Laurentian Bank, Canadian Satellite on tap; provincial sales to remain steady into March

By Cristal Cody

Prospect News, Feb. 9 - The Canadian bond supply is expected to pick up with a couple of new offerings in the works, sources said Wednesday.

Laurentian Bank of Canada is expected to sell C$100 million of three-year floating-rate deposit notes.

Coming up in the high-yield pipeline, traders are looking to the upcoming Feb. 17 vote by shareholders of Canadian Satellite Radio Holdings Inc., the parent of XM Canada, on the merger of XM Canada with Sirius Canada Inc. Canadian Satellite Radio is expected to sell about C$150 million of senior notes to help fund the deal.

Also, Montreal-based paper and packaging producer Kruger Inc., which is said to be planning a major expansion in Memphis, Tenn., is planning to sell up to C$200 million of bonds, a source said. GMP Securities is expected to manage the sale. Other details have not been finalized.

Meanwhile, provincial issuance will be steady into March, said Warren Lovely, a government-debt strategist for Canadian Imperial Bank of Commerce in Toronto.

"As we approach provincial budget season, we have some provinces trying to get a few last deals done," he said.

Borrowing requirements for the upcoming fiscal year, which starts after March 31, are expected to gradually decline.

"Economic growth has improved and deficits should be smaller and funding for infrastructure projects will be reigned in as stimulus programs come to an end," Lovely said. "That being said, there's still a lot of debt to refinance."

Canadian government bonds made gains on Thursday following a good auction in Canada and a strong auction of debt in the United States.

The Bank of Canada sold C$3.2 billion of 2% bonds due March 1, 2014 at an average yield of 2.262%.

Bond yields fell on the day. Canada's 10-year bond yield fell to 3.45% from 3.49%. The two-year note yield dropped 1 basis point to 1.87%.

"The auction came in really well in Canada, but that wasn't the big driver of yields today," said Ian Pollick, portfolio strategist at TD Securities.

There was no major economic data out in Canada on Wednesday.

The U.S. Treasury Department's strong auction helped propel rates in Canada and the United States, he said.

The 10-year Treasury note yield dropped 9 bps to 3.65%, while the two-year note yield shed 5 bps to end at 0.8%.

The Treasury auctioned $24 billion of 10-year notes at a high yield of 3.665%.

"What we saw was a massive amount of indirect bidders accounted for 71% of the auction," a source said. "That's the highest we have ever seen."

Indirect bidders include foreign central banks, while direct bidders include non-primary dealers.

On Thursday, the key will be how the sale of $16 billion of 30-year bonds goes, sources said.

Laurentian Bank deal

Laurentian Bank of Canada is expected to sell C$100 million of floating-rate deposit notes due Feb. 14, 2014, a source said.

The notes are talked at 75 bps over the quarterly CDOR.

Laurentian Bank Securities, Inc. will manage the sale.

Quebec-based Laurentian Bank is a banking institution with operations across Canada.

OPTI Canada holds

OPTI Canada Inc.'s 8¼% notes due 2014 "were holding their own," a trader said, seeing those bonds at bid levels between 53 and 53½ with "some trading," but unchanged levels.

However, with the troubled Calgary, Alta.-based oil sands energy company scheduled to report its fourth-quarter and year-end financial results on Thursday, followed by a conference call with company executives, OPTI's already beaten-down equity fell sharply again on the Toronto Stock Exchange; its shares lost 4 cents, or 10.61%, to end at C$0.30 per share.

Nexen, Inc. - which owns 65% of the Long Lake, Alta., joint-venture project that OPTI owns the remaining 35% of, has also scheduled a Thursday conference call to give an operations update on the project, which has been slower than expected in ramping up to its target levels for converting bitumen found in the oil sands into usable crude oil.

Paper bonds flat

A trader said that paper names "have been sort of blah." He quoted Catalyst Paper Corp.'s 11% senior secured notes due 2016 trading at 104 bid, "up a little bit," but saw the Richmond, B.C.-based papermaker's 7 3/8% notes due 2014 remaining around 88 bid, on "not much activity."

He said that sector peer NewPage Corp.'s 11 3/8% senior secured notes due 2014 were "holding their own" at around 101 bid, around where the Miamisburg, Ohio-based coater-paper manufacturer's bonds have been recently.

Paul Deckelman contributed to this review

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