Husky to sell C$570 million eight-year notes; CCS to start roadshow; Armtec bonds weaken

By Cristal Cody

Prospect News, June 13 - Canadian bond markets stayed mostly quiet on Monday, but the rest of the week is shaping up with a couple of new deals in the high-yield market.

Husky Injection Molding Systems Ltd. plans to price C$570 million eight-year senior notes (Caa1/CCC+), according to an informed bond source.

Calgary, Alta.-based CCS Corp. also plans a bond offering in the United States for C$675 million equivalent of senior notes in two tranches.

In the preferred stock market in Canada, one new deal was brought by Capstone Infrastructure Corp., which announced on Monday that it priced C$75 million of cumulative five-year rate reset preferreds.

Corporate bond spreads were flat after widening 2 basis points to 5 bps on Friday, though trading was active on Monday, according to a bond source.

"It was kind of unchanged starting the day softer," the informed bond source said.

The long end of the curve in bond sectors including financials and telecoms has stayed weak.

"Telcos, the long end has been widening for some time," the source said.

In the secondary market, Armtec Holdings Ltd.'s bonds dropped in trading on Monday after Standard & Poor's lowered the long-term corporate credit rating to B+ from BB- and the senior unsecured debt rating to B- from B.

In other activity, trading activity in Sino-Forest Corp.'s bonds dropped on Monday.

Canadian government bonds rose, ending the day with the 10-year bond yield down to 2.99% from 3.01%. The 30-year bond yield fell 2 bps to 3.46%.

Treasuries briefly rallied Monday before slipping, sending yields up 1 bp to 2 bps on the longer end of the curve, as the market waits for retail sales data on Tuesday. The 10-year Treasury note yield rose 2 bps to 2.98%. The 30-year bond yield closed up 2 bps at 4.2%.

Husky Injection plans deal

Husky Injection Molding Systems plans to price C$570 million of eight-year senior notes (Caa1/CCC+), according to an informed bond source.

Goldman Sachs & Co., Morgan Stanley & Co. Inc., RBC Capital Markets Corp. and TD Securities Inc. are the bookrunners.

Proceeds will be used to help fund the leveraged buyout of parent company Husky International Ltd. by Berkshire Partners LLC and Omers Private Equity Inc. from Onex Corp.

Bolton, Ont.-based Husky is a leading international supplier of injection molding equipment and services to the plastics industry. Husky's equipment is used to manufacture plastic products such as bottles and caps for beverages, containers for food, medical devices and consumer electronic parts.

CCS to start roadshow

CCS plans to start a roadshow on Tuesday in the Mid-Atlantic region of the United States for its C$675 million equivalent offering of senior notes (Caa2) in two tranches, according to an informed source.

The company plans to sell U.S. dollar-denominated eight-year notes and Canadian dollar-denominated seven-year notes, with tranche sizes to be determined.

The roadshow, which is expected to run through the remainder of the present week and to continue into the week ahead, includes stops in Boston on Thursday and in Toronto on Friday.

In the week ahead the deal will be presented to investors in Los Angeles on June 20, in San Francisco on June 21 and in Vancouver, B.C., on June 22.

Goldman Sachs and Deutsche Bank Securities Inc. are the joint bookrunners.

Barclays Capital Inc., CIBC World Markets, J.P. Morgan Securities LLC, RBC Capital Markets and TD Securities are the co-managers.

Both tranches of notes in the Rule 144A and Regulation S for life deal come with three years of call protection.

Proceeds will be used to finance the repurchases of the company's 11% senior notes due 2015 and its 11% senior subordinated notes due 2015, with any remaining proceeds to be used for general corporate purposes.

The company provides waste management services to the oil and gas industries.

Capstone sells preferreds

Capstone Infrastructure announced on Monday that it priced C$75 million, or 3 million shares, of cumulative five-year rate reset preferred stock to yield 5% for the initial period ending July 31, 2016.

The series A preferreds (/P-3/) were sold at C$25.00 per share.

TD Securities Inc., Macquarie Capital Markets Canada Ltd. and RBC Capital Markets Corp. were the bookrunners.

The deal includes an over-allotment option of C$11.25 million, or 450,000 shares.

The shares are not redeemable prior to July 31, 2016.

Proceeds will be used to fund the company's final equity commitment to the Amherstburg solar power facility, to fund future potential acquisitions and for general corporate purposes.

Toronto-based Capstone, formerly Macquarie Power and Infrastructure Corp., maintains a portfolio of infrastructure businesses in Canada and internationally, including investments in gas cogeneration, wind, hydro and biomass power generating facilities.

Armtec weaker

Armtec bonds have moved out in secondary trading and its stock has plummeted after it reported weak first-quarter earnings and suspended its quarterly divided.

On Friday, ratings agency DBRS said it placed the BB (low) issuer rating and the BB senior bond ratings of subsidiary Armtec Holdings Ltd. under review with negative implications.

The 8.875% senior unsecured notes due Sept. 22, 2017 fell to 93.5 bid, 95.5 offered on Monday from 94.375 bid, 96.375 offered on Friday, a bond source said. The company priced C$150 million of the seven-year notes on Sept. 15, 2010 at par.

Armtec is a Guelph, Ont.-based manufacturer and marketer of industrial infrastructure products and engineered construction solutions.

Sino-Forest bonds calm

A trader said that Sino-Forest's bonds, which had gyrated around wildly last week as the Canadian-Chinese timber company defended itself against scathing allegations of corporate wrongdoing contained in a controversial research report on the company, seemed to have calmed down a little on Monday.

"I did not see a lot of activity in that name," he said, quoting the company's busted 4¼% notes due 2016 "pretty much unchanged" in a 52-54 context. He said that the 5% convertibles due 2013 "may be quoted up a point," around 61 bid, "but I don't think there was much volume."

He also saw its 9 1/8% notes that are slated to come due in mid-August at 91-92, which he said was around where they went out of Friday, while the 10¼% notes due 2014 were in a 65-67 range.

"We're not seeing many markets in these," he said of the company's bonds, which had traded quite actively last week, frequently in brisk dealings, as market participants weighed the claims of Muddy Waters LLC - an investment firm founded by short-seller Carson Block, who has taken a short position in the company's shares - that Sino-Forest had way overstated the value of its timber holdings and had engaged in other questionable accounting practices and other business tactics.

Management of the company vehemently denied the allegations and noted that Block and his company stand to make substantial amounts of money by driving the company's share price down. Sino-Forest has called for authorities in Canada, where the company has headquarters in Mississauga, Ont., and where its shares trade on the Toronto Stock Exchange, to investigate Muddy Waters.

The volatile shares - which have lost nearly three-quarters of their value from the C$18.21 level they stood at on June 1, the day before the report surfaced - were on the rebound on Monday, gaining 51 cents, or 11.41% on the day, to close at C$4.98. Volume of 7.97 million shares was about twice the norm.

In contrast, the stock had plunged 13.20% on Friday, on more than five times the usual volume.

Catalyst bonds better

In other Canadian dealings, a trader said that Catalyst Paper Co.'s bonds "got a little easier" in apparent sympathy with the drop that sector peer NewPage Corp.'s bonds took in active dealings, though on no news.

"Maybe the bonds were in, but not as low" as NewPage, the trader said.

He saw the Richmond, B.C.-based paper manufacturer's 7 3/8% notes due 2014 around 60 bid, 61 offered, "quoted there, but not a lot of volume. I'd call those almost unchanged."

Meanwhile, Catalyst's 11% senior secured paper due 2016 was at 88 bid, 90 offered, down 1 point.

OPTI, Quandra steady

A trader said that OPTI Canada Inc.'s 8¼% notes due 2014 were steady around a 44-45 or 44-46 context. He said that there was "not much activity" Monday in the Calgary, Alta.-based oil-sands energy producer's paper, "just a couple of trades."

Quadra FNX Mining Ltd.'s new 7¾% notes due 2019 were seen trading at 99 7/8 bid, 100¾ offered, around the same levels where those bonds finished on Friday after the Toronto and Vancouver, B.C.-based copper mining company priced $500 million of those notes at par.

Paul Deckelman and Paul A. Harris contributed to this review

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