Home Capital sells C$150 million; Rogers Communications bonds widen 10 bps; telecom weak

By Cristal Cody

Prospect News, April 29 - Home Capital Group Inc. priced C$150 million of 5.2% senior debentures due April 15, 2016 in the lone bond sale in Canada on Friday, an informed bond source said.

Home Capital's new debentures had not been cleared for secondary trading late afternoon, but the notes traded in the gray market about 5 basis points tighter, another source said.

"Having said that, when they first started marketing the deal, the spreads they were talking about were a lot tighter than where it came at 265 [bps]," the source said.

Initially, price talk on the notes was the low- to mid-200 bps range.

Corporate bonds narrowed a basis point or two in trading on Friday, except the telecom sector, which has seen an abundance of new deals on the long end of the curve since March, according to one bond source.

"We had a supply in telecom product in March that pushed spreads out a little bit," the source said. "The market hadn't seen much non-financial supply in the long end subsequent to that."

Telecom companies including Rogers Communications Inc. and Bell Aliant Regional Communications LP have brought more than C$3 billion of bond deals in the past month.

"A lot of them aren't trading any better than issue spread. It's been tough for them to perform," the source said. "They're the only sector that's actually widened this month."

Rogers Communications' new 10-year notes (Baa2/BBB/DBRS: BBB) widened 10 bps to 15 bps in trading on Friday, the source said.

The telecom deals and "concern for further issuance in the telecom sector" also have weighed on lower-rated bonds over the past month.

"This month has been characterized by higher-grade issuance. Last month, almost half of it was in triple-B categories," the source said. "This month, it's just under 17%."

The primary market is expected to stay active in May and the week ahead.

"Lower-grade stuff is looking to come," the bond source said. "There are a string of deals waiting to get done."

Government bonds gain

Canadian government bonds closed higher on Friday, sending yields down across the curve. The 10-year bond yield fell 2 bps to 3.21%. The 30-year bond yield dropped to 3.69% from 3.71%.

In economic data on Friday, Statistics Canada said the real gross domestic product fell 0.2% in February following a 0.5% increase in January.

Treasuries made positive gains on lackluster trading on the last trading day of the month, a source said Friday. The 10-year benchmark note yield dropped 2 bps to 3.29%, while the 30-year bond yield fell 1 bp to 4.4%.

"Very slow day. We had a narrow range," a government bond source said.

Home Capital sells debentures

In the lone corporate bond deal on Friday, Home Capital Group priced C$150 million of 5.2% senior debentures due April 15, 2016 at par, an informed bond source said.

The notes (/BBB/BBB) priced at a spread of 265 bps over the Canadian bond curve, in line with early morning guidance but wider than initial talk of the low to mid-200 bps range.

The notes have a Canada call feature at 66 bps.

Scotia Capital Inc. was the lead manager. Co-managers were BMO Nesbitt Burns Inc., Desjardins Securities Inc., RBC Dominion Securities Inc. and Cormark Securities Inc.

The proceeds will be used to provide additional capital to Home Trust Co., a subsidiary of Home Capital, to meet regulatory requirements for further growth and for general corporate purposes.

Home Capital Group is a Toronto-based mortgage lender and credit services provider.

Rogers Communications wider

Rogers Communications' notes, along with other telecom bonds, stayed weak in secondary trading, a source said Friday.

The company sold the 5.34% senior notes due 2021 on March 8 at 270.4 bps over the government benchmark. On Friday, the notes were seen trading 10 bps to 15 bps wider.

The Toronto-based company provides wireless voice and data communications, cable television, internet and telephone services in Canada.

OPTI Canada

A trader saw OPTI Canada Inc.'s subordinated 7.875% and 8.25% notes due 2014 "straddling" the 54 level most of the day, although he did see a little selling late in the session, sending the bonds home around 53½ bid, 54 offered.

That followed the wild gyrations which the Calgary, Alta.-based oil-sands energy company's bonds saw on Wednesday and Thursday, on heavy volume, when they first plunged from the mid 50s down to around 48.5, but then came off those lows to eventually get back to pre-news levels.

The bonds went for their mid-week roller-coaster ride after the company warned that its troubled Long Lake, Alta., joint-venture facility for extracting thick bitumen crude oil from the ground and converting it to more marketable grades of oil will likely fail to meet its output targets for this year, which had already been lowered several times previously.

Catalyst Paper slips

A trader said that Catalyst Paper Corp.'s 7 3/8% notes due 2014 were trading around 68 bid, 69 offered on Friday - down around a point from the levels at which they finished on Wednesday, when they fell between 4 and 5 points after the Richmond, B.C.-based paper company reported disappointing quarterly numbers.

A market source at another desk noted that the bonds were once again among the most actively traded issues in the junk market, with more than $10 million having changed hands by mid-afternoon. However, the source said that the bonds got as good as 70 bid at one point, according to the Trace tracking system.

Paul Deckelman contributed to this review

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