Canada.

Canadian high-yield sources are wishing the same break happens soon.

"Absolutely nothing," said one high-yield syndicate source. "We keep hoping and hoping. We just don't have the issuers. They're not there."

Issuers took to the U.S. high-grade and high-yield markets in March in abundance, including a handful of Canadian issuers.

"Canada is on a different page than the U.S.," a bond source said. "In the U.S., there's lots of product and well bid. From our perspective, it's quite frustrating."

A Canadian high-yield deal in the works for a few months had been expected to price in March.

"It's still lingering," a bond source said. "The M&A side is taking longer. We still expect it, just not anytime soon unfortunately."

Canadian bond spreads have been tightening "just because there's no supply," the source said.

On Wednesday, bonds traded mostly flat to moderately weaker, sources said.

The Markit CDX Series 18 North American investment-grade index eased 2 basis points to a spread of 91 bps.

Bank and financial paper ended flat to lower with five-year notes from Bank of Nova Scotia trading unchanged to 3 bps wider, a source said.

In other trading, Total Capital Canada Ltd.'s short-dated notes sold last year are trading at nearly double the issue spread, a source said.

Ontario provincial bonds tightened about 1 bp to 2 bps in trading following the province's annual budget release, through yields dropped about 2 bps in early morning trading on Wednesday, a source said.

Ontario's 4.3% notes due 2017 firmed 2 bps over the day, the source said.

The markets will be watching for the Canadian federal budget release on Thursday and the potential for new covered bond regulation.

Canadian government bonds ended mostly flat after a weaker U.S. Treasury note auction. Canada's 10-year note yield fell 1 bp to 2.12%. The 30-year bond yield was unchanged at 2.67%.

First Capital Realty prices

First Capital Realty sold an upsized C$175 million of 4.5% series N senior debentures due March 1, 2021 on Wednesday at 100.084 to yield 4.489%, according to the company and a bond source.

The debentures (Baa3/DBRS: BBB) priced at a spread of 237.3 bps over the Government of Canada benchmark.

The deal was upsized from C$100 million.

RBC Capital Markets Corp. and TD Securities Inc. were the lead managers.

Proceeds will be used for development and redevelopment activities, for acquisitions and for general corporate purposes.

The company last sold debentures in the Canadian market on June 3 with a C$65 million add-on to its 5.6% senior debentures due 2020, priced at 102.486 to yield 5.244%.

Toronto-based First Capital Realty owns, develops and operates supermarket- and drugstore-anchored shopping centers in metropolitan areas in Canada.

Scotiabank eases

In the secondary market, Bank of Nova Scotia's 2.55% notes due 2017 eased 3 bps on the day to 96 bps bid, a source said.

Scotiabank sold $1.25 billion of the notes (Aa1/AA-/) on Jan. 5 at a spread of 172 bps over Treasuries.

The Canadian bank is based in Halifax, N.S.

Total Capital Canada widens

Total Capital Canada's 1.625% notes due 2014 were quoted on Wednesday by a source at a spread of 128 bps bid.

Total Capital Canada sold $750 million of the notes (Aa1/AA/AA) on Jan. 21, 2011 at a spread of 65 bps over Treasuries.

The Calgary, Alta.-based company is a financing arm of Total SA.

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