Health Montreal sells C$1.37 billion; high-yield readies for new deal; Garda bonds gain

By Cristal Cody

Prospect News, June 7 - Health Montreal Collective LP priced its offering of C$1.371 billion of senior amortizing bonds on Tuesday, according to a Canadian bond source.

The bond deal was the only one priced on the day, but the Canadian high-yield market is gearing up for a sale or two, according to a couple of insiders.

"Next week there will be a large deal," one high-yield source said. "The market still seems to have a good bid for anything high-yield in Canada. We just need more product."

Another high-yield source expects an upcoming deal in Canada's manufacturing sector.

In the corporate market, there was "not much of a change" on Tuesday, a high-grade bond source said.

"Canada corporate (AA) 10-year went to 3.9886% from 3.9775% yesterday," the source said.

The secondary market saw a little more activity.

The bonds reopened the previous week from Garda World Security Corp. traded higher on Tuesday, according to a high-yield source close to the deal.

Sino-Forest Corp. also took up a good chunk of trading, as investors attempt to get a handle on what is going on with the company. A trader said it was difficult to get a clear picture of what was going on and whether or not the fraud allegations by Muddy Waters research were true or not.

"In the best of times, there is very little transparency, so there is even less now," he said.

Away from the tree-farmer, OPTI Canada Inc.'s bonds declined, though on no news.

Canadian government bonds closed slightly lower, sending yields up a basis point. The 10-year bond yield closed up 1 bp at 3.03%. The 30-year bond yield also rose 1 bp to 3.52%.

Health Montreal prices

Health Montreal Collective launched its deal on Monday and on Tuesday sold C$1.371 billion of senior amortizing bonds (Baa2/DBRS: BBB) at par to yield 6.721%, according to a Canadian bond source.

The series A bonds due Sept. 30, 2049 priced in line with talk at a spread of 315 bps over the Canadian government benchmark. The bonds are expected to have an average life of 28.3 years.

The bonds have a Canada call of 50 bps over the government benchmark.

RBC Capital Markets Corp. was the lead manager.

The Montreal medical teaching center, also known as CHUM, will use the proceeds to finance a new hospital scheduled to open in 2016.

Garda notes firm

Garda Securities' notes, which were reopened last week, traded higher on Tuesday, one source said. The company priced a C$50 million add-on to its 9¾% senior notes due March 15, 2017 (B2/B/) on May 31.

The deal was priced at 106.50, resulting in an 8.08% yield to worst and an 8.3% yield to maturity.

"It's trading slightly higher just off the break," trading around 107.00, the source said.

The company originally priced the C$75 million issue at 98.148 on March 8, 2010 to yield 10 1/8%.

The notes came in a two-part deal that also included $250 million of the notes, which were priced with the same terms but in U.S. dollars.

The security services provider is based in Montreal.

Sino-Forest remains weak

A trader said "tons" of Sino-Forest debt traded during Tuesday's session, "probably $40-odd million of the two issues."

He called the 6¼% notes due 2017 down 5 points at around 55 and the 10¼% notes due 2014 down 6 points at around 60.

Another trader saw the 6¼% notes falling to the mid-50s from the low- to mid-60s previously.

"That was hit pretty good," he said. "Those continue to be active."

After losing major ground on Thursday and Friday, the Hong Kong and Ontario-based forest products company attempted to recoup its losses by releasing documents on its Chinese assets, as well as information on its cash balances.

Last week, a research report put out by Muddy Waters Research in Hong Kong -operated by known short-seller Carson Block - said the company overstated its holdings in China and that its wonky financial reporting was tantamount to fraud. Sino-Forest denied Block's claims on Friday but also indicated that it was going to fully investigate the matter.

Paulson & Co., an investor of Sino-Forest, is also reportedly investigating the claims.

On Tuesday, Sino-Forest continued to make headlines, as Moody's Investors Service said it could cut the company's rating and a Dundee Securities Ltd. analyst was reported saying that Muddy Waters had pre-marketed its controversial report to various hedge funds for the last five weeks.

Muddy Waters also said it would publish more of its research soon.

OPTI debt declines

OPTI Canada's subordinated paper - the 7 7/8% and 8¼% notes due 2014 - "got cheaper," according to a trader.

He pegged the 7 7/8% notes at around 451/2, down half a point.

Another trader quoted the notes at 45 bid, 45½ offered, calling that a half- to a full-point weaker.

OPTI is a Calgary, Alta.-based oil-sands producer.

Stephanie N. Rotondo contributed to this review

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