Ontario sells floaters; Flint Energy readies deal; Savanna Energy, OPTI bonds busy, Nortel up

By Cristal Cody

Prospect News, May 24 - Bond activity stayed light as the Canadian markets returned after a long weekend.

The market was closed on Monday in observance of Victoria Day.

One small new deal did price from the Province of Ontario, which sold C$110 million in floating-rate notes on Tuesday, a bond source said. And talk circulated on Flint Energy Services Ltd.'s high-yield offering of C$200 million in eight-year senior notes.

No new primary activity was seen in the corporate market on Tuesday. Traders were gearing up for bank earnings this week.

"After the long weekend, it's pretty quiet," a corporate bond source said. "Not much is going on, on the bond side."

In the secondary, high-yield bonds traded mostly lower.

Savanna Energy Services Corp.'s new 7% seven-year notes (/B+/DBRS: B) were active in trading. OPTI Canada Inc.'s bonds also were busy. The debt gained ground, but on no fresh news. One trader speculated that a rise in oil prices might have had something to do with the increase.

Meanwhile, Nortel Networks Corp. inched up.

Canadian government bonds rose slightly sending yields down a couple of basis points. The 10-year bond yield fell to 3.1% fro 3.12% and the 30-year bond yield dropped 2 bps to 3.52%.

"We're getting close to the lows for the year on the 10-year bond," said Douglas Porter, BMO Capital Markets' deputy chief economist.

The market is beginning to focus on next week's Bank of Canada policy meeting, but rates are not expected to rise.

"We now don't see them going until September or later than that," Porter said. "There was a chance they would go in July but we've now pushed that back to September because of the strong Canadian dollar and some disappointment in the Canadian economy recently."

On Friday, Statistics Canada said retail sales were flat in March at C$37.3 billion.

U.S. Treasuries rose sending yields down 1 bp to 2 bps on a fresh round of overseas debt concerns and after the government saw strong demand for the sale of two-year notes on Tuesday.

Moody's said a restructuring of Greece's debt would be considered a default and would hurt its credit ratings and also other countries with a heavy debt load such as Portugal and Ireland.

Ontario sells floaters

The Province of Ontario (Aa1/AA-/DBRS: AA) priced C$110 million in five-year floating-rate notes on Tuesday, an informed bond source said.

The notes priced at a spread of CDOR plus 18 bps.

TD Securities Inc. was the bookrunner.

Flint Energy talks C$200 million

Flint Energy Services talked its C$200 million offering of eight-year senior notes (B2/BB-) with a 7¼% to 7½% yield on Tuesday, according to an informed source.

The order books close at 10 a.m. ET on Wednesday, and the notes are set to price after that.

Credit Suisse Securities (USA) LLC and BMO Capital Markets are the joint bookrunners for the Rule 144A for life offering.

The notes come with four years of call protection and feature a three-year 35% equity clawback and a 101% poison put.

Proceeds will be used to refinance bank debt and for general corporate purposes.

Flint Energy is a Calgary, Alta.-based provider of products and services to the oil and gas industries.

Savanna Energy notes

Savanna Energy Services' 7% senior notes due May 25, 2018 traded at 100 bid, 101 offered on Tuesday, a source said.

The company sold C$125 million in 7% senior notes due May 25, 2018 at par on Thursday.

Calgary, Alta.-based Savanna Energy is a drilling and well servicing provider in the oil and gas industry.

OPTI up with oil

OPTI Canada's subordinated issues - the 7 7/8% and 8¼% notes due 2014 - were also actively traded and higher, traders reported.

One trader deemed the debt up 1½ points around the 48½ level. Another said the securities "bounced a little bit," ending "up a solid point" at 481/2.

The second trader said about $25 million to $30 million of the bonds changed hands.

A third trader said OPTI's subs were "stronger" at 48 bid, 48½ offered. With no fresh news out, the trader speculated that the gains came from a rally in oil prices.

"This is one that goes up and down with the market, based on oil," he said.

Oil gained $1.72, or 1.76%, to close at $99.42.

OPTI is a Calgary, Alta.-based oilsands producer.

Nortel notes rally

A trader said Nortel networks' 10 1/8% notes due 2013 and 10¾% notes due 2016 "rallied," hitting a high of 94 before closing around 93.

Another trader said the notes were "kind of active", up ½ point at 931/2.

On Monday, the Toronto-based telecommunications company reported its first-quarter results, which were negatively impacted as the company has been winding down its business. Since filing for Chapter 11 protections in 2009, Nortel has sold "all of its businesses generating approximately $3.2 billion in net proceeds for the benefit of its creditors, and preserving 16,000 jobs for employees with the purchasers of the businesses," the company said in a press release.

Because of the sale of virtually all of its units, Nortel's results were negatively impacted. Revenues dropped to $20 million from $362 million the year before. Net loss came to $105 million, down from net profit of $355 million in the first quarter of 2010.

An auction on the company's patent portfolio is scheduled for June 20. Google Inc. has made the initial starting bid of $900 million and some are expecting that price tag will increase to $1 billion or more.

Paul A. Harris and Stephanie N. Rotondo contributed to this review

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