Videotron, Union Gas sell high-grade, high-yield deals; Ccarat II offers C$540.32 million

By Cristal Cody

Prospect News, June 16 - The Canadian primary bond market saw activity on Thursday with a new deal each for the high-grade and high-yield sectors, informed bond sources said.

Videotron Ltd. (Ba1/BB/) priced an upsized C$300 million of 10-year senior notes, and Union Gas Ltd. (DBRS: A) sold C$300 million of long bonds.

Also, in a new asset-backed security deal, the Canadian Capital Auto Receivables Asset Trust II is expected to price C$540.32 million in five tranches of auto loan receivables-backed notes (DBRS: AAA), an informed bond source said Thursday.

If the market tone remains good, the deal could price Friday.

Market tone was slightly better on Thursday, but "spreads were unchanged," a bond source said. "Can't say why the pace picked up. We didn't see our market throw a lot of stuff back at the Street, which is a good sign. What we saw bought seems to be bought for cash."

The Videotron high-yield deal came late Thursday afternoon during a week that saw others wait on pricing, an informed bond source said.

"It's been a tough week. Quite a few deals got pulled, and this came at a very good price considering how weak the market was," the source said.

Good news helped Nortel Networks Ltd.'s bonds gain a bit of ground. The move came after the company said it was postponing an auction for its portfolio of technology patents, due to excessive interest.

Market mainstay OPTI Canada Inc. also was heavy.

Canadian government bonds were stronger on the budget crisis in Greece and weaker U.S. data. The 10-year bond yield fell 1 basis point to 2.92%. The 30-year bond yield dropped to 3.39% from 3.41%.

In other data on Thursday, Statistics Canada said that foreign investment in Canadian securities continued to rise in April to a three-month high of C$8.2 billion from C$6.4 billion in March. In April, foreign investors purchased C$4.9 billion of Canadian bonds, the agency said.

Foreign investment in Canadian corporate bonds remained strong at C$2.2 billion, led by mortgage-backed securities for a third month. Statistics Canada said the corporate activity was mainly secondary market acquisitions of Canadian dollar-denominated mortgage bonds with high credit ratings.

Canadians sold C$2.5 billion of foreign bonds in April.

Videotron sells C$300 million

Videotron (Ba1/BB/) priced an upsized C$300 million of 6 7/8% senior notes due July 15, 2021 at par on Thursday, informed bond sources said.

The notes priced at a spread of 395.2 bps over the Government of Canada 3¼% 2021 bond. The deal was talked with a 6 7/8% coupon.

"Demand was really good," a syndicate source said. "There were north of 30 buyers in the deal. In the current environment, it was a really good deal to get done at that price. There was almost no new issue concession."

Videotron upsized the deal from C$250 million.

TD Securities Inc. and RBC Capital Markets Corp. were the lead managers.

The deal priced late in the day but traded "slightly better than par bid out of the gate," the source said.

Videotron is the cable, internet and mobile phone subsidiary of Quebecor Media Inc.

Union Gas sells C$300 million

Union Gas (DBRS: A) sold C$300 million of 4.88% medium-term debentures due June 21, 2041 at 99.875 to yield 4.888% on Thursday, an informed bond source said.

The debentures priced at a spread of 147 bps over the Government of Canada benchmark. The deal was upsized from C$250 million and talked at a 148 bps spread.

"That went pretty well," a bond source said. "It's a regulated utility, so people snapped that up quite nicely."

BMO Capital Markets Corp. and TD Securities Inc. were the bookrunners.

Union Gas, a subsidiary of Spectra Energy Corp., is a Canadian natural gas storage, transmission and distribution company based in Ontario.

Ccarat II to sell ABS notes

The Canadian Capital Auto Receivables Asset Trust II is expected to price C$540.32 million in five tranches of auto loan receivables-backed notes (DBRS: AAA), an informed bond source said Thursday.

The deal includes C$230 million of series 2011-2 A1 notes, C$165 million of series A2 notes and C$129.32 million of series A3 notes. The deal also includes two subordinate tranches, C$11 million in the class B tranche (DBRS: AA) and C$5 million in the class C tranche (DBRS: A).

Scotia Capital Inc., BMO Capital Markets Corp. and RBC Capital Markets Corp. are the bookrunners.

Proceeds will be used to acquire a co-ownership interest in a portfolio of secured retail auto loans originated by Ally Credit Canada Ltd. and affiliates.

Toronto-based Canadian Capital Auto Receivables Asset Trust II purchases and manages financial assets acquired from General Motors Acceptance Corp. of Canada Ltd. and its affiliates and borrows funds or sells securities to finance the purchases.

Nortel gains, auction delayed

A trader said Nortel networks' debt was "stronger" after the company said it had postponed its patent portfolio auction due to a "significant level of interest."

The trader placed the 10¾% notes due 2016 "around 94."

At another desk, a trader said the bonds were "not all that different," the 10¾% notes at 93 bid, 93½ offered and the floating-rate notes coming due July 15 at 90½ bid, 91 offered.

The bankrupt Mississauga, Ont.-based telecommunications company is auctioning its portfolio containing 6,000-plus technology-related patents and patent applications. The auction was originally slated for June 20 but will now be held June 27.

Google Inc. made the stalking horse bid of $900 million in April. Companies such as RPX Corp., Research in Motion Ltd. and Ericsson AB have all reportedly considered making bids.

"Speculation is the more the companies [that are] interested, the higher the bids will be," a trader said. Some have speculated that the price could easily top $1 billion.

OPTI gets downgraded, weakens

OPTI Canada got downgraded by Standard & Poor's Thursday, following the company's missed coupon payment on Wednesday.

A trader quoted the 7 7/8% and 8¼% subordinated notes due 2014 at 40½ bid, 41 offered, down from the previous day's levels.

The bonds are trading flat of accrued interest.

Another trader said the 8¼% notes were "down another couple of points" to around the 41 mark.

The Calgary, Alta.-based oil-sands producer said late Tuesday that it was skipping the $71 million payment on the subordinated issues, though it did intend to make a $24 million payment on its 9% first-lien notes due 2012.

The company has 30 days to make the payment on the subs or else it will be in default.

S&P then dropped its long-term corporate credit rating on the company to SD from CCC-.

The rating on the second-lien debt was also dropped to D from CCC.

As of June 15, OPTI has C$220 million in cash and equivalents, the company said in a statement. There is also $73 million available in an interest reserve account.

OPTI said it was continuing to work with Lazard Frères & Co. LLC, Scotia Waterous Inc. and TD Securities Inc. to develop a strategic plan to deal with its overleveraged balance sheet.

Stephanie N. Rotondo contributed to this review

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