Ontario prices $1 billion of notes; BAA, APA detail bond sales; Paramount Resources rises

By Cristal Cody

Prospect News, June 22 - The Canadian bond markets saw light activity on Friday, while the Province of Ontario tapped the U.S. high-grade market with a $1 billion offering of 10-year notes, informed sources said.

BAA and APA Group released more details on Friday of the foreign companies' inaugural Canadian bond offerings from the previous day.

BAA said that its upsized sale of C$400 million of 4% seven-year senior secured notes saw strong investor support.

"The bond issue follows extensive marketing completed in Canada, which provided the basis for strong support for the transaction from major Canadian investors," the company said in a statement. "This transaction builds yet further on the diversification of BAA's bond investor base seen through inaugural bond issues also completed in the U.S. dollar and Swiss franc markets in the last year."

Australian energy infrastructure firm APA Group's chief financial officer, Peter Fredricson, said in a statement on Friday the company's C$300 million seven-year medium-term note sale also followed strong interest from Canadian debt investors.

"For some time now our strategy has been to maintain programs that we can tap when positive windows appear in the various global markets," he said. "This MTN issue is consistent with our capital management strategy - we've further diversified our sources of funding, extended the average length of our debt maturity profile and have additional longer term debt cost certainty."

Corporate bonds ended Friday better. The Markit CDX Series 18 North American investment-grade index firmed 3 basis points to a spread of 115 bps.

In the high-yield secondary market, Paramount Resources Ltd.'s notes rallied, trading up 1½ points over the week, a bond source said.

Connacher Oil & Gas Ltd.'s Canadian- and U.S. dollar-denominated second-lien notes dropped a point over the week.

Canada's most recently priced high-yield issue, from Allied Nevada Gold Corp., ended flat.

Government bonds closed weaker. Canada's 10-year note yield climbed 5 bps to 1.8%. The 30-year bond yield rose 4 bps to 2.36%.

Ontario sells $1 billion

The Province of Ontario priced $1 billion of 2.45% 10-year notes on Friday to yield mid-swaps plus 70 bps, or Treasuries plus 84.35 bps, a market source said.

The notes (Aa2/AA-/) were sold at 99.613 to yield 2.494%.

There is no call option.

Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and TD Securities (USA) LLC ran the books.

BMO Capital Markets Corp., CIBC World Markets Corp., National Bank Financial Inc., RBC Capital Markets, LLC and Scotia Capital (USA) Inc. were the co-managers.

Proceeds will be used for general provincial purposes.

BAA Funding 'delighted'

BAA said on Friday that its inaugural upsized sale the previous day of C$400 million of 4% seven-year class A senior secured notes in Canada saw strong investor support.

The company said the bond sale followed extensive marketing in Canada.

"We are delighted with the outcome of this transaction, which is the culmination of extensive financing activity since the start of 2012 with over £3 billion raised in 11 capital markets transactions across 5 currencies together with the £2 billion refinancing of our core loan facilities," Andrew Efiong, BAA's new treasury director, said in the statement.

"This puts BAA in its strongest liquidity position for many years as it continues with Heathrow's transformation through its extensive capital investment program."

BAA Funding Ltd., the holding company for London-based airport operator BAA, on Thursday sold C$400 million of 4% class A senior secured notes due July 3, 2019 (/A-/A-) in Canada at 99.367 to yield 4.105%, or 263 bps over the Government of Canada benchmark, tighter than guidance of 265 bps.

The deal was upsized from C$350 million and offered in a private placement in Canada and in the U.S. markets under Regulation S.

Bank of America Merrill Lynch, CIBC World Markets Inc. and RBC Capital Markets were the bookrunners. HSBC Capital (Canada) Inc. was a joint lead manager and passive bookrunner.

BAA also raised a U.S. dollar-denominated $500 million of 2.5% three-year senior secured notes (/A-/A-) priced at 99.928 to yield 2.525% with a spread of Treasuries plus 215 bps in a private sale on Monday.

BAA said on Friday that the proceeds from the Canadian and U.S. issues will enable full repayment of the £427 million remaining under the group's capital expenditure facility, which is due for repayment by August 2013. The capital expenditure facility was replaced last week with a new five-year £2 billion revolving credit facility that is presently undrawn.

APA details bond sale

APA Group said in a statement on Friday that the proceeds from the company's first debt offering in Canada will be used to repay existing loans drawn under its current revolving bank facilities, support ongoing investment in the growth of infrastructure assets, acquire Hastings Diversified Utilities Fund and for general corporate purposes.

APA's borrowing entity APT Pipelines Ltd. (Baa2/BBB/) sold C$300 million of 4.245% medium-term notes due July 24, 2019 in Canada on Thursday at 99.997 to yield 4.246%, or 276.3 bps over the Government of Canada benchmark.

The principal and interest obligations have been hedged into Australian dollar obligations under the terms of cross-currency interest rate swap transactions, with coupons payable semiannually in Australian dollars at a fixed-rate of 6.75% per annum.

The notes were sold under APA's European medium-term note program.

Scotia Capital Inc. was the bookrunner, and RBC Dominion Securities acted as joint lead arranger. HSBC Securities (Canada) Inc. and TD Securities Inc. were the co-managers.

Sydney-based APA Group, which is made up of the Australian Pipeline Trust and the APT Investment Trust, is Australia's natural gas infrastructure company.

Paramount Resources rises

Paramount Resources' 8¼% senior notes due 2017 (Caa1/B+) traded up 1.5 points on the week, going out at 102 on Friday, a source said.

The company originally sold C$300 million of the notes on Nov. 30, 2010 at par and reopened the issue on Jan. 28, 2011 to sell C$70 million at 103.

Calgary, Alta.-based Paramount Resources is an oil and natural gas exploration, development and production company.

Connacher falls

Also in the secondary market, Connacher Oil & Gas' Canadian dollar-denominated 8¾% senior notes due 2018 and 8½% U.S. dollar-denominated senior notes due 2019 traded down 1 point on the week to 90 bid on Friday, a source said.

Connacher sold the notes in a C$350 million offering on May 20, 2011 at par.

The company has been underway in a strategic review since it rejected an unsolicited takeover offer in December.

The integrated oil company is based in Calgary, Alta.

Allied Nevada Gold unchanged

Allied Nevada Gold's 8¾% senior notes due June 1, 2019 sold in May ended unchanged on the week at 98¾ bid, a bond source said.

The company sold C$400 million of the seven-year notes (B3/B/) on May 18 at 98.716 to yield 9%.

Reno, Nev.-based Allied Nevada Gold is a gold mining and exploration company.

Andrea Heisinger contributed to this review

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