Norbord sells $240 million; Ontario, Quebec tap market; North American Energy trades lower

By Cristal Cody

Prospect News, June 7 - Norbord Inc. launched and sold $165 million of three-year senior secured notes on top of guidance on Thursday in the Canadian and U.S. high-yield markets, an informed bond source said.

In addition, the company sold a $75 million tranche to a single investor.

"They came out with a specific target in mind, and the market tone really helped them on the back of a couple of days of stability," the source said. "The coupon was attractive at 6.25%, and it was well received by both Canadian and U.S. investors."

The Canadian markets also saw provincial activity with two offerings in the 10-year part of the curve from the Province of Ontario and the Province of Quebec.

Ontario sold C$750 million in a reopening of its 3.15% 10-year notes, and Quebec priced C$500 million in a reopening of its 3.5% 10-year notes.

"We have seen provincial spreads since Monday morning rally here by about 3 to 5 basis points across the curve," a provincial syndicate source said. "With that backdrop, it makes sense for issuers to tap the markets. We've definitely had good secondary market performance this week that provided us with a good platform to do today's deals."

Provincials rallied 2 bps to 3 bps on Wednesday and were seen going out Thursday about 1 bp tighter.

Friday's session may be quiet, and primary activity may stay light in the latter half of the upcoming week ahead of the June 17 Greek election, sources said.

"There's some residual concern as to what the tone will look like next week, especially the back half of next week," a source said.

One deal is expected in the upcoming week from Canada Housing Trust, which intends to sell C$5 billion to C$5.5 billion in a reopening of its 2.05% mortgage bonds due 2017.

In the high-yield secondary market, North American Energy Partners Inc.'s 9 1/8% senior debentures due April 7, 2017 were seen lower, a source said on Thursday.

High-grade bonds traded mostly flat. The Markit CDX Series 18 North American Investment Grade index ended unchanged at a spread of 122 bps.

Government bonds were weaker. Canada's 10-year note yield rose 3 bps to 1.83%. The 30-year bond yield increased to 2.38% from 2.35%.

Norbord prices on top of talk

Norbord sold its U.S.-dollar denominated $165 million of three-year senior secured notes at par to yield 6.25% on Thursday, an informed bond source said.

The notes due June 15, 2015 (Ba2/BB-/DBRS: BB) priced at a spread of 588.8 bps over Treasuries.

The deal was offered in a private placement in Canada and via Rule 144A. The deal had more than 20 investors and saw good distribution, the source said.

The notes will rank pari passu with the company's existing senior secured notes due 2017 and committed revolving bank lines.

Norbord also sold a second tranche of $75 million of senior unsecured notes (B2/B+/DBRS: B) to a U.S. institutional investor.

The company held a roadshow in Toronto and a North American investor call on Wednesday.

CIBC World Markets Inc. was the left bookrunner. Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch were the joint bookrunners.

The co-managers were Comerica Securities, Inc., RBC Capital Markets Corp., Scotia Capital Inc. and TD Securities Inc.

Proceeds will be used to refinance the company's $240 million of 7.25% debentures due July 1, 2012.

The Toronto-based company manufactures wood panels.

Ontario raises C$750 million

The Province of Ontario (Aa2/AA-/DBRS: AA) priced C$750 million in a reopening of its 3.15% 10-year notes at 102.737 to yield 2.833% on Thursday, a bond source said.

The notes due June 2, 2022 priced at a spread of 103.5 bps over the Government of Canada benchmark.

TD Securities Inc. was the lead manager.

The province first sold the issue on Nov. 3, 2011 in a C$750 million offering at 99.589 to yield 3.196%, or a spread of 87 bps over the government benchmark.

The province last reopened the notes on May 24 to sell C$750 million in an add-on at 101.87 to yield 2.933%, or 104 bps plus the Government of Canada benchmark. The total outstanding is C$6 billion.

Quebec reopens 10-year notes

The Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million in a reopening of its 3.5% medium-term notes due Dec. 1, 2022 at 104.317 to yield 3.016% on Thursday, a bond source said.

The notes priced at a spread of 116.5 bps over the Government of Canada benchmark.

National Bank Financial Inc. and BMO Capital Markets Corp. were the lead managers.

The co-managers included Casgrain & Co. Ltd., CIBC, Desjardins Securities Inc., Laurentian Bank Securities, Inc., Merrill Lynch Canada Inc., RBC Capital Markets, Scotia Capital Inc. and TD Securities.

Quebec originally sold C$500 million of the issue on Nov. 29, 2011 at 100.6 to yield 3.434%, or a spread of 115 bps over the Government of Canada benchmark.

The province last reopened the tranche on May 1 to sell C$500 million of the notes at 103.008 to yield 3.163%, or 105 bps over the Government of Canada benchmark. The total outstanding is C$4.5 billion.

North American Energy down

In Canada's secondary market, North American Energy Partners' 9 1/8% senior debentures due April 7, 2017 traded lower at 86.5 bid on Thursday, down from 89.0 bid two weeks ago, a bond source said.

North American Energy Partners sold C$225 million of the debentures (B3/B) on March 26, 2010 at par.

The company said on Wednesday that revenue jumped to C$282.51 million in the fiscal fourth quarter ended March 31 from $174.51 million a year ago, while the net loss fell to C$16.9 million from a loss of C$30.5 million in the same period a year ago.

North American Energy Partners is an Edmonton, Alta.-based provider of heavy construction, mining, piling and pipeline services in western Canada.

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