Hospital Infrastructure Partners, Algonquin Power, Noranda light up new-deal calendar

By Cristal Cody

Prospect News, July 19 - The dry spell that kept new issuance in the Canadian bond market at a standstill for a month appears to be breaking with deals on the way in the high-grade and high-yield markets, informed sources said Tuesday.

New high-grade offerings expected include a C$557 million investment-grade bond sale from Hospital Infrastructure Partners Partnership and C$100 million of senior debentures from Algonquin Power & Utilities Corp.

On the high-yield side, Noranda Operating Trust started a roadshow for its offering of C$90 million 51/2-year senior notes (DBRS: BB).

"It's still in the marketing," one source said.

The Canadian markets also are taking a look at Trader Corp.'s U.S. dollar-denominated $275 million offering of seven-year senior secured notes (confirmed B3/expected B).

Corporate bond markets in Canada had a better tone on Tuesday, but the lack of new deals is being felt.

"The market was better, but we'll see how it is tomorrow," a source said. "It feels better, but we're down more than a month without a new issue here in Canada. We're waiting."

In trading, Nortel Networks Corp. was a winner for the day. The bonds gained about 3 points on news that the Canadian government was not planning to review the company's recent sale of its patent portfolio to a consortium led by Apple Inc.

Among other Canadian issuers, OPTI Canada Inc. debt remained strong. The bonds have moved up at least 10 points in the last week, since the company filed for creditor protections in Canada.

Government bonds fell on the short end but ended higher on the long end of the curve.

"We're all just waiting to see what goes on south of the border and over the pond," a bond source said.

The Bank of Canada left its key overnight interest rate unchanged at 1% on Tuesday but released a hawkish statement that opens the way to a rate hike sooner than later.

The two-year note yield rose 7 basis points to 1.48%, while the 10-year note yield fell 1 bp to 2.89%. The 30-year bond yield fell to 3.34% from 3.37%.

Hospital Infrastructure eyed

In the investment-grade market, Hospital Infrastructure Partners Partnership plans to sell C$557 million of series A senior bonds (DBRS: A), an informed bond source said Tuesday.

The 331/2-year amortizing bonds are expected to price the week of July 25.

Scotia Capital Inc. is the lead manager.

The partnership is a special-purpose entity contracted by Halton Healthcare Services to design, build, finance and maintain a new hospital in Oakville, Ont., under a 34-year public-private partnership agreement.

Algonquin Power on tap

Algonquin Power & Utilities expects to offer C$100 million of senior debentures (/BBB-/DBRS: BBB), informed sources said Tuesday.

"Markets are anticipating a seven-year transaction, but nothing's firm yet," one source said.

National Bank Financial Inc. and BMO Capital Markets Corp. are the co-lead managers.

The company announced on Monday that the proceeds will be used to repay the project debt on the company's St. Leon Wind Energy facility due in October 2011, to reduce amounts outstanding under the senior credit facility and for general corporate purposes.

Algonquin Power held a roadshow on Friday to update investors on the company's latest performance.

"This inaugural issue of debentures by APCo further diversifies the company's funding options and strengthens the company's capital structure," David Bronicheski, Algonquin Power chief financial officer, said in a news release.

"Following this debenture issue, debt levels will remain unchanged and APCo will not have any near-term debt maturities. In addition, the tenor of the APCo debentures is a more appropriate match for the long-term stable nature of the power generation asset portfolio."

Algonquin Power is an Oakville, Ont.-based open-ended investment trust that owns and operates electric utilities in North America.

Trader talks seven-year notes

Trader Corp. talked its $275 million offering of seven-year senior secured notes (confirmed B3/expected B) with a yield in the 10% area on Tuesday, according to an informed source.

The order books close at noon ET on Wednesday, except for accounts meeting with the company on Wednesday.

The deal is set to price thereafter.

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 by Apax Partners.

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

Noranda deal expected

Noranda Operating Trust started the roadshow for its offering of C$90 million of 51/2-year senior notes (DBRS: BB) on Tuesday, an informed bond source said.

The roadshow ends on Thursday in Montreal, and pricing is expected the week of July 25 for the senior notes due December 2016.

CIBC World Markets Inc. and Scotia Capital are the bookrunners.

The notes are guaranteed by Noranda Income Fund, Canadian Electrolytic Zinc Ltd., Noranda Income LP and NILP General Partner Ltd. N-Zinc Ltd. is a special guarantor.

The notes are callable in December 2013 at par plus 50% of the coupon; December 2014 at par plus 25% of the coupon and at par in December 2015 and thereafter.

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

Proceeds will be used to repay debt outstanding under the bridge facility and for general corporate purposes.

Noranda Operating Trust is owned by Toronto-based Noranda Income Fund and has a 75% interest in Noranda Income LP, which owns the Canadian Electrolytic Zinc metal processing facility in Quebec.

Nortel: No Canadian review

Nortel networks' bonds shot up 3-plus points on news the Canadian government had decided not to review its recent $4.5 billion patent portfolio sale to a group led by Apple Inc.

"If there was some concern that in reviewing that it could possibly get blocked, then it was probably a good thing," a trader said.

He pegged the 10¾% notes due 2016 at around 113.

Another trader said the 10¾% notes were "quite active" at 1131/4, which he said was up 3¼ points.

The trader also saw the 10 1/8% notes due 2013 at 113, a gain of 3½ points, he said.

The Canadian government previously said that it was considering reviewing the auction under the Investment Act of Canada, which requires a review of foreign investments with a book value of more than C$312 million to determine if they are of "net benefit" to the country.

However, Nortel had several times written the value of the patent portfolio down to zero.

"Based on the information provided by the investor and Nortel's 2010 audited financial statements, the acquisition of the Nortel patents is not subject to review for net benefit under the Act," the government said in a statement.

The bankruptcy courts overseeing Nortel's case approved the sale on July 11.

Nortel is a Toronto-based telecommunications equipment manufacturer.

OPTI strong post-filing

A trader said OPTI Canada's subordinated debt "continues to go up."

He said the 7 7/8% and 8¼% notes due 2014 traded as high as the mid-50s before "scaling back" to 53 bid, 54 offered.

"Certainly they were up a good bit today," he said, estimating a gain of 4 to 5 points. "These things have rallied 10 points [since the company filed for creditor protections in Canada on July 13]."

He also noted that the paper was "very active" but didn't know what was causing the action or the gains. He opined it could be "a strategic buyer."

Another trader said the subordinated paper was "up a lot." He pegged the notes at 533/4, up 4½ points on the day.

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

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

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