Nova Scotia sells bonds; Ontario long bonds ease; Flint Energy notes mixed; OPTI eyed

By Cristal Cody

Prospect News, May 26 - The Province of Nova Scotia sold a C$300 million offering of long bonds on Thursday as the primary market otherwise stayed quiet over the short week.

A deal for C$200 million to C$300 million of long bonds from the City of Toronto also remains in the works but has not priced yet, one bond source said.

In other provincial activity, the long bonds from the Province of Ontario (Aa1/AA-/DBRS: AA) traded Thursday unchanged but slightly wider than a recent reopening price, a source said.

"We've had a bit of widening over the last couple of weeks, but spreads right now seem to be stable," the provincial bond source said. "It's a decent environment; [I] wouldn't be surprised to see more supply come at us."

In corporate bond activity, Flint Energy Services Ltd.'s 7½% eight-year senior notes (B2/BB-) that priced on Wednesday fell on the bid side, a source said.

Also in trading, OPTI Canada Inc. gained strength, a trader said, on positive comments made by Nexen Inc., with whom OPTI has a joint venture project. But another trader deemed the debt steady on the day.

Government bonds rallied, tracking U.S. Treasuries, on weaker economic data. Canada's 10-year bond yield fell to 3.04% from 3.09%. The 30-year bond yield fell 3 basis points to 3.48%.

Statistics Canada said non-farm payroll employment increased by 21,400 in March compared with the month before. On a year-over-year basis, the number of non-farm employees increased 241,000, or 1.6%.

Treasuries rallied after a strong auction of seven-year notes surprised the market and as overseas debt fears involving Greece, Spain, Ireland and others continue to help bonds. The benchmark 10-year Treasury note yield dropped to 3.06% from 3.13% and the 30-year bond yield fell 6 bps to 4.22%.

"All of the auctions this week just went great," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co. "The market just keeps rallying."

Nova Scotia sells bonds

The Province of Nova Scotia (Aa2/A+/DBRS: A) sold C$300 million 4.4% bonds due 2042 at 99.631 to yield 4.422% on Thursday, an informed bond source said.

The bonds priced at a spread of 91 bps over the Government of Canada benchmark.

CIBC World Markets Inc. was the lead manager.

In secondary trading, the notes were wrapped around the issue price, a source said.

Ontario eases

Ontario's bonds moved out slightly from a previous reopening but have traded flat on the week, a source said. The province sold C$600 million in a reopening of the 4.65% benchmark bonds due June 2, 2041 at a spread of 84 bps over the Government of Canada benchmark on May 18.

"Ontario is trading at 85, no change," a bond source said.

The issue previously was reopened on May 11 with the sale of C$600 million priced at an 84.5 bps spread.

Flint Energy active

Flint Energy Services' bonds were active in trading, according to a source. The company priced a downsized C$175 million issue of 7½% eight-year senior notes (B2/BB-) at 99 to yield 7.669% on Wednesday, according to an informed source.

The bonds were quoted Thursday at 98.25 bid, 99.25 offered.

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

OPTI heads up

A trader said OPTI Canada's subordinated debt was better as oil prices firmed and its Long Lake joint venture partner Nexen said the project should be cash-flow positive soon.

He pegged the 7 7/8% and the 8¼% notes due 2014 at 481/2.

But another trader said the issue was "pretty much unchanged," also around that 48½ mark.

"We should expect to see positive cash flow here any day," said Kevin Reinhart, Nexen's chief financial officer, during a presentation at the UBS Global Oil and Gas Conference in Austin, Texas. "So we don't have to wait for a year or two before we start getting some cash back from that."

Earlier this year, OPTI said it was unlikely that the Long Lake project would hit its 2011 production target, as operational issues have continued to pose problems.

The project has capacity of 72,000 barrels per day. On May 19, OPTI said average daily production was as 28,000 barrels.

Oil prices declined 13 cents, or 0.13%, to $100.10.

OPTI is a Calgary, Alta.-based oil-sands producer. It owns a 35% stake in the Long Lake project.

Stephanie N. Rotondo contributed to this review

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