Ontario reopens long bonds, sells euro notes; Quebecor Media set to price C$250 million

By Cristal Cody

Prospect News, Dec. 14 - The Province of Ontario priced two deals on Tuesday, including C$600 million in a reopening of bonds due 2041 and NOK 500 million of euro medium-term notes, according to sources.

In the Canadian high-yield market, Quebecor Media Inc. is expected to price C$250 million of senior notes due Jan. 15, 2021 on Wednesday, an informed source said.

Elsewhere in trading, OPTI Canada's bonds "got crushed," a trader said.

Canadian government bonds were off on the day, sending yields up, as the bonds tracked volatile U.S. Treasuries trading on a dovish Federal Reserve statement.

The Canadian 10-year bond yield rose to 3.343% from 3.25%. The two-year note yield ended at 1.731%, compared to 1.68% on Monday.

U.S. Treasuries fell after the Federal Reserve's statement on Tuesday indicated no plans to ease up on the $600 billion debt buyback program known as quantitative easing.

The 10-year Treasury note yield has risen nearly 90 basis points since the Federal Reserve met on Nov. 3, when the 10-year note closed at 2.57%. The yield on the 10-year benchmark note ended the day at 3.46% from 3.27% on Monday.

Ontario sells C$600 million

Ontario sold C$600 million in a reopening of its 4.65% bonds due June 2, 2041 at 101.92 to yield 4.553% on Tuesday, an informed source said.

The bonds priced at a spread of 82 bps over the Government of Canada benchmark.

"Canada gave us a fairly small window on things, but it seemed to go well," a source said. "It's now trading at 81.5."

The issue now has C$3.75 billion outstanding.

CIBC World Markets Inc. was the lead manager.

Ontario sells euro MTNs

Also on Tuesday, the Province of Ontario sold NOK 500 million of 3.375% euro medium-term notes due Jan. 20, 2016 early Tuesday, a source said.

"It sold well out of the gates," the source said. "The issuer was very pleased, and demand was quite good."

The notes were sold at an issue and reoffer price of 101.105/99.48.

Additional pricing terms were not immediately available.

Deutsche Bank Securities Ltd., HSBC Bank Canada and TD Securities Inc. were the joint lead managers.

Quebecor Media sets talk

Price talk on Quebecor Media's senior notes due Jan. 15, 2021 on Tuesday was for a 7.25% to 7.375% yield, an informed source said.

The roadshow was held Monday in Toronto and Tuesday in Montreal. The notes will be sold under Rule 144A.

Scotia Capital Inc., TD Securities Inc. and National Bank Financial Inc. are the lead managers. Co-managers include Bank of America Merrill Lynch, RBC Capital Markets Corp., Citigroup Global Markets Inc., BMO Capital Markets Corp., Desjardins Securities Inc., HSBC Capital (Canada) Inc. and CIBC World Markets Inc.

The notes will have a change-of-control put at 101%.

Proceeds will be used by subsidiary Sun Media Corp. to redeem and retire all outstanding Sun Media notes in February and to finance the settlement and termination of related hedging contracts.

Montreal-based Quebecor Media is a subsidiary of Quebecor Inc., one of Canada's largest communications and media companies.

OPTI debt gets whacked

A trader said OPTI Canada was one of the day's volume leaders, as another market source said the bonds "got crushed."

The first trader called the company's debt down 2 to 3 points, seeing the 8¼% notes due 2014 around 67 and the 7 7/8% notes due 2014 around 66.

The second source pegged the 8¼% notes at 67 bid, 68 offered and the 7 7/8% notes at 66 bid, 67 offered.

The Calgary, Alta.-based oilsands producer has seen its debt steadily decline in recent weeks, though there hasn't been much news out. There was, however, news out on Tuesday, as Standard & Poor's said it had cut its rating.

"That doesn't help," a trader said.

S&P dropped OPTI's corporate credit rating to CCC- from CCC+. The first-lien debt was cut to CCC+ from B and its senior secured debt to CCC from B-.

The outlook is negative.

The rating agency attributed its actions to concerns about the company's Long Lake joint venture project with Nexen Inc.

"As the ongoing operational issues at the Long Lake project continues to stall production ramp-up, the acceleration of OPTI's cash burn is faster than we expected during our most recent review in August," said credit analyst Michelle Dathorne in a statement. "Given the company's relatively finite cash resources in 2011, its progress on its strategic review process is also straining its liquidity position and overall financial flexibility.

"As a result, we believe its ability to satisfy its financial and operational obligations has weakened further,"

Last month, Nexen warned that production at the project would be less than anticipated, while OPTI said its profitability depended largely on how the project fared.

Stephanie N. Rotondo contributed to this review

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