Canada primary market takes backseat; Trader Corp. plans U.S. dollar-denominated offering

By Cristal Cody

Prospect News, July 11 - Canadian corporate bonds moved slightly weaker on Monday as investors fled into safer assets on renewed debt concerns in Europe driven by a sell-off of Italian sovereigns. Meanwhile, provincial spreads held steady to slightly higher, informed sources said.

The volatility likely will keep issuers on the sidelines for a bit, sources said Monday.

Details of one long-expected deal emerged on Monday, with the offering slated in a U.S. dollar-denominated sale.

Trader Corp. will begin a roadshow on Tuesday for a $275 million offering of seven-year senior secured notes.

Otherwise, the primary calendar probably will remain sparse over the coming week, bond sources note.

"We think it's going to be a fairly quiet summer," one informed Canadian bond source said. "There is some potential to delay issuance until more clarity on the macros is attained. Spreads are widening from factors related to the general risk-off in Europe. That's going to keep a lot of people hesitant right now."

Italy's investment-grade bonds traded as much as 75 basis points weaker on Monday as investors fled into safer debt on growing concerns with Greece and Portugal.

In secondary trading, the new issue from Toronto-Dominion Bank edged wider on a general weakness in the market, a trader said.

"Spreads have widened, we see that move whenever you see equities down the way they are," another bond source said.

Meanwhile, Nortel Networks Corp.'s recent auction of its patent portfolio got the OK by a joint U.S.-Canada court. But traders gave mixed reports as to how the bonds reacted.

There was not much going on in OPTI Canada Inc.'s bonds Monday. But the expiration of a 30-day grace period is rapidly approaching, leaving one trader to opine that there could soon be more volatility in the name.

Provincial bonds fared better on the day.

"Provincial spreads are holding in - they're still in the ballpark," a source said.

The Province of Ontario's 4% notes due June 2, 2021 rose to 103.09 on Monday from 102.54 on Friday, according to an informed source. Ontario (Aa1/AA-/DBRS: AA) sold C$750 million in a reopening of the benchmark notes at 102.122 on June 22.

Government bonds rose Monday on the flight-to-safety bid, though U.S. Treasuries ended higher. Canada's 10-year note yield dropped to 2.89% from 2.93%. The 30-year bond yield fell 5 bps to 3.36%.

Trader to start roadshow

Trader will begin a roadshow on Tuesday for its $275 million offering of seven-year senior secured notes (expected ratings B3/B), according to an informed source.

The deal is expected to price late in the week of July 18.

RBC Capital Markets is the bookrunner.

The Rule 144A and Regulation S for life notes come with three years of call protection. However a special call provision enables the issuer to redeem 10% of the issue annually at 103 during the non-call period.

The notes feature a three-year 35% equity clawback and a 101% poison put.

The deal is secured by a first-priority lien on substantially all assets shared equally with the revolving credit facility, which will receive collateral proceeds before application to the notes.

Proceeds will be used to fund the acquisition of Trader Corp. by Apax Partners.

Etobicoke, Ont.-based Trader is a print and online media publisher in the automotive, real estate, merchandise and employment sectors.

TD Bank flat to weaker

Bonds traded flat to slightly wider on a general weakness across corporate bonds on debt concerns in Europe, according to bond sources.

A trader saw Toronto-Dominion Bank's new 2.5% senior medium-term notes due 2016 (Aaa/AA-) at 84 bps bid, 81 bps offered on Monday. The bonds were quoted ending Friday at 82 bps bid, 78 bps offered. The notes priced at Treasuries plus 85 bps as part of a $2.5 billion three-tranche offering on Thursday.

The bank and financial services company is based in Toronto.

Nortel gets OK

Traders gave mixed reports of how Nortel Networks' debt fared as a joint court approved the $4.5 billion sale of the company's patent portfolio to a group that included Apple Inc. and Microsoft Corp.

One trader called the 10¾% notes due 2016 half a point lower at 108 bid, 108½ offered. But another trader said the bonds were "all better," seeing the notes gain over half a point to end at 108 5/8.

At the joint hearing, U.S. bankruptcy judge Kevin Gross in Wilmington, Del., and Ontario Superior Court judge Geoffrey Morawetz in Toronto gave the sale the go-ahead to the Rockstar Bidco LP group.

Along with Apple and Microsoft, the group includes Research In Motion Ltd., Sony Corp., Ericsson AB and EMC Corp.

Nortel, a Toronto-based manufacturer of wireless telecommunications technology, filed for Chapter 11 protections in January 2009. Since then, the company has sold off units to pare down and to pay off creditors. With the monstrous bid from the patent auction, creditors are expecting to receive 100% pre-petition recovery and there is some optimism about post-petition recovery as well.

OPTI nears full default

OPTI Canada's paper was radio silent Monday and a trader said the bonds were quoted in the same range as they had been of late.

He pegged the 8¼% notes due 2014 at 42 bid, 44 offered and the 7 7/8% notes due 2014 at 41 bid, 43 offered.

The bonds trade flat, as the company missed a coupon on June 15. The Calgary, Alta.-based oil-sands producer is currently operating under its 30-day grace period, which will expire on Friday.

"I haven't heard much chatter on those," a trader said. "So the end of this week, there could be some volatility. We could get a preview of what people think [will happen].

"There has got to be talks going on behind the scenes," he added. As such, he opined that as the grace period expiration date nears, the details of some of those talks might get "leaked out."

OPTI has struggled to bring its Long Lake joint venture project with Nexen Inc. up to full capacity and has said that without it, the company's bottom line would be severely hampered.

OPTI has been working with advisers to develop a restructuring plan, though no word of any plan has surfaced.

Catalyst Paper declines

Catalyst Paper Corp.'s 7 3/8% notes due 2014 were quoted down at 61 bid, 63 offered, which a trader said was down 1½ points, while the Richmond, B.C.-based paper manufacturer's 11% senior secured notes due 2016 were at 83 bid, 85 offered, also a point lower.

"I did not see much activity, though" in the Catalyst bonds, he said.

Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo contributed to this review

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