Ottawa sells long bonds; corporates quiet; Armtec, Newalta, Videotron flat in trading

By Cristal Cody

Prospect News, June 27 - Canadian bond markets stayed mostly quiet with one new municipal deal brought by the City of Ottawa, while the primary market slowly picked up in the U.S. market after a week of light issuance, informed bond sources said.

The City of Ottawa (Aaa/AA+/) sold C$150 million of long bonds on Monday. Otherwise, "that's it," one corporate bond source noted of primary activity.

"It's a pretty quiet day, compared to last week," the source said.

Corporate bonds traded mostly flat on the day, with little change seen in high-yield bond spreads, an informed source said. Bonds from Armtec Holdings Ltd., Newalta Corp. and Videotron Ltd. were flat on the day.

Moving higher was Nortel Networks Corp. The auction for the company's patent portfolio began Monday morning, and by market close, a winner had yet to be declared, a potentially positive sign for the bankrupt telecommunications company.

Canadian government bonds fell, tracking U.S. Treasuries, as the concerns over a Greek debt default eased. Canada's 10-year note yield rose 4 basis points to 2.9%. The 30-year bond yield ended up 4 bps to 3.41%.

Ottawa prices C$150 million

The City of Ottawa (Aaa/AA+/) sold C$150 million 4.6% bonds due July 14, 2042 at 99.869 to yield 4.608% on Monday, an informed source said.

The Ontario city priced the bonds at a spread of 121.5 bps over the Government of Canada 2041 benchmark bond.

CIBC World Markets Inc. was the bookrunner.

Armtec steady

Armtec's bonds had been free-falling 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, but the bonds edged up in trading last week and remained unchanged on Monday, according to a bond source.

The 8 7/8% senior notes due Sept. 22, 2017 traded unchanged at 79 bid, 81 offered.

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.

Newalta unchanged

Newalta's 7 5/8% senior notes due Nov. 23, 2017 (B1/BB) were unchanged in the secondary market on Monday, a source said.

The notes were quoted at 104.5 bid, 105.5 offered. The company sold C$125 million of the notes at par on Nov. 18, 2010.

Newalta is a Calgary, Alta.-based industrial waste management and environmental services company.

Videotron flat

The 10-year notes that Videotron (Ba1/BB/) sold earlier this month were unchanged in the secondary market on Monday, an informed source said.

The 6 7/8% senior notes due July 15, 2021 traded at 100.375 bid, 101 offered. The company sold the bonds at par on June 16.

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

Nortel up as auction begins

A trader said Nortel's 10 1/8% notes due 2013 and 10¾% notes due 2016 were "up a little bit" as the auction for the Toronto-based company's patent portfolio got underway.

He pegged the issues around the 95 mark.

"There was a rumor that Intel [Corp.] was given status to bid," the trader said. If true, Intel would join the likes of Google Inc., Apple Inc., Research in Motion Ltd., Ericsson SA and RPX Corp. in bidding for the 6,000-plus patents.

There is also chatter that Microsoft Corp. has thrown its hat in the ring, as well.

Google made the "stalking horse" bid of $900 million earlier this year. As the list of interested bidders grew, the market has become convinced that the auction could bring in $1 billion or more.

"The more bidders that show up, the better it is supposed to be," the trader said. Additionally, the longer the auction takes could potentially mean the higher the price.

"They're slowly creeping upwards, so that is a sign," he said.

Nortel, which filed for Chapter 11 protection in January 2009, will use the funds to pay off creditors.

Catalyst trades

A trader quoted Catalyst Paper Corp.'s 7 3/8% notes due 2014 at 61 bid, 63 offered, while its 11% senior secured notes due 2016 were at 85 bid, 87 offered.

He said there was "no real trading" in the 11s, adding that "they didn't seem to be active today. He said they were "quoted a little lower on Monday," by perhaps a half-point to 1 point, after having dropped on Friday to 86 bid, 88 offered.

However, he said he "did not see much activity. I didn't see volume. You can't really tell how much of those are trading."

He said that "it seemed it was more NewPage [than Catalyst]. NewPage wasn't as active as last week, and Catalyst definitely wasn't."

But while he said that "last week, it seemed a lot more active" in both of the paper companies' respective bonds, as Catalyst announced the hiring of UBS Securities to help the Richmond, B.C.-based paper manufacturer explore strategic alternatives, while NewPage gyrated on investor worries about the coupon payment, on Monday, "there was still some decent volume - 10 or 12 trades in each of them. You can't really tell the size of them, but there were 10 or 12 trades in each issue."

Sino-Forest quiet

A trader said that Sino-Forest Corp.'s bonds were "pretty quiet" - quite a difference from the end of last week, when the Canadian-Chinese timber company's bonds were seen up smartly, some by as much as 5 points, after the Paulson & Co. hedge fund - which formerly owned more than 30 million of its shares, or about 12.5% of the outstanding total - defended the due diligence it had done before taking such a large stake in the company, which has recently been rocked by allegations of possibly fraudulent dealings.

Paulson liquidated its position after it lost about 90% of its formerly C$630 million total value in the wake of the allegations by short-seller Carson Block.

The trader saw the 9 1/8% notes scheduled to come due on Aug. 17 around an 85-ish bid, which he called "up a couple of points" from prior trading in an 81-85 context, although he said he didn't see a lot of activity.

He quoted Sino-Forest's 10¼% notes due 2014 unchanged at 51 bid, 53 offered, while the 6¼% notes due 2017 stayed around 47 bid, 49 offered.

The trader said that he "did not see a lot quoted" in Sino-Forest's busted 5% convertible notes due 2013, which he estimated to be at 47 bid, 49 offered, while its 4¼% convertibles due 2016 were at 43 bid, 45 offered.

Another market source said that the 101/4s gained 3½ points to end at 52 bid, though only on large-bloc volume of $1 million. Its 6¼% notes were up perhaps 1¼ points, though again, on only one large-sized trade.

Activity flat in OPTI

A trader saw OPTI Canada Inc.'s 8¼% notes due 2014 at 39 bid, 40 offered but said that it was "a pretty boring day - [it] was quoted there, but there were no real trades in that issue."

He said the same was true for the troubled Calgary, Alta.-based oil-sands energy company's 7 7/8% notes, also due 2014.

"They were just quoted there, with no trading," the trader said.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

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