Canadian Satellite Radio details sale; calendar quiet; Viterra 6.406% 10-year notes firm

By Cristal Cody

Prospect News, Feb. 25 - Canadian bond markets ended the week fairly quiet, though new deals are expected to pick up, with at least one bond offering in the high-yield market.

Canadian Satellite Radio Holdings Inc. released additional details on Friday of its upcoming bond sale to help fund its all-stock merger with Sirius Canada Inc.

Meanwhile, a few provincial issuers are expected to be in the market as the fiscal year-end on March 31 draws near.

"We often have this situation where a number of provinces actually pre-borrow for the next fiscal year," said Douglas Porter, BMO Capital Markets' deputy chief economist. "It's possible that we'll still have a relatively active calendar in March."

The federal budget is widely expected to be announced sometime around March 22, and some provinces are expected to release their budgets also at the same time.

Provincial spreads did not react much to the spike in oil prices on the Libya conflict that helped government bonds rally, sources said.

"There was a tiny widening in Ontario likely because of supply and a narrowing in Quebec, about 1 basis point," Porter said. "There wasn't a big move in provincial spreads."

In secondary corporate bond trading, Viterra Inc.'s split-rated 6.406% 10-year notes were stronger since they priced earlier in the month, a source said.

OPTI Canada Inc.'s bonds also were active, traders said.

Government bonds see bid

Canadian government bonds have rallied up and down the curve along with U.S. Treasuries on the flight-to-safety bid. The rally sent yields down, but they're not expected to retreat much further.

Canada's 10-year bond yield fell to 3.291% from 3.32% on Friday. The two-year note yield fell to 1.783% from 1.81%.

Treasuries ended the day higher, with the 10-year note yield down 4 bps to 3.41%. The 30-year bond yield dropped 4 bps to 4.5%.

"There's a little bit of uncertainty in a situation like this," said Dan Greenhaus, market strategist at Miller Tabak. "As long as the uncertainty is persisting, you could make a case for further declines in yields."

Treasury yields dropped over the week on the revolt in Libya and as oil prices spiked. Investor tension had begun to ease by Friday morning as oil prices fell and stocks rose, one source said.

In U.S. economic data, the Commerce Department said the fourth-quarter gross domestic product was 2.8%, down from forecasts of 3.3%.

Looking ahead to the next week, no rate change to Canada's 1% overnight rate is expected after the Bank of Canada's policy meeting on Tuesday.

"In fact, not many are looking for a move in April either," Porter said. "Our view is the bank will hold off until the middle part of the year. The spike in oil prices this week has reduced the odds of a near-term rate hike."

Canadian Satellite Radio eyed

Canadian Satellite Radio Holdings released additional details on Friday of its upcoming bond sale to help fund the all-stock merger with Sirius Canada.

The company plans to sell 9.75% senior notes due 2018. The deal has been expected to be sized at C$150 million.

National Bank Financial Inc. and Canaccord Genuity Corp. are the joint bookrunners.

The deal is expected to price in early March, an informed source said.

As part of the merger, the company announced an exchange offer and consent solicitation for the $69.8 million outstanding in its 12.75% senior notes due 2014. The bond sale is expected to close on the same day as the exchange offer and merger. The exchange offer has an early tender date of March 11.

Shareholders of the Toronto-based XM Canada parent voted earlier in the month to approve the merger with Sirius Canada.

Viterra stronger

In the secondary market, Viterra's new 6.406% senior notes due Feb. 16, 2021 traded Friday at 102.125 bid, 103.125 offered, according to a source.

Viterra (Ba1/BBB-/DBRS: BBB) sold C$200 million of the notes at par on Feb. 10.

Regina, Sask.-based Viterra provides agricultural ingredients to global food manufacturers.

OPTI reverses direction

Also in trading, OPTI Canada remained an active credit as well, though there continued to be no news out to cause the volume.

Despite ending Thursday on the firm side, OPTI Canada's bonds were "softer after yesterday's run up," a trader said.

He called the 7 7/8% and 8¼% notes due 2014 down "a point and change" at around 531/2. Another trader saw the notes falling 1½ points, also to that 53½ area.

There continued to be no fresh news out on the Calgary, Alta.-based oil sands producer.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

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