Hydro-Quebec sells $1 billion five-year global notes; Videotron, Armtec notes trade up

By Cristal Cody

Prospect News, June 23 - The Canadian bond markets stayed quiet as far as new activity, but Hydro-Quebec sold $1 billion of 2% five-year global notes on Thursday in a U.S. high-grade deal, sources said.

"It's been very quiet since the Videotron deal came last week," one Canadian high-yield bond source said. "CCS pulled their deal. There's just a general weakness and there's not a lot of volume trading. The market conditions are not conducive to new issuance right now."

Calgary, Alta.-based CCS Corp. terminated a planned offering of Canadian and U.S. dollar-denominated high-yield notes earlier in the week, citing adverse market conditions.

Bond spreads moved "slightly lower but nothing material," a trader said on Thursday.

The 10-year notes that Quebecor Media Inc. subsidiary Videotron Ltd. sold have traded up in the secondary, according to an informed bond source.

In other trading, Armtec Holdings Ltd.'s bonds rose on the bid side.

Meanwhile, Nortel Networks Ltd.'s debt traded busily, but "virtually unchanged," as an auction for the company's patent portfolio nears. Apple Inc. was given approval on Thursday to make a bid for the portfolio.

The usually active OPTI Canada Inc. lived up to its reputation during the session. But while the debt was actively traded, it ended weaker, reportedly because of declining oil prices.

Government bonds ended "firmer across the board," a Canadian bond source said. "Yields are down across the curve, with the belly of the curve outperforming, generally in line with the move seen in the U.S."

Canada's 10-year note yield fell 5 basis points to 2.9%. The 30-year bond yield dropped to 3.37% from 3.41%.

Treasuries also closed higher, sending yields down across the bond curve.

Economic data wise, both Canada and the United States will be light on Friday and trading is expected to remain "focused on headlines out of Europe once again," the source said.

Hydro-Quebec sells $1 billion

Hydro-Quebec sold $1 billion of 2% five-year global notes on Thursday to yield mid-swaps plus 22 bps, or Treasuries plus 55.7 bps, an informed source said.

The notes were initially talked in the mid-to-low 20 bps area, and that was later revised to the mid-swaps plus 22 bps area. The notes priced in line with revised guidance.

The notes (Aa2/A+) were sold at 99.981 to yield 2.004%. They are non-callable.

Bookrunners were Bank of America Merrill Lynch, HSBC Securities, National Bank of Canada and RBC Capital Markets LLC.

Senior co-managers were BMO Capital Markets, BNP Paribas Securities Corp., CIBC World Markets, Deutsche Bank Securities Inc. and Scotia Capital.

Co-managers were Casgrain & Co. (USA) Ltd., Desjardins Capital Markets, J.P. Morgan Securities LLC, Mitsubishi UFJ Securities, RBS Securities Inc., Societe Generale, TD Securities and UBS Securities LLC.

Proceeds are being added to general funds to be used for general purposes.

The notes are guaranteed by the Province of Quebec.

The government-owned generator and distributor of electric power is based in Montreal.

Videotron stronger

Videotron (Ba1/BB/) sold 6 7/8% senior notes due July 15, 2021 at par on June 16. In trading on Thursday, the notes had risen to 100.375 bid, 101 offered, an informed source said.

The company is the cable, internet and mobile phone subsidiary of Quebecor Media.

Armtec rises

Armtec's 8 7/8% senior notes due Sept. 22, 2017 rose to 79 bid, 81 offered on Thursday, according to a trader. The notes were quoted at 77.5 bid, 82 offered on Wednesday.

On June 15, the six-year notes were quoted at 90 bid, 94 offered.

The company priced C$150 million of the notes on Sept. 15, 2010 at par.

Armtec's bonds have weakened in trading after parent company Armtec Infrastructure Inc. reported lower first-quarter earnings, suspended its quarterly dividend and received lowered credit ratings from Standard & Poor's and DBRS.

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

Nortel active, auction nears

A trader said Nortel Networks' bonds were "active as we get closer to the auction results."

He saw the 10¾% notes due 2016 trading around 94½ to 94 5/8.

Another trader said "all of the instruments were fairly active," seeing the 10 1/8% notes due 2013 trading within a range of 94 1/8 to 94 5/8.

"That was virtually unchanged from yesterday," he said.

Last week, the Toronto-based bankrupt telecommunications company said it was delaying an auction for its portfolio of patents to June 27 from June 20 due to heightened interest. On Thursday, federal regulators cleared Apple to bid on the portfolio.

Google Inc. made the stalking horse bid of $900 million. To win the patents, bidders must bid at least $29 million more than Google. Prospective bidders include Research in Motion Ltd., RPX Corp. and Ericsson SA.

OPTI debt pressured

OPTI Canada's subordinated issues were "down a little bit," a trader said, "I guess with oil prices."

Oil prices fell after the International Energy Agency said it was releasing about 60 million barrels of oil from emergency reserves to stave off rising energy prices.

The trader placed the 7 7/8% and 8¼% notes due 2014 at 39½ bid, 40 offered.

Another trader said the 8¼% notes - the day's most active OPTI issue - closed at 39 bid, 40 offered.

"Yesterday they were wrapped around 41," he said.

A third trader said OPTI was "a touch weaker, trading with a 39 handle."

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

Andrea Heisinger and Stephanie N. Rotondo contributed to this review

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