Ontario reopens bonds; Postmedia set to price; Air Canada cheaper, Allied Nevada Gold active

By Cristal Cody

Prospect News, Aug. 8 - The Province of Ontario tapped the Canadian markets on Wednesday in a C$600 million reopening of long bonds, while a high-yield deal is in the offing for Thursday's session.

Yield talk on Postmedia Network Inc. 's C$250 million offering of five-year senior secured first lien notes is in the 8.25% area, an informed source said on Wednesday.

In Canada's investment-grade market, one bond source said the slow day was "consistent with the last couple of weeks."

In the secondary market, Air Canada Inc.'s bonds continue to trade cheaper, a high-yield market source said on Wednesday.

Air Canada reported on Wednesday that second quarter revenue rose 2.4% and that it recorded a loss of 5 Canadian cents a share.

In other trading, Allied Nevada Gold Corp.'s 8.75% seven-year senior notes were active following a drop in second quarter revenue reported the previous day.

The Markit CDX Series 18 North American investment-grade index closed flat at a spread of 103 basis points.

The Markit CDX Series 18 North American high-yield index rose to 98.05 from 97.82.

Canadian government bonds saw modest gains. The 10-year note yield fell 2 bps to 1.82% and the 30-year bond yield ended 2 bps lower at 2.35%.

Ontario sells C$600 million

The Province of Ontario (Aa2/AA-/DBRS: AA) sold C$600 million in a reopening of its 3.5% bonds due June 2, 2043 at 102.399 to yield 3.374% on Wednesday, an informed source said.

The bonds priced at a spread of 101.5 basis points over the Government of Canada benchmark.

CIBC World Markets Inc. was the lead manager. Co-managers were National Bank Financial Inc., TD Securities Inc., RBC Capital Markets Corp., BMO Capital Markets Corp., Scotia Capital Inc., and Merrill Lynch Canada Inc.

The province first sold the issue on Jan. 26 in a C$600 million offering priced at 99.187 to yield 3.543%, or 88 bps over the Government of Canada benchmark.

The total outstanding is C$5.25 billion.

Postmedia readies C$250 million

Coming on Thursday, Postmedia Network is expected to price C$250 million of five-year senior secured first lien notes (Ba3/B+/) with yield talk in the 8.25% area, an informed bond source said.

Scotia Capital Inc. and Morgan Stanley are bookrunners. Co-managers are BMO Capital Markets Corp., CIBC World Markets Inc. and RBC Capital Markets Corp.

The notes due 2017 are offered as a private placement in Canada and under Regulation S/Rule 144A.

The issue is non-callable for three years, has a 101% change-of-control put and an equity claw up to 35% of the original amount per year in the first three years at par plus the coupon.

The deal includes a Canadian call at 100 bps plus the Government of Canada benchmark and a special call up to 5% of the original amount per year in the first three years at 103%.

The bonds may be redeemed in 2015 at par plus three-quarters of the coupon, in 2016 at par plus half the coupon, and in 2017 and later at par.

Proceeds will be used to repay debt under the company's existing term loan facility.

The company is a Toronto-based newspaper publisher.

Air Canada lower

Air Canada's 10.125% senior notes due Aug. 1, 2015 (B2/B+) traded at 102.00 bid on Wednesday, a source said.

The company sold C$300 million of the notes at 99.046 on July 27, 2010.

The airline is based in Montreal.

Allied Nevada Gold

Allied Nevada Gold's 8.75% senior notes due 2019 were seen in the secondary at 101.00 bid on Wednesday, up about ½ a point this month, a source said.

Allied Nevada Gold sold C$400 million of the seven-year notes (B3/B/) at 98.716 to yield 9.00% on May 18.

Reno, Nev.-based Allied Nevada Gold is a gold mining and exploration company.

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